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Any Good Blogs or Websites to find Small Caps ?


Shawn
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Does anyone have a list of good blogs, screeners or sites where we can find small, micro, and even nano cap companies ? I'm interested in looking in that area for potential value.

 

The only ones I know of are the TSX venture exchange and the NASDAQ screeners.

 

 

And my apologies if this has already been made/asked before :(

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I'd mostly stay away from the TSX Venture.  It's scum infested.

 

In general (and this is my opinion here), really small companies aren't a great idea.  You are going to experience a huge amount of adverse selection.

 

To be publicly listed, most companies will have around $200k of overhead (auditor, listing fees, transfer agent, board of directors, legal, preparation of financial statements, etc. etc.).  If the company has assets of $20M, then the overhead is 1% of "assets under management".  That is a headwind.  Many legitimate companies will try to lower their listing costs by getting off regulated exchanges.  So you aren't going to find too many legitimate companies that are really small.

 

And on the other hand, most scumbag stocks have smaller market capitalizations.  Short sellers have problems shorting stocks with a share price under $2.50 and stocks with very low market capitalizations.  Many pump and dump guys will intentionally make their promotions have a low share price and market capitalization so that short sellers can't skim off too much of their profit.

And of course scummy stocks tend to be smaller because they don't make money.

 

2- But check out the other forum thread, and in particular check out Oddball Stocks.

 

http://www.oddballstocks.com/

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I'd mostly stay away from the TSX Venture.  It's scum infested.

 

In general (and this is my opinion here), really small companies aren't a great idea.  You are going to experience a huge amount of adverse selection.

 

To be publicly listed, most companies will have around $200k of overhead (auditor, listing fees, transfer agent, board of directors, legal, preparation of financial statements, etc. etc.).  If the company has assets of $20M, then the overhead is 1% of "assets under management".  That is a headwind.  Many legitimate companies will try to lower their listing costs by getting off regulated exchanges.  So you aren't going to find too many legitimate companies that are really small.

 

And on the other hand, most scumbag stocks have smaller market capitalizations.  Short sellers have problems shorting stocks with a share price under $2.50 and stocks with very low market capitalizations.  Many pump and dump guys will intentionally make their promotions have a low share price and market capitalization so that short sellers can't skim off too much of their profit.

And of course scummy stocks tend to be smaller because they don't make money.

 

2- But check out the other forum thread, and in particular check out Oddball Stocks.

 

http://www.oddballstocks.com/

 

True but I can't seem to find anything else that's selling for cheap. I remember another board member telling me at Sanjeev's meeting that Mohnish said something similar in regards to the overhead of being public killing them. But you never know what you can find. I don't want to leave any section or stone for that matter unturned. It is a risk I am willing to accept if I even find anything there that's worthwhile.

 

I haven't been to oddball in a while but I'll be sure to check them out.

 

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You could check out shadowstock:

 

http://shadowstock.blogspot.ca

 

Just as a warning though, lately my virus scanner has been throwing fits whenever I go there.  Probably just an ad with some malware or possibly my virus scanner being silly but I thought I should warn you.

 

There was a blog post on basically this same topic last year.  If you search for shadow stock you might be able to find it.

 

My experience with micro-caps is that they can definitely be rewarding but they require significant time to find and I am never comfortable enough to put more than small amounts into them.  So I end up with all these 2,3% positions and each one takes hours and hours to find and research.  However, if you are very disciplined and have time time I think you can do well.  I would just run a filter on the tsx venture and exclude all resource companies.

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Lots of interesting micro caps are listed on Toronto.

 

The cost of setting up a small boutique fund in Canada is much higher than the U.S., which means small asset managers need to have a much higher AUM threshold to break even (therefore need to look at bigger companies to move the needle). Also the investment community in Canada in general is not as sophisticated as the U.S.

 

The result is far fewer micro-cap bargain hunters and less competition.

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Also the investment community in Canada in general is not as sophisticated as the U.S.

 

The result is far fewer micro-cap bargain hunters and less competition.

 

It was a bit shocking to see when Automodular on TSE was selling for less than cash on their books last May...but your postulation would seem to justify it. I wonder if that'd been the case if Automodular were  trading on NYSE/NASDAQ.

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The majority of my best IRR investments have come out of the Canadian microcap space, despite spending 90% of my time looking at things outside Canada.

 

Yellow Media, for example, traded at a 200% FCF yield after their December restructuring in 2012. You could have done some very easy math to figure out that they would be debt free in a few years and had two solid high ROC businesses, one growing and one shrinking at a manageable pace.

 

Axia Netmedia was probably written up on this board before, and was dirt cheap on a very simple thesis. It's more than doubled since then.

