As we touched upon in our July 9, 2023 Weekly Wrap Up, there is a need to separate the legacy stocks from new stocks that we are writing about that are more aligned with a GARP strategy and new market environment.
Part one of this move is to give you an idea of where our legacy stocks stand in terms of timeliness and risk. Given the change in the market environment, there are changes in the outlook of some of the companies that we follow, so we believe this is a necessary task.
We have started this analysis with the selected longs model portfolio and some of our newer research. Some themes that this exercise addresses for stocks of varying convictions are:
- Newer ideas that are more aligned with the narrative of the new market environment. (post-2022, need monitoring)
- The most promising legacy stocks. (pre-2022, high conviction)
- Legacy stocks facing headwinds that we still think have long-term potential if they address certain concerns we have. (pre-2022, need monitoring)
- Stocks where we feel the headwinds are incredibly substantial. (a.k.a. the graveyard).
| Symbol | When Profiled | Bucket | Comments | |
|---|---|---|---|---|
| CODA | Post-2022 | Suited For New Market Environment | Long-term Moat being created in its underwater mapping and vision target markets. Expect short-term volatility in sales and earnings. | |
| CPH | Post-2022 | Suited For New Market Environment | Bullish thesis is predicated upon FDA approvals or making acquisitions. One of my biotech analysts has some reservations about the potential of the company's topical toenail fungus solution being superior to the oral solution. As a matter of fact, it appears that the company's solution is just a liquid formula of the tablet solution. | |
| DCMDF | Post-2022 | Suited For New Market Environment | Company could be on the cusp of a new growth cycle as it more aggressively targets its new and current customers to its print services platform business and integrates large acquisition that will go through the same transformation that DCM's legacy business successfully went through. Low P/E industry. | |
| SPOK | Post-2022 | Suited For New Market Environment | Favorite in terms of timeliness, but not incredibly undervalued on a P//E basis. Upside to the story exists if the company can accelerate closing deal in its large backlog and gain momentum in its new cloud communication software platform to smaller hospitals. Currently a Top 5 Model Portfolio selection. | |
| TTLTF | Post-2022 | Suited For New Market Environment | Very excited about this new Run To One Model portfolio selection. We think we have found this stock at a major growth inflection point, driven by entering two new markets and launching a new product. If we were going to make a Top 5 Model Portfolio, today, this one be a selection. | |
| CCEL | Pre-2022 | Higher Conviction | Waiting for the all clear from management that it's long delayed opening of its first stem cell infusion clinic is ready to launch. | |
| CRAWA | Pre-2022 | Higher Conviction | Management has proven it can grow its diversified industrial businesses in tough markets. Acquisitions are starting to produce huge EPS. If we were going to make a Top 5 Model Portfolio, today, this one be a selection. | |
| FTLF | Pre-2022 | Higher Conviction | Company is doing a good job increasing its online sales of its nutraceutical products. Just made acquisition that should contribute nicely to growth. CEO Turnaround has been spectacular. | |
| HGBL | Pre-2022 | Higher Conviction | Getting close to fair value, but has potential to beat expectations due to the increasing risk of Chapter 11 events that should benefit its asset liquidation business. The consumer loan charge off platform should also benefit if the economy weakens. | |
| INXSF | Pre-2022 | Higher Conviction | Will experience some short-term pressure as clients cut back on customer experience spending, due to recession fears. But acquisition opportunities and the software side of the business could offer upside surprise. Currently a Top 5 Model Portfolio selection. | |
| KTEL | Pre-2022 | Higher Conviction | On the cusp of closing some transactions talked about in an 8K that seem very meaningful. Currently a Top 5 Model Portfolio selection. | |
| MHGU | Pre-2022 | Higher Conviction | Earnings have taken a short term hit due to inflationary pressure on gross margins. However, the company is still forecasting respectable earnings per share growth in conjunction with restaurant expansion plans. | |
| MMMB | Pre-2022 | Higher Conviction | The new CEO is making great progress with regard to getting the company to the point of reporting substantial profits. He is meeting the challenge of getting gross and operating margins in control that were being negatively impacted by inflation. | |
| TSSI | Pre-2022 | Higher Conviction | Under new CEO, company could be at a major inflection point of growth and profitability. We don't see the demand for data centers decreasing any time soon. Currently a Top 5 Model Portfolio selection. | |
| AMMX | Post-2022 | Needs Monitoring | Company has to prove consistent growth. Biggest catalyst could occur once construction work related to the infrastructure bill goes into effect. | |
| SGRP | Post-2022 | Needs Monitoring | Need to make the customer experience solutions will not be negatively affected by a slowdown in the economy. So far, the company has held up well in this environment. | |
| ACFN | Pre-2022 | Needs Monitoring | Waiting for management to prove they can reach and maintain profitability, given that some competitive constraints have lifted. These constraints were making it difficult for the company to sell upgraded remote monitoring products and services to new and existing clients. | |
| AIFS | Pre-2022 | Needs Monitoring | Still waiting for the company to expand its target market outside library industry. | |
| ATGN | Pre-2022 | Needs Monitoring | Is a favorite, but the company needs to prove it can scale its new software platform. The recent run-up in the stock leaves little room for error. Has a new ai piece to the story through its new Chat Bot. | |
