10 most tipped small caps: Back in black for 2020

At the start of this somewhat eventful year, we surveyed Livewire readers asking for their top stock idea for 2020. From the 7,000 responses, we crunched the data and shortlisted the most tipped names among them. We recently ran a series of deep dives on the most tipped big caps on the shortlist.

In this new wire, we look at how the ten most tipped' small-caps have been faring. As a refresher, this is what that list included. 

    Livewire readers' 10 most-tipped small caps

      Source: Livewire and Bloomberg,  data as of Jan 2020

Some amazing stats came out of this table. For starters, the average gain across the group was an incredible +191% last year, and the few with earnings had an average forward PE of 113! 

By 10th February, this group was flying well ahead of the market (16% versus 4%) as I updated in this wire. But there has been a bit of water under the bridge since then, so where do we stand today? 

Following the record-breaking pullback through February and March, the two-month-long bounce from the lows since has seen the small-cap index (XSO) gain around 40%, which is twice the gain from the lows in the ASX200. 

Amazingly, the most tipped small caps, as a group, have just today nudged back into the black for the year. 

Here's the table tracking the most tipped small caps kindly made available by Sharesight. Click on it for a larger version. 

Source: Sharesight

But given the wild conditions in the market this year, the performance stats are now scattered like ships after a storm, with some smashed on the rocks, and others blown to calmer waters. Three stocks (Nearmap, Avita and Electro Optic) are still all down by close to 30% for the year, one stock (Appen) is up by a third and one (Mesoblast) is well on its way to doubling for the year.

Comparing the two tables above, there is plenty to notice, not least that the ones that had the biggest 2019 (Avita, which increased eight-fold), is now down the most. Conversely, last year's 'stragglers' (Appen and Mesoblast, 'only' up around +70%) are now the leaders! It's not exactly 'Dogs of the Dow', but not far off.  

In terms of the number of tips, Mesoblast only scraped onto the table this year, and was without doubt 'the roughie' of the race. The company has long been a heart-breaker, yet the price has crept quietly higher since bottoming close to $1.00 in early 2019, and has found a further lease of life this year off the back of some COVID news, and even managed to get a chunky cap raise away recently to sit close to $4 today. 

Deep dives on each stock coming soon

While it's interesting to track their recent history, the real question is what lies ahead for these stocks. 

So, as we did with the big caps, we reached out to ten experts to each share a deep dive for one company. 

We asked how the business been impacted by COVID-19, how it might fare for the rest of 2020, how they are valuing the business, whether a cap raise may be likely, if their target differs from consensus, and what the market might be missing about the stock.

So over the next week or so, look out for the following reports:

• Avita (AVH) by Joseph Kim at Montgomery Investment Management
• ElectroOptic (EOS) by Henry Jennings  at Marcus Today
• EML (EML) by Shane Fitzgerald at Monash Investors
• Appen (APX) by James Dougherty, Lennox Capital Partners
• Paradigm (PAR) by Michael Goldberg at Collins St Value
• Nearmap (NEA) by Michelle Lopez at Aberdeen Standard Investments  
• Pointsbet (PBH) by Dean Fergie at Cyan Investment Management
• Nanosonics (NAN) by Katie Hudson at Yarra Capital Management

FOLLOW the managers or stocks to get their reports first

If you want to be the first to read their reports, click on each of the managers you want to hear from, and then click FOLLOW on their profiles. This way you will receive the report directly by email soon after it goes live. 

Also, as a sneak preview of a new feature we've not announced yet, you can now also follow stocks on our site, so you get notified whenever someone posts about a company that you are interested in. Scroll to the bottom of this wire, and mouse over the stock code of interest, then click Follow, as per the image below 

10 most tipped big caps

As mentioned earlier, we also recently ran fundie deep dives into the most tipped big caps. I published a wire summarising them all and bringing their excellent reports together. 

Like the small caps, the big caps, are now nudging into the black, led by a few names doing the heavy lifting, namely the indomitable Afterpay, and gravity-defying Fortescue. 

Stay tuned

Watch out for the most tipped small caps, which will start rolling out on Monday 25th. Follow the contributors named above to get them all the day before they go in the morning note, and please like this wire if you found it helpful.