 

There are still things on the TSX that cheap, but most are in the energy space now. But you can find them if you try hard enough. The institutions here definitely don't.

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The majority of my best IRR investments have come out of the Canadian microcap space, despite spending 90% of my time looking at things outside Canada.

 

Yellow Media, for example, traded at a 200% FCF yield after their December restructuring in 2012. You could have done some very easy math to figure out that they would be debt free in a few years and had two solid high ROC businesses, one growing and one shrinking at a manageable pace.

 

Axia Netmedia was probably written up on this board before, and was dirt cheap on a very simple thesis. It's more than doubled since then.

 

There are still things on the TSX that cheap, but most are in the energy space now. But you can find them if you try hard enough. The institutions here definitely don't.

yellow media still looks v interesting. 270m of free cash flow in 2013, and market cap is a bit more then double that. Allthough they do have 650m in debt vs 200m in cash. is there something horrible that will happen soon?

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I'd mostly stay away from the TSX Venture.  It's scum infested.

 

http://www.oddballstocks.com/

 

Agree its scum infested.  However, I don't think you should stay away from it because of that.  Plenty of pond scum on the NYSE too.  Out of several tens of thousands of stocks in the investment universe I have 7.  Finding even 10 good quality companies on the Venture or any other exchange shouldn't be that daunting. 

 

So the issue isn't that an enriched environment of scum should keep anyone away, but in learning how to avoid the undesirable companies.

 

Here are the current companies I own on the Venture:  GUD.v, RX.v and DAP.U.  All are good quality companies in my opinion.  Just to complete the picture of the portfolio, I also own HCG and EH on the TSX, and EMES and SLCA on the NYSE.

 

I am short a couple of disreputable companies, RVLT and STSI, both on Nasdaq.

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The majority of my best IRR investments have come out of the Canadian microcap space, despite spending 90% of my time looking at things outside Canada.

 

Yellow Media, for example, traded at a 200% FCF yield after their December restructuring in 2012. You could have done some very easy math to figure out that they would be debt free in a few years and had two solid high ROC businesses, one growing and one shrinking at a manageable pace.

 

Axia Netmedia was probably written up on this board before, and was dirt cheap on a very simple thesis. It's more than doubled since then.

 

There are still things on the TSX that cheap, but most are in the energy space now. But you can find them if you try hard enough. The institutions here definitely don't.

yellow media still looks v interesting. 270m of free cash flow in 2013, and market cap is a bit more then double that. Allthough they do have 650m in debt vs 200m in cash. is there something horrible that will happen soon?

 

Yellow Media is basically a public LBO currently in the deleveraging phase. It all comes down to how much you think the digital business can grow/maintain margins and the decline rate of the print business. They recently hired the head of media from a company called Solocal to be their CEO, which is interesting because you can kind of look at Solocal (basically Yellow Media of France) to get an idea what Yellow Media will look like a few years from now.

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Do you have any specific resources to get ideas in that space? Or are you just doing the a-z approach.

 

There are some screeners available I think.. Bloomberg's screener is the best and the TSX website one works too.

 

Also building a mental library of specific businesses I suppose. I followed Yellow Media when they were in the last phase of consolidating the regional yellow pages businesses (a horrible business mistake - considering they were paying high multiples for those businesses already after Google Maps was launched). Back then it was a $billion company and widely owned by dividend investors in Canada. They structured their debts poorly and a lot of it came due at once, when their EBITDA started to feel the competitive pressure. The lenders refused to roll over and restructured the business/wiped out the equity holders. It was a tainted company after the restructuring and there was a lot of forced selling from the debt holders who got equity as part of the restructuring package, but the business was highly profitable and had a digital business that was still a growing concern.

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Some great blogs that I follow have already been mentioned (oddballstocks, shadow stocks). I didn't see www.otcadventures.com on the list, it's a good one.

 

I am very interested in Canadian small/micro caps. I agree there's a lot of crap, but that also means most people don't bother looking at them, so there are some gems too. A few blogs I've gotten ideas from in the past.

 

http://safetyinvalue.blogspot.ca/ Canadian micro-caps, net-nets

 

http://pettycash.wordpress.com/ Good mix of investment ideas and commentary

 

http://harvestinvestor.blogspot.ca/ Not frequently updated, but have gotten a few ideas from here

 

None of these do daily posts by any means, but it only takes a few good ideas a year. I try and follow as many sources as I can...

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1. OddballStocks

2. Ragnar is a Pirate

3. Whopper investments

4. Can turtles fly

5. ShadowStock

6. Greenbacd

7. Geoff Gannon

8. OTC Adventures

9. Fat Pitch Financials

10. The Brooklyn Investor

11. Barel Karsan

12. Share Sleuth

 

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