5 Micro-caps that will 10 bag or more in 5 years or less - January 2021 update

It's now just over 4 months since I wrote the blog "5 micro-caps that will 10 bag or more in 5 years or less":-

The mouse "shares" his thoughts: 5 micro-caps that will 10 bag or more in 5 years or less (michae1mouse.blogspot.com)

Here's the follow up blog I wrote in September:-

The mouse "shares" his thoughts: 5 micro-caps update (michae1mouse.blogspot.com)

It's still very early days, but I thought I'd provide a brief review of progress.

1) IXICO (IXI) current share price 94p (up 36%)

Ixico is the star performer so far with a current share price gain of 36%.  The share price gains have come on the back of excellent full year results and a host of new contract announcements which underpin expectations for the year ahead and add to their already strong order book.

Their full year results showed EBITDA of £1.3m (more than double the previous year),  26% growth in revenues to £9.5m (another record for the group),  superb gross margins at 67% with a strong balance sheet which boasts nearly £8m cash. The contracted order book was up 36% at £21.7m and operating cash inflow was £1.5m.

The only surprise is that the share price isn't higher. 

2) CRIMSON TIDE (TIDE) current share price 3.35p (unchanged)

Not much news since the September update other than two new contract wins and some holdings notices. Perhaps that explains the currently static share price? Probably worth repeating my original thoughts:-

Gross margins 87%. Profitable. Minimal debt. Growing long term subscription revenues. Unaffected by Covid-19. Winning sizeable clients across supermarkets, rail and the NHS. Stick some figures into a spread sheet and see what happens to their profitable growth with double digit revenue growth. 

3) BIOME TECHNOLOGIES (BIOM) current share price 220p (down 6%)

The share price has recently recovered following a share fall after they announced a discounted placing back in September. This company really should capture investors imagination this year. Basically it's in the right place at the right time, and their Bioplastics division is really gaining momentum. Results should be in line with expectations for 2020. They have an expanding list of potential new customers, particularly in the US.

Given the potential for Bioplastics and their expanding US based client roster, the market cap. at £8m is absolutely tiny. They release their full year trading update on the 28 January.

4) SOFTWARE RADIO TECHNOLOGY (SRT) current share price 39.75p (down 6.5%)

Apart from the interim results there has been very little news from the company. The interims contained no surprises. Investors are patiently waiting for news of major contracts which will be transformational for all. There should be fireworks if they can announce one or two contracts over the next three months.

5) TRAKM8 (TRAK) current share price 16p (down 15%)

Half-year results suggested that this is still very much a possible recovery play. Whilst lockdowns continue to hamper and delay their full recovery, they are surviving and will hopefully move through the gears as we begin to see an end to the current stop/start economy. 

This is the line for investors to latch on to from the November interims,  "the Group expects revenue in the second half to be significantly higher than the first half given current orders, even with a reasonable downside scenario taken into account for the ongoing impact of Covid-19."

In summary after 4 months, apart from Ixico, the share price performance of the other four companies has been fairly flat. However, most importantly I'm happy with the progress of all five, and still anticipating an excellent performance over the five year time scale. 

5 micro-caps that will 10 bag or more in 5 years or less

It's been a while since I last penned a blog post so here goes. It's a brief one and it's a bold one. The five micro-caps listed below will 10-bag or more in 5 years or less. I'm not going into too much detail about the companies themselves, you'll have to do your own research. Have I chosen multi-baggers before? Yes. Here's my most successful one:-

https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152&from=1

Avesco. Went from around 20p to the final £6.50 take-over price with substantial dividends along the way.

Have I made mistakes? We all have, but experience makes you a far better stock picker and builds resilience. I'm very confident about these five micro-caps, as I was with Avesco.

For various reasons I've had a sabbatical from posting too much or talking about my holdings. I hold all 5 of these and won't be selling a single share until they've multiplied manifold times in value. Let's start.

1) Ixico (share price 69p, market cap. £32m) - Due to report on trading on Tuesday. 

"IXICO's data analytics services are used by the global biopharmaceutical industry to interpret data from brain scans and digital biosensors to enable better trial design, site qualification, patient selection and clinical outcomes. "

Strong growth. Excellent gross margins. Plenty of cash. Very strong order book. Minimally affected by Covid-19. No debt and strong balance sheet. Recent trading statement indicates £9.1m in revenues for full year 2020 and £0.9m EBITDA. Double digit revenue growth expected across 2021. You'll also feel good about owning this one when you read about the work they're doing.

2) Crimson Tide (share price 3.4p, market cap. £16m)

"Crimson Tide plc is the provider of the full service mobility platform mpro5 - #notjustanapp.  mpro5 is delivered on smartphones, tablets and PDAs, and enables organisations to transform their business and strengthen their workforce by smart mobile working. "

Gross margins 87%. Profitable. Minimal debt. Growing long term subscription revenues. Unaffected by Covid-19. Winning sizeable clients across supermarkets, rail and the NHS. Stick some figures into a spread sheet and see what happens to their profitable growth with double digit revenue growth. 

