Very small caps value stocks

[Partner24]

Hi there,

 

I'm very interested to hear about small caps value stocks that have strong balance sheets and are managed by shareholders friendly people.

The businesses that I'm invested in or follow are the following:

- Volvere PLC (very small cap conglomerate, lot of cash, cheap, stock buybacks, long term growth potential)
- Clarke Inc. (small conglomerate, price ok, long term growth potential, managed by one of the best investors in Canada)
- PDRX (very small, lot of cash, cheap)

Any other ideas or another sources of information regarding that kind of stocks (forum, blog, etc.)?

Thank you!

[Gregmal]

The ones I follow and/or own off the top of my head

 

PCYO-tons of cash and no debt. Good assets. Super conservatively run

 

HTL- great business, well run, classic compounder

 

FIZZ- great balance sheet, great brand, quirky management but opportunistic and conservative

 

FRPH- great assets, tons of cash, great management 

 

CKX- tons of cash, good enough assets, management neutral but incentivized 

 

ALCO- good assets, solid management, strong balance sheet, mediocre primary business

Might be missing a few but it’s Saturday 

 

 

[KJP]

You appear to like small, high-insider owner, asset-rich/cash-rich, companies that may not be great businesses.  If that's right, these may interest you: 

 

Saga Communications 

Unit Corp.  

FRP Holdings

IES Holdings

Monarch Cement

Legacy Housing Corp.

LICT Corp.

Tower Properties

EACO Corp.

 

A similar but larger company:  IAC Corp.

 

 

[changegonnacome]

The best hunting ground IMO right now for this type of this stuff are small cap value stocks listed on the LSE....the ones however that are international with little to no underlying exposure to the UK economy...............valuations are undemanding, frustratingly so for some issuers.....who are moving their listings to Euronext Amsterdam or over to NYSE/NASDAQ......CRH comes to mind..........anyway short version is you've got rule of law, the accounts can be believed as much as small cap value can be in the USA....I think they are less picked over and so better mispricings exist.......and most notably for a USD/CAD investor I think right now you've got in-built currency hedging & tailwinds against the GBP/EUR strengthening against both dollars.................applied to a well chosen basket of non-UK economy exposed but LSE listed companies I think one can do very well here.

 

I'm up to my eyeballs in Hostelworld (HSW) ~150m mkt cap - which i've covered ad nauseam in this thread....so wont go into....but suffice to say that its grown to nearly 33% of NAV and I couldn't bring myself to trim it back even though that type of exposure is a little outrageous even for me.

 

 

I also like Glenveagh Properties (GLV) on the LSE...500m mkt cap.....it tends to trade with the UK homebuilders and that's the opportunity.....it's actually an Irish homebuilder and should not trade with UK peers....cause you couldn't get two more divergent economies & macro backdrops right now.....Ireland has an exceptionally bad housing crisis demonstrably worse historical undersupply than the UK itself especially post-GFC......but its the divergence on the macro side that is the most interesting.... the Irish economy is booming with US big tech driven corporate tax windfall delivering surpluses to the treasury there.....the Irish government has so much cash it doesn't what to do with it and has started a mini sovereign wealth/rainy day fund. However housing is the No.1 political issue of the day.....and money is being spent like drunken sailers now to try and fix it.

 

So interest rates might be rising & a recession might be coming.....which makes homebuilders traditionally bad bets given the interest rate sensitivity.....but in Ireland the system is throwing money at the developers to build with various schemes and loading up first time buyers wallets to buy.....doing in essence, whatever it takes, to make the math work to keep supply rising YoY......not that it's needed......rents have gone crazy in Ireland, the pricing mechanism by which the deep undersupply manifests itself......so the rent vs. buy maths even at 6% or 7% mortgage rates would still work in Ireland. Glenveagh in my view......is not a homebuilder......its a government contractor.......I think their planned 2024, 2025, 26 supply is effectively underwritten by the Irish sovereign at a 20% gross margin........and all this wouldn't matter without the valuation which is just x5 times 2024 earnings....and where the company is using all FCF to buy back shares.....a kind of European NVR.....last they took out 16% of s/o....this year easily 10%...more likely more. I might do up a thread at some stage I like the opportunity so much.

 

[Gregmal]

Yea speaking of London stuff, Oxford Metrics is another gem. 

[changegonnacome]

35 minutes ago, Gregmal said:

Yea speaking of London stuff, Oxford Metrics is another gem. 

 

Yep looked at Oxford too on the back of your reco.......bought a nibble and on my list to do more work.

 

You can't beat the ticker either....it gave me a good laugh when I saw it first  - OMG  

[Spekulatius]

For small cap, Europe is the place to look, imo. France, Germany and Italy are my favorites. I haven’t seen that much in the UK, but haven’t look too deeply either. The advantage of Europe is much less stringent listing requirements than in the US, so even smaller companies can get listed without too much effort.

