I’m going to make an assumption about you: buying lottery tickets was never your thing.
Rationally, you always knew that the odds weren’t in your favour (getting struck by lightning was more likely!), so you didn’t bother. Instead, you plowed your money into the stock market and never looked back. It worked.
Life lesson: you would rather bet on a sure thing, than a hope and a dream.
But here’s the problem.
That’s what some still think about MicroCap stocks: a hope and a dream. Heck, even I was cautious in my early days as a DIY investor, especially with micro-caps labelled as “penny stocks”. *shudder*
But I’ve gone through my epiphany stage, and happy that I changed my perception because there’s just so much untapped opportunity out there in MicroCap land, especially in Canada! There’s treasures to be found…
Today, micro-caps represent a growing part of my portfolio (~20% now).
Here’s why I changed my thinking:
MicroCaps might seem risky at first, but once you get to know them better, some aren’t so bad, and a select few might become Canada’s Next Billion Dollar Company. It’s possible, and it’s happened before.
It’s like that saying: “don’t judge a book by its cover”. Some of these MicroCaps are very compelling once you look deeper inside.
But don’t take my word for it; you be the judge…
Here’s some examples (in a nutshell) of actual MicroCap companies, based on my multi-bagger blueprint:
1. Future-ready Business Model
2. Founder / Operator’s Big Vision
3. Growth Potential (Can it scale?)
What do you think? Which of these MicroCaps stand out for you?
HoldCo that’s investing in strong, stable and profitable Berkshire/Buffett-esque Canadian companies (ice cream, insurance, and more interesting similarities). The current founder/CEO built his previous company into a $1 Billion revenue generator that one of Canada’s largest financial institutions acquired for $440M.
Consolidator of clinics, and acquirer of digital (EMR) assets within the primary healthcare sector. Management has aspirations to leverage more technology throughout their clinic network (e.g. telemedicine) to administer patient care. Mr. Li Ka-shing (HK billionaire) is a strategic investor, and the founder/CEO’s previous company was acquired by PayPal for $304M.
Leader in unified communication solutions (cloud and on-premises) that boasts customers in 170+ countries around the world, with 5 million users of their open source software, and an average of 50,000 new installs per month. In FY2019, it will officially become a $100M revenue company, with aspirations to grow as high as $500M in revenue within the next 4 years.
Innovator of advanced sensors, software and underwater robotics, with $300M+ of current contract pursuits in the pipeline. The company has achieved 4x revenue growth since 2015 ($2M -> $8M), and management & insiders are aligned with shareholders, owning ~30% of the company. Their annual revenue is expected to double this year.
Global eSports and gaming media leader, now that the company has merged with two others (this combined company now generates $22M in pro forma revenue and holds $36M cash). It owns and operates Canada’s largest and most successful gaming expo that hosts 55,000 gamers, including 100+ sponsors. Its website properties reach over 200 million monthly visitors, making it a top 5 video game website network worldwide.
Programmatic advertising platform that empowers businesses to make smarter marketing decisions as they shift to digital channels. The company serves Fortune 500 enterprises and small to mid-sized businesses in the U.S., Canada, and Europe. It’s achieved 79% Revenue CAGR since 2011, with $90M in projected revenue for 2019. Insiders own ~35%.
Animation and children’s content producer with a recent strategic partnership (Bell Media) that now makes them the exclusive curator of kids programming for CraveTV, Canada’s leading streaming service (the “other” Netflix). Current founder/CEO previously built a media company that Corus Entertainment purchased for $554M.
Expanding specialty grocery chain of organic & natural groceries. Management believes that Ontario can support 25-30 locations (5x current footprint), and the founder and operator (20% insider stake) is a seasoned, fourth generation grocer. An ex-SVP from Loblaws now sits on the Board of Directors.
Canada’s largest recreational cannabis retailer with a current portfolio of 35 licensed retail locations nationwide. Management continues to execute on its plan to have 40 stores operating by the end of calendar 2019, and 110 by the end of calendar 2020, with a $300M revenue forecast by that time.
Transportation and logistics company servicing Canada and the United States, with approximately 475 power units, 1,400 trailers and 600 employees & independent owner operators. Management has communicated aspirations to become a $500M+ revenue company through organic growth, and strategic acquisitions.
Global leader in environmentally responsible decaffeinated coffee, with distribution across the United States, Canada, and 56 different countries around the world, including some of North America’s largest roasters, roaster-retailers and leading coffee brands, including Tim Hortons, and McDonald’s.
Producers of alcohol-free beverages (wine & beer) that are available in Loblaws, Shoppers Drug Mart, Sobey’s, and Zehrs (~8,000 stores). Management now strives to become ‘the preeminent global cannabis beverage company’.
Emerging company that produces and distributes one of North America’s widest assortments of consumer products and packaging made from the highest possible percentage of renewable and plant-based materials, with no BPAs, phthalates or other chemicals of concern.
Safety and efficiency (Hardware & SaaS) company that operates in the aviation industry, providing solutions to more than 70 customers (including airlines, leasing companies, and OEMs) worldwide. Notably in October 2018, the company’s management acquired Panasonic Weather Solutions’ assets to fuel future growth.
Makers of industrial-scale dehydration technology for commercial applications in the food, cannabis (entirely new market), and pharmaceutical industries. One of the Big 3 Cannabis Producers recently invested $10M, and so this company is now positioned with a debt-free balance sheet and cash in excess of $20M.
Doesn’t sound so bad, right? Most of these companies above are still trading below $100M market cap. Small companies with big dreams.
… Imagine being one of the early shareholders in any of these companies before they end up in the mainstream news… before there’s countless analyst coverage, and before funds and other investors start to buy en masse?
Because as I said before; maybe, just maybe some of these MicroCaps become Canada’s Next Billion Dollar Company.