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The FTSE Smallcap index represents the smallest market capitalization companies on the main market segment of the London Stock Exchange. Its constituent companies are mostly domestically focused and are comparatively less impacted by global economic and political headwinds compared to their large multinational counterparts. These are also known as Microcap stocks. The FTSE small-cap index had been trending within a range of 6066.18 and 5895.86, since the beginning of 2020 till 21 February 2020. The coronavirus induced market scare started impacting the index since that day, and it has lost nearly 15 per cent of its value till the time of writing this article on 10 March 2020.
FTSE Smallcap Index price volume chart since 1 January 2020, Source â Thomson Reuters
During the period, the increase selling momentum that started on the 21 February 2020 halted on 28 February 2020 with an increased buying momentum lasting till 4 March 2020. After that, the index slid again to reach its lowest level on the 9 March 2020.
The outbreak of the coronavirus epidemic since the beginning of 2020 has had a disastrous effect on the world capital markets. The news of more and more people getting infected and health authorities struggling to get a foothold on the situation is having a catastrophic impact on the market sentiments. The sudden drop in global trade and commerce and the ensuing interest rate cuts undertaken by central banks like The Federal Reserve of the United States and the Reserve Bank of Australia speak volumes of what bank officials think the situation is gravitating towards. This, added to the increasing number of companies coming out with revenue and profit warnings, has made investing a difficult vocation to be in for most of the individual and institutional investors for the time being.
The United Kingdom, which started the new year with improving business fundamentals following the tormentuous period leading up to Brexit, has now been rendered a rude shock. The capital markets, which were expecting a strong revival in sentiments, have now tumbled and erased most of the gains made during the earlier period of 2020. On the London Stock Exchange, most of the major indices have been trading in negative territory with FTSE 100 index losing nearly 20 per cent of its value, the FTSE 250 index losing nearly 19 per cent of its value and the FTSE AIM All-Share index losing nearly 16 per cent of its value in the past one month.
In this article today, we will analyze the segment of the London Stock exchange, which, according to market capitalization, represents the smallest companies traded on the exchange. We will look at the FTSE small-cap index and a select few microcap stocks and see how they have been performing amidst the current market chaos.
Among the top performers on the index since the start of the year are - Sirius Minerals Plc, Petropavlovsk Plc, Huntsworth Plc, Indivior Plc and Batm Advanced Communications Ltd. All of the above stocks have given double-digit returns during the period with Sirius Minerals Plc providing 55.84 per cent returns and Batm Advanced Communications Ltd yielding 13.97 per cent returns.
Sirius Minerals Plc â The organization (LON:SXX) is a United Kingdom-based mineral development and fertilizer company. It holds exploration rights over polyhalite mineral deposits located in Whitby, Yorkshire in the United Kingdom. This mineral combines six micronutrients potassium, magnesium, sulphur, calcium, nitrogen and phosphorus, which can be directly used as fertilizer without need for further processing. The company intends to use this mineral to manufacture granulated NPK type blended fertilizer product called POLY4.
The company had been facing funding issues over the past few years because of the Brexit induced economic downturn. Since the beginning of 2020, there has been speculation that mining giant Anglo American Plc would acquire the company. The speculation was confirmed when Anglo American Plc confirmed its interest in the company and made an offer of 5.5 pence per share to the shareholders of Sirius Minerals Plc. At the time when the offer was made the shares of the company were trading at around GBX 3.66, and immediately jumped to GBX5.5 as the news broke. At the time of writing on 10 March 2020, the shares of the company were trading at GBX 5.48 registering a gain of 55.84 per cent compared to the closing price as on 31 December 2019.
Petropavlovsk Plc â The company (LON:POG) is a London-registered Russian gold mining company with operations in the far east of Russia, and in terms of production, reserves and resources, it is one of the major gold mining companies in Russia. The group is listed on the London Stock Exchange and has operated since 1994, with a key area of focus being the Amur region. In the Far East of Russia, it is amongst the most experienced, and the most established vertically integrated gold producers and focuses on exploration, mining and production of a stable output of low-cost gold. The Amur region benefits from a strong mining tradition, access to hydroelectricity and well-developed infrastructure.
The company benefits whenever the price of gold rises. The price of gold has been rising since the beginning of the year and have reached record levels of 1300 GBP per ounce in March 2020. The coronavirus scare is having a telling effect on the world economy and has been driving the investors to safer investment avenues like gold. Since the beginning of the year till the end of trade on 9 March 2020, the stock of the company has gained 47.25 per cent
Huntsworth Plc â The organization (LON:HNT) is a London-headquartered international communications and healthcare company which seeks to generate value through a network of specialist agencies. The company is primarily focussed on providing medical communications and marketing services to its clients from the healthcare sector, which includes mid and large biotech and pharmaceutical companies. The company also offers a variety of services related to advisory and communications to smaller organizations. The operations of the group are differentiated in four operating segments, namely Communications, Immersive, Medical and Marketing.
The company has recently been in the news because of the acquisition offer it has received from CD&R Artemis UK Bidco Limited on 3 March 2020. Since the breaking of the news until the end of trade on the same day, the stock appreciated 53.77 per cent. Â On a year-to-date basis, it has gained 30.22 per cent in its value.
Indivior Plc â The company (LON:INDV) is a North Chesterfield, USA-headquartered speciality pharmaceutical company which focuses on drugs used for the treatment of opioid addiction and has over 20 years of experience. The company was formed in 2014 after Reckitt Benckiser Group Plc separated its speciality pharmaceuticals segment into an independent company, which focused on developing, manufacturing, and selling prescription drugs used for the treatment of opioid dependence. Primary products of the company are Subutex and its Naloxone-combined preparation Suboxone, and the core geographical segments of the companyâs operations are the United States and Rest of the World.
The company is the largest manufacturer of anti-addiction drugs in the world while also providing treatment for cocaine and opioid analgesic overdose. The stock of the company has gained 15.48 per cent in its value since the beginning of 2020 to 9 March 2020.
BATM Advanced Communications Ltd â The company (LON:BVC) is an Israel-based technology company, engaged in providing real-time solutions which are backed by substantial intellectual property and patents. The company was established in 1992 and develops, produces and markets medical products, as well as data communication products. Its two operating segments are Bio-Medical and Networking & Cyber. The Networking & Cyber division provides innovative telecom networking solutions, focusing on advanced software and cybersecurity while Bio-Medical division focuses on the provision and development of diagnostic laboratory services and equipment.
The company had made two important announcements this year, which have had a positive impact on its share price performance. The first news came on 24 February 2020 when the company announced that it had been awarded a $4m cybersecurity contract from its long-standing government defence department customer and the second one came on 27 February 2020 when it announced that it had successfully developed a new diagnostic kit to detect COVID-19. Between 24th and 27th of February 2020, the stock of the company has gained 20 in its share value on the London Stock Exchange. The stock of the company has gained 13.97% in value in the year to 9 March 2020.
