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Highlights
- Will customer adoption of Csp Inc. (NASDAQ:CSPI) cybersecurity accelerate due to the Crowdstrike disaster?
- TwitterX Spaces event breaks down Tss, Inc. (OTCQB:TSSI) and Sensus Healthcare, Inc. (NASDAQ:SRTS) bullish thesis, partly based on information arbitrage.
- Mueller (paul) Co. (OOTC:MUEL) closes at $100 as it continues to shed its value trap moniker.
- Another “value trap” could be about to surprise investors with substantial upside if the P/E re-rates higher to a growth assumption, based on a new product launch.
- New stock from Canada trading under one dollar with a P/E of 3x enters our research pipeline.
- Shareholder letter provides clues that this company will capture market share as competitors leave the market.
- Frequency Electronics, Inc. (NASDAQ:FEIM) reports breakout earnings.
Crowdstrike mistake opens his door for cyber security competitors
After an all day marathon research session last Sunday, I could not wait for the week to begin. The $CRWD disaster had me looking for stocks in Geoinvesting’s microcap coverage universe that might have competitive offerings or offerings that could work with Crowdstrike to prevent similar disasters. in the future.
That’s when I realized that we had already written a short Reasons for Tracking (RFT) on Csp Inc. (NASDAQ:CSPI) on September 28, 2023.
The stock is actually up 73% since we published the RFT.
At the time we published the RFT, we noticed that the company had launched a proprietary cybersecurity software platform to help jumpstart growth and complement its unexciting, yet profitable, legacy business offering third-party hardware and software IT solutions.
After reading CSPI earnings call transcripts and noticing that the CEO mentioned that they could work with Crowdstrike or compete with them, it became evident that CSPI is definitely a company to watch in the coming weeks and months to see if customers start accelerating the use of their cyber security software solutions.
The biggest issue we’ve had with CSPI is that we have little clarity on when this new software platform may materially impact revenue, although the company does talk about a significantly growing backlog. So, now we want to see if that backlog will be accelerated to revenue, because of what happened with Crowdstrike.
I was hoping we would be able to get you this information on Monday morning before investors found out what we did, including a LinkedIn post, where a CSPI sales rep posted that the company may be able to address some of the failures that were exposed by Crowdstrike’s software update issues. There wasn’t even any information on TwitterX about the connection to be made between the two companies. But unfortunately, management issued a press release about the situation before the market opened.
We’ll keep watching it for now and speed up our attempt to interview the management team, but we felt we at least had a duty to send a premium Tweet out letting you know that we were on the case.
(Note: If you don’t follow us on TwitterX, please consider doing so with your existing or a new account, then enable push notifications for the fastest way to receive the premium tweets!!)
The stock still managed to go up about 16% after the tweet. So, hopefully some of you might’ve been able to get something out of it.
TwitterX Spaces Events
I’ve been participating in some Space events on TwitterX over the last few weeks, discussing some of our strategies we use at Geoinvesting, as well as my research pipeline.
Other investors do the same. Since Tss, Inc. (OTCQB:TSSI) is in our Top 5 Faves Model Portfolio and because we’ve been monitoring the developments going on at Sensus Healthcare, Inc. (NASDAQ:SRTS), we clipped two segments from a Space I was on last week that laid out the bull theses for both stocks based on some information arbitrage. The TSSI information arbitrage and proposed earnings per share target was particularly illuminating.
TSSI
SRTS
Value Traps continue to unlock shareholder value
Mueller (paul) Co. (OOTC:MUEL) may become the poster child of how investing in value traps can be wildly profitable. At Friday’s close of $100, the stock is up 117.39% since we brought it back on our radar in July of 2023. We had been waiting for management to start unlocking shareholder value.
Well, they’ve clearly demonstrated that they are ready.
Over the last several months, the company completed a tender offer in which it bought $12 million of stock at $80, shuttered unprofitable business units, eliminated its costly pension plan, expanded its manufacturing facility by 11,000 square feet, and reported some blowout earnings.
Then on Friday after the close, the company reported earnings per share of about $7.00 for its second quarter and announced a 100,000 square-foot capacity expansion!
Comments:
“Due to record backlog growth over the previous 24 months and strong financial performance, the Company is investing in infrastructure to sustain its ongoing expansion. Construction is expected to begin in the fall of 2024 and complete in the fall of 2025. The new facility will add 100,000 square feet of space dedicated to production and enhancing the Company’s research and development initiatives.”
The stock still only trades at a forward P/E of 3.6x, based on an annual EPS run rate of the second quarter, which is in-line with what the company has been reporting over the last few quarters.
We think that there’s a good chance that we see a major expansion in the P/E ratio. This could get pretty amazing. Just a P/E of 10 would put the stock price at about $280. If the company convinces investors that it is in growth mode, we need to start asking ourselves if the P/E ratio expands to 15x or even higher. The disclosure of the expected 100,000 square feet of manufacturing capacity might just do the trick.
This kind of reminds us of $HMPDF (TSX:HPS-A), which saw its P/E ratio eventually expand from 9x to 25x when the stock increased from $15.60 to $117, since we published our Reasons for Tracking.
Speaking of value traps unlocking value, it appears that another stock we are keeping a close eye on is on its way to following a similar path.
Stock Yet To Materially Rise Ahead Of “Hidden” Announcement Of New GLP-1 Weight Loss Product Slated For October
In case you were unaware, pharmaceutical companies that have launched or are developing GLP-1 treatments for weight loss are on fire.
As we talked about in our special information arbitrage alert on Friday morning, we discovered a company that will be launching a natural GLP-1 weight loss product in October. This low P/E stock started moving a little on Friday and, unbelievably, the information we found in a video message to staff members is still not published anywhere on social media that we could find.
So, there’s a good possibility the momentum established on Friday will carry over to Monday, especially if the company makes an official press release about its GLP-1 products, which, in the video, the CEO mentioned will start happening.
Thank goodness that for iconic American fitness personality Richard Simmons (Born July 12, 1948 – Died July 13, 2024), GLP-1 wasn’t available while he was building his weight loss workout empire. (Rest in peace).
Ironically, the Company,…
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