We asked our freelance writers to share the top micro-cap stocks they’d buy this month. Here’s what they chose:
David Barnes: Begbies Traynor
If you fear a second stock market crash or think the economy will struggle in the short term, I think a good hedge would be to invest in Begbies Traynor (LSE: BEG).
The insolvency and restructuring work specialist should see business demand surge as government support for companies is removed. The company is also a financial advisory and property services consultancy.
The firm has growing revenue and earnings per share, and uses acquisitions alongside organic growth to boost their financial strength.
Begbies Traynor trades at a fair price-to-earnings ratio of 16 and has a progressive 3% dividend that looks to be safely covered.
David Barnes has no position in Begbies Traynor.
Toby Aston: Anglo Pacific
Anglo Pacific Group (LSE:APF) is a global natural resources royalty and streaming company with a fantastic margins (52% profit last year). Its shares are down around 50% since last December, meaning the share price is a just 7 times earnings and at just 93% of book value. Management own around 7% of the shares which is encouraging.
It also pays a solid dividend yielding nearly 7%, which has doubled since 2016. This is all protected by a healthy dividend cover. At 116p the shares are trading at low end of the 52 week range, despite analysts price target averaging 196p.
Toby Aston has no position in Anglo Pacific Group.
Royston Wild: Sylvania Platinum
Gold’s surge to record highs above $2,000 per ounce has dominated commodities-related chatter recently. But the yellow metal’s ascent due to rising safe-haven interest has dragged platinum group metals (or PGM) prices to significant highs as well.
Platinum has just struck multi-month peaks around $1,000 per ounce. And this has swept micro-cap stock Sylvania Platinum (LSE: SLP)’s share price to its highest since February.
I’d buy the miner’s shares with the view that continued macroeconomic fears could drive their value even higher in the weeks and months to come. Sylvania’s low forward price-to-earnings (P/E) ratio of 11 times certainly leaves plenty of scope for additional share price gains.
Royston Wild does not own shares in Sylvania Platinum.
Tom Rodgers: Open Orphan
£96m market cap contract research firm Open Orphan (LSE: ORPH) is the world leader in testing vaccines and antivirals through its unique quarantine unit and on-site virology lab.
Sales have been boosted by biotechs developing Covid-19 vaccines. But ORPH has large, long-term cash flow prospects far beyond coronavirus.
A £4m contract with an unnamed global giant for a human challenge study into RSV is just the latest win. 2019 revenue was only £3.84m but that is expected to jump tenfold to £35m by 2021.
Analysts think shares will more than double from today’s 14p price.
I’m buying big.
Tom Rodgers owns shares in Open Orphan.
Kirsteen Mackay: Trans-Siberian Gold
Russian gold producer Trans-Siberian Gold (LSE:TSG) is a micro-cap stock that has caught my eye. With the price of gold ascending at an astounding rate, gold miners are reaping the benefits.
Since the March market crash, the Trans-Siberian Gold share price has risen 165%. The £113m company has a price-to-earnings ratio of 14 and dividend yield close to 3%. It has maintained operations throughout the pandemic and delivered a positive set of results at the end of July. Its second quarter produced 46.9% higher average gold grades than its previous quarter. With the gold price continuing its ascent, I think the TSG share price will follow suit.
Kirsteen does not own shares in Trans-Siberian Gold.
Matthew Dumigan: Jubilee Metals Group
Industry-leading metal recovery business Jubilee Metals Group (LSE: JLP) boasts an expanding multi-project portfolio with aims to increase both its geographical and commodity exposure. Operating in a rapidly expanding market, I think Jubilee is perfectly positioned to capitalise on increased demand for a reduction in the global footprint of mine tailings.
Having become profitable for the first time this year, I’m impressed by the group’s recent financial performance. Moreover, as Jubilee continues to remain largely unnoticed by institutional investors (market cap: £115m), I think there’s a lucrative opportunity here for those willing to hold for the long term.
Matthew Dumigan has no position in Jubilee Metals Group.
Edward Sheldon: Keystone Law
My top micro-cap stock for August is Keystone Law (LSE: KEYS). It’s an innovative UK law firm that is disrupting the market by enabling lawyers to work from home or their own offices.
Keystone Law has grown at a rapid pace in recent years and I think it looks well-placed for growth in a post-Covid-19 world. I say this because its model is designed to service clients remotely.
KEYS isn’t the cheapest stock around. At the time of writing, its forward-looking P/E ratio using next year’s EPS forecast is about 36. However, I think this company deserves a premium valuation as it has a lot of potential for growth.
Edward Sheldon owns shares in Keystone Law.
Rupert Hargreaves: Inspecs
Manufacturer of eyewear frames Inspecs (LSE: SPEC) is a unique business. The company is one of the few listed eyewear companies in the world, which gives it a defensive nature.
Indeed, the eyewear market is projected to expand at a compound annual rate of 8% for the next few years.
Based on this growth, analysts reckon the company’s sales will double by 2021. This will leave the stock dealing at a forward P/E of 17.8.
The company’s double-digit profit margins and strong balance sheet also make it a prime dividend candidate.
Rupert Hargreaves does not own shares in Inspecs.
