The Microcap Playbook: Finding 10x Stocks Before They Get Discovered

(upbeat music) - There was a big boom, big bust in the industry. I'm picking up the broken pieces. - Volatile overlooked and under $100 million. We're going microcaps this episode. - These companies are completely under the radar. You're looking for the 1% of investable companies that will succeed for the long term. - We've got met you, Martin, of the Rivemont Microcaps fund who learned about microcaps investing from his poker days. - In poker, you want to play against weak opponents. That's how you increase your odds of winning. I translated that to a stock market. - You said software is a dirty word. I think the marijuana sector burned a lot of people. Is it profitable? Are you looking at it? They call it SaaS Pocollips. What does it look like in microcaps? We got an email from a viewer who's like, "Oh, match you. I think he's part of the Montreal Mafia." There's a reputation there. 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The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. The host and the guests may maintain positions in any securities discussed on the podcast, always consult with the qualified financial advisor or professional before making any investment decisions. - Hey everyone, welcome to a new episode of In The Money with Amber Canwar. On this episode, we are talking about the smallest companies that we've ever talked about. We have done a bunch of small-cap episodes, these are microcaps. Our next guest, Matthew Martin of the Reefmont Microcap Fund, is looking for ideas under $100 million. At least in small caps, sometimes you'll get some analyst coverage. Here, none of that exists. So we really relied on his research, a lot of on the groundwork, going to visit these companies, talking to management. And he says out of a universe of 2000 stocks to invest in Canada in microcaps, only 15 to 20 pass muster. Now, he's gonna talk about some interesting sectors, including cannabis. He says he missed much of the, what do we call it? Enthusiasm for these pot stocks, and recently came to the story in the last 18 months. And he's picked some small-cap ideas that you'll find in pro-pix, but he goes through a bunch of your questions. He talks a lot about his process and sheds a light on maybe a darker corner of the market, where there's not a lot of coverage, but as he demonstrates, there can be some massive upside. So let's get into it. (upbeat music) Matt, too, Marten, thank you so much for joining me on the podcast. - Thanks for having me in there. - Now, you and I have never had a chance to speak. So with guests that I'm not totally familiar with, or maybe our audience isn't familiar with, I'd love to just start with a little bit of a background because you traffic in a really interesting world. We've had small-cap fund managers on before. Those are like elephants compared to what you look at. You look at micro-caps. - Yeah, exactly. And I think it goes back to my background as a full-time private investor initially. So maybe I can go back in time. You know, my parents have been entrepreneurs, and I worked for the family business. So my father had a small business in the healthcare sector. So I worked for him, starting when I was a teenager, and I did all sorts of things in the business. Nothing related to the stock market or in finance at all. But then I wanted to do something on my own. So I was experimenting with some stuff. And then I stumbled upon poker. - Poker. - Yeah, poker. So one of my friends was winning money playing poker. So I said, "Oh, that's interesting." So I started learning about the game, reading books, all that stuff. And then started playing on the side while working. And eventually, you know, had some success playing poker. I took it pretty seriously. And. - Did you like enter? There's like a whole circuit. Were you in the circuit? - Yeah, well, you know, I wasn't like a I-profile player or anything like that. But yeah, I played the word series of poker in Vegas. For example, a few times. - Did you come close to winning? - No, unfortunately. - But still just to go, there's pretty cool. - Yeah, no, it was cool. So I was in my early 20s back then. And eventually I was lucky enough to win some money playing poker. And I started putting that capital into the stock market. And the thesis initially was, you know, in poker, you wanna play against a week opponents. So I translated that to the stock market where is competition weaker in the stock market. And I thought, you know, microcaps, especially if you go really small below 100 million market cap, there's no institutions, there's no analysis coverage. You play, if you will, against retail investors for the most part. And this type of investor tends to make a lot of mistakes. - Because why it's volatile. - Well, I mean, it's people that invest part time, they listen to recommendations from their uncle or their friends or whatever. So, you know, it's hard because you don't have access to information since there's no analysis coverage. These companies are not covered by even like the newspapers or any news outlets. So you have to really dig deep. Do your own research, go to Cedar, find the financials, build your own model, talk to the company, visit them in person. So I started doing that with my own capital. And I was, at the same time, I started a blog called the Space Microcaps and developed it into a pretty big community of French speaking microcaps investors. And you know, that allowed me to build my network, find other successful investors that I could learn from. And eventually that's what allowed me to go into asset management. - It's funny you say you have this network 'cause I was saying that we got an email from a viewer and it's like, oh, Matthew, I think he's part of the Montreal Mafia. There's a reputation there, not the actual mafia. - No, exactly. - No, exactly. So with this community that we developed in Montreal, we were few young guys investing our own capital. And we would go to these microcaps conferences. And it was like this crew of like five, six Montreal guys out speaking French. And they started to call us the Montreal Mafia. So it was funny and it sucks. People still refer to this when I go to conferences. - So you talked a little bit about the edge, which is it's undercover, but that's not enough, right? You have to do the due diligence and you have to see a path towards maturity, right? That's the only way these talks go up is eventually they grow. Talk to me about what that edge is. Is it