With the beating that some of these smaller company’s shares have taken and some of the cheap valuations that have persisted for a while, we can expect that more of these “strategic reviews”. I’m sure a number of management teams and boards are in discussions how best to stave off hostile efforts to take control or buy out some of these cheap companies. Watch for poison pill announcements, more share buy backs, special dividend announcements and I’m sure we’ll soon see some management teams try to buy their companies and take them private. An early signal may well be an increase in insider buying. When prices get low enough someone will find a way to extract the value. “The cure for low prices, is low prices.”

This continues to be a market where investors don’t need to chase stocks with big upside while ignoring the big downside. It’s usually the case that to get big returns you must take big risk; you have to pay high prices for high growth. In rare times in the market, you get the opportunity participate in opportunities with high upside AND lower risk. It’s all a function of price. If you can get a fast grower at a lower price you’ve actually increased your upside and decreased your risk. You rarely get that opportunity in bull markets, but you can find them more often in bear markets are markets, like now, that are transitioning. We are seeing a change in market leadership; this market is in transition and great risk/reward investment opportunities continue to make themselves available.

I continue to see signals that indicate to me that we are at a significant inflection point in the small and microcap markets. New leaders and new 52-week highs are some of those signs. Strategic reviews, hostile takeovers are the increase in normal course issuer and significant issuer bids are more signs that value is trying to be extracted. This all has the effect of shrinking the pool of quality small cap opportunities and it also brings capital down market. It also gets investors to start thinking of which could be the next candidate to see value extracted.

Keep watching for more signals. Hopefully it helps to create or increase your conviction to buy or hold some of these microcap opportunities before the next big up wave starts.

Other Stuff   

We are almost at the end of big Q3 reporting season, one more week to go. We have seen a good number of very decent results from some of our watch list. Fab-Form (FBF.V) one of our long time “Cheapies With a Chance” list stocks reported revenues up 30.6% from the year ago period. Shares jumped to an all-time new high tapping $2.00 on Friday.