Adventures in Small Caps

I had read an article in 1997 about buying small cap stocks. It said you should be a basket of them, of at least 5 stocks. If 2 of the 5 when successful you then would be a winner. Theory is that you can only lose what you have invested, but what you can gain is, potentially, enormous.

Mostly the recession after the 2000 bear market came and all the small caps were so heavily damaged by this that they never really recovered. I never invested much in any company, none over $3,000 and some under $1,000.

Small caps were:
Virexx Medical Corp (TSX-VIR) I bought this in 1997 and sold it in 2006 at a loss of 32.18% per year. My total loss was 90%. It hit a high in 2000 and went down every year after that. It was a drug company that had revenue, but never earned any money. I sold when it did a reverse split. It was bought by Paladin Labs Inc. in 2008.

Continental Home Health (TSX-CHT). I bought this in 1997 (for $1.40 a share) and sold in 2005(for $.12 a share) at a 95% loss. I believe it was delisted in 2006. The stock price for this company fell some 80% in 2000. It never seemed to make any earnings after 2001. Continental Home Healthcare Ltd. operates health and personal care stores. This company operated in the US.

Organic Resource Management (TSX-ORI). I made several purchases of the stock over a few months between July and December of 1997. My purchase prices ranged from $.86 to $2.00. My total return since then is a loss of 21.16 per year or a 96.5% capital loss. I still have this stock as it is not worthwhile selling.

I reviewed this stock yesterday. For my last full blog entry on this stock in October 2011, click here.

ITI Education Corp. (TSX-IKT). I bought in 1998. It went bankrupt in 2002 and so I got 0 for shares, so 100% loss. This company seemed to have a good idea (it was into technical education), however, I do not think that it ever made money and it really started to have problems 1998 and 1999. However, the recession that followed the 2000 bear market killed it.

Pan Terra (TSXV-PNT). I bought this company in 2000 for $8.80 a share. Company was then called Tathacus Resources Ltd and it seemed to be doing interesting things. But ever since then, company has had problems. Shares did not fall right away because trading was halted. However, when trading was restarted (sometime in 2002) shares fell 80%, then another 80%. All told it fell 99%.

I retained this stock mainly because it its value is too small to bother selling. Trading was also stopped for long periods of time. My lost is 96%.

The interesting thing about this is that the listing has been acquired and more money has been put into this company. Current owners plan to buy something and change the company’s name sometime this year. I have never blogged about this company. Shares have never been 0 because it has often had trading suspended.

Mindready Solutions (TSX-MNY). I bought this in 2001(at $17 a share) and it was bought out in 2008. My capital loss was 100%, but there was one special dividend paid in 2004, so that the loss would be reduced from 100% to 95%. Company was bought out, or at least the assets were bought by Averna. Problem was they were mainly dependent on, I think, one customer.

This stock did not do too badly at first, but in 2001, it lost 75% of share value, then in 2002 it lost some 75% more. Shares started to climb again in 2003, but the company had not made any profit since 2000.

I did very poorly on this first lot. Part of it was timing. Also, stock prices fall prior to a recession and it takes some time before the damage to companies is really apparent. Tomorrow, I will continue to talk about other small companies I have had experience with.

I think that I have mentioned before that I wanted to get rid of Enerflex (TSX-EFX). This was the spin off from Toromont Industries (TSX-TIH) and I have no interest in holding it. Unfortunately, I had held Toromont in all my accounts. Yesterday, I sold Enerflex from my RRSP and Locked-In RRSP accounts. For the RRSP account, I bought Russel Metals (TSX-RUS) and for the Locked-In RRSP, I bought Genivar (TSX-GNV).

When I want to buy something for an account, I first look to see if it would a reasonable thing to buy more of a stock I already have in that account and then to see if it would be a reasonable thing to buy more of a stock in another account. It is only then that I look for something new. For both of my purchases, I picked a stock already in the applicable account.

There is a lot of volatility in the market. Because of this I started my sales and purchases in the morning and put in a price I wanted to sell or buy at and limited the offer to that day. You do not always get what you want, but mostly I do. You have to be reasonable in price put into the order form. You also have to be patient. You may have to wait the whole day to have the order executed.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.