Behind every stock is a business. The key to successful small-cap and micro-cap investing is to understand that business, its management, its financials, its markets and its competition – and then to accurately evaluate its potential to succeed. This approach isn’t speculating; it’s informed investing.
I follow mainly small and micro-cap Canadian companies for my large retail base. I encourage my clientele to look to me for recommendations on what to buy and sell. This is due to the fact that 90% of the populace who invest in this arena generally end up losing. I am happy to say, however, I consistently achieve superior returns.
Unlike many Investment Advisors, I do not try to time or “trade” the market but prefer to invest in undervalued companies. I tend to invest in companies that have been ignored, or have fallen under the radar screen of the general public. In particular, I look to identify turnaround situations; ones where there is a positive turn in the company’s fundamentals. I keep in close contact with the companies, and while the general market is looking elsewhere, I pick the low hanging fruit and wait for the market to “unlock” their value.
There are periods of time in which I will remain in cash, but only until I find the right mix of equities to diversify a client’s portfolio, or until I feel there is an opportune time, such as the market decline in 2000 – 2002. I do not invest in bonds or mutual funds, and have limited exposure to income trusts. Overall, I am interested in capital gains and believe that with a little hard work, due diligence, and awareness, one should be able to out-perform all of the above.
Generally, the companies we recommend trade at less than $50 million in market cap. Many of these companies have been in business for years. Moreover, many of them have developed a market niche, or intellectual property, that is overlooked by the market. Most of these companies are at the steep end of their growth curve, and it is my goal to identify them as this is where significant share appreciation can occur. With proper diversification, the risk is calculated and one has the potential for positive returns. This is a well thought out and precise strategy that took me years of experience to develop.
So...Where will your investments take you?