Many small caps have come good of late. Is there more to come or is it time to cash in?
I'm sure you don't need me to tell you that many small caps have been booming of late. This makes me nervous as a rising tide lifts all boats and I've been calling "bank!" here and there when I perceive the basic value has been outed -- only to the major gains being made just after the sell.
Such is the value investor's lot I'm afraid and you have to learn to accept it.
Also, anyone investing in small caps (even value ones) has to learn to roll with the punches. They won't all come good and there will be unexpected bad news from out of the blue now and again – but one decent winner can account for a number of losers if your initial selection criteria are sound.
As a specific example, when I wrote about Nautical Petroleum (LSE: NPE) in July 2009, I thought it a "buy and forget" share at 44.5p given its assets and potential. Anyone buying and forgetting (as opposed to selling out too early like yours truly!) would have made enough profit to account for almost ten 100% losses since then – a highly unlikely scenario one would hope – but it illustrates the point.
Anyway, in the four months since I last looked at a few value small caps with interesting potential, Scapa (LSE: SCPA) has really begun to motor, more than tripling in value since May.
Movement capture specialist OMG's (LSE: OMG) shares rocketed last year but I believe there could be more to come as I explained in December.
A lot less exciting has been the share price performance of coal mine methane "gas to power" producer Alkane Energy (LSE: ALK) whose shares have been treading water. The company will be presenting its wares to Fools on Monday 17 January in the evening. Let's hope for some future thrills.
Cash-rich wireless products specialist Filtronic (LSE: FTC) has fared a lot better since I thought the shares presented excellent value at 26.25p. Now at 47.5p, the story is more about future earnings than balance sheet strength, but cash still accounts for a good chunk of the valuation and the growth prospects are interesting.
Capital Pub Co.
Capital Pub Co. (LSE: CPUB), meanwhile, has also been making steady progress both operationally and in its share price, thanks to London's resilient drinkers and diners. I still believe there could be a lot more to come from this steady player as I explained in November.
Michelmersh Brick (LSE: MBH) hasn't done much since I pointed out the inherent value a few months ago, but as and when news comes of a deal with Persimmon (LSE: PSN) on the disposal land at Telford (via a long-term deal) we could, hopefully, see some favourable share price movement.
TRY OUR BRAND NEW INVESTING SERVICE!
Introducing Motley Fool Dividend Edge
Join us as we uncover high yield shares that can give you an investing "edge". You could generate substantial returns simply by following the moves of one of the Motley Fool’s most highly-regarded investment gurus. He'll tell you what dividend shares to buy, when to buy them and when to sell them. CLICK HERE for full details
Elsewhere, Inland (LSE: INL) has more than doubled since I wrote about the brownfield land developer in May 2009. A land sale at West Drayton next door to Heathrow gave the shares a bit of a fillip but not as much as many Fools think they deserve.
Mobile computer specialist Belgravium (LSE: BVM) has made some progress of late, but remains tiny and full of hope for investors valued, as it is, at just £3.8m, and having made over £2m in pre-tax profit a few years ago. A return to that kind of performance would make the shares look excellent value – but it's easier said than done.
Densitron (LSE: DSN) has gone more than four-fold since I wrote about the company in March 09, gaining ground on plans to return cash to shareholders.
And the rest...
Bringing up the rear at the moment are cash-rich carbon exchange co. Camco (LSE: CAO) which looks interesting, asset-rich Plymouth-based property-to-fisheries group Sutton Harbour (LSE: SUH) which is hopefully making plans to realise some of its inherent value, cash-rich (thanks to Harry Potter) Bloomsbury (LSE: BMY) which should make steady progress, and steel gas cylinders specialist Pressure Technologies (LSE: PRES) which also looks good value.
These are just a few of the small caps I've looked at in fairly recent times. There are many more which haven't fared as well and the usual warnings apply re the risks of small caps. Also, I hold shares in most of the company's mentioned so can justifiably be accused of looking at their prospects through spectacles which are distinctly rose-tinted.
To pick a few for yourself, why not take a deep breath have a look at the entries in the Fool's Paulypilot's Pub 2011 Share Competition? There will be some big winners -- and losers -- in there.
More from David Holding:
> David owns shares in Alkane Energy, Belgravium, Bloomsbury, Camco, Capital Pub, Inland Michelmersh Brick, OMG, Pressure Technologies and Sutton Harbour Holdings.