If you can’t beat them, join them. That’s the mindset Marc Robinson brings to small cap investing right now. The Managing Director at FAX Capital makes the case that the traditional small cap playbook is broken—capital is leaving public markets, private equity is stepping in, and more companies are choosing to go private. His solution: blend public and private investing, take concentrated positions, and actively push for outcomes. He explains how his 70/30 strategy works, why active ownership is critical in Canada’s inefficient small cap market, and how investors can capture a “second bite of the apple” when companies get taken private. Along the way, he breaks down the growing disconnect between public and private valuations—and why that gap is creating opportunity.
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Three small cap ideas:
NOTE: The D2L received a non-binding unsolicited take private offer at a 20% premium, the day after the podcast was filmed.
Learning management software – the operating system for universities (e.g., U of T) and organizations for curriculum, materials, grades, and training.
- Outstanding management team: Founder John Baker, a real technologist, owns 50% of the stock for excellent alignment; bench strength is amazing, including one of the best CFOs in Canada.
- Mission-critical, highly sticky business with very low churn, high net revenue retention, and 5-year contracts. Users spend 2–3 hours a day on it (Facebook-like engagement).
- Strong financials: Approximately $300 million ARR, profitable, sitting on hundreds of millions in cash, and EBITDA growing 30%.
- Currently trades at 6x EBITDA with low expectations — double-digit growth is now good enough.
- Catalysts ahead: Continued execution and strong quarters; potential aggressive buyback; AI product Lumi (turns textbooks into new media, creates quizzes/exams, predicts student grades based on engagement in first year).
- Attractive setup: Great business with great management at a good valuation due to temporary factors (SaaS sell-off, higher-ed pressures, small-cap manager redemptions). Optionality if John Baker takes it private.
2. Premium Brands (TSX:PBH)
- Visionary management that was early to major trends in protein and on-the-go convenience; built a strong supply position with major customers like Starbucks, Walmart, and Costco.
- Shift from M&A to major capacity build-out is now inflecting: Significant capex investments (especially in the US) are launching, driving strong revenue growth in those businesses.
- J-curve dynamics ending: After years in the valley (underutilized facilities, inventory build, debt, margin pressure from COVID, labor, and input costs like beef), EBITDA, debt levels, and return on capital are expected to improve substantially through 2026.
- Valuation opportunity: A 30% earnings grower now trading at 15x earnings after the pullback.
- Clear path forward: Organic growth focus after the build phase creates a great opportunity as metrics recover.
3. Consolidated IVF Supplies Business (Private – originated from Hamilton Thorne)
Supplier of consumables and equipment (needles, catheters, petri dish media, etc.) to in-vitro fertilization (IVF) clinics – the #2 global player after consolidating the 3rd, 4th, and 5th largest players (~$250 million revenue, ~$50 million EBITDA, growing).Most compelling reasons to own it:
- Powerful long-term macro tailwind: Declining birth rates and population challenges in the developed world; 1-in-6 couples face fertility issues; governments and corporations increasingly subsidize or provide benefits for IVF.
- Recurring revenue model: Directly tied to IVF cycle growth via consumables needed for every cycle; avoids key-person risk of owning clinics.
- Successful value creation: Took a 12% position in public Hamilton Thorne, joined the board, catalyzed a process leading to sale at a 60% cash premium (~20x EBITDA); rolled equity into NewCo alongside private equity (Astor), then added another acquisition.
- Strong position: Now the second-largest player globally with significant scale; multi-decade growth opportunity as IVF demand expands.
- Ongoing upside: Compounding capital alongside the PE firm with board/minority rights; future liquidity via IPO or strategic sale – no easy public pure-play equivalent in North America.
Don’t miss our next episode! Micro caps!
DISCLAIMERS: This text AI generated and should be checked against actual delivery. The content provided in this podcast is for informational purposes only and does not constitute financial, investment, or professional advice. The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. The host and guests may maintain positions in any securities discussed on the podcast. Always consult with a qualified financial advisor or professional before making any investment decisions.