| CMPD | Pre-2022 | Needs Monitoring | Waiting to see if company can expand its telemedicine offering to multiple healthcare segments. | |
| CXDO | Pre-2022 | Needs Monitoring | Waiting for confirmation that the company can maintain organic growth that it achieved in q1 2023. Also want to see if they can accelerate profitability. Plenty of growth in the cloud communication industry, due to 50% of Small Business Enterprises still not adopting related solutions. | |
| FRTN | Pre-2022 | Needs Monitoring | Company missed its target of reaching profitability in 2022 and has become less communicative with shareholders. Possibly being challenged by increased competitive pressures in the cloud communication industry, especially because it does not have a great cloud offering. | |
| FTDL | Pre-2022 | Needs Monitoring | Company has not been able to make a comeback from inflationary and supply chain issues, as well as to bounce back from the business it has lost from COVID. Furniture/decorative products industry is a low P/E industry. | |
| GLGI | Pre-2022 | Needs Monitoring | Waiting to see if the company can achieve and maintain consistent sales and profit growth and diversify its customer base. A recent acquisition may have helped with this goal. On the positive side, it looks like the company has reached a point where it can at least maintain profitability. Plastic pallet business is a timely ESG trend. Reducing customer concentration risk could materially expand valuation multiples. | |
| IVFH | Pre-2022 | Needs Monitoring | Company finally getting closer to maintaining profitability although the level of profitability is still not substantial. Prepared food industry is competitive and likely a low P/E industry. We think that new management likely has plans to sell the company. | |
| KRMD | Pre-2022 | Needs Monitoring | Given the rich valuation the stock could be dead money until revenue growth accelerates or reaches profitability that could occur sometime in 2024. Valuation is rich, but it is the leader in its segment of the home healthcare infusion market and revenue is highly recurring. Is also expanding its market by developing innovative products like pre-filled syringes and higher volume infusion pumps. | |
| NXTN | Pre-2022 | Needs Monitoring | Waiting to see if the company can establish strong profitability it was experiencing before industry softness hurt the company. Looks like the company wants to raise money for acquisition strategy. | |
| PCHM | Pre-2022 | Needs Monitoring | After a slow start, new management is starting to make progress in its new business model. | |
| PXHI | Pre-2022 | Needs Monitoring | Company has done an excellent job executing its growth strategy over the last 4 years. However, verbiage in last earnings report indicate that pace of growth may slow in the near term, due to a reduction of iPhone trade-in inventory and a slowing economy. Still, valuation is insanely low, We fear management may attempt to take the company private at a depressed valuation. | |
| RTC | Pre-2022 | Needs Monitoring | Sold old business, so we would have to conduct a review of the new business. New business is growing and profitable | |
| RWWI | Pre-2022 | Needs Monitoring | After several years of growth, growth is expected to slow over the news few quarters, due to changes in the way their major customers Autodesk sells software. | |
| SEED | Pre-2022 | Needs Monitoring | Waiting for consistent revenue from business, but more importantly for the company to achieve profitability on those revenues. Investors sentiment has gone from getting excited about China going GMO positive to now requiring SEED to prove it can execute. | |
| SPCO | Pre-2022 | Needs Monitoring | Weak economic conditions appear to be negatively affecting the company, as does inflationary measures on gross margins. | |
| TAPM | Pre-2022 | Needs Monitoring | Waiting to see if management's assertions that the bottom in the mobile gaming industry has occurred. | |
| TCOR | Pre-2022 | Needs Monitoring | Hopefully will come out of the dark and get current with the OTC. If not, if will be difficult for shares to reach fair value. The lumber products industry is already a low P/E industry. | |
| TPCS | Pre-2022 | Needs Monitoring | Waiting for the company to prove they can achieve and maintain a high level of profitability. There was some information arbitrage on the q1 cc to explain why the quarter was temporarily soft. New submarine plans of U.S. navy provides huge growth runway. Still integrating recent acquisition. | |
| TREP | Pre-2022 | Needs Monitoring | Waiting for the company to complete audits for previous years. | |
| WAVD | Pre-2022 | Needs Monitoring | Lots of uncertainty due to batched acquisition which they eventually sold. Key question: can the company revamp the growth in its legacy government IT modernization business? | |
| ZDPY | Pre-2022 | Needs Monitoring | Waiting to see if this cannabis real estate company can achieve and maintain profitability. Two keys to growth = 1. Getting its new Michigan property going 2. Expanding its consulting business. | |
| FULO | Pre-2022 | Needs Monitoring | Waiting for company to prove it can scale its cloud communication business. | |
| EDUC | Pre-2022 | Graveyard | Too many unknowns to bet on this company, now that their licensing relationship with their book publisher was materially altered. | |
| EKCS | Pre-2022 | Graveyard | Has not been able to move the ball forward with any of its project pipeline. | |
| MILC | Pre-2022 | Graveyard | Basically, out of business. Was unable to to receive its cannabis licenses in MI. Furthermore, the cannabis operations in other states underperformed. | |
| MSLPQ | Pre-2022 | Graveyard | Will monitor for news regarding the company's potential exit from chapter 11 bankruptcy. Could be a nice post-bankruptcy play. | |
| SBSAA | Pre-2022 | Graveyard | Company has a tough road ahead to get itself out of its highly leveraged balance sheet issues. Has been shedding some of its broadcasting segments. |