 

Sadly the rule changes on OTC in thr US have chased many into the grey market where most brokers don’t allow trading any more (at least no buying). This has taken away many small/ nano cap opportunities in the US.

Edited April 29, 2023 by Spekulatius

[Morgan]

1 hour ago, Spekulatius said:

For small cap, Europe is the place to look, imo. France, Germany and Italy are my favorites. I haven’t seen that much in the UK, but haven’t look too deeply either. The advantage of Europe is much less stringent listing requirements than in the US, so even smaller companies can get listed without too much effort.

 

Sadly the rule changes on OTC in thr US have chased many into the grey market where most brokers don’t allow trading any more (at least no buying). This has taken away many small/ nano cap opportunities in the US.

From the brief research I did, you need at least $250,000 to make it worth it for a broker to trade on your behalf. Kind of kills options for small time investors. 
 

 

Also, excellent thread guys. Looking forward to learning more about these companies! 

[Masterofnone]

Dave Waters runs Alluvial Capital- this is his bread and butter. He is generous with his ideas:

https://alluvialcapital.com/

[SharperDingaan]

Some good names in this thread .... but a few cautions learnt the hard way.

 

Stick with the names on the senior exchanges, and nations with better investor protections. Those higher listing requirements/protections both save your ass, and give you a deeper market to trade against. When the sh1te occasionally hits the fan, dog sh1te exchanges often go 'no bid'.

 

Easy to get it in, hard to get out. Until there is a 'liquidity event' to sell into (who knows when), you are relying on dividends and interim sales of stock. You are not going to be swing trading, there will not be an options market to sell into, and you need all the interim shares you intend to sell - on day 1. You are liquidating over time.

 

Look hard at the alternative; crypto ETF's. Disliked by many because it is both crypto, and volatile; however there is both a daily market, and if you have 'accredited investor' status; you should also be able to access CME Bitcoin and Ethereum options. Much easier to swing trade, you have the ability to earn premium income on your indirectly owned BTC/ETF, and price change happens much faster. There is also growing evidence that BTC/ETH is poorly correlated against US treasuries.   

 

Different strokes for different levels of risk/expertise.

 

Good luck!

SD

 

 

 

 

 

 

[Joseywales]

Are they any prominent or up and coming fund managers that focus exclusively on small/medium cap? 

[Castanza]

21 hours ago, Spekulatius said:

For small cap, Europe is the place to look, imo. France, Germany and Italy are my favorites. I haven’t seen that much in the UK, but haven’t look too deeply either. The advantage of Europe is much less stringent listing requirements than in the US, so even smaller companies can get listed without too much effort.

 

Sadly the rule changes on OTC in thr US have chased many into the grey market where most brokers don’t allow trading any more (at least no buying). This has taken away many small/ nano cap opportunities in the US.

Curious what you’ve looked at in Italy? Hard to look past the terrible demographic and economic trends in that country. 
 

France, UK, and Germany all had some interesting plays during the covid crisis. Particularly in the REIT/property markets, but haven’t looked any further since. 

[Dinar]

30 minutes ago, Castanza said:

Curious what you’ve looked at in Italy? Hard to look past the terrible demographic and economic trends in that country. 
 

France, UK, and Germany all had some interesting plays during the covid crisis. Particularly in the REIT/property markets, but haven’t looked any further since. 

I own Campari in Italy.

[Masterofnone]

2 hours ago, SharperDingaan said:

Easy to get it in, hard to get out. Until there is a 'liquidity event' to sell into (who knows when), you are relying on dividends and interim sales of stock. You are not going to be swing trading, there will not be an options market to sell into, and you need all the interim shares you intend to sell - on day 1. You are liquidating over time.

Bingo.

A dividend is your friend here- regular or special. Selling into these markets only works when something good happens, and in those cases it can be really hard to part ways. Conversely, when someone with a large position decides to liquidate, some good buying opportunities can arise. There can be weeks of slightly elevated volume and downward price pressure. Not a bad idea with microcaps to look at trend and volume before acting on assembling a position of size.

 

[Spekulatius]

6 minutes ago, Castanza said:

Curious what you’ve looked at in Italy? Hard to look past the terrible demographic and economic trends in that country. 
 

France, UK, and Germany all had some interesting plays during the covid crisis. Particularly in the REIT/property markets, but haven’t looked any further since. 

I have no interest in Reits/ property stocks in Europe. The demographics are of little concern if you invest in small caps.

 

As for Italy, I recommend looking at all the IPO’s in Italy in the last few years. Italy has a very vibrant IPO market for small caps with decent disclosure. There are many profitable private company coming to market with market caps <200M € for example, but you have to put in the work. The same opportunity set does not exist in the US because it is not economical to IPO companies that small, they get gobbled up in acquisitions or private equity instead.

