With the recent volatility in resource/energy sectors and financial sectors, ASX performance has been dented significantly. I always have the belief that large capitalized blue chips in predictable industries are less volatile to trade, until recently, the big four banks can drop over 3% on a single day, not to mention energy sectors, in which shedding over 5% becomes "getting used to".
This is also one of the reasons to re-examine quality small growth cap again. On my watch, medical equipment stocks such as ELX, UBI, ACG and CMP have performed very well against overall index. Although the volume is very low, subject to large volatility, when investors are buying and selling. On a longer horizon, the trend of quality growth small caps follows the like of successful growth stocks, such as Amazon/Disney/CSL/Uber/Facebook.
One year ago, ANZ is about $33 and now $28, close to 20% discount.
One year ago, CMP is about $0.1 and now $0.3, close to 200% premium.
It is true that small caps are very volatile in its initial stage toward gaining market share and restoring to profitability. Once small caps make it through initial phases of gaining profitability and competitive advantage in market. I believe growth phase is what comes next. With much-more established resources and market share, small caps can quickly leverage its resources and gain profit, even in niche markets, due to small size of the company. CMP has had hard time in the most of the 15 years, since it was listed, because it was conducting significant R&D and acquisitions to diversify its business because it did not know which sectors are more profitable and in which CMP has strong competitive advantages in. (just like lots of other small cap, such SOM and RNO) But, only until a firm can make it to growth phase, small firms are extremely risky. Imagine Facebook/Uber did not generate enough user base to make it to the market/growth phase, it would be just another apps to forget about.
With about 5 new contracts signed so far in 2015, CMP momentum is looking quite positive. Plus key-catalysts such as eHealth and Spin-off are yet to come. I hope CMP pulls eHealth sectors off along with appropriate capital-restructuring. See you at $0.40
CMP Price at posting:
29.5¢ Sentiment: None Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)