Rachael FitzGerald-Finch: Concurrent Technologies
Shares in computer product manufacturer Concurrent Technologies (LSE: CNC) are growing nicely, like the company’s underlying financial fundamentals and investment metrics.
In fact, the share price is hovering around its 52-week high price point but is still trading on a price-to-earnings ratio of 22, below the industry average of 30. Given the competitive advantages of the firm, in the form of a growing an innovative product range, I am expecting further stock price growth.
I think Concurrent Technologies is a desirable micro-cap growth stock to hold as part of a balanced portfolio.
Rachael FitzGerald-Finch does not hold shares in Concurrent Technologies.
Anna Sokolidou: Ariana Resources
Ariana Resources (LSE:AAU), a small cap miner, explores silver and gold in Turkey.
Its shares have recently plunged a bit just like the two precious metals. In spite of the several months’ gold rally, the investors seem to be in a risk-on mode right now. However, I don’t really believe it will last for a long time. There are plenty of macroeconomic and geopolitical risks. So, in my view, gold and silver will rise in value pretty soon.
Although I consider small caps to be rather risky, their shares tend to surge more than their larger competitors’.
Anna Sokolidou has no position in Ariana Resources.
Jonathan Smith: Mattioli Woods
Mattioli Woods (LSE: MTW) is a UK-based wealth manager. Financial performance through to the year end of May 31st was strong, with net inflows of around £200mn, despite the pandemic hampering the final few months. The firm has also been proactive with responding to the pandemic, taking on cost cutting measures with employee compensation, saving over £2.7mn in the process.
I’m also impressed with the drive and pro-activeness around growth aims. Only this month news broke of the successful acquisition of another wealth manager, Hurley Partners. This should aid long term growth via economies of scale.
Jonathan Smith does not own shares in Mattiolo Woods.
Kevin Godbold: Concurrent Technologies
Specialist designer and manufacturer of high-end, embedded computer boards for critical applications, Concurrent Technologies (LSE: CNC) had a ‘good’ coronavirus crisis. We last heard from the company in June. The directors said the order book is “strong” and the company maintained production through the lockdown.
The firm serves the military, aerospace, communications, industrial, transport and scientific sectors. It’s a good business, which shows in the robust multi-year record of rising cash flow and dividends suggesting the enterprise has defensive qualities. As we emerge from recession, I think the firm looks well placed to thrive. I’m backing the micro-cap stock for August and beyond.
Kevin Godbold owns shares in Concurrent Technologies.
G A Chester: Sylvania Platinum
Sylvania Platinum (LSE: SLP) has built a record of strong operational performance in recent years. This is founded on its low-cost, low-risk extraction of platinum group metals (PGMs) from chrome tailings in the renowned PGM-rich Bushveld Igneous Complex in South Africa.
The company’s strong operational performance has been matched by a sensible financial strategy. It’s debt-free. It’s strong cash flows fund capital expansion and process optimisation projects. And also support opportunistic share buybacks and shareholder dividends.
Adding a single-digit earnings multiple to the strong management and focus on shareholder value makes Sylvania my top stock to buy right now.
G A Chester has no position in Sylvania Platinum.
Roland Head: Somero Enterprises
I’ve been using this year’s market crash to buy shares in high-quality businesses trading at knockdown share prices. One micro-cap stock I think looks very attractive at the moment is Somero Enterprises (LSE: SOM).
This US business makes high-precision equipment for laying perfectly flat concrete floors, such as those required for ecommerce warehouses. The company went into the COVID-19 crash with a strong order book and reported net cash of $28m at the end of June.
Management say it’s too soon to give guidance on current market conditions. But Somero looks cheap to me on just eight times forecast earnings. I rate the shares as a buy.
Roland Head does not own shares in Somero Enterprises.
Andy Ross: Franchise Brands
Franchise Brands (LSE: FRAN) is a franchisor. Its franchises include consumer-facing ones such as ChipsAway and Ovenclean as well as business to business ones such as Metro Plumb and Willow Pumps.
I like that management are experienced operators. The executive chairman spent 21 years at Domino’s, which operates a franchise model. A number of the board and other senior management personnel also worked at Domino’s so know the industry well.
It’s an entrepreneurial company which has made acquisitions and retains talent within the business.
Franchisors can make good margins because it’s an asset light business model and I think that bodes well now and in the future.
Andy Ross does not own shares in Franchise Brands.
Paul Summers: Somero Enterprises
I think laser-guided equipment specialist Somero Enterprises (LSE: SOM) is a great buy for the long term. It’s the clear leader in a niche market and generates consistently high returns on capital employed.
Recent trading has been inevitably tough. However, Somero remains profitable and cash generative and would likely remain so even if revenues were to fall an additional 20%. It also has $28m in net cash to weather the coronavirus storm.
Those looking for a quick return probably won’t find it here. However, anyone intending to stick around for the next infrastructure boom could be richly rewarded. The shares look cheap at just 8 times forecast FY20 earnings.
Paul Summers owns shares in Somero Enterprises.
The post Top micro-cap stocks for August appeared first on The Motley Fool UK.
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The Motley Fool UK has recommended Anglo Pacific and Somero Enterprises, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020