repeatable? Do you see a specific formula in the last couple of years in which you have been managing money that is a winning formula? - Yeah, absolutely. So, you know, I got inspired by a few different people in my early years when I was learning about how to invest. And one of these people was Paul Andriola at Spongebob discoveries in his basin Vancouver. And I learned a lot from him about the discovery process of microcaps stocks. So essentially the idea is if you look for companies that are below 100 million in market cap, typically there is no institutional ownership, there's no analyst coverage. These companies are completely under the radar. And it's like finding a needle in a stack, you know, it's you're looking for the 1% of investable companies that will succeed for the long term. So it's really challenging. You know, we're talking about over 2,000 microcaps in Canada and I'm looking to build up or follow you 15 to 20 stocks. You know, so I have to filter a lot. But then, you know, you do your research properly. You go like my process is I talk to the management teams, I go visit them in person. I do channel checks, I speak with experts if I need to or other investors that know this, this story is well. And I try to build this really deep understanding of the business, its opportunities and its competitive landscape. And eventually, you know, these companies, if they execute well, they grow behind 100 million in market cap, and that's when they get discovered by your small cap fund managers, for example. So I'm like the smallest fish in the pond and hopefully, you know, I get the. And then you ride it out till like what's the longest that you've held the stock? Like what, you know, the smallest that you've invested and the biggest that it's gotten? Yeah, so I can give you the best example of my process is a company that probably most of your listeners will know called Kraken Robotics. Oh, yeah. So I started buying this stock in 2018 at a 17 cents per share. And what, why? What, what was it? So back then, you know, it was a very small company, 20 million market cap. They had $3.5 million in revenue. They were not profitable yet, but they were getting close. And I met them at an investment conference and I was very impressed with the founder. So I thought really highly of the management team, their products were, you know, they're in the defense space. They supply these sensors that go on to underwater drones. So I thought really cool technology. We started buying a, you know, small starter position at the time. And after a few months, they announced that one of their biggest customers was investing in the company, was taking a stake in the company. And they were paying a 30% premium over the prevailing share price. So to me, that was massive validation. You know, your customer likes the product so much that he's willing to invest in the business and own a stake. So I, we added significantly to our position after that because the product was validated. And then, you know, the company just executed really well. They grew revenue. So I think the revenue carrier was 40 or 50% for the following five years. They became profitable. And the stock kind of languished, you know, up and down. So we were sitting on a profit, but not a massive profit. And then in 2023, the founder retired. He owned 10% of the stock. And he decided to just sell his position in the market. And you know, we're talking about microcap. It's a big, that's a big, yeah, exactly. So he made the stock crash from about 65 cents to 35 cents, almost a 50% drawdown over a few months. And I was, you know, thinking about my thesis, like, is there anything wrong? Does he know something? I don't know. So you see inside or selling like that? That seems like a big warning. Yeah, exactly. So you question, like, did I assess all the risks, you know, correctly. But you know, I called up the management team. They told me business as usual, we're not aware of anything negative. I couldn't find, I didn't many channel checks, couldn't find anything. So I said, well, it's either like you know something or it's a fraud or it has to be legit. And the stock is cheap and I should buy more. That's what I decide to do. So at the low point at 35 cents, the stock was trading at five times EBITDA for a company growing 40% per year for the last five years. So it was like the biggest no brainer I have ever seen. So I made it a 10% weight in the portfolio back then. And then when the founder finished selling, there was no selling pressure anymore. The stock rebounded and it went on this crazy run where he must be kicking himself. It's an $8 stock and a $3 billion. Yeah, well, actually, you know what? It passed away like a year later. So no, but like that explains why you probably sold and just enjoy it as well because perhaps it was sick. So you never know that that's the list and you never know why and inside of your selling. But sometimes it doesn't have anything to do with the fundamentals. That's an amazing story. What a ride for crack and robotics. That is just one winner. You're building a portfolio of stocks. And I imagine some of these things are uncorrelated to each other. And you're trying to build sustainable performance. And in the years that you've been managing money for Reefmont, it's been patchy. You've had a couple of down years. Then you have these explosive up years. Is that to be expected? Do you hope that over the fullness of time, you know, like you can have more of those 90% years or 25% years than some of the down years? Like what should investors brace for when it comes to the volatility of the old? Overall, looking at the sector. Yeah, well, I think volatility is to be expected for sure. I mean, it's, and that's what we tell our clients, you know, don't invest capital that you will need for the next five years because it will be up and down a lot, hopefully, you know, trending up over the long term. But you know, the microcap market specifically is very driven by liquidity. So if you look at the trading volumes and the financing volumes also on the TSX venture, it's been all over the place. So that's, this is data that the TMX group publishes every month. So I tracked that for the TSX venture. And essentially, it's the number of the amount of financing, financing is raised by TSX venture listed companies. And you can also look at trading volume in dollar. So it's called value traded. And if you look at 2022 to 2024, these two pieces of data, they were extremely depressed, like 30, 40 companies can't raise