We think AEP is going to be a big winner. MediaValet (MVP.V / VRXWF:PINK) is a new idea that presented at our conference for the first time. They sell cloud-based digital asset management solutions through a SaaS model. They announced back in August a huge growth quarter where recurring revenues surged 65% and billings grew by 85%. But the market did nothing. And now it’s up 122% since our conference. It’s not just companies we follow that are sending bullish signals. Intrinsyc Technologies (ITC.V / ISYRF:PINK) announced they will be acquired by Latronix (NASDAQ:LTRX), a US-based IoT company. The deal comes at a 28% premium for shareholders. Medicure (MPH.V / MCUJF:PINK), a cardiovascular pharmaceutical company, announced an issuer bid for over 25% of their shares outstanding at prices up to $6.50 – that was over double the current trading price! Shares rocketed up 44% in a single day on the news. What does all this mean? We see it like this: if the public markets won’t give Canadian microcaps the valuations they deserve, other players will step in. Value will be realized one way or another. And as a microcap investor, this is GREAT news. But we’ll admit it’s not easy. You need to have a strong stomach to profit in this market. You may have to look at some stocks down 70, 80, even 90% and buy when the fundamentals say you should. Which takes us to…. Lite Access Technologies Lite Access (LTE.V / LTCCF:PINK) announced one of their most significant contracts in their history. LTE, you’ll recall, leverages innovative fiber installation technology to lay fiber-optic cable cheaper and faster than conventional methods. The contract is with CityFibre, the UK’s leading alternative provider of wholesale full fiber infrastructure. The project covers fibre-to-the premises (FTTP) installation to over 28,000 homes in Lowestoft, England. And it’s valued at approximately CAD$20 million over 2 years. For a company with a current marketcap of CAD$8.5 million, this is a BIG deal. But sentiment on the stock couldn’t be more negative. And for good reason. LTE – if you look at it from its March 2017 high until now, qualifies as one of our biggest disappointments. The company failed to deliver on its promising UK-growth strategy, hemorrhaged cash and in this brutal market lost 97% of its value. We’ve even been sellers since the company announced Q3 revenues were down 52% over Q2 this year. But when the facts change, we change our minds. And we’ve been big buyers as of late. We know CEO Carlo Shimoon has refused to sign any contract unfavorable to the company. Careful not to repeat the mistakes of the past, he’s walked away from a few mega-deals in the UK since coming on board. He’s looking for a deal with work guarantees. A deal that doesn’t require LTE to fund all up-front working capital. And a deal that leads to new projects as the company delivers. So while we don’t know all the specifics, we are confident this contract will be much better than we’ve seen historically. We also know from Q1 this year (Dec 31st ending) what’s possible when LTE can operate at full ramp on a large project. That quarter they delivered $6.8 million in sales at 31% gross margins, driven by a big contract with Gigaclear. If they can execute this $20 million contract at those same margins, you can see $0.03-$0.05 in EPS next year – which looks pretty darn good for a sub-$0.20 stock. And we think the market is dramatically mispricing the stock to the downside. But this is still a market where emotional selling can keep prices dislocated from value. And we’re trying to use that to our advantage. Bottom Line Our approach has always been fundamental driven. Find great growth companies at cheap prices and the returns will take care of themselves. It doesn’t always work – and we can look foolish for long periods of time. But with the recent market action, we are cautiously optimistic life is coming back to the Canadian microcap market. And we continue to think there has been few better times to be focused on our corner of the market. To your wealth, Paul & Brandon
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