Microcap Manager Review October 2018 Not for the faint hearted!

Mark Tobin

Well, October 18 was a brutal month for microcaps with the S&P/ASX Emerging Companies Index closing down 10.9% for the month, Yikes! Although things have stabilised in November there has been no major recovery of the losses in October. Not that the larger cousins escaped without injury, the S&P/ASX All... Show More

MicroCap Stocks To Watch 

Mark Tobin

Well, one of the roughest month in a long time is behind us and November has seen a bit of rebound in share markets. Microcap's were one of the worst hit in the last month, with the S&P/ASX Emerging Companies Index returning -10.91% for the month! Other indexes faired somewhat... Show More

Microcap Managers Continue to Outperform ETF’s

Mark Tobin

Q1FY19 was a challenging quarter for microcap managers but the majority of managers navigated the market well with the average manager posting a return of +2.6% for the quarter. This was in contrast to S&P/ASX All Ordinaries Accumulation Index which returned +1.9% for the period. The performance of large stocks... Show More

A Microcap Turnaround Story

Mark Tobin

BuildingIQ (BIQ: ASX) Is a stock that is completely off the wider investment radar for a reason that will become obvious in due course. That doesn’t mean though it’s not an interesting investment proposition. Show More

MicroCap Stocks To Watch Sept 2018

Mark Tobin

Well, the first quarter of FY19 is behind us and it has been tough for microcaps. As I alluded to in my newsletter last month, reporting season overall was pretty insipid as far as microcaps were concerned. This is reflected in the performance of the index with the S&P/ASX Emerging... Show More

MedAdvisor A global technology company in the making? 

Mark Tobin

MedAdvisor (MDR: ASX) operates in the healthcare IT space, specifically in improving the interaction between pharmacies, patients, drug manufacturers, doctors, and government. MDR provides a fully digital end to end experience for handling medical scripts for prescribed medication, primarily targeting chronic conditions which require ongoing medication management. Show More

3 EduTech Focused Microcaps

Mark Tobin

At a recent technology conference, I attended there was a whole panel discussion on the opportunities around the use of technology and innovation in the education sector. While not as sexy and almost ubiquitous as FinTech or platform businesses like Facebook and Netflix etc. Education globally is still a huge... Show More

Microcap Stocks to Watch

Mark Tobin

Well, another reporting season has come and gone. After sifting through literally hundreds of microcap results my assessment was that it was a very average reporting season for microcaps. A few standouts with good beats to guidance and strong outlook statements but the vast majority came in soft or missed... Show More

ASX Microcap Early Reporting Season Results

Mark Tobin

Well, another reporting season is on us and results are starting to come in thick and fast. As investors, August and February represent the 2 months of the year when we find out does our investment thesis get proven or disproven. I have previously done a guide on how to... Show More

Microcap Fund Review FY18

Mark Tobin

FY18 was a strong year for both microcap and small caps indexes. Once again, microcaps significantly outperformed large caps. The S&P/ASX All Ordinaries Accumulation Index returned 13.7% for FY18 a healthy return. In contrast, the S&P/ASX Emerging Companies Index posted a stellar return of 23.2% for FY18. Leading to an... Show More

3 Microcaps Stock to Watch

Mark Tobin

Silex Systems (SLX: ASX) a long time listed uranium play is cutting a forlorn figure these days on the ASX boards. SLX recently announced that it had failed to resolve all the due diligence issues with regards to its purchase of 76% of is GLE joint venture from its JV... Show More

Four more microcap stocks to watch

Mark Tobin

This month we outline four microcaps to watch, and discuss some research from Goldman Sachs on coverage at the small end of the market. We also talk to a high performing microcap fund, and discuss one of the more interesting stocks from their portfolio. Show More

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Energy Action A Microcap Stock Redeemed?

Mark Tobin

Energy Action (EAX: ASX) has had a very chequered past in recent times. Following a successful IPO and relatively successful early days post IPO the performance under the tenure of the previous CEO Scott Woodridge was a torrid affair from a shareholders point of view. The share price fell from... Show More

Microcap Managers continue to outperform ETF’s

Mark Tobin

We are on the home stretch of FY18 and microcap and small caps indexes have continued to demonstrate strength. Once again, microcaps significantly outperformed large caps. The S&P/ASX All Ordinaries Accumulation Index returned a -3.69% for the Q3FY18. In contrast, the S&P/ASX Emerging Companies Index posted a -1.85% return in... Show More

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IIR March 18 Microcap Monthly Newsletter

Mark Tobin

Veris Limited (VRS: ASX announced another acquisition in its continuing strategy to rollup firms in the surveying and urban/regional planning business. Veris decided to wind down its old OTOC construction business over last 18 months to focus on its surveying and planning strategy. The new acquisition was well received with... Show More

Does Kip McGrath Education Get an A

Mark Tobin

Kip McGrath Education Centres Limited (KME: ASX) has been a long-standing microcap on the ASX. The company provides private tuition for students through a network of franchise tutors. The company has been overhauling its business model and systems in the last few years in order to improve profitability and capture... Show More

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Consolidated Operations Group are the cogs starting to turn?

