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Highlights
- KRT 32.41% move help prompt our decision to close the position in our Buy On Pullback #11 Model Portfolio (BOP).
- QUIK Becomes the 15th stock to be added to our new AI Screen, now up just over 32%, after we launched the screen just 4 months ago.
- 🚨CAWW – Turnaround story progressing; Inflection appears to be set for Q4. We take a first stab at multibagger price targets, assuming the turnaround inflects.
- QEPC – EPS for Q1 2025 grew 112% to $1.17.
- 🚨 Is a new unknown Data Center stock emerging? More insider buying as insiders continue to add to already large positions.
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After last week’s monster rally in the smaller cap market, the iShares Russell 2000 ETF (IWM) and the iShares Microcap ETF (IWC) slowed their momentum but still managed to close out the week ending July 19, 2024 up 1.74% and 1.69%, respectively.
This should not be a surprise, given the magnitude of last week’s rally. Will the small cap indexes rebound in short order? Actually, we really don’t care. The majority of stocks we follow are not represented in the smaller cap indexes, and are of higher quality than a good amount of stocks in the Russell, where as of mid-2024, approximately 40% of companies are currently losing money.
With the S&P 500 Index (SPY) retracing 1.96%, the good news is that the larger cap indexes continued to show weakness. We would love that to continue because we believe this money would rotate into quality smaller capitalized stocks, where there is by comparison an extreme amount of undervaluation.
Do you want to buy a large cap like CrowdStrike Holdings, Inc. (NASDAQ:CRWD), down a little more than 11% on the heels of a faulty cybersecurity update from the company causing significant disruptions in the medical and travel industries?
Compared to CRWD’s price to sales (P/S) ratio of 22.85x and a price to earnings (P/E) ratio of about 566x, wouldn’t you rather buy stocks selling at P/Es of less than 10x or 15x, and growing earnings at a pace of over 30%?
CAWW Turnaround getting close to inflecting; Valuation remains to be the wildcard
Let’s start out this week’s stock commentary with Cca Industries (OTC:CAWW), a “turnaround company” in our Run to $1 Model Portfolio that manufactures and markets health and beauty aids. GeoInvesting’s “Run to $1.00 Model Portfolio” (R21) focuses on microcap stocks trading under $1 per share that have the potential to exceed this threshold.
The newest product from CCA Industries is Neutein, a brain health supplement. Beginning in the second quarter of fiscal 2024, Neutein is now available in 3,420 CVS stores across the country. This product is part of the company’s efforts to turn around their financial performance and is supported by a marketing campaign featuring NFL Hall of Fame football player Mike Singletary.
CAWW shares are up 87% since its inclusion in the R21 and actually briefly exceeded one dollar per share for a few trading days after Oprah Winfrey endorsed the “Plus White” brand from CCA Industries, Inc. The Plus White teeth whitening kit was selected as the 2024 Oprah Daily’s Editor’s Choice for teeth whitening.
For the fiscal Q2 2025 quarter ending May 31, 2025, the company recorded revenues of $2,210,566. This represented a decrease compared to the same quarter in the previous year, where revenues were $2,993,954. The net income for Q2 2025 was a loss of $24,421 ($0.00), which marked an improvement over the net loss of $133,069 ($0.02) recorded in Q2 2024. It’s important to keep in mind that last year‘s numbers included one of the company’s iconic brands, Bikini Zone, which was sold in October 2023 to pay off all of the company’s debt and raise some cash for a new marketing plan.
The numbers were obviously not lights out. However, this is in line with what we are expecting until the company gets some momentum selling its Neutein product through CVS locations and continues to accelerate its online marketing push.
Recall that when we published our initial research article on the company, on March 18, 2024, that before the new CEO came on board, online revenue across all products was minimal and now it represents 50% of revenue.
And what was the the main takeaway from CAWW’s press release?
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