Micro caps

[hyten1]

i think saying buffett will look at micro caps only (when he manages small amounts) is little short sighted and underestimate "the man"

 

i think buffett will find/look at whatever has the best value relative to price, that could be micro, that could be large cap, that could be korean stocks, that could be "whatever opportunity".

 

i think its equally limiting to say "i focus on micro caps" vs "i focus on quality biz". I understand you only have so much time/energy to spend on research etc.

 

i guess for me, i'll look at anything (maybe that is too broad maybe i should focus more). i'll follow/track various blogs, investors etc etc. with different focus concentration etc.

 

but i do have to say i have not been as successful in micro/nano caps vs none micro/nano, that is just me. also many nano/mico caps have so low liquidity, my transaction cost eat up a good portion of the return. again this is just me.

 

jmho

[LC]

I've always looked for companies with established histories, and run by people who seemed trustworthy. I remember a company run by a (and I say this as a compliment) boring, 60-something year old doctor from the Midwest. I never met the man or heard him speak, but his background seemed a bit more trustworthy versus say, the CEO of Medical Marijuana Inc, a former real-estate broker going on CNBC who was long on hype and charisma and short on operating results.

[hyten1]

http://journalrecord.com/2013/06/28/pd-rx-pharmaceuticals-awarded-federal-contract/

 

oddballstocks, how do you usually track/receive/find these press releases? do you setup some sort of google alert for every company you track?

 

 

 

PD-Rx, yes, I really like them.  They are an example of what's great about these companies, a press release came out two (maybe three) weeks ago saying they signed a $40+m contract with the government.

It might be me, but can't fidn a press release anywhere.

[Tim Eriksen]

http://journalrecord.com/2013/06/28/pd-rx-pharmaceuticals-awarded-federal-contract/

 

oddballstocks, how do you usually track/receive/find these press releases? do you setup some sort of google alert for every company you track?

 

 

 

PD-Rx, yes, I really like them.  They are an example of what's great about these companies, a press release came out two (maybe three) weeks ago saying they signed a $40+m contract with the government.

It might be me, but can't fidn a press release anywhere.

 

PDRX is incredibly cheap.  Don't know much about management.  I don't think the government contract is what some are assuming.  I think it is more of a budget over time.  Potential revenue, but not necessarily actual revenue.    Somewhere I saw that there was a similar agreement signed a year earlier, and according to the company it did not result in material revenue in fiscal 2013. 

[slkiel]

 

PDRX is incredibly cheap.  Don't know much about management.  I don't think the government contract is what some are assuming.  I think it is more of a budget over time.  Potential revenue, but not necessarily actual revenue.    Somewhere I saw that there was a similar agreement signed a year earlier, and according to the company it did not result in material revenue in fiscal 2013.

 

Just FYI that I recently spoke with Jack McCall at PDRX. He said the $46.4m contract is a perfunctory renewal and will likely not change revenue. They expect to only receive a few hundred thousand dollars of revenue from it.

 

I also asked him what some of the risks to the company would be. He said if they lost their DEA license the company would be over.

 

I don't have a position, but it looks cheap even without the revenue from that contract. Thought I'd throw that info out to you guys.

[abitofvalue]

 

PDRX is incredibly cheap.  Don't know much about management.  I don't think the government contract is what some are assuming.  I think it is more of a budget over time.  Potential revenue, but not necessarily actual revenue.    Somewhere I saw that there was a similar agreement signed a year earlier, and according to the company it did not result in material revenue in fiscal 2013.

 

Just FYI that I recently spoke with Jack McCall at PDRX. He said the $46.4m contract is a perfunctory renewal and will likely not change revenue. They expect to only receive a few hundred thousand dollars of revenue from it.

 

I also asked him what some of the risks to the company would be. He said if they lost their DEA license the company would be over.

 

I don't have a position, but it looks cheap even without the revenue from that contract. Thought I'd throw that info out to you guys.

 

This is very useful information.  thank you for sharing. 

