Here are a few microcaps picks from a newcomer — albeit one with considerable business analysis experience — and a veteran of the sector. (A few words of caution here: These are not recommendations to buy these stocks. Despite their upsides, they still involve significant risk to your investment dollars.)
The newcomer: Robin Speziale, author, business analyst, DIY investor and blogger
GreenSpace Brands (CVE: JTR)
Market capitalization: $84 million
GreenSpace Brands is growing into the ever-expanding market of organic and health food. It’s not only using its increasing revenues (more than 200 per cent year over year) to expand the reach of its current lineup of products, it also acquires smaller companies in this highly “fragmented space,” Speziale says. Among its acquisitions is the popular baby-food brand Love Child, which was featured on Dragons’ Den. “They’re very cognizant of building these reputable organic brands that people are drawn to.”
Pioneering Technology (CVE: PTE)
Market Capitalization: $58 million
The company develops fire-prevention technology for the kitchen. “They want to limit the number of house fires that result from stovetop cooking.” That’s a potentially large marketplace to grow into: every kitchen in North America, Speziale adds. The Ontario firm’s primary product is its SmartBurner, which “substantially” reduces the risk of fire, the company’s website states. Speziale says Pioneering is profitable and growing. The drawback, however, is its shares may be pricing in its future growth — meaning it could be overvalued.
The veteran: Danny Deadlock, DIY microcap investor of more than 30 years, publisher and equity analyst at MicroCap.com
Exro Technologies (CNSX: XRO)
Market capitalization: $11 million
The company aims to redesign the electric motor, using artificial intelligence-like technology that increases efficiency and power. Deadlock says the company “has really good management,” including its CEO Mark Godsy, a serial entrepreneur who helped found some of Canada’s most successful biotech companies, including D Biomedical, the largest vaccine company in the country and the fifth-largest in the world. Trading at about 25 cents, “a stock like that has tremendous potential,” he says, adding it is realistic to believe it may reach $1 in the next year and a half. “But still very hard to get there.”
Trinidad Drilling (TSE: TDG)
Market capitalization: $445 million
One of the leading drilling companies in North America, it doesn’t quite fit into the microcap space because it is a big company by market capitalization. But Deadlock says it has been beaten down so badly by the slump in the energy industry, its share price now has microcap qualities. What’s more, he believes it is highly undervalued. “If you were to replace their drilling fleet right now, it trades at a third of the replacement cost of their drilling fleet,” he says, cautioning no one knows for certain how long oil prices will remain low.
“But for somebody who wanted a relatively safe microcap, it’s that’s a great stock.”