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15 Feb 2024 - A few charts from our Micro Caps CY2024 Overview

By: Equitable Investors

A few charts from our Micro Caps CY2024 Overview

Equitable Investors

February 2024

CY2023 Review


Stocks on higher multiples did better than those in "value" territory as investors chased "quality" (if you define that as top quartile return on capital or companies paying dividends) but the most clear cut divide in ASX listings in CY2023 was simply size as investors shunned the perceived heightened risk of micro caps. Below we analyse CY2023 performance of our ASX "FIT" (Financials, Industrials & Technology) micro-to-mid cap universe, alongside the S&P/ASX benchmarks. All FIT returns presented are averages of the stocks that meet the relevant criteria.

CY2023 Sector & Industry Review


The Materials sector, covering chemicals, packaging and paper, was the most beaten-down in CY2023 with an average decline of 10% and a median decline of 15%. Health was an interesting space, where the average return was -1% but the median was -17% as the median biotech, pharmaceutical and health care stock fell by more than 20% BUT one stock surged 214%. Interesting to note that Consumer Discretionary stocks strongly outperformed Consumer Staples.


Returns by Size - Broader International Perspective


On an equal-weighted basis, the smallest 10% of stocks by market cap have outperformed the larger 90% in North America and in Asia Pacific ex-Japan (Australia, Hong Kong, NZ & Singapore) over the past 30+ years. But returns over CY2022 and 2023 have favoured the largest and most profitable businesses.


We began tracking the dispersion of trailing (historical) EV/EBITDA multiples when we launched the weekly "Small Talk" publication in 2020. There has been a tangible shift downwards in multiples, with 51% of companies on 10x or less in 2022 and 2023, compared to just 39% at the end of 2020.

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Equitable Investors Dragonfly Fund


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