Our preliminary interview with management with a company we just added to our Top 5 Faves Model Portfolio, as well recently published analyst estimates on its stock, confirm our view that the stock’s price has the potential to increase significantly over the coming months. The idea was originally published on Geoinvesting by MS Microcaps, a company founded to help investors gain more alpha through an actively managed model portfolio subscription.
The core of the thesis revolves around a hefty dividend investors in the stock receive while waiting for several bullish growth catalysts to materialize over the next 2 quarters. We also believe that the company is a high candidate to be acquired by a larger company at a very nice premium.
In this stock market environment, think of a dividend as a welcome gift that tempers any pain you might be going through as you wait for things to come back to normal.
Furthermore, we believe the company’s involvement in the healthcare services industry allows it to possess traits that make it “Recession Proof.” A little later in this post, we refer you to a forum clip where we touch upon what it means for a company to be recession proof versus recession resistant.
So, we spoke with a company representative in early November to pre-qualify it for a Live Fireside Chat that will be accessible by and exclusively archived for you.
We are in the process of scheduling this call, as we believe the stock has the potential to double.
To summarize, we are bullish on this Growth + Value idea for the following reasons:
- The company is the leader in its industry.
- High dividend yield of over 15%. Yes… microcap stocks declare dividends!
- Over 80% of the company’s revenue is recurring.
- Activists have invested in the company and are working to keep the management team in “check.”
- If you’re into options, they are available, and very playable without a high premium.
- The stock is selling at a cheap valuation because management’s growth initiatives have yet to be fully reflected in the financial results of the company. We predict by the end of the year, investors will get to see the tangible effects of the company’s efforts.
- Management has just started buying the stock on the open market.
- This is a very unique situation where you’re going to be able to collect a hefty dividend yield while you wait for growth to occur – the perfect Growth Value setup for the current market environment.
- A comp was recently acquired at 13x sales; The company we are looking at currently trades at 1x sales, which suggests it’s trading at a significant discount to fair value. It also suggests that it is a potential prime acquisition target, given that they are the leader in their industry.
Recession Resistant or Recession Proof Stocks?
Speaking of a potential recession, a few open forums ago, in October 2022, we reviewed a few recession resistant or proof type of stocks, a subject matter that was and still remains pertinent in light of the uncertainty heading into 2023, who some think will usher in an even tougher economic climate.
In the December 2022 Open Forum, Maj revisits this subject as it pertains to some stocks in GeoInvesting’s coverage universe that might fit the bill of staving off recessionary factors that other companies cannot.
This process started when we first started looking at our model portfolio rankings, an idea we launched last year to help our members understand the timeliness of some of the companies’ business plans and potential inflection points.
It worked well for a while. But now, it’s actually gotten tough to establish how many of the stocks are going to fare as we move forward. Having said that, we have to make a best effort to assess this situation. So, as we look to revisit that process, click to listen to a primer – a Forum clip where Maj briefly breaks down his view on why certain stocks can be categorized in the following ways.
We’ll likely add to and massage these over time and as we get more clarity heading into 2023.