The small cap market is on the move—finally. Green shoots are everywhere—junior public companies are now being rewarded for achievements/milestones/improvements in their business.
Since the peak in interest rates in late October, small caps have been on a fairy-tale run, with a rising tide lifting all boats. But those companies with fast growing cash flow have the best shot at EXTENDED capital gains.
THAT’S WHY I attended the CEM Conference (Capital Events Management) in the Bahamas on January 20, where I did “speed-dating” with 18 junior public companies there (out of 54); interviewing them for 20 minutes each. This conference is co-sponsored by small cap fund manager Stephen Palmer of AlphaNorth out of Toronto.
This is a fun and very useful conference; it has become one of my top sources of new ideas. It’s not just useful to meet the management teams, you get to meet the large investors and bankers who are either behind these companies, or who KNOW the big money players behind the companies.
And in the junior stocks, understanding who is behind a company, or knowing someone who has a history with a particular management team, can be a big help in gauging how well a team can execute and how they may or may not get rewarded by the market on good news.
I will be releasing my first full report on one of these companies on Monday February 9 just before market open.
After two years of incredible growth, this unique business is on the cusp of positive cash flow, with annualized revenue already over $10 million. Management owns a large position. They have several channel-to-markets. They have developed a MOAT—a unique competitive edge—that is attracting partners in many verticals.
My own competitive edge is using my 30 years in the junior markets to not only ferret out these companies, but explain them in simple English.
This is an early stage company, so I don’t know which new press release in 2024 will be the one that excites investors and moves the stock. But revenue has more than doubled in each of the last two years.
To get this report on Monday, click HERE.
Before the conference starts, I do my best to research all 18 companies I meet—so that in 20 minutes, they don’t waste time explaining the business. Knowing the share structure and financing history in advance is important.
These companies are at different stages—some have positive cash flow, some have revenue but not yet break-even, and some are pre-revenue.
In the meeting, I want to hear them explain to me
- What MOAT, or competitive edge they have over any competition
- Milestones / major achievements they need to make in the coming 6-9 months to get to positive cash flow
- If they aren’t getting to positive cash flow in 9 months time, what milestone could be so big the Market would actually care (something happens that the Street gets a much clearer picture of either The Big Story or imminent cash flow) and bids up the stock
During our 20 minute talk, I want to hear how they pitch (most teams have a hard time explaining the guts of their story in 15 minutes—telling me they don’t really understand investors yet) and how they answer a tough question—do they get defensive or vague? And if the company does have really good financials, why is the stock trading so poorly? You rarely hear the truth to these questions, but you do get to hear their opinions!
You learn SO MUCH when you get face time with the CEO, CFO or director. And then there is some social time mixed in as well, so you can either follow up or just get to know them better. And in that time, you get to know other big investors and bankers as well.
It was such a good conference I urged them to make it two days next year.
You will be seeing reports on several of these companies in the weeks/months moving forward. Many of these companies are not ready for MY investment yet.
It has been a difficult junior market since it peaked in January 2021—three years ago. Good news—corporate developments–does not get rewarded like it used to; until a company is within a quarter of positive cash flow, the stock generally lags unless it has big sponsorship (a powerful shareholder who can sway the Street, like a Carl Icahn kind of person). Few juniors have that kind of sponsorship.
My calendar is full of follow up meetings throughout February on these companies. Monday’s report will be the first of several in the coming weeks—and the time for them has not been this good since the early stages of the small cap bull market of 2020-21.
Get my next report when subscribers do—click HERE
Keith Schaefer
