Finding opportunities in micro-caps

Examples of companies like this are:

• Arena Event Group, a specialist provider of infrastructure and services to Tier 1 global sporting and leisure events such as Wimbledon or The Open.

• Xafinity, an actuarial consultancy providing advice to the trustees of defined benefit pension schemes that have an ongoing multi-decade obligation to their members to account for and manage their scheme effectively.

• Filta, a franchise operator, whose franchisees provide services into commercial kitchens on a recurring contracted basis, focusing on equipment cleaning, maintenance and ancillary services.

• Tax Systems, a provider of corporation tax compliance software to large corporates, enabling them to automate the computation and submission process to improve efficiency and reduce risk.

This contrasts with resource companies or banks which are heavily dependent on macro-economic factors outside the control of their management.

Regardless of your definition of risk, it does not have to be a four-letter word. While ‘low risk’ might not be a term often associated with the world of micro-caps, it is a world of opportunity if one knows how to successfully navigate the risks.

Ken Wotton is a fund manager at Livingbridge Equity Funds