Performance Update - August 2024

Our MS Microcap Quality Index logged another positive month in August, jumping 5.13%. This comes on heels of record monthly move of 13.87% in July. The index has now averaged 64.43% since inception.

With another month under our belt, it is time to look at what matters the most for our MS Microcap Quality Index (MSMqi): Performance.

From strength to strength

After a weak start to the month, where we gave up our record setting 13.87% July gains, the stocks in the MSMqi managed to stage a successful rebound, outpacing the market by the end of the August.

The MSMqi ended the month up 64.43%, on average, since inception in February 2022. This represents a jump of 5.13% in August.

This compares to the S&P 500, up 36.34% since the inception of the MSMqi in February 2022 and was up 3.03% for the month of August.

NASDAQ is lagging behind. The index was up just 0.83% for the month and remains up 28.44% since the inception of the MSMqi.

We think the returns of the MSMqi is a confirmation of our belief that there is a strong change in investor sentiment, where they are deploying capital away from overvalued large caps to undervalued smaller cap names.

We also added a new benchmark, the iShares Micro-cap ETF. Since the MSMqi primarily focuses on microcap companies, we wanted to also illustrate how well we are doing compared to the area of the market where the MSMqi has the most exposure. iShares had a tough month, declining 3.27%. The ETF has significantly lagged behind the S&P and NASDAQ benchmarks since the inception of the MSMqi, with an average return of only 0.87%.

Average peak return - 115%

As per previous months, the peak average return continued to climb and is 115%, about a 14% increase from July. This means that the average stock in the index already doubled at one point in time and confirms that the MSMqi is a great hunting ground for quality stocks that can truly “beat the market.”

The rising high performance of the MSMqi in August was partly due to strong showings from TSSI (data center integration) and CPHRF (CPH in Canada/pharma). TSSI and CPHRF were up 71.68% and 49.29% in August, respectively.

Another month, another multi-bagger, 80% of stocks up at least 20% at some point

This time it was Harrow Inc (HROW) that managed to get over the 100% return mark. HROW was added in May of last year as Cliff Note #59. You can see it here.

With this addition, we are still able to maintain the statistic that every third stock added to the MSMqi achieved multi-bagger status. You can see all of the multi-baggers here. On average, it took ten months for a multi-bagger stock to reach a return of 100%.

We would also like to highlight the positive moves in August that are visible in the peak return performance spread. You can see that 80% of stocks were up at least 20% at one point or another.