It’s a jungle out there right now. Amid the chaos, we speak to WCM Global Growth Limited about two small cap picks they believe will outperform in the current market, and how they’re positioning their portfolio amid the chaos.

During periods of market volatility, professional investors implement various strategies to manage uncertainty and protect their portfolios. They may gravitate towards defensive stocks, take advantage of decreased share prices, or simply continue to invest in strong 'durable' companies with growth potential.

In a recent client presentation, Greg Ise, Portfolio Manager of the WCM International Small Cap Growth Fund, outlined his strategic approach for resilience and opportunity. He also highlighted the companies he believes have the potential to strengthen their competitive advantage in a highly uncertain market.

Don’t try to predict movement based on bad headlines

When markets get noisy, Greg says his approach with WCM is to stay focused on the things that don’t change. Ise said that his fund is locked into a clear strategy of finding businesses with strong moats and clear, growth-aligned cultures that support long-term growth.

In the current environment, Ise backs companies that provide essential goods, work in niche markets, and that have the strength to keep growing while their competitors go defensive:

“We’re looking for those companies that find ways to widen their competitive advantages even when the environment is difficult,” Ise explained. “That’s where real durability comes from,” he added.

As a result, WCM isn’t following the trend and is instead doubling down on businesses that stay relevant through market cycles. Ise spells it out clearly in his interview: “Uncertainty doesn’t change what people truly need.”

Keeping it simple: investing in the essentials

As the numbers spin around in a tricky market, Ise reckons he sticks to the obvious: some consumer needs will always exist, regardless of what’s happening in the world.

Putting it plainly, Ise said “people [will] keep buying the basics.”

“Whether it’s prescription medication or bottled water… consumers may trade down from premium brands to private label, but they don’t stop buying altogether,” he said.

“That’s why WCM has focused on companies that aren’t flashy tech darlings, but are essential, well-run businesses with robust cultures and reliable fundamentals.

“These kinds of companies tend to be less sensitive to macroeconomic earthquakes and often benefit when people become more price-conscious,” he said.

To prove his point, Ise shared two picks: Redcare Pharmacy and Lifedrink, both international businesses focused on the essentials.

Redcare Pharmacy, Ise explains, is a German-based, pure-play online pharmacy delivering both prescription and over-the-counter medications to customers across Europe.

WCM, through Ise, sees Redcare as a long-term winner for three reasons:

1. Demand durability: “Healthcare is non-discretionary and customers still need their medication regardless of the macro backdrop.”
2. Competitive strength: “With a strong balance sheet, Redcare is well positioned to pull ahead of weaker rivals, who may struggle to invest or grow in a higher cost-of-capital environment.”
3. Culture as an asset: “Redcare’s leadership continues to invest through volatility,” Ise believes. “This sets the business up to widen its moat, just when others are retreating.”

Then, Ise continues, there’s Lifedrink out of Japan. He’s backing the opportunity offered by the private label bottled water supplier to major grocery chains.

“Inflation has made price a major driver for consumers,” Ise said. “Retailers are looking for low-cost suppliers they can count on – and Lifedrink fits that need.”

Three key traits stood out to Ise:

1. Private label tailwinds: Consumers shift to cheaper alternatives during downturns, and Lifedrink helps retailers meet that demand.
2. Cost leadership: With vertical integration across its operations, Lifedrink is able to offer the lowest-cost water to grocery partners.
3. Operational discipline: Lifedrink’s reliability, efficiency and long-term thinking align closely with WCM’s criteria for strong culture.

“It’s not flashy, but it’s a great business – and in a market like this, that’s the edge we look for,” Ise surmises.

Invest with us

The WCM International Small Cap Growth Fund (Managed Fund) (the Fund) provides investors with access to a high-conviction, actively managed, diversified portfolio of listed, quality, high-growth small capitalisation companies sourced from developed (ex US) and emerging markets.

The portfolio is managed by WCM Investment Management, LLC (WCM), a California-based specialist global equity firm with an outstanding long-term investment track record.

• ✅ Proven world class manager: WCM has an outstanding long-term track record of global equity management. Their International Small Cap Growth Strategy has outperformed its Benchmark¹ by an annualised 5.33%² since its inception in 2014.
• ✅ Unique investment process: WCM's two key criteria for selecting an investment are: 1) a rising competitive advantage or expanding economic moat; and 2) a corporate culture that supports the expansion of this moat. WCM believes the direction of a company's moat is more important than its absolute width or size.
• ✅ Quality international stocks: WCM’s focus on quality international stocks with expanding economic moats leads it towards high growth sectors such as Technology, Health Care and Consumer. For Australian investors this provides significant diversification benefits, as these sectors represent a relatively small proportion of the local market.
• ✅ High conviction, long-only portfolio: The Fund typically comprises between 50–70 securities. WCM’s investment strategy is to construct and maintain a high conviction, actively managed long-only equities portfolio invested in listed securities of developed market (ex-US) and emerging market smaller market capitalisation companies.

How to invest

To invest in the WCM International Small Cap Growth Fund, please follow the below steps:

1. Download and read the Product Disclosure Statement
2. Complete the Online Application Form

Contact us

To find out more about the Fund, please visit our website.

DISCLOSURE: Associate Global Partners maintains a financial interest in Switzer Group, the owner of this publication.

DISCLAIMER: Past performance is not a predictor of future returns. This update has been prepared for information purposes only. Any figures provided in this document are unaudited and approximate. This post does not contain investment recommendations nor provide investment advice. You are strongly encouraged to obtain detailed professional advice and to read any relevant offer document in full before making any investment decision. This is not an offer to invest in any security or financial product.