 

Sitestar is another interesting micro-cap.  Ragnarisapirate has some very good posts on it, not sure how much faith to have in the CEO's  ability to be prudent in real estate investing over the cycle but company seems undervalued right now.

[Partner24]

Thanks to all for all the suggestions! I've took a look at all of them. Pdrx is indeed quite cheap. Lot of cash (stock is almost trading for the cash into the bank account) and is still profitable and generate free cash.

 

One thing that pick up my attention were the Grant Thornton accountant notes. No declaration posted on the website! So I've asked Jack to obtain the official financial statements. Accountants declaration is fine. The new annual results should come out in the coming week, but yes the stock price is still especially cheap. I should have take a look at it a few years ago!  ;)

 

Cheers!

[Partner24]

Someone asked my to give him the auditor's statement I've received from Jack McCall from PDRX, so here it is in the attachment.

PDRx_FS_2012_FINAL_10_29_12.pdf

[matjone]

I wish I had known about it a year or so ago when it had a lot more asset protection. It is still under NCAV and it has generally been profitable, so I bought some.

[oddballstocks]

Yes, PDRX is cheap, I just ran through the numbers on it again, EV/EBIT of 1.12, cash of $2.19 per share, book value of $4.02.

 

This is actually a larger position for me at 4% of my portfolio, I purchased between $2 and $2.50.  I'm looking forward to seeing how they did this year, it wouldn't surprise me to see earnings back up slightly.

 

The little microcaps like this are great.  The company has a ROE of 21% if you strip out the cash, and they have asset protection.  I'd love to be able to find another 5-10 companies exactly like this selling at about 50-60% of BV, unfortunately they seem to come along maybe once or twice a year.

 

The stereotype of microcap investors is we're buying these melting ice cubes, but the reality (for me at least) is my portfolio is filled with a bunch of PDRX type companies.  I don't mind that there's a huge understanding gap, keeps down the competition.

[matjone]

I think the thing is to build a library of them over time. 

 

I've been experimenting with a new policy: when I sell something, I usually keep 1 share.  That way I can keep track of them, and over time I might have a database of 100's of companies that I know something about, and I can buy back again when they get cheap.  As long as it's only a couple percent of assets, I think the pros of this might outweigh the cons.

[oddballstocks]

I have so many single shares my accounts are cluttered beyond belief.  This is actually a good thing because it helps keep me away from the day to day movements in stocks.  I have a share in Coil Tubing Technology, it rises between 30-150% and then falls 80% almost every week.

 

I've considered opening a new account and transferring all my single shares in there to clean things up.  I love having a library of this stuff.  I have a shelf in my office (looking at it now) that's filled with paper annual reports from a lot of these companies.  Almost none are flashy, some are xeroxed and stapled and mailed out, others look like they were last redesigned in 1957.  When I get a new report in the mail I'll pull the old copies and make notes and refer to notes in my previous annual reports.  Maybe it's an old fashioned system, but it makes sense to me.

[Hielko]

Why would you need to keep a share when you sell your position? For most companies you can get financials without being a shareholder. I simply keep every single stock I have owned on my watch list.

 

About PDRX: anybody who knows something about how much stock insiders own?

[matjone]

I had the same question, but I don't think they are required to disclose it.

 

As for your other question, some brokerages will mail you reports if you have a share, so it is more convenient.  Otherwise you have to set a reminder on your calendar to look for the report.

 

I hope they are buying back shares.

[Hielko]

I had the same question, but I don't think they are required to disclose it.

Can't you get access to the shareholder registry? I have no idea how that works, but I think you have that right as a shareholder?

[oddballstocks]

I had the same question, but I don't think they are required to disclose it.

Can't you get access to the shareholder registry? I have no idea how that works, but I think you have that right as a shareholder?

