Semler Scientific, Inc. (NASDAQ:SMLR) is a perfect case study in “Why Microcaps.” The stock was first shared with GeoInvesting premium members when a research contributor published his bullish thesis on November 30, 2015. The company develops, manufactures, and markets patented products that assist healthcare providers to evaluate and treat patients with chronic diseases in the United States.
Three years later, we wrote about the company and provided our bullish thesis. We also added the company to one of our model portfolios in April of 2018 when the stock was trading at $8.30. The stock is now trading at $131.99, generates annual revenue of around $60 million, is solidly profitable and about to uplist to the NASDAQ from the OTC. Due to our penchant for identifying multibagger medical device stocks (8 so far), we are taking a look at a few more that have recently entered our research pipeline.
We began our most recent coverage on Energy Focus, Inc. (NASDAQ:EFOI) in December 2019 when we connected with the restructuring initiatives of the newly appointed CEO, James Tu. The company is a leading manufacturer and supplier of high tech LED lighting solutions to commercial customers and the U.S. Navy. Ironically, Mr. Tu was the CEO of EFOI during 2015 when the company operations were solid and when we had a good run with stock, logging a 70.5% return. However, his vision for EFOI was not fully aligned with the Board, so he parted ways with the company in 2016.
In 2019, the Board asked him to rejoin the company as the CEO in the midst of poor stock performance and a deterioration of the business that was flirting with bankruptcy. As an aside, Mr. Tu has put a significant amount of personal capital into the company since he accepted the offer.
Then, as luck would have it, COVID-19 hit and all the company’s commercial projects were put on hold. Now, as it waits for its legacy growth to rebound and in hopes of revising growth, EFOI is currently attempting to launch a line of UV-based disinfectant products designed to combat COVID on indoor surfaces.
After the start of our research, EFOI had an initial run from $2.23 to $9.53, but in recent days sits in the $3 range. Had COVID-19 not arrived, we think the stock would have held its multi-bagger status. This is a great case study that shows the unpredictability of investing. Surprises and circumstances beyond your control can quickly turn a stud into a dud.