Small Cap Portfolio: 1 New Buy + Big Cap Portfolio Rebalancing

A new and first healthcare stock in the small cap portfolio

I started my small-cap portfolio in February. I am still building it and it will soon reach 10 stocks. The target is around 15 stocks. I just added 1 position and I share it why you.

My portfolio update is just here to see both portfolios.

I am also rebalancing my big cap portfolio to improve long term return. This is the execution of the strategy discussed here in my portfolio review. Most of the stocks won’t change, a lot will be reinforced (mainly winners as I prefer to reinforce winners) and some of them might be sold.

My small cap investment method

I won’t buy small cap stocks the same way I buy big caps. They are more volatile, unpredictable and less followed by analysts and investors.

Therefore, I will follow these rules:

• My positions will be very small. This will allow me to

  • Limit the risk for each stock

  • Easily reinforce if the stock price falls - and my investment thesis remains the same

  • To get my foot in the door and then reinforce or exit

• I won’t focus too much on the price even if, of course, I don’t want to unreasonably overpay

• Of course, I continue to keep my investment philosophy: great quality companies that will be able to thrive over the long term.

• I want to aim a higher TSR (Total Shareholder Return)

And now, it is time to discover the stock and why I bought it.

New small cap stock

The first new stock is Clinuvel, an Australia healthcare company company. It is specialized in the development of drugs for the treatment of light-related severe skin disorders. Already profitable, it is developing new medicines and is using its cash to create a new skincare cosmetic brand - leveraging its knowledge and skills acquired with their core activity.

My position: 44 shares (around 400€)

Main metrics

Market cap $515M

Revenue 24 $60M

Revenue future growth 14.1% in 2024 / 11.2% in 2025

Net profit margin 38.8%

5y average ROE / ROIC: 26.0% / 25.8%

PE24 22.5x / PE25 20.8%

Dividend 0.44% / Payout ratio 10%

Cash $124M (4.5x EBITDA)

Dilution: 0.5%/year (but a new share buyback program has been initiated)

Why invest in this company?

• Great market - skin damage and skincare pharmaceutical are great sectors

• Huge profitability (almost 40% net profit margin)

• Very clear and transparent management

• 25% of their market cap is cash - they can use it to boost their already interesting growth

• Already profitable biotech

• They want to diversify and launch a new skincare cosmetic brand - using the knowledge they have acquired with their core activities

I begin a small position and plan to add late. The ATH was in 2021 around AU$44. Previous one was in 2019 around AU$40. AU$13 is a support and could be use to reinforce. The 100-month moving average and is around AU$10.2.

And now, it is time to look and how I am rebalancing my big cap portfolio