Research reveals UK professional investors say it is becoming harder to find ‘hidden gems’ in micro-cap sector
Some 60 per cent of wealth managers, fund managers and other institutional investors in the UK 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 from MBH Corporation plc, a diversified investment holding company listed on the Frankfurt Stock Exchange and the OTCQX in the US, which acquires successful, well established micro-cap and small sized enterprises across multiple geographies and sectors. It surveyed 45 professional investors based in the UK who collectively manage USD140 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 22 per cent of professional investors in the UK expect this trend to continue over the next 12 months. Only 16 per cent anticipate this situation to improve.
As a result of micro-cap stocks receiving less attention from brokers and analysts, 35 per cent of professional investors in the UK expect the cost of obtaining information on the sector to increase over the next three years, and just 28 per cent 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, 16 per cent of UK professional investors expect this to increase over the next 12 months.
Callum Laing, CEO of MBH Corporation plc, says: “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 USD1 million – USD10 million EBITDA and are generally still run by their founders who become co-owners of MBH.