Four small caps for the long term – MoneyWeek

Withthisinmind,wehavebeenfocusingonqualityandfundamentals,lookingatstrongmanagementteamsinareasbackedbyGovernmentspending。

ArelativenewcomertothepublicarenaisCarterCarter(CART),aspecialistproviderofoutsourcedservicestotheautomotiveindustry。

Atfirstglance,thismayappeartoconflictwiththestrategyofavoidingcompaniesoperatingindifficultindustries。

However,thebulkofthefirm’sprofitscomefromprovidingtrainingto16to19-year-oldsonbehalfofautomotivemanufacturers。

Demandforqualifiedtechniciansisrisingduetotheincreasingtechnologicalcomplexityofcarsandanageingexistingtechnicianbase。

Furthermore,theGovernmentviewsthisasawayofencouragingyoungpeopleintotheworkplace,andprovides85%ofthefundingforthecollegesthatCarterCarterruns。

AnotheronewelikeisGoalsSoccer(GOAL),whichfloatedonAimlastyear。

Goalsprovidesnew-generationfive-a-sidefootballfacilitiesandisrunbKeithRogers。

Rogersfoundedandsoldthecurrentmarketleader,Powerleague,whichisalsonowlookingtofloat。

Goals’cash-generativecharacteristicsandhighbarrierstoentrymakethefinancialmodelextremelyattractive。

Morerecentnewissueshavenothadsuchsuccessfuldebuts。

However,thatmakesthisthetimetopickoutthequalitycompanieslistingfromtheraftofquestionableonesandtakeadvantageofanyshare-priceweakness。

VisualDefence(VDI)hasdriftedsinceitsfloat,butwithnationalsecuritygrowingissue,itsdigitalsurveillancesolutionsareprovingagoodalternativtoanaloguesystems。

Theorderbookisgrowingrapidly,withBellCanadarecentsign-up。

Oneofthejoysofinvestinginthesmallerendofthemarketisthepossibilityofpickingupstocksthathavenotyetreachedpeoples’radarscreens。

OneoftheseisCrosbyCapitalPartners(CSB),aninvestmentbankingandasset-managementbusinesswithafocusonAsia。

Thefirmhasagoodtrackrecordofidentifyingundervaluedbusinesses,raisingcapitalfromitsownAsianandMiddleEasternnetwork,andthenrealisingvaluefromtheassets。

Thedealsarecomplexandtaketimetocomplete,butbarrierstoentryarehigh。

TherecentflotationofoilproductionandexplorationcompanyLodoreResourcesisanexampleofsuchadeal,andonewhereCrosbyretainsasignificantstakeinviewofthevaluestilltobeunlockedintheassets。

Behindthismerchant-bankingdivisionisafast-growingfundmanagementarmthatistappingliquiditycomingoutofChina。

Thissortofstockisnotforthefaint-hearted,butasdealsareannounceditbecomeseasiertoappreciatethevalueoftheassetsitissittingon。

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