Eckoh's of my own investing strategy

In my very earliest investing days I remember receiving a circular from a company whose name escapes me now. However, I do remember that in the circular there was a raft of information about micro-caps which were listed or about to be listed on the LSE. I don't remember too many of the companies that were mentioned, apart from one called Eckoh. I tended to concentrate my efforts on medium and large cap. shares at that time, and certainly never entertained purchasing any of Eckoh's shares. Times have changed of course, and now I like to focus my attention on the micro-cap sector of the market. Yes, it can be perceived as more risky and there will be inevitable disappointments, but the rewards can be phenomenal. With a little bit of luck and judgement  the winners will dwarf your losers, and even one or two multi-baggers will enable you too easily outstrip the indices year in and year out even if the others are duds. Anyway, I digress.

Eckoh plc caught my attention today because they have just released a positive sounding trading statement.

http://uk.advfn.com/news/UKREG/2015/article/68611575

The key summary line is:- "We remain confident that the high levels of growth seen in previous years will continue through the new financial year and beyond with current trading remaining in line with market expectations."

Today I am not looking at the current investment case for Eckoh, but the parallels between it's fundamentals and the type of companies I try to identify.

Firstly, a look at Eckoh's chart will tell you that the company hit the market towards the end of the 90s on a far too heady valuation. This is far too often the case, and I would argue that nobody is ever going to get rich by buying into IPOs. By the early 2000s the share price has plummeted, and then went nowhere for several years. However, look at 2009 onwards. A multi-bagger. Timing is crucial. These are the situations that I often look for. Interesting businesses where investors have lost patience, but where the company looks like it is about to turn the corner.

What else though? Well for me, sufficient cash on the balance sheet and a company that is capable of producing good cash generation. Little or no debt. High gross margins. Securing contracts with blue-chip and/or reputable companies/household names. A bullish outlook statement.

Now take a peek at Eckoh's final results from 31 March 2010.

http://uk.advfn.com/news/UKREG/2010/article/43300791

The share price chart from this point tells it's own story.

Will the story continue from here? Certainly the trading statement is encouraging. I haven't re-examined the most recent fundamentals so I've no idea if the current valuation is cheap, expensive or about right? I'll leave that to your own further research, but investors who bought shares at Eckoh's lows will have done very well indeed.