money from investors. They can't raise money. So all the unprofitable companies really struggle and many go end up going out of business. And you know, the trading volume is so low that it's hard to enter or exit positions, especially for a fund like mine that, you know, we manage a certain amount of capital compared to a retail investor. So it's been mostly liquidity driven, I would say, the downturn that we had in 2022 and 2023. But the companies were fine. I mean, like if you look at the fundamentals, you couldn't tell by looking at, you know, the trends in revenues and profits, you couldn't tell that these stocks were down 50% from their peak. And eventually they recovered. So now are those trends improving? Yeah. So these trends have been really improving starting last year. So 2025, we got back above the long term average. And so far this year, it's looking really strong again. And I guess we should point out that, you know, looking for microcaps in the Canadian market hard enough and you exclude it looks like commodities. Well, actually, I used to exclude commodities. I've changed my mind a little bit on that. Because they're doing so well. Well, it's hard to ignore. Let's be honest, especially since last year, but you know, I wouldn't invest in an exploration company at this point. Never sin ever, but for now, that's still excluded. Because you know, I'm not a geologist. So it's really tough if you don't have that technical background in my opinion. So I've focused more on the producers. Like if you're a profitable producer, I can understand cash flows, you know, and valuation multiples. So I've looked at some gold producers. I've looked at some oil producers as well. Like microcaps ones, like what's an example? Yeah. So when we own the portfolio, it's called emisphere energy. Emisphere energy. What's the ticker? HME. HME. Okay. Tell me about it. Yeah. So it's a small producer in Alberta. The very simple story. They have one main asset that's under polymer flooding. So it's a low decline rate. The company is taking the cash flows from this asset and paying dividends, buying back shares. You know, there's low maintenance, maintenance cap exo. For me, it's like the type of opportunities where if I'm going to go out of my comfort zone and look at something that's a bit unusual in terms of my process, I want it to be simple enough that I don't make a big mistake, you know. And it's done very well. It's done very well. And you think it can continue, HME? Yeah, I think so. I mean, if you look at, I mean, it's hard to tell exactly where the oil price will settle after the current crisis, but under any sort of scenario, like even if you model it at $70 at WTI, it's still trading at close to 20% free cash flow yield right now. So to me, it's one of the cheapest opportunities in the oil and gas space today. Very small, $260 million market cap. So it fits in that wheelhouse. Okay, that's nice. We've got kind of a bonus commodity outlook. Let's dip into the mail bag because we have a lot of stock specific questions. You know, normally I like to do my homework on these stocks, but my homework is limited by analyst coverage and portfolio manager. So I'm going to defer to you to be the expert on a lot of these. The first one actually is about crack and robotics. And you told a really nice story about how you've you discovered it at $0.17. Now it's $8. I guess the question is, do you continue to hold it? Would you? add to Kraken Robotics here or has the best of the story played out for you? Yeah, well, for me, it has played out already. And I still hold it by the way, a little bit, a very small position. I trimmed all the way up. Now it's a 3 billion plus market cap. So definitely, not a microcap anymore. But these types of businesses that execute every year for five, six, seven years, it's so rare in microcaps. So you have to continue to hold at least a little bit of those types of businesses because they're really impressive. And I like to think, don't bet against a winner like that. Yeah, the second idea is a bit smaller. I mean, I'm glad Bloomberg has nothing on it. So I'm going to rely on you for hydrate technologies. This question from Mike, thoughts on this company. What is it? First of all? Yeah. So this one is a platform that connects nurses and doctors to patients in the US. So you can think of it as like the Uber of LKR, if you will. So I'm sick at home. And I need a doctor. I need a prescription. Well, so it's, it's, they deliver very specific types of services like IV therapy, for example. They connect patients with doctors to get prescribed GLP1 drugs, for example. Those kinds of treatments. So it's a bit faddish, in my opinion, you know, they didn't follow these trends in the market. Like what kind of medication is out right now? And they push it through these channels. So I'm not sure how sustainable that is long term. But so far, you know, you can't argue with the numbers. They've been growing very quickly. They published their 2026 guidance recently. They're guiding for 400% revenue growth with positive EBITDA. So, you know, if you just look at the numbers, it looks cheap. Could be a long term winner. But the regulator is side of things, you know, with these types of drugs. And the way they get them to market, if you will. I think might be at risk of regulatory changes eventually. I just don't know. And if I can't assess a risk like that, typically I tend to stay on the sidelines. So that's the primary reason why I don't own this stock right now. All right. Interesting business. So the other one is KETS I wear. We got a question from Ray. I'm considering buying this company. They're I'd read they've recently been some insider buying. Do you follow the stock? Yeah. So I follow it and we own it in the in the portfolio. What is KETS? So KETS is an online optical retailer. So they sell contact lenses and glasses online through their website kits.com or kids. That's yay. I recommend your list. They're checking it out. They have right prices. I know. I go to my doctor every time. And yeah, well, that's the thing. You know, the optical industry hasn't really innovated in a long time. And KETS came out with disruptive offering in that they have the they're they set up their own manufacturing optical lab actually in Vancouver. So they can manufacture the lenses and assemble the glasses on site and ship typically same day or the next day. So if you go on the website with your prescription, you order if you're in Western Canada, you might get your glasses in your mail the next