Small caps are stocks that have market capitalizations below $1 billion. This is the generally accepted definition. Likewise, micro caps are those with a market cap below $500 million. Although these stocks can be highly volatile, there are some high-quality companies in this space that are worthy of investors’ attention.
Earlier this month, I brought to your attention two micro caps that have the potential to yield outsized returns — Hamilton Thorne (TSXV:HTL) and WELL Health Technologies (TSX:WELL). Earlier this week, Hamilton Thorne released strong preliminary results, and it is up by 7.4% in only a few weeks.
It was a record quarter and year for one of world’s leading Assisted Reproductive Technology (ART) companies. Fourth-quarter revenue of $10.8 million and EBITDA of $2.2 million represents growth of 34% and 27%, respectively. Margins continue to trend upward, and Hamilton Thorne experienced growth across all of its segments.
For the fiscal year ended December 2019, it posted record revenue of $35.3 million and adjusted EBITDA of approximately $7.1 million. Once again, this represented strong growth of 21% and 14.6% over fiscal 2018.
Not only did the Hamilton Thorne pre-announce strong results, management also introduced the company’s 2020 outlook. The company is looking to drive strong growth across its U.S. and U.K. equipment businesses and has several big sales in the pipeline for 2020. Although these bigger-ticket items are lower margin, the focus remains on driving top-line and adjusted EBITDA growth.
The company also re-iterated plans to execute its growth-through-acquisition strategy. Speaking of which, its latest acquisition — Planer — contributed approximately $1.6 million in revenue to fourth-quarter results.
In 2019, Hamilton Thorne’s share price climbed 23%, and it is well on its way to posting double-digit gains again in 2020. After announced preliminary results, the company briefly touched a 52-week high of $1.50 per share. This is close to analysts’ one-year average price target of $1.54 per share and implies 15% upside from today’s share price of $1.30 per share.
The top stock on the TSX Venture
Another small cap garnering plenty of attention is DynaCERT (TSXV:DYA). The company is involved in the design and manufacturing of a transportable hydrogen generator system. DynaCERT’s technology reduces carbon emissions in diesel engines. This makes it an attractive investment for those looking for eco-friendly investment options.
This past Thursday, the company was announced as the top stock on the TSX Venture 50. The TSXV 50 is an annual ranking of the top-performing stocks on the venture exchange. In 2019, DynaCERT’s share price shot up by 284%, more than tripling investors’ investment.
Is DynaCERT a buy? Unlike Hamilton Thorne and WELL Health Technologies, the company remains a speculative buy on the basis that it generates little revenue and is far from profitability. It is early days for this eco-stock, and investors can expect considerable volatility.
Can the company post a repeat performance in 2019? It will be a tough task. On the bright side, the company has the shift to renewables and sustainable investing as a tailwind. Investors are craving for the next clean energy company, and DynaCERT’s technology certainly fits the build.
Hamilton Thorne is poised to continue strong growth and is one of those rare small caps that is profitable. It remains a top micro cap and is worthy of investors’ consideration. On the flip side, DynaCERT is still in the “prove itself” stage, and investors should not rush out and start a position in the company based solely on last year’s performance. That being said, it is worth adding to watch lists.
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Fool contributor Mat Litalien owns shares of HAMILTON THORNE LTD. The Motley Fool owns shares of and recommends HAMILTON THORNE LTD.
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CBRE predicts record $50 billion investment for commercial real estate this year – Times Colonist
TORONTO — Canada could see a record-breaking $50-billion worth of investment in commercial real estate this year as economic tailwinds and immigration policies support the booming sector, according to a report by CBRE, but it says the strong economy is also creating challenges of affordability and supply.
The commercial real estate services firm said Tuesday that total investment would be about $5 billion higher than 2019 and about a billion dollars higher than the record set in 2018.
Growth comes even amid low vacancies in major markets as tech companies in particular continue to prize downtown locations. Other strong areas include investments in rental apartments as home affordability gets out of reach for many Canadians, and industrial growth driven by e-commerce demand for logistics centres.
“Canada has so many advantages, and so many underlying fundamentals that are positives over the long-term, that we certainly think that growth in the Canadian commercial real estate market is going to continue,” said CBRE Canada vice-chairman Paul Morassutti.
Those trends, along with strong population growth and stable banking and governance, would help steer the sector if a recession hits, said Morassutti.
“The wild card is a recession. My feeling is we’re very well positioned to weather a recession, and I think we’ll continue to flourish after that because of those attributes.”
Heightened interest in the market is also creating challenges, including rising rents and limited office and industrial space, while climate change is creating its own issues.
CBRE says prime office rents jumped 20.9 per cent in Vancouver between 2018 and 2019, 14.2 per cent in Montreal, and 10.1 per cent in Toronto, while national industrial rents rose by 12.3 per cent between the two years for the largest increase on record.
Rents still form a small portion of company budgets and don’t seem to be a major constraint on growth yet, said Morassutti. He noted that in the industrial sector, costs savings in transportation from better locations more than offset costs from higher rents.
Rental rates for apartments are also climbing in major centres as home ownership becomes more expensive, which has helped drive investment in the multifamily. The sector could see about $11.9 billion in investment this year, up from $8.3 billion in 2018, to see the most of any commercial sector, CBRE expects.
The upward trend in residential rental rates is however putting pressure on income inequality, said Morassutti.
“Partially because of that lack of home affordability, you have all these people becoming renters, so on the one hand that’s a good thing. On the other hand, it’s not great for society that our two major cities are becoming unaffordable, it’s not great for the income divide, which is already a large social issue.”
Along with affordability, CBRE says the lack of investment in transit infrastructure, and increasing pressures of climate change on the construction sector and land values are also structural issues of concern for the year ahead.
More immediately, the impacts of the coronavirus outbreak also loom as a big unknown, but could be short-lived if it is contained, said Richard Barkham, global chief economist at CBRE said in a statement.
“If the coronavirus outbreak is relatively contained sometime in March, impacts on the Canadian economy and most commercial real estate sectors will be noticeable in the near term but less substantive over the year.”
He noted that short-term impacts would largely hit the hotel and retail sectors. He said the global property market should be able to weather the effects of the virus as anticipated today, but that a clearer picture of the epidemic should materialize sometime in March.
This report by The Canadian Press was first published Feb. 25, 2020.
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