GEO Investing

If you are familiar with legendary fund manager Peter Lynch and his must read book, One Up On Wall Street, you know exactly what “Buy what you know” represents. The Fidelity Magellan Mutual fund averaged an annual return of around 30% while Lynch was its portfolio manager between 1977 and 1990. Lynch was a big believer that even the average investor could achieve great success by investing in companies and industries that they have some type of relationship with.

For example, let’s say that you worked at Gap, Inc. (the) (NYSE:GPS) when it was a dominant player in retail during the 1980’s and 1990’s. $5000 invested in GAP stock in 1980 would have been worth $4.2 million at its peak in 1999 and would still be worth $1 million today.  Or maybe you like to wear lululemon athletica inc. (NASDAQ:LULU) sportswear while doing yoga, freshening up afterwards with beauty products from $ULTA. Both of these stocks have performed spectacularly since going public:

Maybe instead of buying your morning brew at Starbucks, you opt for a 32-ounce energy drink from Monster Beverage Corporation (NASDAQ:MNST), the best performing stock of the last 20 years, up 7000%. Now, I don’t recommend you do this, but we all have that fetish that we are not so proud of!

When I was younger, fresh off reading One Up On Wall Street, I would frequent shopping malls to find out what stores were trendy by counting shoppers and interviewing employees. I remember buying stock in costume jewelry retailer Claire’s Stores, making money several times based on this practice.

Unfortunately, Chick-Fil-A is not a public company or I would have invested mounds of money into the stock. Whenever I was on one of my undercover mall road trips, I would always get side-tracked by devouring two classic Chick-Fil-A meals before starting my store to store route. By the way, although it doesn’t quite make up for all those times the Philadelphia Airport lost my luggage, Chick-Fil-A is the only reason I still love flying into Philly. Just don’t fly in on a Sunday. Chick-Fil-A is closed.

My big Peter Lynch multi-bagger miss of the last few years was when a GeoInvesting analyst strolled into the office one morning, telling me that I should look at a stock called “HEAR”, now well-known as Turtle Beach Corporation (NASDAQ:HEAR). I murmured something and dismissed the idea, thinking the stock was an old hearing aid device stock (Hear USA) that I wanted nothing to do with. Well, had I dug deeper, I would have realized the company was actually a leading manufacturer and marketer of headsets for gamers. The headsets were selling off the shelves due to the crazy popularity in the interactive on-line video game, Fortnight.  The stock was around $2.50 cents at the time. Around $30 later, I lashed out at my brother and 15 year old nephew (at the time) who loves playing video games for not making me buy the stock!!!

That brings me to a stock I’ve dealt with before…

Ocean Bio-chem, Inc. (NASDAQ:OBCI) manufactures, markets, and distributes appearance, performance, and maintenance products for the marine, automotive, power sports, and recreational vehicle markets.

During a morning email last week we mentioned:

“We have fooled around with OBCI several times since Geoinvesting’s inception and will dig into our OBCI dating woes more during the Weekly Wrap Up Newsletter this coming Sunday.

We are mildly intrigued and will visit this unpredictable company due to the possibility that there will be sustained  “COVID-19 demand” for boating and RVs amid less air travel. This is definitely a trend that investors have been talking about, which has caused similar types of stocks to increase over the last few weeks.

Shares are trading at a P/E of 17.2.”

I have toyed with the OBCI in the past because of its strong balance sheet, leading brands, long 27-year history and for being known for its well-respected extensive product line it sells to boaters. Any boater in South Florida knows OBCI’s Star Bright product lineup of waxes, polishes, cleaners, teak finishes, motor oils, and fuel additives.

However, the company has been an extremely slow grower because its products have been well-entrenched in the market for years. OBCI’s stock chart illustrates the lack of breakout growth:

So, why am I getting a little curious about the stock now? I just turned 50 on June 9 and celebrated by joining my friend for a boating trip with some of his family members visiting from California. Of course, I had a Peter Lynch “aha moment” and took the chance to ask the owner of the place where we rented the boat how boat sales and rentals were going. His exact words were, “off the charts, record year.” I immediately scrolled through my phone  to locate my contact at OBCI to schedule a visit at their headquarters in Fort Lauderdale, Florida, which is about 20 minutes from where I live.

Well, I had that meeting last Thursday. While the company seemed upbeat about the legacy boating and RV business due to increased demand for recreation (as people are not flying these days)…

“Mr. Dornau continued: “However, as stay-at-home and shelter-in-place orders are being lifted by states, marinas and retail outlets, including those of our largest customer, are reopening. We believe that as recreational boating increases, we will see our core marine incoming order pace increase. Several factors, including lower-than-average fuel prices, lack of options such as movie theaters or theme parks, and with what we believe is a strong desire from consumers to be outdoors will all support a very active recreational boating 2020 season.”

…I became most excited about the potential outlook for PERFORMACIDE, a new product the company introduced a few years ago. Basically, performacide is a pouched powder solution you drop in a bottle and fill with water. The solution is odorless and environmentally friendly.

Star brite’s PERFORMACIDE® is a suite of unique point-of-use ClO2 generation system products. There are three main Performacide categories: Disinfectants for Hard non-porous surfaces, Air Care Products, and Mold & Mildew Products. When the PERFORMACIDE® sachet is immersed in water, it creates a ClO2 solution that delivers the freshest, most-effective means of disinfecting, sanitizing, deodorizing and mold/mildew remediation. The solution remains active for 15 days.”

However, the product has not really gained the traction the company had expected in a very crowded disinfectant space that has some dominant players. That is until COVID-19. Now, it appears that the product is rapidly gaining popularity as demand for cleaning solutions to combat COVID-19 is outstripping supply. This is evidenced by the increase in shifts and the additional personnel at its subsidiary manufacturing plant, Kinpak Inc. in Montgomery, Alabama hired to meet the overwhelming demand for its disinfectant product Performacide®.

Additionally, during my site visit, I observed a photograph hanging on the wall showing what I believe is a recently completed massive expansion of its manufacturing plant.

In a nutshell, it looks as if the company could experience a short-term bump in sales in its legacy business (which we estimate is about a  $30 to $40 million business) and benefit from the arrival of possible short and longer term inflection points in its PERFORMACIDE product line. I will continue to flesh out the story and where I think the stock could be heading. But I think for now, Peter Lynch would be proud.

Have a great week

Maj Soueidan, Cofounder GeoInvesting

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