Here’s the list of other stocks on our portfolios and watch lists that are hitting new 52 week highs this past week. It seems that this weekly list is growing larger every week. Gatekeeper Systems, (GSI.V), Biorem Inc (BRM.V), McCoy Global (MCB.T), Sylogist (SYZ.T), Foraco (FAR.T), Payfare (PAY.T), Hammond Mfg (HMM.a.T), Kraken Robotics (PNG.V), California Nano (CNO.C), Grown Rogue (GRIN.C). What these companies all have in common are that they are profitable, growing and many are still too small for the institutional buyer to pay attention.
We finally have a bull market in these types of stocks.
The small supply of these kinds of companies and their small market caps means that any meaningful capital that comes into this sector of the market has a huge impact. Small supply and growing demand equals higher prices and in some cases, much higher prices. And I think this is just getting started. I know this because I’m just now starting to hear from my institutional contacts.
Institutional buyers, the big capital allocators, are starting to come down market. The liquidity flywheel is starting to turn. When fund managers see a stock like DRX.T make the move its made they come looking for the next one and as they start to buy and increase price and liquidity it brings more players into the market. And as liquidity down market improves it brings even more buyers. That small company that couldn’t seem to get a double digit PE ratio even though it’s growing at high double digit growth rates all of a sudden looks pretty cheap to an institutional buyer when he/she compares it to one of his larger slow growing companies.
It may still be mostly anecdotal but my phones are ringing again. It’s brokers and old industry colleagues that want to know what the next hot microcap might be.
There is a massive amount of cash sitting on the sidelines, some of it is sitting in big stocks and ETFs. If even just a small fraction of that capital is brave enough to make it into this microcap universe of ours it will have massive impacts on share price.
You think we’ve had a decent past year with these profitable and growing microcaps? If I’m right and this microcap bull market is just getting off the ground, you ain’t seen nothing yet!
Yes, I’m very bullish for our sector (profitable, growing Canadian microcaps) longer term but I know nothing goes straight up and I’m happy to be a bit lazier here. Yes, we need to be ready and be very aggressive on new, undiscovered ideas but with established positions I think we can afford to be a bit more cautious and wait for pullbacks to add.
I’m happy to wait for dips and will even sell some shares on sharp spikes. We’ll get some great buying opportunities as this microcap bull market grows legs but we need to remember to be greedy when others are fearful and a bit fearful when others are greedy.
Other Stuff
"Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise." Peter Lynch.
