Will New Addition to Run to One Model Portfolio “Quench” Our Thirst For Supersized Returns?

• August 11, 2023
• Microcaps, Pitch

Today’s focus is on a company that now resides in our Run To One Model Portfolio

This portfolio consists of stocks trading under $1 per share (sometimes, well under $1) that we think have a good chance of eventually eclipsing that mark should the companies achieve revenue and EPS growth commensurate with what we expect, based on our research. 

The company is a manufacturer of non-alcoholic and alcoholic beverages. The company’s CEO has a strong industry background, annual revenues are on an upward trajectory, and the launch of an energy drink line targeting a significant market segment holds promise. With key distribution and financial initiatives, its potential for growth coupled with a favorable valuation makes it a very interesting stock at this time.

The company is already profitable, operating with a small revenue base and a cleansed capital structure. The company’s commitment to maximizing shareholder value is evident through the Board of Directors’ decision to reduce the amount of shares the company can issue and to initiate ongoing stock buybacks. The introduction of its new product line is expected to boost revenue growth in a business model that is already profitable.

The company’s CEO, an industry veteran with a reputable track record, further raises our curiosity. Despite the modest revenue base, the company has an established distribution network, particularly for its legacy specialty water line. With ongoing research into the potential of the female energy drink market and an interview with management planned, we are closely monitoring this evolving situation.

While it’s too early to determine the company’s extreme undervaluation in comparison with established beverage players like $MNST and $CELH, the stock has potential to significantly rise if momentum builds in its new beverage product.

Caveats to consider include the stock’s illiquidity, especially in light of the company’s stock buybacks, the unproven nature of the new drink line, and the need to expand distribution to accelerate growth.

Here are a few more reasons why we like the stock:

• The company’s products have quietly gained a presence in 10,000 locations.
• The company just launched a new beverage product line that targets a market that is significantly larger than its current product lineup.
• It’s already profitable at a small revenue base

Valuation

It’s still too early to tell, but it is worth noting that shares are trading at a P/S of 2x vs. comps that sell at around 10x. Furthermore, the company has about $1M in net operating losses to offset future taxes.

GeoInvesting’s Run To One (R21) Model Portfolio was launched in 2013.

You might have noticed that a few winners we have highlighted over the years on GeoInvesting started out as penny stocks trading under $1.00.

Since its inception, of the 42 stocks that entered our Run To One Model Portfolio, 25 remain on the list as actively tracked. The current average return for all 42 stocks is 836.69%. 

Additionally, the average return for the 15 stocks that we removed from the portfolio was 289%, at the time we closed them out of the portfolio.

The market conditions in 2002 forced us to take a break from aggressively pursuing R21 candidates, but we are finally ready to dive back in with our newest idea that we just added to the Model Portfolio this week.

Geoinvesting is a research platform founded in 2007 to publish premium research on microcap stocks that meet a certain set of criteria that we have proven leads to superior returns. Empirical evidence proves that investing in microcap stocks beats the returns of larger cap stocks by 8.24% per year. Even Warren Buffett and Peter Lynch have said that if they were to invest in one type of stock, it would be microcaps. We provide our subscribers with an even bigger edge by combining the microcap investing edge with our own tested strategies to find the best stocks that are undervalued relative to their growth prospects or other positive catalysts. Our approach is based on qualitative and quantitative factors that finds stocks a point where they are going through significant changes that the market has yet to identify. This opportunity is only available in the Microcap world, an area ignored by institutions, Wall Street and the financial media.

Over the last 15 years, we have also built a expert Microcap investor network who contribute ideas to our subscriber base.

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