{"id":1780,"date":"2024-02-01T10:33:44","date_gmt":"2024-02-01T18:33:44","guid":{"rendered":"https:\/\/smallcapdiscoveries.com\/?p=1780"},"modified":"2024-02-01T10:33:44","modified_gmt":"2024-02-01T18:33:44","slug":"bucking-the-trend","status":"publish","type":"post","link":"https:\/\/smallcapdiscoveries.com\/articles\/bucking-the-trend\/","title":{"rendered":"Bucking the Trend"},"content":{"rendered":"

Bucking the Trend<\/strong><\/h2>\n

It\u2019s no secret that 2023 was a rough year for the smallcap market. A simple snapshot of the TSX Venture index shows this story quite clearly:<\/p>\n

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Inflation, high interest rates, global instability with the predictable flight to safe assets\u2014the list goes on. There was a growing wall of worry for investors to get over, and for many this meant the last thing on their minds was investing in a smallcap.<\/p>\n

These types of companies, also known as “penny stocks”, have a well-known reputation for being a terrific way to lose money. And this is because most stocks in this space are not profitable, are highly diluted, and are often more of a fad, chasing the latest trend with the same players at the helm.<\/p>\n

To put it into context, of the 3,500 companies on Canadian exchanges, only about 350 make any money. And as we\u2019ve noted many times, of this 350 you\u2019re looking for an even smaller number\u2014the companies that have solid fundamentals, low market caps, and are growing\u2014the 5%.<\/p>\n

Bucking the trend<\/strong><\/h2>\n

When we look at what happened in 2023, it was a tale of two different sides of the smallcap market.<\/p>\n

On one side, there were the smallcap companies that needed money. This represented most of the smallcap market, which faced a difficult year. They just couldn\u2019t get any cash, as financing was non-existent. The result was a plunge in stock values (of the 90% money losing companies) across the board, taking the whole market down.<\/p>\n

But on the other side, there were the smallcaps with money, and making more of it. This group performed much better. In this group, we saw more than 30 companies bucking the trend, delivering a strong year with many up well over 100%. They displayed stellar performance in a brutal market, going against the sentiment. And the interesting thing is that there was no specific sector that stood out; it was a complete mix.<\/p>\n

A couple of winners include: ADF Group (TSX: DRX)<\/a>, Cipher Pharmaceuticals (TSX.V: CPH)<\/a> , Firan Technology (TSX: FTG)<\/a>, Kits Eyecare (TSX:KITS)<\/a>, Vitalhub (TSX: VHI)<\/a>, Enterprise Group (TSX: E)<\/a>, Atlas Engineered Products (TSX.V: AEP)<\/a>, Thermal Energy (TSX.V: TMG)<\/a>, McCoy Global (TSX:MCB)<\/a><\/p>\n

The lesson here is simple . . .<\/p>\n

Stick to the fundamentals<\/strong><\/h2>\n

The money tide going out in 2023 proved that fundamentals are the ultimate thing that really matters. It\u2019s a simple lesson, but a hard one to remember in this space because when a fad takes off and money comes in, even junk can go up quickly.<\/p>\n

The companies we follow tick most of the boxes in this list:<\/p>\n