Coffee Microcaps October 2024 Newsletter
Reporting Season Incoming
Live Event Postponed
Hi Everyone
As many of you will be aware, the plan was to run an in-person microcap conference later this month. However, despite reaching out to over 100 companies, there simply was not enough demand to warrant running the event at this time, so I am going to postpone it and look at doing another event in the first half of 2025.
However, I plan on running a series of Zoom webinars with companies reporting their Q1 Appneidx 4c reports, and a few others post their AGM updates through late October and early November, so watch out for those invites coming to your inbox later this month.
Microcap Market Analysis
As for the market, well, things are looking up! The S&P/ASX Emerging Companies Index TR powered up 7.70% in September. It was the microcap's index-best month since July 2022. The microcap index is now up 21.77% on a 1-year basis, which is bang in line with what the ASX 200 TR Index has returned over the same period.
I have been crunching some other numbers around the index and the state of the microcap market, which I have shared on our various social media platforms. However, for those who may have missed them, here are some other interesting data points on ASX microcaps currently.
The S&P/ASX Emerging Companies TR Index returned 9.56% for the recent September quarter, with positive returns in each of the three months. This was the first time since the September 2021 quarter that all three months in a single quarter delivered positive returns.
Global Microcap Indexes Performance 1-Year Returns as of Sept 30th 2024
USA: 24.3%
Australia: 21.8%
Global: 18.8%
UK: 12.9%
Canada: 4.0%
Despite everyone lamenting how bad the Australian microcap market is, it has delivered the same returns as the S&P ASX 200 over the last year, as noted above. The ASX microcap market has also been one of the better microcap markets globally in the last 12 months.
So, are we out of the ASX microcap bear market yet? Has the ASX microcap market bottomed? I don’t know. The chart below shows 12-month rolling returns for the S&P/ASX Emerging Companies TR Index over the last 20 years, and it certainly looks like we are going in the right direction.
Only last week did we read the headline in the AFR that the ASX IPO market is dead! Dead? Really? We are in a drought, but as any good investor, like any good farmer, knows, the drought will end eventually, and the cycle will turn, but the timing is uncertain. Out of curiosity, after reading the AFR article, I looked at microcap IPO activity over the last few years for ASX, and we are well and truly in a drought. This fact should be a surprise to absolutely nobody, but I wanted to put some numbers around the microcap end for context.
Number of ASX microcap IPOs
2022: 83
2023: 28
(YTD) 2024: 15
After some back-and-forth on Twitter about the topic, I then focused on the “industrial microcaps” and excluded microcap REITs, LICs, and resource IPOs. The subset of “industrial microcap” IPO’s and their ticker symbols are in brackets.
2022: 16 (LGI, MAP, AHL, B4P, SOC, FRE, RLF, HAL, MRI, BGE, OXT, CTQ, EQS, MBX, NGL, CSF)
2023: 5 (NDO, ACE, CVB, COV, FCG)
(YTD) 2024: 4 (BWN, AAL, WAG, BB1)
In the last newsletter, I included a chart of the best and worst months for the S&P/ASX Emerging Companies Index and the average returns per month, as shown below. June is the worst month for returns, while July is the best, and the September quarter is traditionally the best.
Digging a little deeper, I wanted to check the frequency of actual negative return months for June and the frequency of actual positive return months for July.
The frequency of negative months in June was 57.1%, so it's not much better than a coin toss, but when June registers a negative return, it tends to be a large negative return.
For July, the frequency of positive months was an astonishing 81.0%, with 17 of the 21 months in the dataset being positive.
Something to remember for tax loss selling or position building next June/July.
Upcoming Coffee Microcaps Zoom Webinar Events
For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. Two or four companies usually present Thursday mornings from 9 a.m. to 11 a.m. AEDT Sydney time.
I thank Raas Research 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” Include 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 free events.
ASX Microcap Roundtable
The next event is a Microcap Roundtable, where I will be joined by Luke Winchester from Merewether Capital and Gregg Taylor from Salter Brothers to discuss the ASX's current microcap market and a few ASX microcap stocks.
Feel free to register for the event happening this coming Thursday 10th, October 4 pm AEDT via Zoom.
We would love to have some questions from the audience on the current market.
Coffee Microcaps YouTube Channel
All the Zoom events get recorded and uploaded to the Coffee Microcaps YouTube Channel. In addition to the ASX microcap company presentations, I interview 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, subscribe to the Coffee Microcaps YouTube channel and hit the bell to receive notifications when new content is added.
Also, in the description section of each video on YouTube has relevant chapters, so you can jump to the start of a specific company presentation if that’s what you are after in a particular video.
Be sure to check out the channel, subscribe, and hit the bell to receive notifications of new content.
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.
Anyone who has subscribed to this newsletter for some time knows I am a bit of a fanboy of Brian Bares from Bares Capital Management.
On a recent holiday, I finally found an hour to listen to one of Brian’s recent interviews with Tobias Carlisle and Jake Tyalor on the Value After Hours podcast. Once again, Brian shares some great insights into investing in microcap and small-cap markets. I have shared the YouTube link above, but you can also get it on Spotify, Apple, etc.
Thanks for reading. If you haven’t already subscribed, you can do so below.