We hope that you, your family, and colleagues are doing well. Crises always create fear and stress, but somehow, someway, we manage to come out the other side mostly intact. Consider that over the past 100 years, we have:

• survived pandemics that killed millions, like the Spanish Flu, HIV/AIDS, Asian Flu, Hong Kong Flu;
• recovered from over 30 wars, including WW1, WW2, Korea, Vietnam, Persian Gulf, Afghanistan War, Iraq, and;
• withstood global warming, global cooling, ozone deterioration, acid rain, gas crisis, Y2K and 9-11.

Although the current financial market crisis is not as important as your family and friends, we survive them too. Over the past 100 years, we’ve endured 25 bear markets where the S&P 500 declined 20% or more. And in our experience, microcaps with solid balance sheets often outperform when the bear ends.

Look at the 1-year, 2-year, and 5-year performance of the Dow Jones U.S. Micro-Cap Total Stock Market Index (green line) below. It outperformed the Dow Jones Industrial Average, S&P500, Nasdaq, Russell 2000, and S&P/TSX 60 one, two, and five years after the March 9, 2009 credit crisis low. Even if you invested January 1, 2009 before the markets hit bottom, microcaps still outperformed one year after the low.

Dow Jones U.S. Micro-Cap Total Stock Market Index (Green) outperformed the Dow Jones, S&P 500, Nasdaq, Russell 2000 and S&P/TSX 60 1-year off the March 9, 2009 credit crisis low.

 

Dow Jones U.S. Micro-Cap Total Stock Market Index (Green) outperformed the Dow Jones, S&P 500, Nasdaq, Russell 2000 and S&P/TSX 60 2-years off the March 9, 2009 credit crisis low.

 

Dow Jones U.S. Micro-Cap Total Stock Market Index (Green) outperformed the Dow Jones, S&P 500, Nasdaq, Russell 2000 and S&P/TSX 60 5-years off the March 9, 2009 credit crisis low.

So if you’re bold and looking to step into microcaps while the market whips around, here are a few names for you to consider:

Kraken Robotics (TSXV:PNG). At the end of September 30, 2019, the Company had:

• working capital of $7.7 million (including $2.7 million of cash) compared to $4.9 million at December 31, 2018;
• $560K total debt, with $200K current;
• Adjusted EBITDA was $1 million;
• Nine-month cash flow from operations before non-cash working capital changes was $1.9 million.

OneSoft Solutions (TSXV:OSS). At the end of September 30, 2019, the Company had:

• working capital of $9.1 million (including $11.5 million of cash) compared to $2.4 million at December 31, 2018;
• zero debt;
• Nine-month cash burn from operations before non-cash working capital changes was $1.6 million.

Legend Power Systems (TSXV:LPS). At the end of December 31, 2019, the Company had:

• working capital of $6.4 million (including $4.2 million of cash) compared to $7.9 million at September 30, 2019;
• zero debt;
• Three-month cash burn from operations before non-cash working capital changes was $1.3 million.

Nanotech Security (TSXV:NTS). At the end of December 31, 2019, the Company had:

• working capital of $9.1 million (including $9.5 million of cash) compared to $9.7 million at September 30, 2019;
• zero debt;
• Three-month cash burn from operations before non-cash working capital changes was $405,000;
• INSIDERS BUYING (link).

Remember, this current global crisis will end, and we kind of know how – we’ll get the virus under control (maybe a vaccine accelerates the timeline), infections will decline, and hopefully deaths will cease. Until then, stay safe, help your elderly neighbors, and remember that we’re in this together and we’ll make it through.