Fellow, investment trust Kingfish, has been running such a buyback programme for its shares since last year.
Salvus says in its latest quarterly update that the New Zealand sharemarket is in a volatile patch and that it may benefit from conditions if as the economy slows and interest rates remain stable or fall.
“This has historically been associated with smaller company shares outperforming larger quoted companies,” manager Andrew Couch says.
“The risk is that inflation concerns, exacerbated by a falling New Zealand dollar and high oil prices, mean a prolonged period of high interest rates.”
It has covered this situation by having exposure to companies that earn a good chunk of their revenue offshore, such as 42 Below, Mainfreight, Provenco and Tru-Test.
During the quarter Salvus’s net asset value rose 6.8%, compared to a rise of 2.8% for the benchmark NZX SmallCap index.
“The NZX SmallCap Index continued to underperform the NZX MidCap Index over the period but outperformed both the NZX 50 Portfolio and NZX 50 Indices. The continued outperformance of the MidCap Index reflects both corporate activity and the reinvestment of funds from corporate activity in the more liquid mid cap sector.”
The most significant contributors to performance were Methven (up 19.1%), Mainfreight (+15.6%), and Provenco (+13.9%).
The main underperformers were Pod (-23%) and 42 Below (-12%).
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