day. Oh, wow. So it's they're really full. And are all brands or is it that they're like a warby parker element where they're making the glasses? So they they they have their own KETS brand. Okay. They also sell all the big brands. But you know, if you want to go for the lowest prices, you go with the KETS brands. And it's actually great quality. I've tried I don't wear glasses for vision, but I ordered some sunglasses. And the quality is really impressive, honestly, for a $38 pair of glasses. So it's a stock that's like had some volatility from 2015 over the last couple of months. How do you evaluate its prospects or its fair value? Like what do you think a company like KETS should trade for? Yeah. So I mean, this one has been a growth compounder for a few years. You know, they've grown revenue at 25, 30% a year. Like almost every quarter, very steady. It's run by great management team. The insiders are still only I think 70% of the shares. This one is in the penalty box right now when you refer to volatility, you know, it's it's down from $21 earlier this year to now about 15. There are a few reasons for that that people should be aware of. The first one is when they disclose their their when they publish their financial results for 2025. There was a line item on the balance sheet called investment. And if you look through the notes, you find out that they bought Bitcoin ETF to put on their balance sheets. Okay. So that was kind of a red flag for a lot of people. You know, it's it's a small investment. Like we're talking like it's a six six hundred million market cap company. They bought five million of Bitcoin. So it's still a lot. It's still a lot, but I mean like 10 gentile to what they do. Exactly. You think they were just trying to be cool? I think so. Yeah. Like I just don't understand the capital allocation process to do something like that. Did you speak to them? So I haven't spoken to them after that decision, but you know, through my contacts, you know, on this outside, I know some people who have spoken to them. And essentially, I think they got a lot of backlash on this decision. And I believe that they won't make that mistake again. But you know, the unfortunate thing as well as they bought it in Q4, while Bitcoin was going down. So they lost money on it like right off the back. Yeah. So, so you know, I think people look at it now and they say, well, is there any oversight by the board to allow these capital allocation decisions? Like five million is a lot for a small cap company too. Yeah. So it's about something that's not directly for your business. Yeah. Now for sure, I agree. And you know, I disagree with the decision to buy Bitcoin just to be clear, but I don't think it changes the long term thesis on the fundamentals of the kids business. So to me, that's a yellow flag. That's not a thesis breaker. The other thing to watch also and why the stock has been volatile is, you know, every quarter, the share guidance for the next quarter, the upcoming quarter. And the slightly missed their Q1 guidance on revenue. Not by a lot, a few percentage under. But they beat on EBITDA. So kind of mixed, mixed result on based on compared to Q1 guidance. And the last thing I would mention is that the CFO recently left for another company. So again, like another yellow flag. Yeah. So I mean, you look at every separate thing. You say, well, not a big deal. If you add all of those up in the span of two or three months, you know, maybe that could be concerning to some people. And you know, I'm nothing. I'm not concerned. I think the thesis is still intact. But those are yellow flags to watch. And, you know, hopefully they can get back on track growing 25, 30% over a year. Everything's fine. They don't buy more Bitcoin and should be okay. I use the example of Warby Parker, which is a bigger company, $3 billion, trades at a higher multiple, then kits. Do you see that? And a kit, as I mentioned, is about $500, $600 million market cap. Do you see a pathway to at least $1 million market cap? Yeah. I think so. I mean, it's a huge category. You know, I care. And the category is moving online, more and more as people, you know, I guess people my age are, are aging and getting classes. And they're used to going for that digital experience. So I think that that court of people will buy more and more online. So there's a big tellwin for kits. If you compare it to Warby Parker, Warby has a lot of physical stores, which is kind of the problem in the, in the, in the eye care industry. You know, that's why you pay your glasses. That's why they're so expensive. It's because you have to, the, the retailers have to support all this infrastructure. So kits by being online only, they can offer disruptive prices. That's why you can see what they look like too. Maybe they'll have an AI offering. They do they actually do yeah so they call it up to an AI yeah it will recommend based on your face you you You do it on camera and it will recommend some models for you. My God, so smart. Okay, let's move on to ADF Group. This question coming about whether it's a beneficiary of the builds Canada. We've been hearing, I think a lot of small cap investors are very interested in this because it's a direct kind of government spending initiative towards targeted industries of which there's public companies that could benefit is ADF. One of them, what do they do? Yeah, I think so. So ADF is a is a fabricator of steel structures. They're based in Quebec. They have they also have a plant in the US. So the story since Trump became president has been tariffs, you know, especially tariffs on steel. So this affected ADF in terms of their sales pipeline in the US because you know, they're with the tariffs. They are less competitive. They are or perhaps they have to sacrifice some margin to win contracts. And it's created also some delay, some uncertainty in their sales pipeline. So what they did, they said, well, we got a focus more on winning in the Canadian market. And they actually made a really smart acquisition last year of another Quebec based company that's more or less similar to what they're already doing. And this acquisition called the large group, it does a lot of work for hydro, hydro Quebec. So I'd if you look at hydro Quebec, their long term outlook, they're going to spend billions and billions of dollars on hydroelectricity and infrastructure over the next, I don't know, five to 10 years. So this company that did just but should be a beneficiary of that spending. So everyone's looking at ADF saying it's