Chris Lahiji is the founder and president of LD Micro, which is an investment newsletter firm that focuses on finding undervalued companies in the microcap space. Since 2002, the firm has published reports on select companies throughout the year. LD Micro concentrates on researching and investing in companies that are often overlooked by institutional investors. The firm also hosts the LD Micro "Invitational" and LD Micro "Main Event" MicroCap Growth Conferences for investors in June and December of each year, respectively. It is a non-registered investment advisor. In this Wall Street View, our host caught up with Chris Lahiji, LD Micro at the B. Riley & Co. Investor Conference 2015 in Hollywood, CA.
When asked what is the state of the MicroCap Market, Mr. Lahiji begins, “The state of the microcap market is you’re guilty until proven innocent. And, what I mean by that is, if you’re over $300 million [in market capitalization], I think people are giving a lot of companies the benefit of the doubt. If you’re under $300 million [in market capitalization], you’re getting a lot of scrutiny. I think it’s just the law of attrition – I think a lot of people since the 2008 crash have ultimately left the microcap space, and there’s not a lot of new entrants that are coming in. So, you have, in many cases, a lot of companies not getting the valuations they deserve very simply because there’s no investors – not to say there’s not a lot of companies that aren’t doing well, it’s just that, it’s hard to find buyers for things under a certain size.”
He continues, “I think a lot of it is just correlated with liquidity, and when’s there’s less interested people in something, it becomes less fluid. This is one of those big issues – it’s like, which comes first: the chicken or the egg? My take is that the retail investor is not coming back to off-set this decline institutionally. So, let’s look at it – the retail investor is not as interested as it used to be, the institutions have essentially gone upstream, and then you have a lot of these small companies, where the main argument is, well - I don’t want to invest in it because it’s not liquid. Well, that liquidity gets worse when there’s less interest.”
“I don’t know if there’s one definitive solution, but all I can tell you is that microcap needs a big winner. It needs something that goes from $1-$50, and outside of the biotech world, there have been very very few companies that have done that. So, it’s hard for me to basically look at the last 3-4 years and say, even names that I didn’t own, ‘oh yeah, these things have done tremendously well,’ and, I think a lot of it is just regulatory too, and I think that there are things going on with the SEC and in the JOBS Act and Reg. A that are helping the cause, but that help cannot come soon enough. If they make it easier and cheaper for companies to go public, then we have more choices; when you have more choices, you can make more potential investments.”
For more information about Chris Lahiji, LD Micro and his upcoming event schedule, including next week’s LD Micro Invitational, go to: www.LDMicro.com
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