A year in the life of a small cap investor
This U.S. small cap specialist looks back over a year that started in gloom, but got brighter in the spring and yielded some big winners.
We’re going to take one more look back at 2009.
But it’s not going to be one of those sweeping market surveys. We’re going to tell the story of one investor and his adventures during the year.
This investor just happens to have his own advisory devoted to small cap stocks. He’s been publishing The Bowser Report in Newport News, Virginia for the past 33 years.
We’re going to follow Mr. Max Bowser as he reviews the ups and downs of the market from his point of view in 2009.
Mr. Bowser has a specific game plan for small cap stocks, or microcap or penny stocks, as he variously calls them. He buys and sells the stocks himself, and tracks their progress for a readership of investors who represent a cross-section of middle America.
So let’s get in the time machine and go back one full year.
A stock caught fire
January 2009 opened what Mr. Bowser calls the “Zagg era.” This is the story of a stock that caught fire.
Zagg Inc. (OTC-ZAGG) makes an invisible shield developed from protective film used on the blades of military helicopters. It’s used on handheld devices to protect them from wear and tear.
The stock was purchased for a little over a dollar and roared up to almost $8 in less than a year. It has since settled down to $3.17. He continues to hold the stock.
In the meantime, the Beginner’s Portfolio, a simulated portfolio for those “in a learning situation,” was up 88 per cent, “a fairly low gain for it.”
In February, during some of the darkest days of the market slump, Mr. Bowser reviewed his investment philosophy, “emphasizing diversification and an exit strategy.”
And he was “still reeling” from one of those jolts that can strike with small caps. IBSG International, a tech holding company, had been hit with a class-action lawsuit and investigators were looking into the mess. “All they found is that Michael Rivers, the company’s founder, disappeared with the firm’s money. (He hasn’t surfaced since then.)”
In March, the news was better. Mr. Bowser awarded his rags-to-riches Horatio Alger award to Mesa Laboratories (NASDQ-MLAB), a specialist in dialysis. Bought in 1991 at $2.31, it trades today at $27.45.
Main Street investor
In April, the editor revealed a group of downtrodden stocks plucked from the New York Stock Exchange as the market hit its lows. Dubbed the “Terrible Ten,” each traded for less than 70¢ a share.
As a group, they have risen more than fourfold since then. One of them, Intertape Polymer (TSX-ITP; OTC-ITPOF), is Canadian. (See Daily Buy-Sell Adviser, April 20, 2009).
A big event took place in May — the selection of the Investor of the Year. In Mr. Bowser’s world, this is not some Wall Street wizard, but a salt-of-the-earth “Main Street” investor. This year it was Ms. Ruby M. Haugaard, 77, of Illinois.
Meanwhile, one review of all the major stock indexes in the world showed the Bowser Microcap Stock Index standing 10th.
In June, Mr. Bowser decided it was time to boost the morale of investors, so he charted the highs on the Nasdaq index. In March, there had only been six, but in just three months that number had jumped to 129. Things were looking up.
One of the advisory’s “big winners,” Female Health Co. (NASDQ-FHCO) moved from the Amex exchange to Nasdaq. This firm, which makes female condoms and ships many to third-world markets, has gone from under $2.00 to as high as $7.79 and now trades at $5.55.
It must be the ZAGG era. In July this firm won the second Horatio Alger award of the year.
Very well or very poorly
In August, there was news that doesn’t come every day from microcaps. Two of the editor’s stocks declared quarterly dividends.
Golden Enterprises (NASDQ-GDLC), a food company whose address is One Golden Flake Drive in Birmingham, Alabama, today yields 3.3 per cent on its 12¢ dividend and trades at $3.70 after a strong run-up. Community Bankers Trust (OTC-BTC) is yielding 5 per cent on its dividend of 17¢ and trades at $3.08.
Autumn dawned with more kudos for Female Health Company. In its September issue, Fortune magazine highlighted the company’s rapid growth as more of its condoms went into the fight against HIV/AIDS.
The Beginner’s Portfolio was now up 116 per cent.
Mr. Bowser began October by tracing his Company of the Month selections, which had risen 54 per cent from September 2008 to August 2009. This editor is also a believer in warrants, options to purchase shares at a set price within a set time issued by companies.
And he noted that the warrants of Bio Time Inc. (AMEX-BTIM), which makes surgical solutions, had risen 2,706 per cent in one year. “It seems that warrants do very well or very poorly,” he notes wistfully.
In November, Mr. Bowser felt compelled to defend his territory once again. “Periodically we have to write an article defending penny stocks, which we did.” He also wrote about the implications of health care reform for one of his stocks, an issue that obviously is not dying down.
All in all, not a bad year, but as December rolled around, the editor felt compelled to “rant” about the Sarbanes-Oxley disclosure rules, stock options and share buybacks. “Don’t like any of them,” he says curtly. But he did like the progress of the Beginner’s Portfolio, which ended the year up 120 per cent.
In short, it was a year that resembled that of many other investors: a few discouraging losses, more encouraging gains, and a learning process that never ends.
|
E-mail this article
Printer-Friendly