a hit by US tariffs and it has been that shows up in the financials, but the benefit of Lars acquisition and it's almost pivot to Canadian infrastructure and Canadian building. Is that priced into the stock? I don't think so. Actually, if you look at, I mean, there's little and it's coverage, but the coverage that is out there, I think they're trying at a forward, a bit more people of four. Right. So there's there's no euphoria in this stock right now. But the thing is, you know, they've guided on their last earnings call that the first half of 2026 will be a bit softer. They expect a bit lower gross margins because some of their backlog from the acquisition was, it came at lower margins. So they're fixing that in terms of their sales pipeline going forward, bidding, is better bidding on contracts. I mean, the companies projections, their guidance or their forecast of where things are going to be, I think are always important. Do you find a lot of these smaller microcaps companies do that? Like provide those forecasts. Do you invest in companies that don't or is that part of your screening process? Like you have to give me a forecast. I need to know where you think you're going. And then when your results come out, I need something to benchmark you against. Yeah. No, actually, it's the other way around. I prefer when companies don't issue. Yeah. Tell me why? Yeah. But because like these are small companies. If you look below 100 million market cap, I mean, these aren't startups, but still like small companies. So results can be volatile. And if you provide guidance and you can't meet it, you go directly into the penalty bugs for a few quarters. And I've seen that over and over. So I prefer to build my obviously if I invest in something, I have my own expectations. And I'm going to try to validate that with management. Like it's just reasonable or trying to understand what's the growth run we hear. But I don't like them to publish public guidance because they just set themselves up for disappointment with investors. Okay. Interesting. Hot take. Let's talk about our next stock. I feel like this name has been floating around for such a long time. It's poet technologies. And people probably want to know about it. I'm just going to calculate what it's done just this week alone is 55%. There's something kind of going on in the markets right now where you're seeing a big short squeeze and poet is a shorted stock. It's it basically it's like a semi semiconductor company has had this huge run. I think it was targeted by shorts recently. And the company has hit back on it. But do you own poet? Did you ever look at it? What's what's the poet's story today? Yeah. Well, actually, you know, it's one that I was following a little bit when it was trading in in in Canada on the TSX venture. They they actually delisted from the TSX venture and went to NASDAQ. And I guess for good reason, because the stock has been doing exceptionally well recently. So they found a better audience, I guess, which is kind of a sad commentary about what Canadians are willing to fund. But yeah, but that's the thing in Canada. If you're not profitable, it's really challenging to get support from the market, from investors. We like in general, like not just me, other fund managers as well, we like profitable companies. So at least revenue generation. Ask your sub one hundred million dollar companies to be profitable for the most part. Yeah. It's it's pretty rare that I invest in something that's unprofitable. And is that why you don't invest in poet? Yeah. Yeah, exactly. So so for the time that I've been following it, it was a pre revenue or or maybe that the nominal revenue I don't recall. But it was just too early stage for me. Because at the end of the day, you know, if I'm not going to be an expert on something, I need to see proof that it's working. And typically the proof is in the results. You know, if you see revenues growing and they're able to be profitable at such an early stage, it means they're doing something right. What about the Amazon example, though, like if you asked Amazon to be profitable, it wouldn't have been able to invest in its growth. Right? It was like 20 years. It was the world's largest nonprofit. I mean, then they flipped a switch. So could you not argue that not just you, but Canadians, we miss out on this opportunity, because we're asking our startups to show profitability. Yeah. That's that's a good point. But there are a few ways to look at it. Like if we go back to kids, I think kids is a great example of that. Because if you look at the profitability profile right now, they're they're running at about 5% a bit, the margin. It's been lower a little bit in the past. So they're not optimizing for profitability right now. Management has said that their long-term goal is to reach 15% to 20% a bit of margins with scale. So the way I look at it right now, if you look at it on a knee, but the multiple really expensive. So you have to value it on a revenue multiple, thinking that down the road in three to five years when they reach that scale and these types of a bit of margins that they target, it's going to be really cheap on an EBITDA basis. So that's the way probably people looked at Amazon back then was they're going to scale into profitability over time. And if we pay an appropriate revenue multiple today, it's going to translate to an appropriate EBITDA or net income multiple down the road. So that's the way I look at kids right now. And I've looked at other SaaS names, for example, this way. And I know SaaS is a dirty word these days, but a few years back, I was heavily invested in SaaS companies. These are software as a service companies. Talk to me a little bit more about that. Are you looking at some of the, they call it SaaS apocalypse? And where does it look like in microcaps? Well, actually, in the microcaps space has been depleted, completely depleted of attractive SaaS opportunities. Why? Because they've been taken out. Yeah, exactly. So when I said, you know, the downturn we had in 22, 23 liquidity dried up completely. Many of these stocks were trading at ridiculous valuations. And what actually flipped the market at some point and led to the comeback was that all these private equity firms started to acquire and privatize many, many, many of the technology names in Canada in small in small cappellan. So in our portfolio, we had four takeouts in 24. And many of the companies I follow that were on my watch list. I have been taking out as well. So right now in my