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Small cap value outperforms in 2012 (and it may again in 2013)
Posted by: Gerry Wimmer

Investorfile Top Ideas up 25% – on fundamentals, not hype

2012 was a good year for the Investorfile blog, since we first stated our mandate to uncover value while focusing on small cap investment opportunities. See: Investorfile has a view for value.

Investorfile's Top Ideas for small cap value stocks posted a combined average total return of over 25% in 2012. Compare that to the S&P/TSX Small Cap Index a loss of 4.9%, or the S&P/TSX Venture Exchange Composite Index which was down 17.7% in 2012, the results appear even stronger.

To this point, investing in undervalued small cap companies that are fundamentally strong but still trade at a big discount because they are currently misunderstood, require no capital raises or are in a turnaround mode, can be very rewarding even in a down market for growth companies.

At year end, RDM Corporation (TSX: RC) was our top performer, up 72% and, on the bottom, DDS Wireless International (TSX: DD) was down 1% among our Top Ideas in 2012.

Our two takeaways from 2012:

  • Buy a small cap stock when its valuation is low to allow the Company to generate positive surprises and exceed on lower expectations to outperform
  • Buy a small cap company that has plenty of cash and little or no debt. A small cap stock with a strong balance sheet can better withstand changes in the marketplace should something unexpected happen.

For 2013, we will continue to recommend purchasing small cap stocks on a value basis. We also look forward to our Top Ideas that could realize shareholder value–enhancing events such as a special dividend, accretive acquisition or outright sale of a company at a significant premium to the current stock price.

Will Investorfile's small cap stock value Top Ideas outperform the market in 2013 again? Just maybe.

As a reminder, all Investorfile blog posts are open to questions and comments (at the bottom of all posts). We will respond to all questions in a timely manner through the blog forum. Blog questions can be posted anonymously. For those wishing to contact me directly: See - Contact us.

Links to all current news for our Top Ideas are posted as our latest tweets on Investorfile's home page. For twitter-savvy investors, sign up and follow Investorfile on Twitter for up-to-date news and listing of all past tweets.

Here's to another prosperous new year for small cap value investors.

Author Ownership Disclosure: TSX: RC – Yes, TSX: DD - Yes


This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.



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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.