A new survey of professional investors in the UK, US and Germany, reveals that 80 per cent think small and micro-caps are a good investment opportunity in the current market, while three quarters (76 per cent) believe investors should increase their exposure here over the next six to 12 months. Of them, over half (54 per cent) think investors should increase their allocation to small and micro caps ‘slightly’, whereas 22 per cent say there should be a ‘significant’ shift. Comparatively, just 2 per cent of those surveyed believe investors should decrease their exposure to small and micro caps.
The findings are from MBH Corporation plc, a diversified investment holding company, listed on the Frankfurt and Dusseldorf Stock Exchanges, that acquires successful, well established small to medium sized enterprises across multiple geographies and sectors.
This year, micro-cap indices have been outperforming mid and large cap indices, a trend that 71 per cent of the 117 professional investors surveyed believe will continue over the next six months. In fact, their low correlation with large caps performance is one of the key aspects driving the increase in appetite for micro caps, with 73 per cent of investors citing this as an increasingly attractive feature.
Callum Laing, CEO of MBH Corporation plc: “We have seen first-hand, within our own portfolio, how smaller businesses have been able to successfully and profitably ride the storm of 2020. So we’re pleased that our research shows an increasing number of professional investors recognising the potential of small and micro-cap stocks.
The Covid-19 crisis has made for a tough year for all businesses, and small businesses have not escaped unscathed. However, many small and micro caps have built up an excellent long-term track record of performance, and those investors that do increase their exposure here will find these stocks are typically nimbler and more resilient to changes in the market.”
MBH Corporation recently published its half year results for 2020, which revealed revenue growth of 31 per cent to GBP27.4 million (1H 2019: GBP21.0million) and a stable net profit of GBP0.7 million. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 13 per cent to GBP1.5 million (1H 2019: GBP1.3 million).
MBH currently has 21 very successful and profitable small businesses in its portfolio and, as part of a continued growth drive, is looking to acquire more companies of a similar nature.
MBH targets well-established companies that are predominantly debt free, delivering around GBP0.5m-GBP10m EBITDA and are generally still run by their founders.
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.