GeoInvesting June 2018 Highlights
What We’re Tracking
Stocks we monitor very closely
We recently just took a position in a medical device technology company that offers more liquidity than the average microcap we usually bring to our members. We are betting on the CEO’s previous record of success, including three acquisition exits. Over the last several years, the new CEO divested of nonprofitable business segments to concentrate on a hidden gem of an asset that old management ignored. We believe he has finally positioned the company for growth with a recurring revenue model that has reached an inflection point that we think will lead to consistent and accelerated growth, displacing the market leader. For more information and our proprietary research on this idea, join GeoInvesting here.
Learn With Us
Education to help you become a better investor
Months ago, I came across this video highlighting Professor’s Andrew Lo’s presentation titled: “Adaptive Markets: Financial Evolution at the Speed of Thought.” I wrote about this video a couple of months ago, covering Professor Lo’s take on the Efficient Market Hypothesis and offering my thoughts on how it could relate to the state of the microcap environment. Since we have added a good number of new members over the past few months, I thought it would be a good idea to highlight Professor’s Lo work again. It’s important to understanding how behavior can influence investment decisions that may lead to improved returns regardless of whether you’re an active or passive investor. At least, that is my opinion.
In case you missed it, please take a moment to read the original article, located on my blog at GeoInvesting.com we recently also added Mr. Lo’s slides to the associated presentation transcript to help you follow along.
Studs & Duds
The reality of investing – Our best and worst picks
The reality of investing – Our best and worst picks now and in the past
Stud: Friedman Industries Inc. (AMEX:FRD)
On July 29, we established a swing trade in FRD, a steel processing, pipe manufacturing and distribution company in the United States, based in Texas. We noted that the company has had sporadic financial performance over the years and that we were reviewing the story based on the company’s huge Q4 that it recently reported. The company commented it is being helped along by the tariff environment and that they also expected a strong Q1. FRD’s tangible book value per share (TBV) is $9 compared to the then current stock price of around $8. Finally, we also came across a bullish shareholder letter buried in one of the exhibits of the 10K, which we don’t think many investors have found yet (information arbitrage).
The stock currently trades at about $9.19, up about 13% from where we bought it. We’re still long FRD as we continue our research.
Dud: Dhi Group, Inc. (NYSE:DHX)
On June 4, we published our reasons for tracking on DHX, a data, insight and connection services company. Our “Reasons for Tracking” is a set of points highlighting what has caught our initial attention about a company, while we continue our research. We noted that an activist filed a 13D showing that they bought a big block of stock and were expressing an interest to potentially acquire the company, and that the company recently announced a $7M stock repurchase program. The average EV/EBITDA multiple of 10 (per Sentieo) for the recruitment sector implies DHX could be worth about $7.5 a share, representing more than 100% upside to the stock’s levels. However, the company is dealing with some growing pains and trying to implement a turnaround, which we will continue to track. The stock has fallen to about $2.20 of late. We are attempting to secure an interview with management and will share our findings with our members.
A Final Note
This month’s message from Geo Co-founder Maj Soueidan
Our goal is not only to source what we believe are the best quality microcap ideas for our premium members, but also to source great ideas from the best microcap investors. With the success of the documentary The China Hustle continuing to fuel interest in our company, we have added not only a new slew of investment ideas, but also a new roster of members and potential contributors. Of late, we have been welcoming new ideas from our contributors, sorting through them and trying to vet them with our team. If you want to contribute an article to Geo just reach out to us at firstname.lastname@example.org.
As a reminder, all of our members receive all of our contributor’s articles as well as all of our in-house proprietary institutional quality research. For a free trial, click here – and if you have any questions, please don’t hesitate to reach out to me personally at email@example.com.
P.S. Please feel free to reach out to me any time at firstname.lastname@example.org 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.