Regal's ultimate guide to microcap investing in 2023

If there is one request that we repeatedly receive from our audience, it’s that you want more content on the wonderful, often under-covered world of microcaps. 

It makes cents (literally). These stocks usually fly under the radar of the masses, providing diligent investors the opportunity to invest in mispriced stocks and generate capital growth over the long term. 

However, investing in this area of the market comes with its risks. In 2022, the S&P/ASX Emerging Companies Index suffered a brutal blow (it fell 24%), with one Livewire contributor describing it as a "killing field". This year, however, the Index has lifted around 3%, but it hasn't been a tide that has lifted all boats. 

So in today's episode, we're joined by microcap expert Jessica Farr-Jones, the portfolio manager of the Regal Emerging Companies Strategy*. She shares why she is feeling bullish about the opportunity in small and microcaps, some of the stocks that have her excited, as well as a deep dive into what small and microcap investors can expect this reporting season. 

And yes, if the last name sounds familiar, she’s the daughter of Wallabies great Nick Farr-Jones, who now also works in funds management as a mining specialist.

*Note: This strategy is only available to wholesale investors. However, around 25% of the Regal listed investment trust (ASX: RF1) is exposed to the Emerging Companies Strategy, which investors can access on the ASX. 

This interview was recorded on 2 August 2023.

Timestamps

• 0:00 - Intro 
• 2:08 - Is the worst of the pain over for small and microcaps? 
• 4:30 - Today's market is a stockpicker's paradise 
• 6:16 - Where Regal is seeing value today
• 9:18 - The case for Life360 (ASX: 360)
• 11:15 - Why resources companies like WA1 Resources (ASX: WA1) and Latin Resources (ASX: LRS) look inexpensive, despite their recent rallies 
• 12:35 - There could be a short-term tactical opportunity in consumer discretionary stocks (and why Regal is backing Cettire (ASX: CTT))
• 15:40 - The areas of the market Regal is avoiding today
• 17:53 - Why P/E multiples are not the best indicator of future returns in this area of the market
• 20:32 - Unlisted opportunities: The risks and rewards
• 23:21 - What small and microcap investors can expect this reporting season
• 27:29 - Stories of big wins and big losses from Jess' career so far (and what she has learnt from these) 
• 33:31 - A stock for the next five years: Iris Energy (NYSE: IREN)
• 34:03 - Why Jess has a bullish outlook on the Bitcoin price 
• 36:12 - The "asymmetric risk-reward" of the picks and shovels plays in Bitcoin