Joel Fleming speaks with The Australian Financial Review on stocks, COVID-19, assessing management teams and the holy grail for microcap investing.

What’s your pick for an emerging company shooting for a large addressable market?

As populations move closer to industrial sites and the focus on environmental factors in society is on the rise, social licence to operate has probably never been more in focus.

While it will take some time to play out, Envirosuite is one company with enormous potential given the increasingly mandated requirement for environmental monitoring across industries.

The company’s platform provides a unique solution to many of these monitoring requirements. While it’s still early days, we think it’s a company to keep an eye on given the significant market opportunity.

When did NextDC come to your attention and how do you see its growth profile relative to other technology companies?

The holy grail for microcap investing is to discover a very small company early and see them ultimately move into the ASX 100. NextDC is a great example of one stock that has ridden that wave.

The company has long believed in the tailwinds of increased digitisation, building a vendor-neutral business based on increasing demand for cloud services and being based in high-quality locations.

NextDC is quite unique compared to other technology success stories in that it is highly capital intensive, and unlike a software product or a service there is a finite amount of capacity for sale.

The flip side is that NextDC is building an infrastructure-like asset. Its long-term predictable cashflows are hugely appealing in this environment.

You’re bullish on Alliance Aviation—what’s the thesis?

While it may seem an unusual time to be looking at aviation stocks, given the structural changes underway and shifting competitive dynamics, Alliance Aviation is a well-managed business with a core focus on supporting mining companies with fly-in, fly-out services.

Together with its charter flying operations, Alliance provides important services in a period of mass disruption to domestic aviation.

The company’s recent equity raise provides growth capital to increase its fleet at a time when pricing should be very attractive.

With long-term contracts in place with its key customers, Alliance is in a strong position to become a much larger and more profitable business.

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