WHAT YOU MISSED FROM GEOINVESTING LAST MONTH
October 2022, Volume 2, Issue 9
This month, we are continuing our video clip and discussion series that gives you a glimpse into the personalities that have paved the way for many investors in how they approach different strategies to find the best stocks in the market.
This month we are continuing our video series, highlighting 3 full length videos that we believe are too good to be clipped.
One video we picked for October is salient because we’re at a moment in history when keeping your emotions in check is as important as ever.
We’re also putting a spotlight on replays of live management interviews we hosted for two companies – one for Richardson Electronics, Ltd. (NASDAQ:RELL), an electronic component/engineering design company hitting on all cylinders, and the other on a high risk turnaround restaurant play, Muscle Maker, Inc (NASDAQ:GRIL).
So, the first video features Lauren Templeton talking about emotions as they relate to investing, and highlights some investing statistics to drill the point home. Apart from her philanthropic contribution to a number of non-profit organizations, Lauren is the founder and President of Templeton & Phillips Capital Management, LLC, a global investing boutique located in Chattanooga, Tennessee. Additionally, she serves as an independent director for a financial holding company as well as a solar power company.
At about the 12-minute mark, Lauren starts talking about behavior and investing. She brings up a slide that highlights the returns of the “average investor” compared to various asset classes between 1995 and 2014.
“But value investors are saying no we don’t buy that. You know intrinsic value often differs from price. Risk is simply paying too much for security and really the returns bear this out. The returns support a value investor’s perspective. Here we have a graph showing the twenty year annualized returns by asset class.
And as you can see stocks had returned 9.9%, bonds 6.2%, gold 5.8%, oil 5.6%, international stocks 5% and homes 3.1%. The average investor, 2.5%.
Now, how is that possible if all these asset classes outperform the average investor? It’s because people are really terrible decision makers and they are oftentimes buying high and selling low.”
The average investors logged in a “whopping” 2.5% return! Another quote that drives this point home, says:
“Peter Lynch, when he was annualizing 29%, conducted a study and he wanted to know what the average investor in Magellan had earned. And what he found was that the average investor had earned 5% and many had actually lost money. He was annualizing 29%.
So again, investors are constantly doing the wrong thing. When a manager runs up, they give him money, when the manager draws down they take it away and that was how the average investor earned 5% or lost money when the product they were investing in was annualizing 29%.”
So, using the current market set-up, in contrast to what most investors do, you are better off buying stocks when the market is pulling back, rather than selling into fear.
Our final 2 videos this month are live management Interviews from our own personal video shelf. They feature two companies that we believed possess the necessary traits to have great gains in a bear market, and one already proved that – RELL. In fact, RELL has shown a respectable 325% growth since January 2021!
We, alongside our members, have partaken in a portion of that ride, garnering 37% returns since its inclusion in our Select Long Disclosures Model Portfolio, a number that sits in our predicted range based on Information Arbitrage and expected earnings. As a reminder, since January, we have sent over 3 pieces of content to our non-premium contacts laying out our bullish thesis on this company BEFORE it experienced its gains.
VIDEOS IN FOCUS
Lauren Templeton opines on how human behavior and investing emotion can negatively influence the ways in which we invest. We find this to be an especially important topic right now, given the current volatility in the market.
- When a stock “multibags”, you have plenty of opportunity to capture some of the gain. More importantly, many multi-baggers turn into mega-busts. What is important is that you try to base your buy and sell decisions on sound analysis.
- Selling a position based on emotion, compared to having an investment process, are two entirely different concepts.
Focus on dealing with emotion and perfecting your process. Go here for five tips I follow to conquer my emotions.
Featured Video #2
In the following Morning Management Briefing (MMB) we hosted in April 2022, we interviewed four members of the Richardson Electronics (RELL) management team. The event was recorded a few days after one of our site visits to RELL, and we believe it is one of our most valuable MMBs to date.
- We had the unique opportunity to have 4 members of the company’s executive team on board for this update, which was a great opportunity to fully showcase everything Richardson Electronics does.
- It’s our opinion that the company is capitalizing on a rare opportunity to create a moat in several of its business segments that will enable it to log above average growth rates in sales and EPS for the next several years. We think this will result in an expansion of the stock’s valuation multiples and put the stock on track to be a multi-year multibagger.
- We are extremely excited about the company’s involvement in the wind turbine industry, as its ultracapacitor solutions extend the useful life of equipment needed to operate turbines when compared to the status quo lead acid lead acid battery solution. Furthermore, the company is starting to address the needs of lab grown diamond and 5G markets, hot sectors where RELL is seeing increased order flow.
On a related note, one of the many benefits Premium Members have at GeoInvesting is being privy to Maj’s on-site company visits. Part of our due diligence process (if relevant) can include tours and in-depth interviews on site.
This allows GeoInvesting to more fully understand the products these companies are offering as well as their daily inner workings, serving as a primer for any future live event-based conversations.