portfolio, I own, I have one small position in a SaaS company. Other than that, it's completely gone. And my watch list is also completely depleted. So, you know, it's not a call on the sector. It's just you can't find opportunities. Yeah, exactly. But I'm happy I don't own any SaaS quite frankly, but it's not because I don't want to. All right. That's really interesting color. I'm on what's going on with the software stocks and microcaps. We have one more question in the mail bag. I actually can't believe Sinoplex is considered a small cap. But it is. It's around 700 million. So still large for you. But I'm curious if you look at it. What do you think about buying it here? And I couldn't believe I think it was a few weeks ago, rumors again of it trying to find potential buyers. And of course, it had a deal that looked like a slam dunk and then COVID hit. And that deal fell apart. And I think Alice Jacob is still there. He was supposed to ride off into the sunset. Yeah, now exactly. So like the cinema industry in general has been in recovery mode for since since COVID essentially. And they had all sorts of issues. There was the Hollywood strikes a few years ago. So the recovery has been really long. Still not back like I'm looking at the revenues not back to 2019 levels. No, exactly. But I think they shared in their most recent update that they had their best Q1 since since 2019. So it's coming back and it's coming back big time this year. So the movie the movie slate for 2026 is looking really strong. The forecast for North American box office are it's going to grow over 10% and I think it's actually outperform so far in after Q1. So if so I like the industry. I think cineplex is a good way to play this industry. I played a different way, which I think we'll talk about later. But you know, if you're looking at something that's a bit larger that's a bit more liquid, yeah, definitely that could be interesting. So you like the recovery in cinema? Yeah, I think I mean, it's happening. That's for sure. Like will it last for like the next five to 10 years hard to tell at this point, but you know, short term is looking really good. Okay, well, let's find out how you want to express that and get into our pro picks. Pro picks is brought to you by ATB Financial. With over 100 billion in assets, ATB Financial is powering possibilities for more than 843,000 financial services clients. ATB CoreMark Capital Markets is a leading North American investment firm providing holistic corporate and capital markets advice and full service financial solutions. Visit ATB.com/inthemoney for more information. Okay, so yes to cinema recovery, no through playing it in cineplex, but the pick that you have to play a cinema recovery is debux technologies. Talk about this. I think a lot of people will have used or experienced a debux experience. Maybe they didn't know it. Yeah, exactly. So debux is best known for its cinema seats. So you buy a debux ticket and you know, you sit in that seat that will move and vibrate based on what's happening on the screen. So actually, cineplex is one of debux is customers. So you can experience it that I think any cineplex in Canada. The thesis on debux, you know, if people have looked at it in the past, it's been a disaster. They've been public for 20 years. They've been unprofitable for 18 years, I think, the first 18 years. And eventually an activist started to accumulate shares in the company, about 10% of the shares outstanding. And eventually sent a letter to the board and got a board seat. So that's about two years ago. And he started to clean up the company. So there was a turnover in the management team. There's a new CEO, new CFO since last year. And they really refocus the company on its core competency. So when I talk about the seats in the theaters, that's their core competency. They were trying to go after a few other projects like gaming chairs and the home theater market. It didn't work. They just wasted time and money. So the new management team refocus the company because, you know, what's attractive about the theater business is that there's a hardware sale. Initially they sell the seat. But then there's a royalty component as well. Every time you go to the theater and you buy a debugs ticket, it's a $8 upcharge on your ticket price. And part of that $8 goes back to debugs in the form of royalty. So if you want to play the cinema recovery, you know, the more there are big blockbuster films, action movies that come out in the theater, people tend to buy more debugs tickets. And so that drives the royalty revenue up. And its revenue is above pre-COVID levels. Yes. So unlike Santa Plex, how unusual is it or how easy is it to be an activist or have activist situations in microcaps? You don't see it often. I think it's, I mean, it can be challenging for sure. I mean, like I see a lot of people trying, but the boards tend to be very entrenched and they push back a lot. So in debugs, it actually went really well. The board agreed to give this activist, his name is Daniel Marx. They agreed to give him a board seat and then he was able to affect some change. So it took a, it was a process, but it worked out beautifully so far. They got the company to profitability. And now the way the model kind of works is they have these hardware sales that tend to cover most of the operating expenses. And you have that royalty component that is almost 100% growth margin that drops directly to the bottom line. So as long as you can keep growing that royalty piece, you're going to see profits grow pretty quickly. Okay. So your next two picks have something in common. And I saved this to the very, to the bitter end of the show because I know people are very interested in marijuana. You've got two microcaps, marijuana companies, Canara and Oxley, which ironically both were spoken about on our last episode with Mark Robinson as small ways to play. And in fact, Mark preferred the smaller players over the larger players. You said software is a dirty word. I think the marijuana sector burned a lot of people, came out with a lot of hype, is down dramatically from where it was. First, let's talk about the evolution of that industry and how long have you been there? Are you are you just picking up these names now fresh? Or are you waiting to recover some losses? Yeah. So fortunately, I came to this sector late. So it's been about 12, 18 months. So yeah, I'm picking up the broken pieces. But like you said, there was a big boom, big bust in the industry. Lots of people got burned last money. If