Microcaps play a role in Mackenzie small-cap fund

Manager Scott Carscallen favours basket approach for illiquid stocks.

Sonita Horvitch 6 September, 2017 | 5:00PM

Scott Carscallen, vice-president and portfolio manager at Mackenzie Investments, says that some of the best opportunities in Canadian small-caps are to be found among the microcaps.

A specialist in small-caps and a value manager, Carscallen defines microcaps as those companies with a market capitalization of less than $400 million. Investors, he says, appear to be favouring microcaps in the Canadian small-cap universe. "Stocks on the Canadian Venture Exchange, as represented by the S&P Venture Composite Index, have been doing better in the first seven months of 2017 than those in the S&P/TSX Small Cap Index."

A caveat, he says, is that these smaller smaller-cap companies tend to carry more business risk while they establish themselves. Also, their stocks are not that liquid. His strategy in tackling microcaps, he says, is to focus on those companies that are either profitable or "on the cusp of profitability." Furthermore, he says, he has only a modest weight in each stock. "It is more of a basket approach."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Clearwater Seafoods Inc4.98 CAD0.61
Equitable Group Inc54.46 CAD-3.15
GreenSpace Brands Inc0.04 CAD-12.50
Home Capital Group Inc16.13 CAD-10.24
Morneau Shepell Inc27.72 CAD-1.84
People Corp7.44 CAD6.29
Richelieu Hardware Ltd22.00 CAD-3.13

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Sonita Horvitch

Sonita Horvitch