Small Cap Portfolio: 2 New Buys + 2 Adds to Existing Positions - May 14, 2024

Including a small movement in my big cap portfolio too

I started my small-cap portfolio in February. I am still building the first positions. Before today’s buys, the portfolio had 2 new positions. As a reminder, the first stock bought was sold following a takeover bid for the company (it was Altium, an Australian software company).

My portfolio update is just here for the visibility on the whole portfolio.

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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.

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

First new stock

The first new stock is Qualys, an American cybersecurity company. This company is not as famous as Crowdstrike, Palo Alto Networks or Fortinet, but has a lot of qualities and is well managed. For instance, SBC are reasonable vs most of its peers. Some difficult newsflow and a difficult market pushed back the stock around $150. It can be a good entry point. As usually, I plan to enter in several times.

My position: 3 shares (around 400€)

Main metrics

Market cap $5.5B

Revenue 24 $605M

Revenue future growth 9.2% in 2024 / 9.9% in 2025

Net profit margin 23.0%

5y average ROE / ROIC: 26.0% / 21.7%

PE24 41.7x / PE25 36.5x

Dividend -% / Payout ratio -%

Cash $598M (2.3x EBITDA)

Buybacks: 0.9%/year

Why invest in this company?

• Interesting cybersecurity small cap

• Great profitability ratios

• Well managed

• Increasing number of clients

• A lot of cash for strategic options

My fair price estimation is around $140, so roughly the current price. There is a monthly moving average just at the current price. $130 can be another support (even if it is close to the current price), $95-$105 is an interesting range and a very strong support (it is the Monthly Moving Average 100, it was a resistance in 2018 and 2019 and a support in 2021)