you look at the last few years, there were I think 70 bankruptcies in the Canadian cannabis sector. Not all public. But like licensed producers going out of business. So it's been total chaos in this industry. And if you look at the stock prices of the primary LPs that most people know, can a pig grow, tillery, aurora, they're all down like 90 plus percent from their from their pigs. So you know, the way I approached the sector initially was to look at I Tide, which is a retailer. It's actually the biggest retailer in Canada. And this company, I looked at it more as like essentially a retailer. It's not like I didn't look at it as a cannabis opportunity. So the retail metrics, sales per square foot, all these types of metrics that you use for a retailer, they were looking really good. And the company was profitable. So I said, okay, that's interesting to me. So I started buying a little bit of I Tide. And then that led me to look a little bit more into the cannabis sector. Like who are the leading licensed producers right now? And then I started to pull that thread and discovered that there were a handful of licensed producers that were actually growing 20, 30% 40% a year, profitable, founder, led businesses, I and side of their ownership. You know, all the characteristics that you look for in a quality business. And I was like amazed. And I found these opportunities trading at four or five, six times. So high tide actually hasn't done well. It's rolled over. Do you continue to hold it? No, so I've sold this one some time ago. Okay. And really focused on the licensed producers. So now you like licensed producers. Let's talk Canara, which has done well, especially from the 2024 lows. Well, I don't know. Is it profitable? Yeah, it is it is profitable because some of the big players still aren't profitable. And what advantage do the microcaps have over the larger caps? Yeah. So I mean, for Canara specifically, one of their unfair advantages is that the took advantage of this downturn in the market. They bought a large scale facility from one of their competitors that was going bankrupt. So the facility that they have in in Vallifilk, Quebec, it was built for $250 million by another LP. When bankrupt, the bank repossessed the asset and the sold it, Kennera bought it for $27 million, $10 on the dollar. Because the building wasn't exactly finished, they had to put some more money into it to get it operational. But they did. And they rent that asset up from $0.00 in revenue to over $100 million in revenue over three or four years. So it's been an incredible growth. So they have this world-class facility that's probably way better than any other facilities in the world, actually. So that's unfair advantage number one. The number two is they're based in Quebec. We have very low electricity costs. And electricity is a big input indoor or greenhouse cannabis cultivation. So they have a cost advantage. And the last thing is they are the dominant player in Quebec with the provincial body that sells cannabis at retail. It's called the SQDC. And the SQDC has a strong bias to buy from local producers. That's how we are in Quebec, like for local companies. For better or worse. So that's why Canera has a very good relationship with the provincial body. And they essentially grew from zero to number one market share in the Quebec market right now. I think that's the shocking part is that these smaller players do have number one market share. The bigger ones, like they're still fighting for maybe fourth or fifth. Yeah, exactly. So Canera is number seven across Canada, but they're number one in Quebec. So the play here is, OK, now let's expand outside of Quebec. And the way I think about it is they became number one in Quebec with no marketing at all, because you can do any sort of marketing in Quebec. So it's purely based on the quality of their product and selling it at a great price. And I think they can replicate that success in other provinces. So they're starting to expand now into the other-- What's the Oxley story, which is your second pick, ticker XLY? Yeah. Oxley is a bit different. Oxley is a bit of a bigger company, not in market cap, but in sales. So they're number three license producer in the buy market share in Canada. They have the number one brand across the country, called back 40. This one is a bit different because they were around when there was the big boom. They raised a lot of capital. They have a strategic investor. It's a tobacco company called Imperial Brands. So they raised hundreds of millions of dollars and spent it. They weren't profitable for a long time. And they got in trouble almost with bankrupt. If you look at the stock chart, I think the stock went down to $0.2 a share. And they had to dilute shareholders to stay afloat. They converted some convertible debentures. They restructure their debt. So the last couple of years has been spent cleaning up the cap structure and the balance sheet. And the meantime, they're still growing. Yeah, the business. If you look at the numbers, the business is doing well. It's growing. They're profitable. They have best-in-class margins. I think they're probably the lowest-cost producer in Canada today. So two pushbacks. One, what's exciting about being a producer where you've been mentioning the brands, but it's not quite like wine or drinking. I don't know the affinity that people have for marijuana brands. And they're limited in their pricing power, because they have to compete against still a black market. Yeah, well, I would push back on your first point about brand affinity, because I'm not a consumer. So like you initially, I thought the same thing. But then I started doing research and talking with these management teams and looking on Reddit. And you read some content on the industry, and you realize that there is actually some brand affinity. Like Canera, for example, they told me they sell $50,000 worth of merch per month. Wow. So people buy the brand. And why? Because they put out these IQALTY products over and over. So there's an innovation cycle in the cannabis industry that you should know about. It's basically, you grow a certain genetic of plant, a certain strain. And you put it out in the market. And typically the life of a strain in the market can be like 12, 18 months, and then it falls off. Like people want to try something else. It's like maybe if you look at the craft beer industry, probably a bit similar. So the companies need to always innovate, find new strains, new genetics, new product formats. So