Speed-dating with Gems — the new corporate marketing for microcaps!

It is now a little over a year since we first tried this innovative approach to pairing up interesting companies with busy fund managers — and last week we hosted the fifth in our series of “speed-dating” lunches which are proving extremely popular. We call them “Uncovered Gems” and presenting on 12th October were key board members of Creightons, Fishing Republic, Lighthouse Group and Symphony Environmental Technologies — plus eight fund managers focussed on small cap opportunities and the relevant N+1 Singer analysts and sales to moderate the discussion. In a follow up note on 18th October we summarised the N+1 Singer take on the four companies who were an interesting and contrasting mix of Consumer, Retail, Financial & Technological plays. This follow up note is a good aide-memoire for the institutions who attended, but also for those who wanted to attend but could not.

The concept is deceptively simple, yet highly compelling. Each company has only ten minutes to present their business model over lunch before we move on to quick-fire Q&A and the next management team. By sticking to ten minute “elevator pitches” company managers tend to deliver very punchy presentations — at the same time busy fund managers get to sample four or five very interesting companies in one convenient hit and we make it easy for them to follow up on the companies that piqued their interest most. We suspect a key attraction to non-holder fund managers is that it “de-risks” the traditional approach to corporate marketing whereby they are asked by the broker to sign up for a lunch or an hour long presentation for a new company which either requires significant upfront tyre-kicking before accepting, or runs the risk of being an unsuitable potential investment after the meeting — time that could be in hindsight and in both cases unproductive. By contrast, our speed-dating allows a snap-shot of several companies with no need for prior knowledge, giving a higher chance that one at least will prove to be of interest. As we are not broker to the companies, the lunch is usually not part of road show which can be differentiating.

So how do we select the companies? The first point is that they are exclusively ones that we do not have under formal coverage at the time of the lunch — hence “Uncovered Gems” — so N+1 Singer too is taking an early and fresh look. Typically they may have only their broker writing on them or very few other commentators — so we look for companies whose stories we believe are not very well known or understood by the market. Very often we invite companies whose business model we think is changing (Lighthouse Group and Creightons were both examples at our last lunch) or where some other catalyst or inflexion point may be looming that could cause the market to re-evaluate the story. Finally of course, like everybody else, we are trying to spot fast-growing companies with decent momentum and management teams that acquit themselves well.

So how have the lunches worked for everyone? From the company perspective the share prices of those 20 or so that have been at our 5 lunches since July last year have in aggregate been flat on an unweighted basis — but it is early days yet and we know we have generated considerable additional interest and indeed investment in the participating companies — several of whom have gone on to successfully raise money. Star performers have included Yu Group up 80% since our lunch in June and Gfinity up 60% since our lunch in April — both fast-growing stocks we spotted that have very much continued to prosper. In some cases we have gone on to produce formal coverage on the attendees — most recently LiDCO which attended our June lunch and where we initiated on 10th October, so the lunches can act as good feed-stock for our coverage.

Finally from the institutional attendees we have received uniformly positive feedback and as a result you can expect us to host more of these innovative lunches!