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!

Can it rise from the ashes once more?

It's difficult to believe that SpaceandPeople (SAL) was a former darling of the stock market, as the share price languishes at 11.25p down a further 6% after today's trading update. I think today's fall  may reflect a lack of interest in a forgotten micro-cap rather than a reaction to today's news, but more of that later.

In summary the company describes itself as follows:-

"SpaceandPeople (AIM:SAL), the retail, promotional and brand experience specialist which facilitates and manages the sale of promotional and retail merchandising space in shopping centres and other high footfall venues"

In 2007 the share price of SAL hit the dizzy heights of 220p only to fall sharply to around 45p (like so many other companies at the time), and then rise once more like a "phoenix from the flames" to around 150p in 2014. Sadly, and perhaps not surprisingly, the share price alongside the company's fortunes has slid back to today's 11.5p seemingly mirroring the demise and troubles of the high street.

Can it rise once more?

Firstly, let's be realistic and confront the negatives. Over recent years SAL has been a serial disappointer, always on the verge of returning to growth, but never quite managing it. Indeed this morning's trading update reported revenues below expectations and slightly below last year at £7.7m.

https://londonstockexchange.com/exchange/news/market-news/market-news-detail/SAL/14407056.html

On the plus side, they have recorded a very small profit before tax (around £100,000) which is broadly in-line with expectations. It should be noted these were revised targets following higher expectations at the beginning of the year. So not inspiring so far.

However, context is everything and SpaceandPeople is valued at around a measly £2m, and there are some positives worth considering.

Their year end cash position was £1.2m with £0.6m of bank debt.

Most interestingly, they've upped the dividend payout by 50% to 0.75p from last year's 0.5p. If you bought the shares at today's price of 11.5p then you'll get a nice yield of 6.5%. Perhaps, more pertinently, the dividend hike suggests that they're confident of an improved performance in 2020.

So what has inspired that confidence?

In today's trading statement, they also announced a contract win with Abellio and a contract extension with Network Rail:-

"The Group is also pleased to announce that a multi-year agreement has been signed with Abellio to provide commercialisation activity in the Greater Anglia and West Midlands rail regions. This is the first time that SpaceandPeople has worked with Abellio and we look forward to growing this relationship.

Also, the Network Rail agreement that was due to expire in September 2020 has been extended by a further year and we look forward to continuing to expand on this very successful relationship."

Furthermore, at the interim stage the company had this to say about prospects for 2020:-

https://londonstockexchange.com/exchange/news/market-news/market-news-detail/SAL/14245740.html

"However, the foundations for a sustainable and significant turnaround have begun. Although the resurgence of German RMUs has come too late to have a significant impact on 2019, the new venues joining our service this year and the pipeline of additional venues in development for 2020 is the most positive it has been for many years. This will result in substantial revenue improvements  next year."

As mentioned, they've disappointed in recent years, and who's to say they won't disappoint again this year? However, with such a tiny market cap., a current progressive dividend policy, and hints of a turnaround (I suspect they would payout at least a 1p next year or 8.7% at today's share price), there is the potential for a significant upside surprise from this tiddler imo.

As ever, no recommendations are made and it's AIMHO.