Research reveals US professional investors say it is becoming harder to find ‘hidden gems’ in the micro caps
Some 53% of wealth managers, fund managers and other institutional investors in the United States of America say because of shrinking coverage of micro caps from brokers and analysts, it is becoming harder to identify ‘hidden gems’ in the sector.
This is according to a new survey (1) from MBH Corporation plc, a diversified investment holding company listed on the OTCQX in the US and Frankfurt Stock Exchange, which acquires successful, well established micro-cap and small sized enterprises across multiple geographies and sectors. It surveyed 90 professional investors based in the US who collectively manage $230 billion in assets under management.
In recent years, the level of coverage of the micro cap market by brokers and research houses has fallen, and 21% of professional investors in the US expect this trend to continue over the next 12 months. Only 10% anticipate this situation to improve.
As a result of micro cap stocks receiving less attention from brokers and analysts, 24% of professional investors in the US expect the cost of obtaining information on the sector to increase over the next three years, and just 22% expect this to fall.
MBH Corporation’s research also found that although micro caps are trading at a significant discount to the wider small cap universe, 17% of US professional investors expect this to increase over the next 12 months.
The Limited Level Of Coverage Of Micro Caps
Callum Laing, CEO of MBH Corporation plc: “Since the Coronavirus crisis started, some of the best performing individual stocks around the world have been micro caps. However, given the limited level of coverage many of these receive from brokers and analysts, most investors won’t have heard of many of these companies.
“Our research suggests that the level of coverage of micro-caps could fall further, and this will make it even harder for investors to identify ‘hidden gems’ in the sector.
“At MBH Corporation, we only consider acquiring successful micro caps that have a proven and established track record of growth and profit. This means we acquire a relatively small percentage of companies we review, which means we are doing the in-depth analysis and research for investors to help find these hidden investment gems.”
MBH currently has 25 very successful and profitable small businesses in its portfolio and will continue its highly focused growth of well-established profitable small businesses across multiple geographies and industries.
MBH companies carry minimal debt, deliver around US$1m – US$10m EBITDA and are generally still run by their founders who become co-owners of MBH.
By leveraging its unique Agglomeration™ strategy, MBH can create substantial shareholder value through the consistent and accretive acquisition of excellent companies. With Agglomeration™, profitable companies convert their private shares into public shares or bonds in MBH Corporation plc in a perpetual earn-in model. Company owners are then incentivised to accelerate their growth trajectory using the resources of the plc including expertise, skill transfer of best-in-class practices, cross-selling to other group companies and where appropriate, zero cost funding for new growth projects.
Each group company retains its autonomy and follows appropriate corporate and financial governance. Business owners are also incentivised financially to enhance shareholder value through a share bonus scheme aligning their interests with public shareholders.
MBH Corporation plc is a diversified investment holding company, listed on the Frankfurt and Dusseldorf Stock Exchanges and the OTCQX® in the United States. The company acquires small to medium enterprises across multiple geographies and sectors that are well established, profitable and looking to scale. By leveraging its Agglomeration strategy, MBH Corporation plc is able to create substantial shareholder value through the consistent and accretive acquisition of excellent companies.