The 2025 Microcap Meltup... Could it be?
How Beaten-Down Stocks and High-Risk Plays Could Deliver in the Year Ahead
Disclaimer
This is not investment advice. The stocks mentioned in this article are all HIGHLY SPECULATIVE, and no sane investor should ever buy any of these. I’m releasing this purely for entertainment purposes—mostly so you can laugh at my picks. If any of them do go up in value, consider it blind luck.
Preparing for the Microcap Meltup
The Canadian microcap market had a fantastic 2024, leaving many investors optimistic about what 2025 might bring. As the dust settles on an impressive year, I believe the next phase of the rally is about to take shape—one that could see even the beaten-up, lower-quality names get a bid. Here’s why I’ve been accumulating select microcap stocks in anticipation of what could be a Microcap Meltup.
The Landscape in 2024
2024 was a breakout year for profitable and growing Canadian microcap stocks. These companies not only delivered exceptional returns but also attracted increasing attention from institutional investors. For the first time in years, we saw institutions coming down market to finance and highlight these high-potential businesses, leading to a wave of phenomenal gains.
Some of the standout performers in 2024 included (there were many more):
Enterprise Group Inc. (E.TO), Zedcor Inc. (ZDC.V), Kraken Robotics Inc. (PNG.V), Vitalhub Corp. (VHI.TO), Zoomd Technologies Ltd. (ZOMD.V)
There was notable success in traditionally promotional stock picks, especially among quantum computing companies. These buzzwords captured investor interest and generated substantial gains, highlighting the effectiveness of timely promotion. Similarly, smaller crypto-related stocks experienced a resurgence, with improved sentiment in the crypto space driving increased bids and liquidity.
Another key dynamic in 2024 was the increased number of newsletter/blog writers in the Canadian microcap space, which was great to see. These thought leaders (SmallCap Discoveries, Common Sense Investing, Wolf of Oakville) and their subscribers played a significant part in discovering and highlighting many of the companies that performed exceptionally well. Their influence brought much-needed attention and liquidity to these stocks.
The stocks I’m highlighting, however, are vastly different. These companies remain largely undiscovered and completely off the radar of most investors and industry influencers. This lack of awareness creates a unique opportunity for those willing to dig deeper and take calculated risks.
The U.S. large-cap market is currently overextended, with valuations that are unsustainable and a trade that has become overly crowded. Many investors will start looking elsewhere for alpha, and some of that money will flow down-market. Continued institutional interest and the resulting liquidity surge could make 2025 an even more exciting year.
Why 2025 Could Be the Year of the Meltup
2025 could be the year when even the forgotten, overlooked, and beaten-down microcaps get their moment. Here’s why:
Rotation to Lesser-Known Names: As investors chase returns, many of the high-quality names in the microcap space have already seen significant appreciation. This creates opportunities for less-followed stocks to attract attention.
Speculative Appetite: Bull markets in microcaps often end with a speculative frenzy. We’re not there yet, but the groundwork has been laid as capital flows increasingly target riskier plays.
Momentum Building: The “meltup” phenomenon thrives on momentum. As more investors pile into the space, sentiment alone can drive significant price appreciation.
My Strategy
My investment thesis is that these companies are not at risk of bankruptcy and have successfully right-sized their businesses to significantly reduce cash burn. While bankruptcy risk still exists, it’s minimal. This creates an asymmetrical bet where the company can either generate profits or pivot into a new sector, attracting fresh investor interest and liquidity.
For 2025, my strategy focuses on stocks that have been overlooked or left for dead. These companies have extremely low market capitalizations—most under $5 million, many under $2 million, and one as low as $600k. While these are highly speculative plays, they share common traits that make them intriguing opportunities:
Stabilized Cash Burn: These companies have stabilized their cash flow, reducing the risk of insolvency and allowing more time to execute on their business plans.
Potential Catalysts: Each of these companies has potential upcoming events or developments that could draw increased attention and liquidity to their stocks.
High Risk, High Reward: Although most of these plays are likely to fail, the potential for one or two success stories to deliver massive returns makes the overall risk-reward balance appealing.
This approach requires patience, thorough research, and a clear understanding of the risks involved. However, the potential upside in these underappreciated names makes it worth the effort.
Stocks on My Radar
Here are some of the stocks I’ve been focusing on in preparation for the Microcap Meltup. Over the next few weeks, I will highlight each in more detail.
Novra Technologies Inc. (NVI.V, Market Cap: $2.3M): The company announced substantial new orders in Q4 totaling $2.3M by the halfway point, surpassing the entire Q1-Q3 order book. Additionally, a significant investment of $12.25M from a U.S.-based lender, SNAPS Holding Company, is expected at the end of March 2025.
Yangaroo Inc. (YOO.V, Market Cap: $1.87M): The company’s balance sheet has been improving each quarter. A recent acquisition is beginning to bear fruit as the advertising division continues to grow. They have also added additional award shows to their portfolio.
Vibe Growth Corporation (VIBE.CN, Market Cap: $647k): A vertically integrated cannabis company with operations in California. While not yet profitable, Vibe Growth has been edging closer each quarter. With $12M USD in annual sales, the company offers intriguing value.
Atmofizer Technologies Inc. (ATMO.CN, Market Cap: $1.21M): Currently a low-float shell company, Atmofizer has started to see renewed activity after years of dormancy. My hunch is they will repurpose this shell into a new venture during the year.
Network Media Group Inc. (NTE.V, Market Cap: $1.52M): Despite its small size, Network Media Group continues to win and execute new projects. These efforts will likely show up in financial results over the next few quarters. At under a $2M market cap, the company could be an acquisition or privatization target.
Belgravia Capital Intl (BLGV.CN, Market Cap: $5M): What excites me about this company is its newly established wholly-owned subsidiary, NodeVest IO Inc. The CEO and board members have been exercising warrants, signaling their bullish sentiment about current developments. The company shares parallels with SOL Global (SOL.CN), which shifted to a Solana-focused crypto model and saw a tenfold stock increase.
Risks to Consider
It’s important to acknowledge that investing in these types of stocks is inherently risky. Liquidity constraints, volatility, and the potential for significant losses mean this strategy isn’t for everyone. I have a portion of my portfolio that I keep allocated to these degen plays. As always, please consult with your financial advisor before making any investment decisions.
Final Thoughts
The Canadian microcap market’s incredible performance in 2024 has set the stage for what could be an even broader rally in 2025. While quality names have led the charge so far, I believe the meltup phase will see a wider range of companies participating. By positioning myself now, I aim to capitalize on this potential shift while remaining mindful of the risks.
For those willing to take on the challenge, the microcap space offers a thrilling opportunity—and 2025 might just be the year to ride the wave.