Small Stock Investing.

Discuss your favourite picks, broker, and trading or investment style.
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Thegipper
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Small Stock Investing.

Post by Thegipper »

Since 2009 I have been aggressive in buying small caps and it has been rewarding. I basically used in my taxable accounts and our TFSAs. My taxable accounts are now finished and I have decided to convert our TFSAs to dividend paying stocks. I still buy some small caps in our RRSP and RRIF accounts. My approach was to concentrate of high growth and high ROE especially stocks with 20 % plus ROE. Based on my experience I am leery of high ROE stocks with low ROC. Concordia and Valeant got high ROE with a lot of debt and we know what happened. I certainly like small caps with really strong growth, high ROE, ROC , with a low PE and aren't being covered by the analysts. I don't sell after making strong returns. I will sell if trouble signs show up. If there is smoke there will be fire. Valeant, Concordia, CRH, Home Capital were stocks I unloaded when controversies arose. I got rid of them with nice capital gains .
During the past 6 or so years I have held Alarius, Andrew Peller, MTY Foods, Boyd Group, Sylogist,CRH,Caroget, CSU, ITP, New Flyer, One Text,,Photon Controls,Richards Packaging, Savaria,Shopify, Spin Master, Touche Carde, Badger Daylight,A&W and some others. I have found some losers as well. If their story is changing in a negative way I unload them. . These kind of stocks have been rewarding and I have been fortunate to avoid some of the train wrecks when they decided to reverse coarse. I haven't done much in the USA . I did very well with Papa John's,Skyworks Solutions and a few others. I never worried about dividends. I recall Buffet saying something on this. If a company is growing and can re-dploy excess capital by investing in it's growth and get a 20% return why pay it out in dividends?

I basically use stock filters to find prospects. Globeinvestorgold and RBC AD are my filters. I have a half dozen metrics which I try to score in an objective way . Stocks that get the high scores get my money. There are a few commentators on market call that I pay attention to. Peter Hodson is one . I asked to start a thread on small caps so this is my experience and I hope it is useful. I do track my returns and my small caps have given an average return of about 25% plus over the past 8 years. I think they offer an advantage for the retail investor. It's hard for the big funds and institutional to invest in small companies.
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scomac
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Re: Small Stock Investing.

Post by scomac »

I too have had good experiences investing in Canadian small caps. We have owned many of the same names over the years. The trick is to ride the winners because you have to make up for those that don't work out in your favour and there will be some to be sure.

Having said that, I am less enamoured with small cap investing than I once was because the blue chips can accomplish the same task over time with less risk. Oh sure, you won't get the same high flyers, but you don't have to contend with the same percentage of losers either. Furthermore you generally get a fairly good dividend payout along the way that isn't always a certainty with a smaller stock. It's a small thing, but it generally portends a more stable business with less volatility. This is something that I appreciate as I get older -- less maintenance.

It's not so much about being first or even being better than the next guy. What's important is earning enough to get the job done to your requirements with the least amount of angst and upkeep. There are several way to achieve those ends, it just depends on your preferences.

Not really what the OP was looking for, but a different perspective nonetheless.
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adrian2
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Re: Small Stock Investing.

Post by adrian2 »

Thegipper wrote: 04 Nov 2017 21:38Touche Carde
:rofl: (sorry, could not resist!)
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Taggart
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Re: Small Stock Investing.

Post by Taggart »

I went through the taxable portfolio and was surprised to find that we had only two companies could be classified as small according to the iShares S&P/TSX Small Cap Index ETF

Gluskin Sheff and High Liner Foods. Owned Home Capital until last spring until they showed that they weren't quite the good company I thought they were on the original purchase. Unfortunately, I don't have the $billions like Buffett has to help prop these companies up. Another advantage Buffett has over most other investors is that after buying a company outright he can go in and take out any excess cash to reinvest in other investments. I can only do similar using my after-tax dividends. Geraldine Weiss got it right a few decades ago, when she said dividends don't lie.
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deaddog
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Re: Small Stock Investing.

Post by deaddog »

The opportunity for above average gains seem to be in the small cap sector.

As a trader my biggest winner seem to be in that group. I buy stocks that are increasing in price and sell when they stop.

My biggest holding at this time are BYD, PBH and ADW.a. All were acquired over 5 years ago and have not met my sell criteria.
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Thegipper
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Re: Small Stock Investing.

Post by Thegipper »

Dividend stocks can be misleading . One has to looking a real CF and the payout ratio. I could make a list of those that crashed. My experience with small caps tells me you have to monitor them closely. When they start disappointing or get involved with red flag issues I head for the exits. I would not want them in a major market correction like 1999 and 2008 . They seem to get hammered harder then anything else. I could name some star small cap fund managers who crashed in those periods. All I know is my small cap strategy has served me well since 2009. Because of my age I have refocused our TFSA stuff toward dividend payers. Dividend stocks are a different topic. I did have some in my portfolio . That was not my focus at that time.
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AltaRed
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Re: Small Stock Investing.