it's a trend meal of innovation. So you wouldn't think that initially when you look at the sector. But the companies that are falling behind or that are still unprofitable today, it's because they failed at that innovation gain. What about pricing? So pricing has been improving. When the industry was legalized, everybody thought cannabis would sell for $10 a gram or more. Prices crashed to about, I believe, at the low, maybe $3 a gram. So that's why you see everybody-- all the at-piece were unprofitable. What changed over the last couple of years? Some international markets opened up on the medical side. The main one is Germany. And Germany is importing a lot of Canadian cannabis because they don't have a domestic industry. Same for Australia, same for the UK. So maybe people don't know this, but Canada is actually a world class cannabis producer. Like we're the best in the world. And there's a lot of demand by international medical markets by IQOTE Canadians cannabis. So that has soaked up a lot of demand from actually supply from the Canadian market. And that stopped the prices from falling further. And now we're starting to see prices increase a little bit. So what? Up from three to what? I mean, early days, the wholesale market, I think the prices went even lower in the $12 range, I think. And it's a bit of an opaque market. But some at-piece share some of these metrics. And you see the wholesale-- $5? Or no? No, maybe $2 to $3. But at retail-- actually, for example, as one of the market leaders took some price increases at retail last year. And all the competitors followed and increased prices as well. So you're going to see, I think, more rational competition by all the LPs. Now that the space is getting cleaned up, many have gone bankrupt. Competition is less fierce these days. So I think if everybody is able to be rational in their pricing strategies, the industry should become profitable for everyone down the road. All right, Matthew. An absolute pleasure. I learned so much about different industries today and about microcaps in general. I really appreciate it. Yeah, my pleasure. Thanks for having me, Amber. This ETF minute is sponsored by CI Global Asset Management. This video is for general informational purposes only and not personalized investment advice. Everyone these days is interested in asset allocation. And there's tons of products to choose from. CI has come out with two new products that add in sectors that you won't typically find in other asset allocation ETFs. For a look at this, let's speak to Adam Baram, who is the director and investment strategist at CI Global Asset Management. Adam, thank you so much for joining me. Amber, thanks for having me on. So as we noted, lots of interest in asset allocation because it's sort of like a set it and forget it. I want 50% bonds. I want 50% equities. And then you've got these suite of ETFs that just do that for you, except it's missing some other assets. And this is where CI has come out with two new products, CEQP and CBAP. Tell me about what other assets you're adding to the mix. That's a great way to frame this because we all know about asset allocation ETFs at this point. They are a one click diversified global solutions, right? But at CI, we felt the need to have the next step in this innovation, in the form of introducing what we call the plus leaf. So CEQP and CBAP, they are the typical asset allocation ETFs. But on top of that, there is a plus leaf involved, where we have introduced gold and Bitcoin into the strategic allocation. And we believe we have many reasons to believe this may benefit portfolio is going forward. Tell me about why that is. Is this a call on the direction of Bitcoin or the direction of gold? Good point. So that's usually when we talk to investors, they talk about these two asset classes being very volatile. But we don't think in terms of one having our say on one asset class, what we do think about is on a portfolio construction level, how does that improve returns, expected returns and risk adjusted returns as well. So gold and Bitcoin, very volatile asset classes, but these do have some uncorrelated capabilities. You combine high volatility with uncorrelated mix of asset classes and then you mix in rebalancing. You benefit from portfolio diversification. And you're not like loading up on it. What percent of the asset allocation is it? Absolutely. So it's a measured allocation. That's a good point to raise as well. We optimize our portfolios by including asset classes. So CBAP has a 2.5 percent gold, 2.5 percent Bitcoin allocation into it. And the rest of it is can be thought of as a 6040 fixed income and equity portfolio. CE, QP, this will have a 92 percent global equity sleeve, globally diversified. And then 8 percent would be gold and Bitcoin. What if it's still too volatile for your appetite? Do you still have like, we'll call it the plain vanilla asset allocation ETFs? Exactly. We do have the plain vanilla asset allocation ETFs which don't have these allocations. But I would like to take some time to talk about why we introduced the C, QP and CBAP when the plain vanilla asset allocation ETFs do exist. I think it's an important message to deliver here where since the onset of COVID-19, since 2020, the regime in investment landscape has changed. There was an incredible amount of like bazooka of money printing happening where $4.4 trillion plus dollars got printed into the economy that led to inflation. We believe that regime will continue into the future. And the thing about gold and Bitcoin in particular is that gold and Bitcoin supply is no one can hamper that. Nature is the supply determinant of gold. Whereas when it comes to paper money, governments can print on more and more if there are wars and there are billions and billions of dollars involved, there might be more money printing coming. So that's why we introduced this innovative allocation to all in one ETFs because these do have those, they tend to include diversification benefits and protect you from that future inflation. Right now, there's 0% management fee till June 30th. Absolutely, until June 30th, C, QP and CBAP are both 0% management fee. All right, thank you so much Adam for joining me. My pleasure, thanks for having me on. I'm going to be on the next episode. We've got Jason Landau of War Talk Capital Advisors. He talks North American stocks. If you've got questions, you can email us questions at inthemoneypod.com or find us anywhere on social media, @inthemoneypod and we'll see you on the next episode.