 

In theory yes, all shareholders are legally required to have access.  Usually a request goes like this:

 

Shareholder: "I'm a shareholder I want to see the registry"

Company: "Hmmm, I don't see you on the shareholder register"

Shareholder: "Oh I own the shares in my brokerage account"

Company: "We don't count those, you need to either sue us or register them in your name"

 

Shareholder registers them in their name

 

Shareholder: "I'm a registered shareholder now"

Company: "Yes, we see you on the books, you're welcome to view them while standing in the CFO's office, let us know when you'll be here..."

 

That's for a very nice company, most will stonewall until you send them a strongly worded letter written by a lawyer, or actually file suit.

[Palantir]

I like buying stock in neat clean blocks of 5-10-15% of portfolio size. Having random single shares in my portfolio would be like having a pebble in my shoe...

[Hielko]

I had the same question, but I don't think they are required to disclose it.

Can't you get access to the shareholder registry? I have no idea how that works, but I think you have that right as a shareholder?

 

In theory yes, all shareholders are legally required to have access.  Usually a request goes like this:

 

Shareholder: "I'm a shareholder I want to see the registry"

Company: "Hmmm, I don't see you on the shareholder register"

Shareholder: "Oh I own the shares in my brokerage account"

Company: "We don't count those, you need to either sue us or register them in your name"

 

Shareholder registers them in their name

 

Shareholder: "I'm a registered shareholder now"

Company: "Yes, we see you on the books, you're welcome to view them while standing in the CFO's office, let us know when you'll be here..."

 

That's for a very nice company, most will stonewall until you send them a strongly worded letter written by a lawyer, or actually file suit.

Unfortunately not surprised that this is the practice.

[ECCO]

In Canada, there is Omni-Lite Industries Canada (OML, 0.85$) with a market cap of 10.3M$ and a book value of 17.7M$. I like the story. Last few quarters results has been average but things seems to get better. I have a small position in this stock.

[DoddDisciple]

Some interesting thoughts on the microcap space. Thanks to you all! I have some lingering thoughts however, mainly related to data:

 

(1) Insider Ownership % - I know for domestic companies that file with the SEC, there are several forms with this information on EDGAR. However, I would prefer just a straight % number instead of looking at the number of shares owned and having to calculate that for each insider. I notice that screener.co doesn't always have insider % all the time in the microcap space (a lot of nulls). I also am not sure how you look up this information for international stocks.

 

(2) Bid/Ask Spread - What's a good place to get this information for micro caps, including international stocks? I'm looking for level 2 since level 1 is typically what is listed on say Google/Yahoo, correct? I know IB is supposed to offer this data at a cost, but are there anywhere free or cheap sources?

[gfp]

Congratulations ragnarisapirate! - appointed to the board of directors of Sitestar - SYTE  -->

 

http://www.sec.gov/Archives/edgar/data/1096934/000072174813000727/site8kappt.htm

[Parsad]

Congratulations ragnarisapirate! - appointed to the board of directors of Sitestar - SYTE  -->

 

http://www.sec.gov/Archives/edgar/data/1096934/000072174813000727/site8kappt.htm

 

Congratulations Jeff!  Cheers!

[DoddDisciple]

Congratulations Jeff!  Cheers!

 

Awesome. A quick question Parsad: is it possible when writing responses to "quote" just selected areas, rather than "inserting quote" and then deleting what you don't want to quote? Maybe this is a vBulletin only feature, but on other forums, you can highlight the text and a dialog box that says "quote" appears and if clicked, only quotes that section of the message in the reply editor. Thank you!

[ragnarisapirate]

Congratulations ragnarisapirate! - appointed to the board of directors of Sitestar - SYTE  -->

 

http://www.sec.gov/Archives/edgar/data/1096934/000072174813000727/site8kappt.htm

 

Congratulations Jeff!  Cheers!

 

Thanks fellas. Hopefully, we can create some value. :)

 

Feel free to email with suggestions.

[Palantir]

Fascinating. I'm curious to know why more people don't do this. I bet some of you veterans could get together and go all Carl Icahn on some poor unsuspecting microcap CEO, "PAY MY DIVIDEND B*****!!!!!".