2024 Year-in-Review

Dec 19, 2024

Well, it's already the end of the year!

As my last post in 2024, I thought I'd do a year-in-review post recapping some of the main highlights and insights from a phenomenal year in Canadian microcaps.

Let's dive in!

TSX Venture Statistics

If you've been following me on social media, you'll have noticed that I follow two key monthly data sets from the TMX Group, the operator of the TSX Venture Exchange: Value Traded and Total Financings Raised.

Value Traded is the trading volume (in $) on the exchange and is a proxy for the liquidity of the microcap market. More trading volume is desirable because it makes entering or exiting positions easier, enticing more capital to flow into stocks and leading to better valuations.

Total Financings Raised (in $) is exactly what it sounds like. It's a proxy for the appetite to finance microcap companies through new share issuances. Higher financing volumes mean it's easier for issuers to raise capital to grow organically or by acquisitions. A higher volume of financings is also desirable.

On both fronts, 2024 started at very depressed levels. Value Traded in 2023 was 43% below its 15-year average, while Total Financings Raised were 30% below the average.

2024 was off to an even worse start, declining further in the year's first half. Only in October 2024 (and subsequently, in November) did we see a significant rebound in both areas, bringing the YTD data merely into positive territory year over year. Essentially, on a yearly basis, we're still at extremely depressed levels. However, the trend is now solidly on the upswing, and I expect to see meaningful improvements year over year in 2025 to bring us back toward historical averages.

From what I see in the data, the recovery still has several months to go.

Canadian MicroCap M&A

Since starting this newsletter in late 2023, I've written extensively about M&A transactions in the Canadian microcap space. If you haven't seen my posts on the topic, I encourage you to check them out: Flurry of Acquisitions - Part 1, Part 2, and Part 3.

In total, I recorded 23 M&A transactions in non-resource Canadian microcaps in 2024. Here are some stats:

Ten targets were acquired by a private equity firm, eight by strategics, and five by the management team and/or large shareholders.
12 were in the technology sector
The average deal value was $178 million
The average premium offered was 59%

As valuations have improved significantly this year, I expect the pace of M&A to slow down quite considerably in 2025.

M&A transactions were clearly the catalyst for this year's recovery, and I'm thankful for the significant capital inflows into the asset class. That said, I'm also relieved we are returning to a thriving public market ecosystem where companies see the benefits of staying public.

Rivemont MicroCap Fund

It was a terrific year for the fund I manage at Rivemont. The Series A units of the fund ended November with an +89.6% return year-to-date!

In 2024, the fund held between 15 and 20 names and had:

One stock up over 300%: Kraken Robotics (TSX-V: PNG)
Two stocks up over 200%: Covalon Technologies (TSX-V: COV) and Biorem (TSX-V: BRM)
Three stocks up over 150%: Simply Solventless Concentrates (TSX-V: HASH), California Nanotechnologies (TSX-V: CNO), and Renoworks Software (TSX-V: RW)
Four positions have been acquired or announced they would be acquired: Mediavalet (TSX: MVP), OneSoft Solutions (TSX-V: OSS), Givex (TSX: GIVX), and Ackroo (TSX-V: AKR).

The largest loser was a detractor to the fund's performance by less than 1%.

It was truly an exceptional year.

The best part, in my opinion, is that plenty of quality growth stocks still trade between 10 and 15 times cash flows (compared to 5-8x at the beginning of the year). Even after this solid performance, Canadian microcaps are not anywhere near the elevated valuations of large caps.

If you are an accredited investor and are interested in learning more about the fund, please don't hesitate to contact me!

Personal Achievements & Lessons

At a personal level, I'm very proud of two achievements this year:

Overcoming my fear of speaking in public. I gave a handful of keynote speeches at live and virtual conferences and participated in a few podcasts, too (the latest one with Robin Speziale was just released last week - listen HERE). Initially, those appearances would make me extremely nervous, but I guess it's like a muscle: the more you train it, the better it gets. I've gotten surprisingly comfortable speaking in public lately, which has been a big personal win.
Running my longest distance ever in July, a 110-kilometre trail race with 5,000 meters (16,400 feet) of elevation gain. In case you're wondering, it took me a little over 22 hours! (Read my recap here)

My biggest challenge has definitely been doing business development for the Rivemont MicroCap Fund. When the market was the cheapest I'd ever seen, nobody would touch the asset class because past returns were unattractive. Now that the fund has had a solid year, most investors seem to think that microcaps have reached peak valuations and are on the cusp of a breakdown.

It's on me to keep conveying the right message and get more people to see the opportunities I'm seeing. I expect this will remain an area of focus and continuous improvement in 2025.

On another note, my favourite book in 2024 was "Outlive" by Peter Attia. Longevity is not rocket science: eat well, sleep enough, exercise, etc., but it was fascinating to learn more about the leading causes of death and how to avoid them by improving your daily habits.

My favourite investing book was "7 Powers" by Hamilton Helmer. It is a very practical book about competitive advantages. If you've read and liked "The Little Book That Builds Wealth" or "Quality Investing," you'll probably love 7 Powers too.

Stocks & Stones Newsletter

I started this newsletter in late 2023, hoping to convey that Canadian microcaps were an attractive asset class to consider. The timing couldn't have been better.

I am deeply grateful to anyone who signed up for this newsletter or follows me on social media.

I started the year with 266 subscribers, and I'm pleased to report I just reached 1,200 subscribers this week! My posts have been viewed over 64,000 times.

I also gained over 2,200 followers on X and over 1,500 on Linkedin

My social media posts reached over 1 million impressions on X and almost 900,000 on Linkedin, including one post that went viral and reached 525,000 views.

Honestly, I'm blown away by those numbers.

Thank you all so much for the support!

As we approach 2025, I can't help but be a little nervous about the macro environment. US large caps currently trade at valuations that some are starting to call bubble levels (the S&P 500's trailing P/E ratio is 28x, way above its historical mean of 16x).

We're also seeing increasing speculation in different pockets of the market, such as AI and cryptocurrencies.

On the other hand, Canadian microcaps still appear reasonably priced. We are nowhere near euphoria, and I feel like the sentiment still has lots of room to improve. But who knows what could happen in a total market meltdown?

I think 2025 is a time to be more defensive than offensive. Fortunately, it's still possible to play good offence in some high-quality microcap names that remain undervalued.

It will be a stock pickers market.

Valuations and margin of safety might not seem to matter right now, but they will eventually.

As we enter 2025, I firmly believe that Canadian microcaps remain one of the most attractive pockets of the stock market, and my personal portfolio is positioned accordingly.

On that note, I wish you all Happy Holidays and look forward to chatting with you in the New Year!

Disclaimer

This publication is for informational purposes only. Nothing produced under the Stocks & Stones brand should be construed as investment advice or recommendations. Mathieu Martin, the author, is employed as a Portfolio Manager with Rivemont Investments. This publication only represents Mathieu Martin’s own opinions and not those of Rivemont. Rivemont may own positions and transact on any securities mentioned in this publication at any time without prior notice. At the time of this writing, the Rivemont MicroCap Fund holds positions in Kraken Robotics (TSX-V: PNG), Covalon Technologies (TSX-V: COV), Biorem (TSX-V: BRM), Simply Solventless Concentrates (TSX-V: HASH), Renoworks Software (TSX-V: RW), and Ackroo (TSX-V: AKR). Always do your own research and consult a professional before making investment decisions.

If you’d like to invest in small public companies, check out this post.