Coffee Microcaps October 2022 Newsletter
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. We have two new additions to the database this month. One managed fund and one LIC.
First, we have Snowball Asset Management, a relatively new start-up boutique fund run by Portfolio Manager Shaun Zhang. If you would like to know more about the fund, Shaun has advised the best way to get in touch is via email, shaun@snowballam.com.au, as the website is currently a work in progress.
Second, I have added the Salter Brothers Emerging Companies Ltd LIC. I recently sat down with Gregg Taylor, the PM of the LIC, to discuss two of the microcap stocks in the portfolio, namely Acrow Formwork and Construction Services Ltd (ASX: ACF) and Ai-Media Technologies Ltd (ASX: AIM). You can find a link to my conversation with Gregg further down this email. Acrow and Ai-Media have also presented at the Coffee Microcaps Morning Meeting events in recent weeks, and you can find their respective presentations on the Coffee Microcaps YouTube Channel.
Like all asset classes, microcaps are also in a bear market in 2022, and microcap fund managers are not immune to this drawdown in wider risk assets over the last twelve months. One noticeable thing I picked up, especially if you look at the 1y and 3y returns, is the sheer dispersion of returns between managers. This is exactly what we should be seeing and what investors are paying for, i.e. active management. Microcap managers focus on stock selection and are generally index or benchmark agnostic or index unaware when constructing their portfolios. That doesn’t mean that they will all pick winners, but it does mean that investors are getting a truly active product, not an index hugger. You are also getting a lot of diversification between funds and managers clearly by the breath of returns, another benefit of microcaps. As the ASX microcap universe is roughly 6x larger than the ASX200 for example, individual managers’ portfolios will differ greatly from manager to manager, more so than large-cap managers who predominantly invest ASX200 names.
The LIC microcap cohort continues to fare worse than their managed competitors overall. This is very evident when you look at the 3y returns for the LICs versus the managed funds. One would think LICs will reverse this performance differential at some stage but at this stage-managed funds are in the box seat.
The index returns, domestically and internationally, are terrible over shorter periods. The one silver lining for Australian microcap investors is that over 1y (less bad) and 3y (meaningful outperformance), the story looks much better than what microcap investors in other international markets have recently experienced. As my grandmother back in Ireland says, “We must be grateful for small mercies.”
Coffee Microcaps Zoom Webinar Events
For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. These events normally happen on Thursday mornings from 9 am - 10 am Sydney time, with two companies presenting.
I would like 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 of my subscribers. If you would like to be added to the events list, please email me at mark@coffeemicrocaps.com, and I will get you added. I would love for you to join us for these events. These events are free to attend.
Coffee Microcaps Microcaps Morning Meeting
The next Coffee Microcaps Morning Meeting is happening this coming Monday, October 31st. I will have the following four ASX Microcap Companies presenting at this event.
Scott Farthing, CEO EVZ Ltd (ASX: EVZ) 9:30-10.00
John Kelly, Founder & CEO Atomo Diagnostics Ltd (ASX: AT1) 10.00-10.30
Michael Cooper, MD of Pure Foods Tasmania Ltd (ASX: PFT) 10:30-11:00
George Paxton, CEO of Halo Technologies Ltd (ASX: HAL) 11:00-11:30
If you wish to join us, you can register for the event here
Coffee Microcaps Microcap Technology Virtual Conference
I will run an ASX Microcap Technology Virtual Conference on Tuesday 8th, and Wednesday 9th of November. Each morning will see six ASX microcap technology companies present.
Agenda Tuesday 8th of November (Click the Link to Register)
Nic Pollock, CEO of K2fly Ltd (ASX: K2F) 9.00-9.30
Rod Bishop, Co-Founder & MD of Jayride Group Ltd (ASX: JAY) 9.30-10.00
Andreas Kroell, CEO of De.Mem Ltd (ASX: DEM) 10:00-10:30
Christopher Clark, CEO of Delta Drone International Ltd (ASX: DLT) 10:30-11:00
Jamie Conyngham, CEO of Bridge SaaS Ltd (ASX: BGE) 11:00-11:30
Charif El-Ansari, MD of Dropsuite Ltd (ASX: DSE) 11:30-12:00
Agenda Wednesday 9th of November (Click the Link to Register)
John Thompson, CEO of Knosys Ltd (ASX: KNO) 9.00-9.30
Gerard Dyson, MD of Spectur Ltd (ASX: SP3) 9.30-10.00
Kate Quirke, CEO of Alcidion Group Ltd (ASX: ALC) 10:00-10:30
Paul Gillespie, CEO of Smart Parking Ltd (ASX: SPZ) 10:30-11:00
Rene Sugo, CEO of Symbio Holdings Ltd (ASX: SYM) 11:00-11:30
Rob Broomfield, CEO of AVA Risk Group Ltd (ASX: AVA) 11:30-12:00
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 have added a stack of new content to the channel. You can click on any of the links below to watch the recent 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.
Microcap Fund Manager Interview with H&G High Conviction Ltd (ASX: HCF)
I discussed the following two stocks with portfolio manager Joseph Constable.
Po Energy Energy Limited (ASX: PVE)
Centrepoint Alliance Ltd (ASX: CAF)
You can watch a recording of my chat with Joseph here
Microcap Fund Manager Interview with Salter Brothers Emerging Companies Ltd (ASX: SB2)
I discussed the following two stocks with portfolio manager Gregg Taylor.
Acrow Formwork and Construction Services Ltd (ASX: ACF)
Ai-Media Technologies Ltd (ASX: AIM)
You can watch a recording of my chat with Gregg here
Coffee Microcaps Morning Meeting 13th October
Xref Ltd (ASX: XF1)
ARC Funds Ltd (ASX: ARC)
SKS Technologies Group Ltd (ASX: SKS)
Joyce Corporation Ltd (ASX: JYC)
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 to something while not content related, is nevertheless something that will be interesting to Coffee Microcaps subscribers. I recently had a good discussion with Alistair Warren from Trade for Good.
Alistair and the Trade for Good team provide the ability to trade ASX stocks for $9.45 and then give 50% of the profit to charity. The platform caters to retail investors, wealth advisers and financial planners all the way up to institutional fund managers through various partnerships with GBST and Morrison Securities.
Some of the charities it supports include Rural Aid, Pet Rescue, Habitat for Humanity, Variety and Food Bank Victoria, to name a few of its charity partners.
If you want to find out more, you can watch this 30-second video for an overview.
Thanks for reading. If you haven’t already subscribed, you can do so below.