Mark Tobin

Consolidated Operations Group (COG:ASX) is the new incarnation of the old Armidale Investment Corporation (AIK:ASX). COG has been slowly transitioning itself from the old LIC structure to a proper operating business structure over the last two years. COG is now pursuing two main lines of business: Show More

Is the bear out of hibernation?

Mark Tobin

After a turbulent week in the markets, some people are asking if this is the beginning of a new bear market? While it is too early to tell at this stage if this is a major downturn in equity markets it is probably a good time to think about how... Show More

Hi Owen, Many thanks for the comment I decided to leave this particular cash option out of the article in order to focus on the highest potential return arbitrage which is via the scrip option. However, as you rightly point out this 20,000 shares for cash option is also a nice arbitrage play and should not to be discounted.

On Four more microcap stocks to watch -

Hi Harley One intriguing scenario not sketched out in your thesis could be CUP on its own accord buying Count. A long shot maybe but certainly not beyond the realms of possibility. Many thanks for the analysis an intriguing little stock story and one to keep an eye on as it plays out.

On Opportunities Post Royal Commission? You Can Count On It -

HI Peter Please see a link to their website. I would email the principal Niv Dagan or Richard Rouse head of Business Development about becoming an investor or requesting an information pack. https://www.peakassetmanagement.com.au/about/

On 4 microcap stocks to watch -

Hi James, KAT cant be consider because they focus more on mid and large caps. A quick look at their last NTA and names like NAB, RRL, CGF, WBC, MQG, HSO. The market caps of these names are well above micro and small cap levels.

On Microcap Managers continue to outperform ETF’s -

Hi Graeme, Many thanks for the feedback. Please see an extract from the SPIVA report as to the benchmark used for small and mid-cap managers below. The choice of benchmark used by the funds or by investors for performance comparisons is a subjective area. Some managers use the Small Ords as you say but don't invest in junior miners & resource companies. So in 2016 that would have been great as industrial stocks were doing well and miners & resources couldn't catch a bid. Today, the same fund would be finding it difficult to match benchmark returns as the performance of the two sectors has inverted. The All Ords Index has still returned 7.86% over the last 5 years. That's still a decent absolute hurdle for a manager to outperform net of fees. So while the makeup of the index I agree might not be applicable or comparable the index can still provide a decent hurdle/benchmark for an active manager to overcome. "The S&P/ASX Mid-Small is designed to measure the performance of companies included in the S&P/ASX 300, but not in the S&P/ASX 50. It is a combination of the S&P/ASX MidCap 50 and the S&P/ASX Small Ordinaries."

On 4 microcap stocks to watch -

Hi Claude, Many thanks for the feedback. That’s is my ultiamte goal. To bring industrial type microcaps to a wider audience. I hope you enjoy future editions as much as the current.

On 4 microcap stocks to watch -

Hi, Weimin great article. Please see my article from last year on the subject of 100 Baggers that may be of interest. https://www.livewiremarkets.com/wires/100-baggers-common-traits

On 10-baggers are everywhere (so are 100-baggers) -

Thanks, Huiyi I think anything they do will be a lot more measured going forward given previous experiences by management. I get the sense management still see opportunities for growth but investing in growth will be far more circumspect and will need hit key milestones before more capital will be deployed. I don't see any "big bang" type initiatives or investments. Slow and steady wins the race as they say although the market can sometimes be impatient when it comes to this strategy.

On Does Kip McGrath Education Get an A -

Hi Martin Thanks for the comment I will try and tackle each of your points raised Investors need something to measure the performance of the manager against and while outperformance versus a benchmark is by the no means the only criteria that could or should be used it is at least a starting point. So I think it is important to put benchmarks performances in the report. The managers also need some reference point or base if they charge performance fees so again benchmarks fulfil this function. If investors feel neither of these two benchmarks are relevant to the managers they could always perhaps use the long term returns of the Australian market (circa 10%) as an absolute measure to see how the managers track records stack up against it. I include the performance of the All Ordinaries Index to try and reflect this. These are the two most relevant benchmarks I am aware of for Australian microcap managers but if you have suggestions for more appropriate benchmarks for inclusion in the next report I will happily consider adding them for comparative purposes. All the above are active managers and you want active managers to actively allocate capital differently to the underlying index benchmark. You don’t want to be paying active fees for index hugging. So, their portfolio should look different in terms of stock selections and sector weightings versus the benchmark. Yes, there is a large weighting to resources and indeed technology in the emerging companies index. If these sectors are performing very well some of the active managers may actually underperform the index and vice versa if these sectors are under performing the managers may do well, but that is what you are paying the managers to do. Allocate your capital to the best performing companies and sectors in order to generate alpha. If we look at the emerging companies index the median market cap is shade under $200mil with the general industry standard being $300m and under being regarded as microcaps. So, with 50% of the index names well under that $300m threshold I think that the emerging companies index is at least a reasonable benchmark to compare these active microcap managers against.

On Microcap Managers Continue to Outperform ETF’s -

Hi, Ivan indeed and as they say a good start is half the battle. A long way to go yet and by no means guaranteed. However with the strong management team in place and a favourable macro environment currently I believe they are well positioned to execute on their strategy and my investment thesis to hopefully play out as planned.

