Last week was a blast! The
Showcase team knocked it out of the park for this year’s edition. Here are the stats according to host Robert Kraft:
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96 companies presented and participated in 1x1 meetings
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1,200+ 1x1 meetings conducted
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800+ attendees in person and even more online
I haven’t seen this much interest in microcaps over the last three years. We are back!
The first day of the event was dedicated to educational panels. I especially enjoyed the Planet MicroCap Podcast LIVE session with Sam Namiri (Ridgewood Investments), Ben Claremon (Devonshire Partners), Artem Fokin (Caro-Kann Capital) and Michael Liu (Intelligent Fanatics Capital Management).
Ben Claremon, who focuses on private equity and tries to find privatization opportunities in the public markets, highlighted how private valuations have been higher than public ones lately. The costs of being public are increasing, making staying/going private more attractive for companies. The private financing ecosystem is also much more developed nowadays than decades ago. Balance that, on the other side, with the main benefit of being public: liquidity for shareholders, which is a super important aspect for most investors. It’s hard for me to think that public valuations won’t revert higher over time, but I guess we’ll see.
Artem Fokin also shared a fascinating and somewhat controversial point of view. When you look at historical returns for microcaps, the asset class has overperformed compared to large-caps over a long time. However, that hasn’t been the case recently, and most people expect a reversion to the mean. Artem doesn’t think it will happen. In the past, large companies were not innovators and relied heavily on small companies to develop new products/technologies. Microcaps were where innovation happened. Nowadays, the mega-caps are incredibly innovative, which could allow them to keep overperforming compared to microcaps over time. That doesn’t mean you can’t find mispriced opportunities in microcaps, but just getting exposed to the asset class broadly won’t be sufficient anymore, according to Artem. It remains to be seen if he will be right on this call, but it’s an interesting point of view to consider.
On day two, I watched several company presentations and held my own fireside Q&A sessions with six portfolio companies: OneSoft Solutions (TSX-V: OSS), BioSyent (TSX-V: RX), Biorem (TSX-V: BRM), Sabio Holdings (TSX-V: SBIO), Yerba Brands (TSX-V: YERB-U), and BQE Water (TSX-V: BQE). It was my first time hosting fireside chats at a conference, and according to the feedback I received afterward, it sounds like it went well! You can watch all the company replays (including my sessions) using the following link:
I specifically enjoyed hearing the following presentations:
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Nova Leap Health (TSX-V: NLH) - Chris Dobbin (CEO) mentioned that the last couple of years were about integrating acquisitions, putting the right people in the right spots, and paying down debt to clean up the balance sheet. Now that the pieces are in place, the company is resuming its acquisition program and expects continued revenue and earnings growth this year.
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Music Royalties (Private) - I enjoyed learning about the music royalties space and how one can participate through this investment vehicle. I also really liked the team and their background in business/capital markets. I believe the company aims to go public within the next couple of years.
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Urban Infrastructure Group (TSX-V: UIG) - I was looking forward to discovering this one since it just went public. UIG seems to benefit from the same housing tailwinds as Atlas Engineered Products (TSX-V: AEP). It’s smaller than AEP and will also be looking to grow through M&A. The team looks solid, too. I’ll be watching this one.
Finally, on the third day, I met with 15 companies one-on-one. These meetings are opportunities to ask more specific questions and dive deeper into businesses. Most importantly, they’re also opportunities to get to know management teams and form first (or second/third) impressions.
The standout for me was BQE Water (TSX-V: BQE). I just love how they are exposed to strong tailwinds around sustainability and environmental regulations. The company could also benefit from a commodity bull market, given its mining end market, but I don’t think you need a bull market for the investment thesis to work out. After chatting a few times with management virtually, I had a chance to meet them in person for the first time. I have to say I was very impressed. This top-notch management team is probably one of the best I’ve seen in microcaps, which increased my (already high) conviction.
I’d put McCoy Global (TSX: MCB) in second place of the meetings I most enjoyed. I’ve been reluctant to buy shares of McCoy due to its indirect exposure to the oil & gas market. During our meeting, Jim Rakievich (CEO) mentioned that the company doubled its business in the US last year while rig activity was down 25%. The new technologies McCoy developed and started to commercialize led to substantial market share gains, which reduced the risks in a soft oil & gas market. I didn’t fully appreciate that until Jim mentioned it. Given the valuation that appears very low currently (a little over 3 times EV/EBITDA), it’s certainly a name I’ll spend more time researching.
I could go on and on about other exciting meetings, but this post is already getting too long, so I’ll leave it at that for the highlights!
Lastly, I’d be remiss not to mention all the new connections I made with investors and industry participants. Sometimes, the best insights and ideas come from the networking cocktails rather than the day sessions. I met tons of great people, which made the trip all the more valuable.
See you next year, Vegas!