" I believe there are exciting times ahead." Luke Jeffrey CEO.

3) Biome Technologies (share price 234p, market cap. £6.5m)

"a leading bioplastics and radio frequency technology business"

Bioplastics is the exciting bit and it's come of age! RF division is cyclical, but profitable and cash generative in normal times. At the interims the Bioplastics division had grown revenues by 53% and this week they announced an order worth US$550,000 from an existing major client operating in the United States packaging market. It was "the largest single order to date for Biome's heat-stable and compostable bioplastic for coffee pod applications". They work closely alongside their clients (largely US based) to meet their exact needs and hence their clients stick with them. Commercialisation is really beginning to take-off now.

4) Software Radio Technology (share price 42.5p, market cap. £69m)

"SRT Marine Systems PLC (SRT), a global provider of maritime surveillance, monitoring and management systems"

It's taken them a long time and many injections of cash but the promise has always been there. They've navigated the recent crisis admirably (see recent trading statement) and are about to deliver in spades.  That's it, time to enjoy the rewards!

5) Trakm8 (share price 18.75p, market cap. £9m)

"global telematics and data insight provider"

From stock market darling to pariah.  Priced to go bust. It won't. Superb client list, and supportive shareholder in a company called Microlise. Half their revenues are recurring. Hot and competitive sector, but Trakm8's offering is second to none. Worst case scenario is they're acquired at about 3 times the current share price.

And that's the five. Don't expect a smooth ride with any. Micro-caps are generally very volatile, but staying the course proves very worthwhile if you've done your research. 

I should add that I'm not a stock tipper and that these are merely my own personal views, and as mentioned I own them all.

Good luck with your investments.

Valuations matter

A relatively short blog post this one. It's really for those who are relatively inexperienced in 'stock picking' and those fretting about the current situation.

This is the third bear market/huge correction I've encountered since starting my 'stock picking' passion.

I suspect it's more of a bear market than correction because it feels very much like 2007/2008. Just when you think a company's share price can't get any lower, it does.

In truth, the huge sell off has been a long time coming. I thought last year would be the year, but of course there were no triggers. However, along comes Covid-19, mass hysteria, mass panic and stock markets around the world plummet as potential worldwide recession casts it gloom across the globe. It's the end of the world!! Again.

In future, some of the signs to look for before a mass sell off are stock pickers relatively new to investing believing they're demi-gods after a couple of years or so of positive returns, a rise in the 'investment gurus' on social media and elsewhere where their mere mention of a company moves it's share price up regardless of it's valuation (I'll come to this in a minute), a significant number of companies on p/e ratios of 30+ which can all be justified of course because earnings will eventually reach infinity and beyond, companies with market caps that are a significant multiple of it's revenues. These are just some signs, but I could go on.

Largely, I learnt my lesson (and it was an invaluable lesson) in the dot-com boom and bust (look it up if you're new to stock picking or a youngster). I wanted a piece of the 'stock market' action, but knew sod all about balance sheets, p/e ratios, balance sheets etc. I got lucky at first, every one's a winner!! Big percentage rises, easy money! Of course, along came the non too friendly bear and oh dear!

Here's the thing though. At that stage of my 'stock picking' excursion I thought I was being sensible and conservative. Two of the companies in my portfolio were GlaxoSmithKline and British Telecom.

I bought GSK for about £20 and BT for around £8 per share. During the bear market, their share prices plummeted. These are quality companies (certainly in GSK's case) but in nearly 20 years the share prices of these companies has never returned to these levels. I should add however that at least you'd have received a nice income stream, but capital appreciation would have been less than zero. Quality companies but not great investments at those prices.

The bear market was the best thing that happened to me however. I couldn't understand why the share prices of these two stalwarts of the market had fallen so dramatically?

That's when I started to read extensively. I'm not talking about the shite website tipsters, the bloggers, the twitter gurus or bulletin board heroes. Ignore all these. Get some books and information about the proven great investors with track records e.g. Buffett, Graham, Lynch, et al and learn about dividends, p/e ratios, net asset values etc.

When I did this in the early 2000s it was transformational. I quickly ditched GSK and BT and took the losses on the chin. The stock market made sense and was no longer a scary place. Knowing how to value companies sensibly is the key to successful investing. Bear markets create huge opportunities. Life changing opportunities.

Of course, I still make mistakes and pick some howlers, but being able to pick companies on a cheap valuation gives you an edge. Where's the evidence then? Well here's one example. The majority of the shares were bought around the 25p mark. The company eventually got bought out for £6.50, not to mention all those dividends and special dividends along the way:-

https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152&from=1

If you read no further than post 2 on this thread it'll give you an idea of why the valuation of this little known company was fantastically appealing. It'll also give you an idea of how low valuations can sink in times of irrational panic.

In conclusion, valuations matter!