On Mining services picking up Tempo -

Hi, James, the QVG Capital offering is more a pure small-cap fund than microcap fund. I am sure they will have a few microcap names in the portfolio from time to time but not enough to warrant inclusion into the review. Current top 5 positions are all above $300mil market cap which is our benchmark for classification of microcaps.

On Microcaps Stellar Quarter: 8.9% vs. Large Caps 1.0% -

Hi, James, the QVG Capital offering is more a pure small-cap fund than microcap fund. I am sure they will have a few microcap names in the portfolio from time to time but not enough to warrant inclusion into the review. Current top 5 positions are all above $300mil market cap which is our benchmark for classification of microcaps.

On Microcaps Stellar Quarter: 8.9% vs. Large Caps 1.0% -

Hi, Boyd as a LIC, the shareholders will have the right vote on who they appoint as the relevant IM to manage the portfolio on their behalf. The microcap and small-cap space in Australia is blessed with many fine active managers with great track records, ultimately, however, shareholders must vote as to who they want in place as the IM even though this may be odds with ones one opinion on the best IM for the mandate.

On Microcaps Stellar Quarter: 8.9% vs. Large Caps 1.0% -

Hi, Alan many thanks for the kind feedback. That is what I hope to try and provide to the Livewire audience, stocks which are under the radar. As noted in a previous article running screens on microcaps is nowhere near perfect due to the poor quality of the data these screens are run on. HRL just another case in point. Good luck with your holding hopefully this interesting story plays out as the strategy implies.

On HRL Holdings: Another ALS in the making? -

Hi Thom, noted I am planning on doing a mid year review in Jan 18 and I will add it in then. I do know however that the ASX Small Ords Industrials did +7.9% for the year which was only marginally ahead of the ASX Small Ords at 7.0% Most microcap managers handily outperformed either index if you look at the table in my first article for FY17 at least.

On How do microcap managers perform in the long-term? -

Hi, Graeme, I have asked the people at S&P who produce the SPIVA report to consider adding microcap asset class to their Australia 2017 report this will then tackle the issue of survivorship basis as you point out.

On How do microcap managers perform in the long-term? -

Hi Chad, Another trading strategy is to buy the options for say $0.02 then convert them at $1.10 so your all in cost is $1.12 (plus some brokerage). Then you can sell the shares at $1.20. Profit of $0.08. I have found the pricing of LIC options to be very misunderstood generally by investors and this can cause dislocations that can be capitalised upon.

On How to profit from liquidity provision in LICs -

Hi James Yes and no. ATM's of the future will be like mini banks where you can also deposit cash for example (STL planning on rolling this breed of ATM out in AUS) along with more expanded service compared to today. They are also moving into EFTPOS and all the backend processing of transactions which still needs to be done for Visa Paywave/Mastercard Paypass or standard ATM transactions. Cash will also be with us for a fair while yet in my view.

On 5 Interesting Microcaps & Nanocaps for 2017 -

Hi Graeme many thanks for the historical perspective. However I can only speak to the current position BWF finds itself in and its current performance. Hopefully the WOTSO concept will continue to deliver results to shareholders new and old. I will however carefully monitor any proposed restructures or capital management initiatives given the insight you have provided.

On Blackwall Property Funds: A microcap property play -

Hi Boyd One man involved in this story who can without doubt answer yes to both the questions you raised is Geoff Wilson, in the interest of full disclosure I used to work at Wilson Asset Managment and can honestly say Geoff on many occasions has fought for shareholder rights and especially small shareholders rights. Some of his previous activism has also caused many a share to rise and benefited all shareholders. Geoff's efforts in the RHG/John Kinghorn battle spring to mind.

On AMP gets wake-up call over its beleaguered China Fund -

Ireland also recovering very strongly. 4.8% GDP growth in 2014 the fastest in the EU. Feedback from on the ground is that 2015 continuing in the same vein. So should be good for Harvey Normans Ireland operations.

On Three wires that caught my eye this week -

JYC:ASX nice update just before Christmas. Profit in its Bedshed and KWB Kitchen Connection retail businesses expected to finish the December 2014 half well above last year, with double digit growth Board to review strategic plans with this site on the Moorebank industrial property early in the new year. Have received solid interest according to the update. Seeking additional retail growth opps and welcome suitable enquiry to the executive director. This is a little nanocap with a potential nice asset sale and cash to look at more retail opportunities with or without the sale.

On Moorebank Intermodal a nanocap play -

Not an upgrade James Marlay basically a continuation of 2H14 run rate into 1H15 but it is an improvement on the PCP. Even if they do the same in the 2H15 it will still be good growth in FY15 on FY14. This 1800 business is pretty stable, there are a few regulatory changes in the works but mgt have said they don't expect any major impacts. They are working on getting it running as efficiently and effectively as possible. This is a mature stable business and basically a cash cow. It helps to generate to cash to fund growth ops in my view.

On Nanocap ReverseCorp REF:ASX Mkt Cap $12mil, $6mil in cash, no debt, estimated ex-cash P/E of 3.4 with 20% growth FY15 -