It’s been a tough year for small-cap investors like Steven Palmer, president and chief investment officer at AlphaNorth Asset Management in Toronto.
His AlphaNorth Partners Fund is down by about 14 per cent over the past 12 months as of Sept. 30. But Mr. Palmer believes the drop creates an opportunity for long-term investors to buy higher-quality small caps at discount prices. “ will turn, and when it does, the returns are usually dramatic,” he says. “Small caps are higher risk, but also higher reward. If you take a longer-term approach, you can do very well.”
His fund has seen an annualized return of 5.3 per cent over the past five years. Mr. Palmer says that compares to an annualized drop of 4.7 per cent for the benchmark S&P/TSX Venture Exchange over the same five-year period. The performance is based on total returns and net of fees as of Sept. 30. Mr. Palmer declined to provide the value of his assets under management.
The Globe and Mail spoke recently with Mr. Palmer about what he’s been buying and selling and a stock he wished he owned.We focus on early-stage micro- and small-cap companies diversified across all sectors. Typically, we have a growth bias. We try to get into a stock early and make multiples on our money. We take a longer-term approach.Typically, we don’t hold cash. It’s more difficult to liquidate positions in the small-cap market because they don’t trade as often as large caps.