Stay tuned. We’re preparing for our next road trip, really soon. The trip will be to a company with a leading market share in its industry. Furthermore, it is about to benefit in a big way from Chinese competitors exiting the space, opening up a 50% market share opportunity hole for them to fill.
Featured Video #3
We interviewed Michael Roper, CEO and Secretary of Muscle Maker, Inc. (GRIL) in September 2022.
Muscle Maker, Inc. owns, operates, and franchises Muscle Maker Grill, SuperFit Foods meal prep, and Pokemoto Hawaiian Poke restaurants (POKE). The Poke foods market is poised to grow by $1.2 billion from 2020-2024, at a CAGR (Compounded Annual Growth Rate) of 14%.
- High-risk turnaround, trading below enterprise value.
- Currently, the company has several Poke franchise agreements that have not yet become operational, but have been paid for. More specifically, GRIL has 24 Poke franchised locations in operation (13 company owned and 11 franchised) and 44 signed and paid for franchise agreements waiting to be launched. There is significant potential revenue from those agreements and the biggest challenge has been finding appropriate locations.
- It remains to be seen if Michael can orchestrate an effective turnaround to allow the stock to achieve multibagger status, but we certainly want to track his progress due to the valuation of the stock.
About our Live Management Events
The live management events we host are intended for microcap executives to offer more color on pertinent company information and operations, above and beyond what one might read in press releases or hear in conference calls.
The Management Morning Briefings (MMBs) serve as quick updates on current events, lasting up to 30 minutes. Here, we aim to discuss one or two subjects with the executives to gain more clarity on things that might have just taken place.
Fireside Chats (GeoChats) are more thorough interviews discussing topics in depth, usually lasting about an hour.
Both are hosted in a manner to allow for and encourage participation from our premium member base so they might be able to benefit from the immediate knowledge or InfoArb (Information Arbitrage) gleaned as a result of their attendance.
RESEARCH AND IDEA PIPELINE
PROGRESS, YEAR TO DATE
GeoResearch Articles & RFTsPodClipsFireSide ChatsContributor ArticlesManagement Morning Briefings
WHAT YOU MAY HAVE MISSED THIS MONTH
Does Recent LGL Spinoff MPTI Offer a Decent Value Proposition?; Grilling GRIL’s CEO [GeoWire Weekly No. 53]
Another highlight of this past week was our comprehensive Fireside discussion with an executive at Muscle Maker, Inc. (NASDAQ:GRIL), a company that delivers high-quality healthy food options to consumers through traditional and non-traditional locations. Joining us was the company’s CEO and Secretary, Michael Roper, who has been in the food franchising business for 22 years. He “started off in restaurants in the year 2000 as a Quiznos franchisee out of the Chicago area.” Michael referenced his story as having been a “mailroom to the boardroom” saga that at the time culminated with him being the Chief Operating Officer of Quiznos worldwide.
On September 15, 2022, our Co-founder presented at the MicroCap Leadership Summit, an annual event hosted by MicroCapClub, a platform for experienced microcap investors to share and discuss ideas on stocks trading at valuations of less than $500 million. He was asked to pitch a company to the Summit’s audience, so he came through with the reasons why Spar Group, Inc. (NASDAQ:SGRP) deserved to be a company worthy of a close look. The company provides merchandising and brand marketing services worldwide He prefaced his pitch on SGRP with a little about Geo and himself, and what you may know by now to be GeoInvesting’s focus on the qualities we believe that Tier 1 Quality microcap companies should have:
As Oil Field Chemical Company Enters Radar, Let’s Make Sure We Are On The Same Page On InfoArb [GeoWire Weekly No. 51]
We may have found an information disconnect with another company. While we pulled the trigger right away with ESCC, it’s not always a given that we will do so with all information arbitrage plays, nor is it a given that we are entirely comfortable with going too gangbusters on our commentary, especially if it’s a company that operates in a field we are not too well versed in. This is the case with oil field chemical company,, when on August 15, 2022, the company filed a Management Discussion & Analysis document in conjunction with its Q2 financial results. It should be noted that we missed the filing when it came out but are using this as an example of how detrimental it can be to miss valuable information. In other words, while it would have been nice to have tracked it from ground zero, we’re not sure we would have bought the stock.
We are following a stock that has something in common with an historic stock market milestone – the year 1929. The span of time between 1929 to 1939 marked a 10-year era known as The Great Depression, a protracted event that many argue had a multitude of causes, both domestically in the United States and worldwide. The US saw a major decline in the stock market, falling consumer prices (deflation) in the midst of a major shift in product manufacturing techniques, joblessness, and an eventual slowdown in global trade that brought commerce to a fraction of what it once was just years before. Ironically, we are now following a manufacturing company that was incorporated the very year marked by the beginning of the Depression. (although it was technically founded in 1880). If you think about that for a second or two, it’s not often you can find a company that has been around for 140+ years. As you may know by now, our first criteria in our tier one quality microcap checklist is “long operating history.”