My guest on the show today is Thomas Richard, CFA, Portfolio Manager at Philippe Hottinguer Gestion, based in Paris. Thomas has been diving deep into European microcaps – a market segment he describes as “so unloved and uncovered,” with unique inefficiencies and opportunities.
In our conversation, Thomas lays out why Southern Europe – especially countries like Spain, Italy, and Greece – is currently one of the most interesting regions for microcap investing. He explains the value of bottom-up research, the importance of direct interaction with management teams, how non-European investors can begin navigating this often-overlooked space, as well as some of the structural risks that exist in this space – including governance concerns and delisting threats.
We also touch on specific names like Euroconsultants, Shelly Group, Reway, and ALA, and for full disclosure, I am not a shareholder in any of them. For more information about Thomas Richard and Philippe Hottinguer Gestion, please visit: https://www.philippehottinguer.com/fr/phhgestion/
Watch on YouTube:
Overview/Breakdown of the interview:
1. European Microcaps: An Unloved and Inefficient Market
The European small and microcap segment is heavily underfollowed and has seen sustained outflows in recent years, leading to inefficiencies—and opportunities.
“At least in Europe this segment is so unloved and covered nobody cares... you are seeing a lot of outflows... since at least five years.”
“This creates a lot of opportunities... a lot of inefficiencies in the market.”
2. Regional Focus: Southern Europe Gaining Momentum
Southern European countries (Spain, Italy, Greece) are particularly attractive right now due to economic recovery, EU stimulus, and underperformance in the prior decade.
“What’s very interesting is south of Europe... Spain, Italy, Greece... they were lagging during the past decade... now it’s the opposite.”
Greece in Focus
Greece stands out due to significant inflows from EU recovery funds.
“Greece is benefiting the most from the European recovery fund... hundreds of billions going to Greece... this creates a fundamentally favorable environment.”
3. Structural and Cultural Barriers for Non-European Investors
International investors face several challenges:
Fragmented markets
Lower liquidity
Language barriers in filings
Differing corporate norms
“The European market is very fragmented... language barriers, lower liquidity, and management culture can vary a lot.”
4. The Critical Role of Bottom-Up Analysis and Management Access
Investment decisions are driven more by company-specific factors than country-level macro trends. Speaking directly with management is crucial.
“That’s the best part of my job—conferences, talking with management... That’s how you understand company quality.”
“You don’t have the same standard from one country to another... management access is key.”
5. Technology and Networking are Easing Entry
Tools like AI-based translation and increased access to company management through conferences and online platforms are lowering the research barrier.
“It’s very easy today to translate any document... even an annual report... in a few seconds, and it’s free.”
“It’s kind of easy to have access to the management—they want to speak with investors.”
6. Behavioral Differences: Risk Aversion in Europe vs. North America
European investors tend to be more conservative, leading to fewer microcap opportunities and slower capital flow.
“European investors tend to be more risk-averse... there is less capital dynamism in Europe compared to North America.”
7. Market Structure and Policy Incentives Matter
Certain countries like Italy encourage microcap listings via fiscal incentives, whereas others (France, Germany) lag behind due to lack of government support.
“Italy has fiscal incentives for IPOs... that has an effect. More IPOs in Italy compared to France or Germany.”
“You don’t have much incentive to invest in small caps in some other countries.”
8. Governance Risks: Takeovers and Delistings
Founder-owned or closely held companies can pose a risk of being delisted or bought out at unfair valuations, often involving conflicts of interest.
“Sometimes you have companies getting delisted because they get a bid... not properly valued.”
“There is a conflict of interest when founders or management buy out and delist the company.”
9. Investment Process: Start Small, Build Conviction
Richard prefers starting with a small position to learn more before committing larger capital.
“I usually start with a small position... to follow the company and better understand it over time.”
10. Recommendations for Non-European Investors
Use free online platforms (Substack, MicroCapClub)
Attend local conferences
Engage directly with company management
Learn from local analysts and investors
“You can find a lot of free information... investors writing on Substack, MicroCapClub.”
“Try to speak with management—it’s easier in the small/micro space.”
11. Highlighted Microcap Investment Ideas
🔹 Euroconsultants (Greece)
€20M market cap, consulting for public administration
€15M backlog, trades at 5x EBITDA
Potential asset sale; Richard is a shareholder
🔹 Shelly Group (Bulgaria, listed in Germany)
Smart home device company
30–50% annual growth, 25% EBITDA margin
Discovered at conference; small starter position
🔹 Reway (Italy)
Infrastructure maintenance firm (highways, rail)
Strong backlog (€1B), trades at 6x EBITDA
High visibility and profitability; Richard is a shareholder
🔹 ALA (Italy)
Aerospace logistics and distribution
15–20% organic growth, improving margins
Recently subject to a takeover bid by private equity
Conflict of interest suspected in valuation; Richard was a shareholder
12. Personal Insights and Travel Experience
First trip to the U.S.: attended Planet MicroCap Showcase and Berkshire Hathaway AGM
Present during Warren Buffett’s announcement about stepping down
Enjoyed trying U.S. fast food chains like Shake Shack and In-N-Out
13. Where to Find Thomas Richard
LinkedIn: Thomas Richard
Email: t.Richard@phhgestion.com
Website: Philippe Hottinguer Gestion – monthly reports
MicroCapClub handle: abacus
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