GeoWire Monthly, Vol. 4, Issue No. 1, January 2024

While perusing Twitter, I came across a Twitter post by Clark Square Capital (@ClarkSquareCap) highlighting a list of stocks from the River Oaks Capital H2 2023 Report that included a table of companies that were labeled as either an ‘Excessive Discount’ or ‘Wonderful Business’. We recommend that you read the entire update to get a feel on their take on stock idea discovery.

By the way, we want to extend a big thank you to Clark Square for posting it.

Aside from being a beautifully simple way to initially introduce the list of portfolio companies using one descriptor, we couldn’t help but notice that 2 of the companies on the list intersected with our coverage – nutritional supplements company $FTLF (Wonderful Business) and PharmChek® Sweat Patch drug detection manufacturer $PCHM (Excessive Discount),

Enjoyed the River Oaks Capital H2 2023 Letter:

h/t @Whit_Huguley https://t.co/DP3n5jscjJ pic.twitter.com/clRbWAgFgS

— Clark Square Capital (@ClarkSquareCap) February 6, 2024

Here’s an excerpt on FTLF from page 19 of their letter:

“Fitlife Brands (FTLF) develops and markets nutritional supplements – protein powders, pre-workout, amino acids, weight loss products, fish oils etc. – under 13 different brand names. It is our seventh largest position in the fund and now has a market cap of $90m.

Through CEO Dayton Judd’s innovative capital allocation decisions since taking over in 2018, he has turned a near bankrupt company that sells commodity branded products into a wonderful business.

Each step of Dayton’s remarkable turnaround from 2018 to H1 2023 was highlighted [on pages 7 and 8] in the last letter.”

River Oaks is an Investment Fund run by Whit Huguley (@Whit_Huguley), CFA, who describes the fund’s focus in the following manner:

“We invest in a select number – 8 to 15 – of publicly listed companies primarily in the United States. Our focus is discovering mispriced companies in underfollowed markets by doing extensive in-depth research and visiting each management team.   The average market cap of the companies we own is ~$200m.”

While some might argue that investing in a larger bucket of stocks is an equally good or even better way to capture a larger opportunity to nab multibaggers, we do have to admit that the strategy they use is similar to that of our 4 to 7 stock Buy on Pullback Model Portfolios that can be argued contain “discounts on wonderful companies”. Our Buy On Pullback Strategy Webinar of ours offers some more insights into our strategy.

And of course, their market cap preference is right up our alley.

Besides, connecting with some of River Oak’s stocks in their H2 2023 letter, we also connected with the tenets they lean on to start to qualify potential investments.

• Sells a wonderful product that will generate substantial cash for years to come.
• Treats their customers, employees, and community admirably.
• Is run by honest and able people that also have ownership in the business.
• Does not take excessive risk.
• Has a long-term plan for the business.
• Is selling ownership at a significant discount to fair value.

Sounds pretty good to us. We also lean on 2 lists that expand on both the qualitative and quantitative, our Tier One Quality and Multibagger checklists.

We obviously agree with their assessment on FTLF and PCHM that have been Model Portfolio holdings of ours since 2018 and 2016, respectively. And the returns speak for themselves.

So, once in a little while, it’s nice to get some validation on the stocks that we choose to put in our Model Portfolios from well-respected firms such as River Oaks that dabble in the same universe as ours.

As a side note, we also wanted to point out that gaming company $GLXZ is part of the list, so that calls for a shout out to a contributor of ours that identified the stock as an undervalued asset back in 2016, and currently with the exceptional returns below!

Now, it looks like our next task is to look under the hood of the remaining companies on their list. Maybe there’s another diamond in there, so definitely keep track of our own assessments on them should we find a few compelling enough to dig deeper.

If you want to see our evolution of research on FTLF or PCHM, and the initial GeoInvesting contributor pitch behind GLXZ, let us know and we’ll be happy to share it with you for free.