Hi fellow investors, Maj Soueidan here. I’m really excited about some of the most promising stock ideas generated at GeoInvesting of late. Although they are premium ideas, my team and I still share some names so you can get a feel for the kinds of stocks we cover and continually research. Please feel free to reach out to me any time at email@example.com or follow me at Twitter, @majgeoinvesting, if you have any questions, or just want to talk. You can also reach me on my mobile at 267-246-3263.
GeoInvesting February 2018 Highlights
What We’re Tracking
Stocks we monitor very closely
We are long shares of a 40-year-old building supply company that is a leading distributor of building products in North America. We initially established our long position in August of 2016. This company’s revenues are dependent on housing starts and to a lesser extent the home remodeling market. While I’m not particularly fond of the highly cyclical nature of the industry in which it operates, there is some hidden potential.
The company was layered in debt coming out of the 2008 financial crisis. But it’s been aggressively selling assets to reduce the debt load and has now potentially reached a major inflection point. Furthermore, the U.S. housing recovery, measured by housing starts, is still not near pre-crisis levels. This should give the company a steady runway for growth and reduce cyclicality in the near-term.
As part of a few GeoInvesting model portfolios that implement contrarian strategies, shares of the company are selling well below the valuation of its competitors, and where it used to trade before the global recession.
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- Could This Speculative Information Arbitrage Play Be Worth An 8 Times Current Price?
It appears that the company’s recent Q4 2017 results have attracted some insider purchases, the first wave of buys in a long time. Cost restructuring initiatives, initially a headwind, have turned into a tailwind now that they are complete. With two straight quarters of top and bottom line improvements, the company seems well-positioned to continue this trend in 2018.
More impressive is the company’s meaningful profit it just reported in its seasonally weak Q4. This is a quarter in which they’ve historically reported a loss, as some of its competitors did this year. On the Q4 2017 conference call, management stated that they are in the third inning of their comeback story. Now that costs are under control, management can focus on top line growth. All told, it may currently be one of the cheapest building supply stocks in North America.
This stock was 1 of 4 stocks that was mentioned in a premium member article here.
With a 7-day free look at our pro portal, you can read more about the company and other current stocks in our research pipeline.
Learn With Us
Education to help you become a better investor
“Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” Peter Lynch
Following the moves of company insiders can prove to be a great method for identifying investing opportunities. Many times, insiders have a distinct “information arbitrage” advantage and buy shares at opportune and timely intervals.
As mentioned in a recent article to premium members:
“Show me anything I can do to increase my odds of avoiding disaster and I will listen. When it comes to investing, a lot of us like to keep it simple; that’s why I like InfoArb so much. The free and readily available information that is ignored in the microcap space is a gift. You can use it to your advantage to trounce passive investment strategies. Many of you reading this probably agree that following the moves of managers/insiders you respect is another activity that increases the odds for success. Combine it with a little InfoArb, and your portfolio is in good company. It is a great strategy that even beginners can implement.”
I go on to identify several names we are currently following due to bullish insider action and some InfoArb. While we do write in depth research articles, the article highlights how we like to lay out our research for premium members in way that is easy to understand. Sometimes, simple is just better. The stocks covered include Eastern Company (the) (NASDAQ:EML) and Mastech Digital, Inc (AMEX:MHH).
Please see the complimentary article here.
Studs & Duds
A Recent Stud: FTNW
Fte Networks, Inc. (AMEX:FTNW) provides a one-stop network connectivity solution for its customers. The company performs construction and network activities inside and outside the building, and also specializes in turning facilities into a smart (IoT) building. With a new product offering, FTNW is also plans to ride the upcoming technology networking solution called edge computing, which addresses security, speed and storage constraints that the current technology standard embodies.
We began to follow FTNW in November of 2017, when the stock was at $8.10. We first stated in early November that we wanted to investigate the company’s capital structure and prior loan agreements from 2015. In December 2017, with the stock at $13, we noted that the company had yet to return our phone calls, nonetheless continuing our diligence. In January 2018, we disclosed to GeoInvesting Premium Members that we were long the stock at $15.81 due to the extreme cheapness of company shares on some measures. The deciding factor in our decision to buy shares was none other than a successful interview with management!
Since then, the stock has risen to $25.00, a gain of about 60%, and we have continued to update our research here. On February 20, 2018, I also released a premium podcast here where I briefly discussed the pitch, price target and caveats to the story.
A Final Note
This month’s message from Geo Co-founder Maj Soueidan
Winter looks like it could finally be over (in some places). Hopefully, the microcap space will take this as a queue to continue the thawing process it’s been undergoing since the Global Recession!
Microcaps are providing plentiful opportunities for us and our Premium Members. The last year and a half has been amazing. Even though the stock market is still near record highs, every time we “turn over a new leaf” we find fresh ideas to be excited about. At the same time, we continually work to refine our education, not only on the microcap space, but on the market itself.
In addition to “What We’re Watching” above, I have also identified an opportunity in a company I recently interviewed and shared with our members.
This technology company has a P/E of 6 on our 2018 EPS estimates and we believe that it could be a long-term multi-bagger with over 100% upside in the near-term. Shares are cheap because investors are still not aware that the impact of past restructuring initiatives have reached a positive inflection point.
A pitch on this company can be found here, and for more information on the thesis and our model portfolios, such as our multi-bagger portfolio, please consider giving GeoInvesting’s premium service a try for a week. Thank you!
Wishing you all the best for the move into springtime!