These small cap companies offer good returns
Smaller companies are often vulnerable to economic cycles, but some have rewarded shareholders for many years
Chasing small-cap companies with low single-digit earnings multiples can be a hazardous strategy for investors. Smaller companies — which don’t always have the most reinforced balance sheets — are often vulnerable to the vagaries of economic cycles, and their determination to grow into bigger companies frequently results in damaging missteps in merger and acquisition activity. Of course, there are small companies that have rewarded shareholders wonderfully over decades (yes, decades) and that still trade at very modest market ratings. Two such companies are packaging group Bowler Metcalf and vehicle retailer Combined Motor Holdings (CMH), both graduates of the class of 1987 listings boom. Both have provided decent short-term returns to investors who backed the shares when they were languishing six months ago. The share prices of Bowler, which recently sold off its investment in beverages business SoftBev, and CMH, which reported stout results in the year to end-February, have apprec...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.