Post by AltaRed »

I don't have the inclination to pursue 'trading' stocks and have for the most part avoided this sector. Clearly there are some big winners in the 198 stocks in the iShares small cap index but can't say I would have moved the needle on my portfolio returns playing in that space. If I did play, I'd do it through an actively managed mutual fund with a fund manager with at least a historical track record in this space.

It looks like from http://www.moneysense.ca/save/investing ... nour-roll/ the Mawer New Canada Fund would have been an opportune choice, i.e. combination of performance over the past 5 years and fund management reputation.

I also tend to like Peter Hodson's perspective. He is worth googling for those interested in small/mid-cap growth stocks.
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schmuck
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Re: Small Stock Investing.

Post by schmuck »

I don't mess around too much with small caps either, but try not to miss the occasional nugget in Norm's annual picks (thanks to DenisD for the recent link). One of Norm's picks that I did follow up on some 5 or 6 years ago was PBH which is now a 6 bagger for me and not so small any more. One that is a real small cap (market cap $242 mil) and made his list for 2018 is CERV, which I bought today in my TFSA account at 15.50.

However, what caught my real attention were a few picks on his US list as I am looking for something to buy in my unregistered US account after journaling a bunch of cash from my Cdn account with Norbert's gambit after Poloz drove the $Cdn to what I thought was an unsustainable level. Trying to avoid ETFs in that account to keep tax tracking simple, and one that may have gotten away from me was FT (Foot Locker) as I missed it by a couple of pennies the day before its quarterly report...up about 10% since then. :(
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Re: Small Stock Investing.

Post by Taggart »

schmuck wrote: 09 Nov 2017 17:38 ....and one that may have gotten away from me was FT (Foot Locker) as I missed it by a couple of pennies the day before its quarterly report...up about 10% since then. :(
Thought I was hearing things when I heard on the radio after the market close that Foot Locker went up over 28% today.

Sure enough.....

https://www.google.ca/search?q=foot+loc ... e&ie=UTF-8
Thegipper
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Re: Small Stock Investing.

Post by Thegipper »

Taggart wrote: 17 Nov 2017 17:34
schmuck wrote: 09 Nov 2017 17:38 ....and one that may have gotten away from me was FT (Foot Locker) as I missed it by a couple of pennies the day before its quarterly report...up about 10% since then. :(
Thought I was hearing things when I heard on the radio after the market close that Foot Locker went up over 28% today.

Sure enough.....

https://www.google.ca/search?q=foot+loc ... e&ie=UTF-8
28% ON the NYSE . I think it would be a midcap in the US.
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AltaRed
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Re: Small Stock Investing.

Post by AltaRed »

Correct...except today when it closed, if Google Finance is right, with a market cap of $5.06B. :wink:

S&P mid-cap in the USA is $200M to $5B which is a pretty large range.
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JaydoubleU
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Re: Small Stock Investing.

Post by JaydoubleU »

My experience with small caps tells me you have to monitor them closely. When they start disappointing or get involved with red flag issues I head for the exits.
Does this apply to ZCL or ITP? Both have stumbled and are hovering around 52-week lows. With ZCL there's a CEO change and the future of the company seems a little uncertain; they've missed targets in the last few reports. ITP, I'm not quite sure what's wrong: I'm in the process of finding out.
Thegipper
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Re: Small Stock Investing.

Post by Thegipper »

JaydoubleU wrote: 24 Jun 2018 10:02
My experience with small caps tells me you have to monitor them closely. When they start disappointing or get involved with red flag issues I head for the exits.
Does this apply to ZCL or ITP? Both have stumbled and are hovering around 52-week lows. With ZCL there's a CEO change and the future of the company seems a little uncertain; they've missed targets in the last few reports. ITP, I'm not quite sure what's wrong: I'm in the process of finding out.
I had a look at ZCL at one time and decided to avoid it. Sometimes you get lucky. ITP has had down period for a the last 18 months. If I recall there manufacturing facilities took a bit hit from a hurricane . I don't own it but it might be something to look at. I would like to see their results next quarter. ITP is something that I will be watching. I don't tend to invest in turnaround possibilities. I tried that strategy with companies like Nortel and a few other sad stories and they turned into sad investments.
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Re: Small Stock Investing.

Post by Thegipper »

ZCL seems to be effected by a declining market for it's storage tanks. They have two basic tanks ne for fuel storage and one for water. Sales in both areas have been declining. ITP has a lot of positives.. It makes a wide arrange of tapes from consumer to industrial and they are a leader or a close second in most. They had a strong position in the USA and do much of their manufacturing in the USA. They had a large facility damaged by a hurricane and I believe that facility is coming back into production and has been upgraded. I am thinking that the US economic strength will be very beneficial. It looks like a Canadian company that is shielded from the Trump protectionism.
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