Coffee Microcaps January 2023 Newsletter

Microcap Fund Review and Upcoming Webinars

Hi Everyone

Welcome to this month’s edition of the Coffee Microcaps newsletter.

Microcap Fund Manager Review

My quarterly look at the performance of microcap fund managers is below. Let’s not try to put lipstick on the pig here when everyone already knows 2022 was a terrible year for investors, almost universally across asset classes, especially equities. The Australian microcap fund manager was no less immune to the market falls seen in 2022. However, many fund managers outperformed over 2022, at least on a relative basis, providing some cold comfort to microcap investors. Things look somewhat more sanguine when we look at the 3-year performance numbers. By some weird quirk of geography, the top three funds, based on 3-year performance figures Snowball, Westferry and Altor, are all based out of Brisbane. Who said all the top fund’s management talent is based in Sydney and Melbourne?

The microcap LIC cohort had a rare winning period when we look at their performance versus their managed funds competitors in 2022. However, a cursory glance at the 3-year performance differential shows the considerable ground microcap LICs need to make up. One new LIC has entered the group with the IPO of H&G High Conviction Ltd (ASX: HCF).

Domestically and internationally, the 2022 microcap index returns are terrible over shorter periods. The one saving grace for Australian microcap investors is that over 1y (generally less bad) and 3y (meaningful outperformance), the story looks much better than what microcap investors in other international markets have experienced. A modicum of solace given the year it was and as we close in on the 3rd anniversary of the start of the CV19 pandemic.

Coffee Microcaps Zoom Webinar Events

For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. These events usually happen on Thursday mornings from 9 am - 10 am Sydney time, with two companies presenting.

I want to thank DMX Asset Management for sponsoring all the Coffee Microcaps Virtual events.

The ASX Microcap companies that present generally have the following four criteria.

•Under AUD$300m in market capitalisation

•In revenue and approaching cashflow breakeven or already profitable

•Outside the resources and biotech sectors

•"Industrial Microcaps” In other words, microcap technology, financial services, consumer goods, industrial products or services business, healthcare stocks etc.

I have created a separate email list for invites to these Zoom events so that I am not spamming all my subscribers. If you want to be added to the events list, please email me at mark@coffeemicrocaps.com, and I will add you. I would love for you to join us for these events. These events are free to attend.

Coffee Microcaps Appendix 4c Results Wrap

The next Coffee Microcaps Appendix, 4c Results Wraps, is happening this Monday, January 30th, and Tuesday, January 31st. I will have the following six ASX Microcap companies presenting at this event.

Monday, January 30th
John Kelly, Founder & CEO of Atomo Diagnostics Ltd (ASX: AT1) 9.00-9.30
Teri Thomas, CEO of Volpara Health Technologies Ltd (ASX: VHT) 9:30-10:00

If you wish to join us, you can register for the event here

Tuesday, January 31st Martin Filz, CEO of Pureprofile Ltd (ASX: PPL) 9:00-9.30
Paul Ostergaard, Founder & CEO of Norwood Systems Ltd (ASX: NOR) 9.00-10.00
Wayne Arthur, CEO and John Rankin, COO of Skyfii Ltd (ASX: SKF) 10:00-10:30
Oleg Vornik, CEO of Droneshield Ltd (ASX: DRO) 10:30-11:00

If you wish to join us, you can register for the event here

Coffee Microcaps YouTube Channel

All the Zoom events get recorded and uploaded to the Coffee Microcaps YouTube Channel. As well as the ASX microcap company presentations, I do interviews with leading ASX Microcap Fund Managers on some of their top picks. Occasionally, we also have presentations or interviews with some international microcap investors.

So if you can’t join the Zoom webinars due to work, kids, life, or whatever, you can subscribe to the Coffee Microcaps YouTube channel and just hit the bell for notifications when new content gets added.

I added new content to the channel before the Christmas and New Year's breaks. You can click the link below to watch these presentations.

Also, if you look in the description section of each video on YouTube, it has the relevant video chapters, so you can jump to the start of a specific company presentation if that’s what you are after in a particular video.

Coffee Microcaps Morning Meeting 8th December

Alloggio Group Ltd (ASX: ALO)

Big River Industries Ltd (ASX: BRI)

Carly Holdings Ltd (ASX: CL8)

Advanced Braking Technology Ltd (ASX: ABV)

Top Shelf International Holdings Ltd (ASX: TSI)

Content Recommendation

As part of this newsletter, I also want to highlight some good content worth sharing with my subscribers. Hopefully, the content will be something subscribers will also enjoy and get some value from.

This month I wanted to give a shout-out to Dave Waters from Alluvial Capital Management. Dave recently wrote up a stock called Clinica Baviera, a European healthcare provider that operates over 90 ophthalmology clinics in his substack blog. I enjoyed the business overview, but my tangible takeaways were Dave’s thoughts on illiquidity and its meaning for the investor. For microcap investors, illiquidity is par for the course, but Dave provided an interesting mental framework and some real-world observations from his experiences of investing in illiquid securities.

Thanks for reading. If you haven’t already subscribed, you can do so below.