In 2007 (age 20), I invested in a small company – SXC Health Solutions (Healthcare/Pharmacy Technology) – after conducting my own extensive research, and due diligence. I should have listened to my non-investor University roommate, who in 2006 said: “Robin, you should really invest in Amazon”. However, it is only now that Bezos is the richest man in the world that most people have realized they missed out on one of the greatest wealth-creating opportunities the world has ever seen.
FAST GROWING MICRO CAP STOCKS CRACKED
Many so-called analysts were claiming that Amazon was overvalued all of the way up until recently when Jeff Bezos finally cracked the list of top 10 richest people in the world. The majority in 2013 were still doubters, focusing on Amazon’s lack of net income, obscene P/E multiple, and calling the company grossly “overvalued”. In hindsight, it is interesting to think that most people thought investing in Amazon as recently as even 5-10 years ago was crazy. Though they are probably all now relaxing on a beach somewhere. The ones who held Amazon since 1997 were either crazy, genius, or simply forgot to check on their stock portfolio for 20 years.
Who do you think has owned Amazon since its 1997 IPO? Very few investors bought Amazon’s stock at $18 and held until now at $1,849/share. In fact, Amazon suffered a double-digit drawdown each year since going public and a 20% drawdown in 16 of 20 years. Amazon fell -95% from December 1999 to October 2001 (tech bubble), and fell -64% in 2008 (financial crisis). MarketWatch succinctly outlined its trials and tribulations over that period. Amazon had its IPO in 1997 and started trading at $18/share. Sure, from 1997 – 2017 (20 years), Amazon’s stock went up 38,155%, but its trajectory certainly was not linear. Can you stomach watching a small stock drop -20% in a day, rise +10% the next, and then lose 75%+ of its value within the following year? Well, that was part of Amazon’s wild ride. Even if you do pull the trigger, and invest in a promising small company, will you have the conviction and wherewithal to hold that stock from $100M to $1B+ market cap? Because successful small stocks do not just shoot up, they are highly volatile (i.e., lots of sharp ups and downs in price). Because when companies are at an early-stage in their business life-cycle, you are betting more on the jockey than the horse, hoping that the jockey is not only honest, and able, but executes on his vision and delivers shareholder value. Therefore, I believe achieving a semblance of success in micro-cap investing comes down to first eliminating the bad batch (80% stocks) from the micro-cap universe, so that one can focus on the good batch (20%) that contain meaningful companies with real future prospects, managed by responsible, and enterprising owners/ operators. It is actually quite depressing sifting through and pulling up the charts of most Venture stocks. The majority of small companies listed on the TSX/Venture exchange are un-investable, in my opinion, and some companies should have never gone public in the first place shoddy business models, questionable shell holding companies, and bad actors promoting, pumping, and then dumping garbage.
Actually, very few small companies get there. I should have pulled the trigger…”īut I am also a realist, and understand that while all great companies start small, not all small companies become “great” (i.e., big). It was a painful phase, and I would repeatedly ask myself: “Why didn’t I invest in that stock!? It popped up in my screener, and I conducted extensive independent research. However, years of passing on these small companies would later lead to much regret, after seeing some grow from ~ $100M to $1B+ (10x) in market capitalization, achieving multi-bagger status that I believe most DIY investors pursue in the market. I did not want to lose my money on a dumb trade and look stupid. It was the fear of the unknown betting on a tiny company that might fail. I was fearful of undiscovered micro-cap stocks because of their small size, low institutional ownership, slim trading volume, and little analyst coverage. Robin Speziale | J| SmallCapPower: When I was younger, 18 – 25, I would usually pass on the smaller companies (sub $100M market cap) that popped up on my stock screener. Save Article Robin Speziale has applied his discovery and qualification processes to arrive at 60 Canadian micro cap, small cap companies that he will continue to track
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