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Micro Caps - Results Preview

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One thing common to our microcap universe is that investors need to look beyond near term financial performance to appreciate the potential. However we expect investors to selectively do so, particularly given the capital flowing into the microcap space. Our picks in our universe are currently CLX and GRB. For logistics business CLX, we believe FY17 will prove to be the trough year and that mid-cycle earnings support a higher share price. And brewer GRB is successfully executing to date its strategy to sell more proprietary product. We are upbeat on the potential for OEC’s drone business, but worry about timing and the drag from REMSAFE in the near term. TPS and VLT are still in the process of proving their business models. The former turned the corner in the latest quarter, but both are still close enough to our valuations to warrant hold calls.

Note: we exclude from this preview earlier stage companies under coverage for which we do not have financial forecasts (AMN, BOT, HZR, OBJ, OCC and SO4).

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