GEO Investing

A Monthly Review of GeoInvesting’s Most Notable Activity — GeoInvesting May 2016 Newsletter

Our Calls to Action

Money-making Moves that the GeoTeam Conveys to its Premium Members

  • May 27, 2016 — Educational Development Corpora (NASDAQ:EDUC) – EDUC fell around 12% on 5/26/16 following the filing of its 10K. The company reported a slight loss in Q4 despite an 84% YOY surge in net sales.  The loss was due to a one time internal shift between two divisions — discontinued its wholesale business and will now sell directly to the retail market – that negatively affected Q4 margins.  We expect margins to return to historic levels in the coming quarters.
  • May 10, 2016 — Kitov Pharamceuticals Holdings (NASDAQ:KTOV) — On May 10, 2016, we wrote an article to members with 10 reasons we were beginning to track KTOV. Our reasoning included the company’s recent IPO hitting new highs, small float, no debt and $10.6M cash position and positive Phase 3 data for combination drug KIT-302. We still believe KTOV to be a very speculative play and we are closely monitoring the company’s cash burn. The stock was moving up nicely after our call until the company surprised us with an equity offering.
  • May 18, 2016 — Domino”s Pizza Inc Common Stock (NYSE:DPZ) – Published report on DPZ stating the stock could have up to 34% downside. Our original thesis was developed in April for submission to the Sohn Conference Idea Contest when DPZ was trading around $138.  Our report was selected as a finalist so we were unable to publish it until after the May 4 conference ended.  Although the stock has fallen over 10% since our submission to $122 in recent trading, we think it has further to fall.  See our full report and Geo Co-Founder, Dan David, discuss the DPZ bear case on Yahoo TV here and here.

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Information Arbitrage News

News Before the “Rest of the World” Finds Out

  • May 27 and 31, 2016 — BG Staffing Inc Common Stock (AMEX:BGSF) – Shares were marked down 15% after the company announced a share offering. On 5/27/16, BGSF presented a classic information arbitrage opportunity when its shares traded down 17.3% to close at $13.53. We immediately alerted members that we were buying on the pullback. The catalyst for the decline was the company’s announced public offering of 1,075,000 newly issued shares of common stock at $14.00 per share.  The investors who aggressively sold BGSF were apparently focused only on the dilutive effect (13%) of the offering without regard to its benefits based on management’s plan to pay off $14.7 million of high cost (13%) debt generating a first year EPS benefit from reduced interest expense that is greater than the dilutive of the newly issued shares. See our full report and analysis here.
  • May 5 and 25, 2016 — Momo Inc. (NMS:MOMO)News in China not released in the U.S. concerning MOMO and other ChinaHybrids that have received offers to go private reported rumors that the China Securities Regulatory Commission will postpone relisting of ChinaHybrids that have already gone private or plan to do so. Specifically, relistings in China through shell companies, a restructuring process, or IPO might be restrained bringing into question proposed going private transactions for MOMO, YY, DANG, VNET, and AMCN among others.   Additional news on May 25, reported investment industry sources believe that in addition to the suspension of YY’s transaction, MOMO’s might also be suspended.

Top Performing Picks

Picks that GeoInvesting is Particularly Proud Of

  • May 6 and 13, 2016 — NV5 Global Inc. (NASDAQ:NVEE) – Even after being marked down 10% following an announced secondary offering to fund acquisitions, NVEE has rallied back to near $28.40, exceeding its pre offering price. It is still 100% higher than our original bullish article regarding the company in February 2015. We opened our initial position on 12/15/14 at $14 and closed it on 5/19/15 at $22.38. We re-entered the stock on February 22, 2016 at $19.38; shares are up 46% since then. NVEE has posted consistently strong sequential growth since then driven by solid organic growth and successful acquisitions.  The company reported strong Q 2016 results and reiterated 2016 guidance of $220 million to $230 million and EPS of $1.67 to $1.81. 
  • May 9 and 13, 2016 — Pioneer Power Solutions Inc. (NASDAQ:PPSI) — Initiated long position in PPSI and coded it a GeoBargain on 3/30/16 when it was trading at $4.60. The shares subsequently rose over 38% to a recent peak price of $6.38.   Q1 2016 results were in line with analyst estimates and management reaffirmed 2016 guidance including non-GAAP EPS between $0.55 and $0.66.  Management expects further bottom line improvements throughout the year driven by favorable economies of scale and improved operational efficiencies.  Stock has pulled back since Q2 earnings.

GeoBargain Updates

Additions & Subtractions of GeoInvesting’s Best Picks

  • May 12 and 19, 2016 — SMITH-MIDLAND CORP (OOTC:SMID) — Closed position and removed from GeoBargain list after losing confidence in management’s ability to put the company on the path of consistent growth and profitability. SMID failed to post a profit in Q1 2016 (loss of $0.02) despite generating $8 million revenue which was 92% more than the revenue in the same period in 2015 and more than Q4 2015 ($7.7 million) when the company reported EPS of $0.05. Further, management commentary in Q4 2015 was decidedly less bullish than Q3 2015.  While commentary regarding revenues for all of 2016 was bullish, we have less clarity on how margins and therefore profitability will play out.  We will continue to track this story as the recently passed highway bill could still be a catalyst for significant revenue growth.
  • May 6, 2016 — Manitex International Inc. (NASDAQ:MNTX) – Company reported Q1 2016 results of $102.4 million vs. $101.0 million in the same period 2015, beating analysts’ estimates by $8.6M. Non-GAAP EPS was $0.02, less than $0.10 in the same period last year but $0.03 better than estimates.  Management describes business as operating at a reasonable level considering the continued sluggishness in MNTX’s sector.  The order rate in Q1 suggests the market has stabilized and may have hit bottom.  Management is using this protracted lull in business to focus on cost reduction programs, integration of PM acquisition, expanding ASV joint venture branded distribution, refocusing product line on higher margin business, and reduction of debt. This has been one of our most disappointing GeoBargains to date and we are considering removing it from our GeoBargain list if progress isn’t made over the next few quarters.

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