You can check in Alluvial capital letters for some ideas as well.

[bookie71]

Where in the US can you trade PDRX?

[gfp]

11 minutes ago, bookie71 said:

Where in the US can you trade PDRX?

 

On 6/15/2022 at 11:06 AM, Tim Eriksen said:

Odeon ask for Michael Zlatin.  

 

On 2/27/2023 at 11:17 PM, Tim Eriksen said:

You have to be a high net worth investor or institution and use a smaller firm.   Likely have to transfer in 250,000 or more in assets.  Be willing to pay $50 minimum commissions per trades.  

 

[Castanza]

2 hours ago, Spekulatius said:

I have no interest in Reits/ property stocks in Europe. The demographics are of little concern if you invest in small caps.

 

As for Italy, I recommend looking at all the IPO’s in Italy in the last few years. Italy has a very vibrant IPO market for small caps with decent disclosure. There are many profitable private company coming to market with market caps <200M € for example, but you have to put in the work. The same opportunity set does not exist in the US because it is not economical to IPO companies that small, they get gobbled up in acquisitions or private equity instead.

You can check in Alluvial capital letters for some ideas as well.

Interesting will check that out 

[SharperDingaan]

2 hours ago, Masterofnone said:

 

Bingo.

A dividend is your friend here- regular or special. Selling into these markets only works when something good happens, and in those cases it can be really hard to part ways. Conversely, when someone with a large position decides to liquidate, some good buying opportunities can arise. There can be weeks of slightly elevated volume and downward price pressure. Not a bad idea with microcaps to look at trend and volume before acting on assembling a position of size.

 

 

The most a fund will offer is a annual NCIB, and a trolled stink bid; the expectation being that if you need money, you are going to borrow it from the fund, and pledge your holdings against the loan. You will discover that at best a bank will only give you up to 40% of the market value, and that if you really need out; depending on the volume, you will be accepting a discount of 20-40% to market. You will also discover that as soon as you try to sell even a few shares, you will automatically tank the share price by 10%.

 

SD

 

 

[Gregmal]

Was just looking through one of my accounts and found another I had forgotten about. NATH. 

[gfp]

22 hours ago, Joseywales said:

Are they any prominent or up and coming fund managers that focus exclusively on small/medium cap? 

 

I recommend this guy.  He is an occasional poster on this board.  Publishes his investor letters publicly so you can follow along.  Deals in very very small companies that won't overlap with stuff most people are investing in for themselves.  Also runs Solitron Devices, a tiny but promising operation - ticker SODI.

 

https://static1.squarespace.com/static/5ea6570a0ba57d406203e048/t/644872509e61401b01f36b78/1682469456611/Q1+2023+Results+for+Cedar+Creek+Partners.pdf

 

https://www.eriksencapitalmgmt.com

[formthirteen]

5 hours ago, gfp said:

 

I recommend this guy.  He is an occasional poster on this board.  Publishes his investor letters publicly so you can follow along.  Deals in very very small companies that won't overlap with stuff most people are investing in for themselves.  Also runs Solitron Devices, a tiny but promising operation - ticker SODI.

 

https://static1.squarespace.com/static/5ea6570a0ba57d406203e048/t/644872509e61401b01f36b78/1682469456611/Q1+2023+Results+for+Cedar+Creek+Partners.pdf

 

https://www.eriksencapitalmgmt.com

 

Thanks. I've read his letters. The "EPIC play" is interesting, especially with recent developments in the banking sector. Does anyone here have ”Goldman Sachs” big enough to buy any of them (CZBS, MFBF, PCB, CZBS, UBAB, BFCC, etc)? I was thinking of YOLOing into some of them but it's not really my style to go against the market.

Edited May 1, 2023 by formthirteen

[KJP]

22 minutes ago, formthirteen said:

 

Thanks. I've read his letters. The "EPIC play" is interesting, especially with recent developments in the banking sector. Anyone here have ”sachs” big enough for buying any of them (CZBS, MFBF, PCB, CZBS, UBAB, BFCC, etc)? I was thinking of YOLOing into some of them but it's not really my style to go against the market.

 

Yes, I'm invested in some of them.  For example, take a look at CZBS's latest call report.  It's trading at ~5-6x earnings on what appears to be a conservative balance sheet (at least for a bank).

[formthirteen]

11 hours ago, KJP said:

Yes, I'm invested in some of them.  For example, take a look at CZBS's latest call report.  It's trading at ~5-6x earnings on what appears to be a conservative balance sheet (at least for a bank).

 

Thanks. I started a separate thread so we could continue the discussion there: