GeoWire Monthly, Vol. 3, Issue No. 2, February 2023

We Don’t Care If We’re In A Recession

In last month’s regularly scheduled installment of our Monthly GeoWire, Volume 3, Issue #1, published on January 11, we promised a Part 2 follow-up that was slated to be published one week later, with some more perspectives on 2022 at GeoInvesting, with a few snapshots prior to 2022 to highlight our strengths. Well, once we got into it, we ended up taking a deeper dive into some of GeoInvesting’s history since its inception and put together a more comprehensive report for the month of February, which trumped our previous idea of back to back monthly issues spanning 2 weeks.

To briefly reference last month’s subject matter, we cited how the talk of a recession inspired us to make room for a recession proof stock to our Top 5 Faves Model Portfolio accessible at our pro portal. This new idea is in-line with our decision to create two new Model Portfolios, one with a “Recession Proof” theme and the other with a “Recession Resistant” theme. We discussed this new Recession Proof idea and these two new Model Portfolios in an article we published a few weeks ago.

Don’t worry, we’ll be getting back to the normal Monthly GeoWire format next month where we break down videos featuring our peers, investor greats and at times, relevant clips from our discussions with company management. In March, we’ll cover the process of how publicly traded companies can be affected by Chapter 11 bankruptcy, as well as case studies from our coverage universe, and how you can profit from investing in companies going through bankruptcy.

We’ve seen and experienced a lot over the last 15 years of GeoInvesting’s existence. To put it into perspective, having been founded in 2007 (red box below) should give you an idea of how daunting it was for a fledgling company to stare down the barrel of 2008’s gun, but still come out alive and kicking in 2009, albeit a bit bruised. The good news is bear markets always end, and bull markets typically have longer runs. The key question becomes, do you have the emotional intelligence and conviction in your research to stick through bear markets?

Recent Bear Markets (S&P Baseline)

Recent Bull Markets (S&P Baseline)

Source: Yardeni Research, Inc, Oct 28, 2022

So, 3 bear and 2 bull markets later, our history is rich.

We’ve accomplished quite a bit on both sides of the equation, recently experiencing the brighter side of things from March 23, 2020 (Covid trough) to January 3, 2022 before a microcap winter for many, including us.

During this period of nearly 21 months, we posted an average 134.96% rise in holdings that were initiated after December 31, 2016 and closed and/or still open by the time the bull market ended (a total of 67 unique model portfolio stocks).  Yes, while it’s true that the 2020 Covid bull run was a great outlier period when it was hard to lose money, we still managed to beat the S&P by 20%. Furthermore, the stats we highlight later will show that we had above-average returns well before this 2016 to 2021 timeframe. As an initial example, in each of the last 10 years going back to 2012 through the year 2021,we’ve logged at least 7 stocks per annum that have gone on to at least double during our holding period.

When 2022 came along, it created another challenging period for investors. Last year put into perspective just how unpredictable and frustrating investing can be, especially when you are dealing with a group of stocks that investors might tend to ignore or abandon, lending to thin trading and extended periods of price stagnation or decline. When some of 2021’s duds turned into 2022 duds, we knew we were in for a disappointing ride. But a little later, we’ll get into the strategies we are employing that are perfect for the next bull market, which we feel is right around the corner. Our goal is to even better the performance we logged in the prior bull markets.

Maj and one of his analysts, Jan Svenda, recently recorded a skull session to conduct some further due diligence on some companies that are currently in our research funnel. We thought it would be nice to give Premium Subscriber’s a wider perspective on what part of our process looks like in bringing Tier One Quality Microcaps to our community. 

We talked about Crexendo, Inc. (NASDAQ:CXDO), an underperforming (in terms of stock performance) cloud communication play we have been following for a while. We went over their earnings and how the market unfairly punished the stock and why we feel the bullish growth trends are unchanged and even stronger than ever.

We also mentioned Konatel Inc (OTC:KTEL). This is another cloud play attached to a niche telco offering that we are fans of. We discussed the near-term catalyst for the shares to truly skyrocket. Earnings are coming out by Friday .

Lastly, we discussed Verde Agritech Plc (OTC:AMHPF) (NPK.TO), a Brazilian fertilizer company. The play here could be an asset which could supply Brazil with potash for the next 60 years. We discuss what could go right and wrong. If things go right, we think it’s not gonna be a 10-bagger.

To view our entire research on these companies and to see our recent Calls to Action CTA’s, become a premium member

Multibaggers Identified

Since 2009, GeoInvesting has posted a multibagger hit rate of over 30%, or over 200 stocks, among those that have been included in our watchlists (GeoBargains and GeoSpecials in the early days) and model portfolios.

Our long standing Growth + Value style of investing and the 10 tenets by which we live to pinpoint the best Tier One Quality microcaps and high probability turnarounds enabled us to achieve this.

We predict that the carnage that led to the decimation of lesser quality stocks in 2022 will lead to higher quality growth + value stocks (GARP) to leading the next Bull Market we are about to enter- one in which we foresee will open the door for traditional GARP stocks to outperform the broader market as they did  during his first 20 years of my career (starting in the mid 1980’s) – Before 2008 changed the playing field.

Pump and Dumps Exposed

In 2012, we wrote our inaugural Pump & Dump report on Raystream (Old symbol RAYS), which, as predicted, became a stock that went on to become worthless and delisted. Pump & Dumps (PnDs), as the moniker implies, are companies whose stocks are artificially buoyed by professionally crafted and misleading promotional campaigns touting dubious, pie-in-the-sky business ventures that trick investors into buying into farce.

Over the next several years we exposed, through reports, synopses and research briefs, 22 more PnDs, bringing our in-depth analysis total to 23 before we largely settled back into our roots of finding bullish stock ideas. However, not only was it worth bringing these frauds down, but it sharpened our chops in a way to enable us to conduct differential risk analysis on ANY stock of interest. In other words, we are not blind bulls. 

China Fraud Exposed

At first hesitant to admit that some of our bullish coverage on U.S. based China Listed stocks was based on lies, we came to the realization via our own on-the-ground due diligence that there was indeed rampant fraud. In the end, between 2010 and 2014 (when the bulk of our investigations occurred), we identified more than a dozen Asia-based companies that bilked 100’s of millions of dollars from U.S. investors.

Our reports made the rounds to all major media outlets, and the companies we exposed either got delisted by the exchanges or self-delisted by way of privatization to avoid further regulator and investor scrutiny.

Ultimately, our company was featured as one of the main  protagonists in the movie, The China Hustle, which chronicled the fight against criminal behavior in U.S. markets by foreign perpetrators.

Read more about our take on the evolution of  China based frauds here.

Medical Device Trend Harnessed

Medical Device Trend Harnessed

Between 2013 to 2020, we focused heavily on identifying medical device companies with recurring revenue models that were about to reach growth inflection points.

Investing in medical device companies with predictable business models gave us the opportunity to gain exposure to the hot healthcare sector without dealing with the unpredictability and risk that comes with traditional biotechs.

Right before the start of the last bull market in 2020, we published an article giving accolades to a slew of medical device stocks that, as of 2021, sported a startling 10-stock average return of 932%. so we made (and are still making) it a point to continue with the identification of these potential gems.

MOVING FORWARD

For our team, and for probably many other investors, 2022 was a humbling experience. In all honesty, it’s not the worst thing to have happened to us, since as we said, we adapt. We used our humility to get us back on course in finding a few names that performed nicely in the face of market-wide adversity.

2022 forced us to stay laser-focused on our idea generation that adhered to our Tier One Quality checklist, as evidenced by a few big wins, among the carnage, in our coverage universe and the broad market.

In 2022, Richardson Electronics, Ltd. (NASDAQ:RELL) saw a peak return of 89.7% during its tenure on or Select Long Model Portfolio.  Canterbury Park Holding Corp. (NASDAQ:CPHC) climbed 70% after we posted our research report, and Rcm Technologies (NASDAQ:RCMT) peaked at a solid 89.69%.

As we continue to add more stocks to our coverage universe and adjust our Model Portfolios in accordance with new market trends we predict they will significantly outperform the market, in-line with our long-term track record.

We added 10 stocks to our Model Portfolios in 2022, and so far 1 in 2023. We are highly bullish on several of them and believe that 5 have the ability to at least double in price in the near-term.

Soon, we will have a special offer for you that will allow you to gain access to that group of 5 stocks. You can also opt-in here to stay informed of when this becomes available.

One of these companies pays a huge dividend, is about to experience a large acceleration in earnings per share growth, is buying back stock, and insiders are purchasing stock in the open market for the first time in a while. It’s the perfect stock for the new market environment we are currently in, where investors demand earnings and cash flow from companies.

Another company struggled to consistently grow for years and has historically been known as a boring, high expense, print advertising and mailing company. That is not the case anymore. The company has cleaned up its balance sheet and simplited its capital structure by taking advantage of its rising cash flow to buy out investors holding dilutive securities. 

They are approaching $20 million in free cash flow, they recently purchased a profitable company which is very strategic to the business and is a value-add to their existing customer base. The increased growth profile of the company and de-risking of the overall business should lead to a large expansion of the company’s valuation multiples. 

Finally, we worked with MS Microcaps, Maj’s newest venture, throughout the year as a research contributor, and we would like to highlight one of their closed trades from 2022 to give you an insider look at how their new product, the “Active Portfolio (AP)” works.

Their portfolio is a mixture of short, medium, and long-term strategies. The AP navigates the volatility and takes advantage of spikes in the share prices in our shorter term investments while waiting for the longer-term positions to play out. This also includes reducing exposure to longer term positions when they rise and adding exposure when they fall. 

One of their recent AP holdings, Ceco Environmental Corp. (NASDAQ:CECO), is a great case study about how MSM uses its short term InfoArb strategies to grow their Active Portfolio. It should be noted that:

• Their InfoArb strategy focuses heavily on delayed reaction to positive news flow, which opens opportunities for us to allocate a small amount of the AP’s capital to the Active Portfolio prior to a price increase.
• When stock prices fall due to investor overreaction on misunderstood news, their AP can benefit by gaining exposure to the stock before the bounce as smart investors eventually start buying.

In the case of CECO:

• They identified the InfoArb quickly and added CECO (old symbol CECE) to the Active Portfolio.

• CECO was removed from the Active Portfolio after the InfoArb was exploited

CONTRIBUTOR RETURNS

Of course, we don’t want to forget our contributors who have identified stocks that went on to have some pretty amazing all-time peak highs since the pitches. These are some of the ideas that we look forward to the most, since we feel honored to have members respect our opinions enough to want to share it with the GeoInvesting community. It validates everything we want to stand for in peer to peer collaboration and is a pinnacle of satisfaction when the ideas work out.

PROGRESS, YEAR TO DATE

WHAT YOU MAY HAVE MISSED THIS MONTH

Weekly Wrap Up Highlights, Education and More

Investor Finds Value in Recreational Powerboats Company [GeoWire Weekly No. 70]

February 5, 2023

February 6th, 2023In concert with one of our favorite themes of highlighting compelling content from other investors, this week I have opted to bring you another investment thesis from a peer who also focuses on micro to small cap companies.  Last week, we shared a pitch from a hedge fund that is putting stake in a money services company that it believes is grossly undervalued and whose opportunities are misunderstood or discounted by investors who think foreign bank notes don’t have a bright post-Covid future. So, after another bout of research from “around the web”, we found an intriguing pitch from a Seeking Alpha author who wrote on a dividend-paying microcap company that designs, manufactures, and sells recreational fiberglass powerboats for the sport boat, sport fishing, and jet boat markets worldwide.

Hedge Fund Assigns a 3-year $70 Price Target on $18 Stock in Finance Industry [GeoWire Weekly No. 69]

January 29th, 2023

While perusing through Twitter, I came across a tweet that highlighted an investment letter by a long/short hedge fund based in New York, which included their bullish thesis on a company, together with its subsidiaries, engages in the money service and payment businesses in the United States and Canada, with a general increase of those activities in some select foreign countries.” A segment of the company’s operation deals with banknotes, which are “bills” or forms of currency that one party can use to pay another party. What caught my attention was that hedge fund has a three year price target of $70 on the stock, and it’s currently selling at $18.69 with a P/E ratio of 10.5. We’ll get into the investment thesis in a second. It’s not often that we seriously track companies that are in finance related industries, but when the stock came across our screener in June of 2022, we couldn’t help but do a little more investigating into the fundamentals that were improving, of which success is dependent on some predominant trends in the travel sector that deals with international currency and payments.

We Are Paying Attention To This Nearly 100 Year Old Customer Experience Company [GeoWire Weekly No. 68]

January 22nd, 2023

This January, our first Fireside Chat was with a nearly 100 yr-old company that takes a multi-channeled, technology enabled, approach to customer experience (CX), operating through three segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services. It’s not our first talk with a company involved in a part of that industry, who dealt with customer satisfaction and employee standard operating protocol management, which could be viewed as a subset of CX. We argued that in the post-Covid era there would be an increased need to put an emphasis on the way businesses understand their customers, and why it’s now more important than ever. As the world sees it, there is plenty of room for CX to grow. A study conducted by Grand View Research determined that…

How Investors Can Turn a Profit from Stocks Going Through Bankruptcy [GeoWire Weekly No. 67]

January 16th, 2023

In light of the riskier market environment we are in, I have been writing to you about our new Recession Proof and Recession Resistant Model Portfolios. A great related next step is to dive deeper into the tunnel and focus on the topic of Chapter 11 Bankruptcy and how to profit by focusing on two buckets: 1) Companies that survive a bankruptcy process. Will Muscle Pharm Corp (OTC:MSLPQ) be a candidate? 2) Companies whose businesses will actually benefit as bankruptcies increase, such as Heritage Global Inc. (NASDAQ:HGBL) and Creditriskmonitor.com Inc (OTC:CRMZ)

GeoWire Monthly, Vol. 3, Issue No. 1, January 2023

January 11th, 2023

We’ll be getting back to the normal Monthly GeoWire format next month, but we wanted to take this first edition of the new year to look back at everything we were up to in 2022. Don’t worry, we will be getting back to our normal video format starting in February.  This month’s GeoWire will be split up into 2 issues –  one today, and the other next week. A lot happened in 2022, and we thought it was best to split it up into two separate posts to be able to put adequate focus on the themes we want to discuss. This Week: The stock market and recession, our new Model Recession Portfolios, and still the chance to participate in our special offer for 2023.

Non-GAAP – The Pragmatic Approach to Earnings Analysis [GeoWire Weekly No. 66]

January 8th, 2023

In 2016 we addressed the dichotomous approach to understanding the differences between generally accepted accounting principles (GAAP) and non-GAAP earnings. There are ways they should be scrutinized when trying to get a sense if numbers being reported by a company are a true representation of what is going on at the net income level. Non-GAAP financials are also referred to as “adjusted.”  For example, “adjusted earnings per share (EPS) or “adjusted earnings before interest taxes & depreciation & amortization (EBITDA). Because we plan on delving into this subject in a Tweet thread that we anticipate will engage our investor network and extensions thereof, we feel it is a good idea to give another primer on the subject, especially since GeoInvesting’s Premium Subscriber base has grown substantially since 2016. If part of your investment strategy is executing bullish or bearish short-term stock trades on earnings report news flow, it’s extremely important to understand if the GAAP and Non-GAAP earnings per share numbers being reported in a press release are “clean”.

When Cyclical Stocks Become Relevant, Here’s A Strategy You Can Use [GeoWire Weekly No. 65]

January 3rd, 2023

The sales, earnings and thus share prices of cyclical stocks (cyclicals) tend to fluctuate with the overall economy and are associated with industries that are heavily affected by the economic cycle and consumer demand. (Example: stocks in the automotive, airline, hospitality, housing, building material and retail industries). Cyclicals do well when the economy is strong and consumer demand is high, and conversely, can suffer when the economy is weak and consumer demand is low. This makes them an attractive investment class for those who are skilled at identifying economic trends or when it becomes fairly obvious that an economy is peaking or bottoming.

See All Past GeoWire Issues Here