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Rich Howe

Chief Analyst, Cabot Micro-Cap Insider

Rich is a trained economist and Chartered Financial Analyst (CFA). He has researched and invested in stocks for more than 20 years and has become a recognized expert in micro-cap stock investing. He started his career at investment advisory firm Eaton Vance where he covered a wide range of sectors including software and internet, financials, and health care.

Following his time at Eaton Vance, Rich joined the Citi Private Bank Private Equity Research team and led the creation of a private equity and real estate fund-of-fund that raised over $300 million in capital commitments from sophisticated high net worth individuals and institutions.

Rich left Citi to launch Stock Spin-off Investing, a research service focused on tracking and identifying the most promising stock spin-offs and special situations.

His recommendations have consistently outperformed the market.

From this author
The bear market has lowered valuation multiples across the board, but small-cap stocks look particularly attractive at current levels.
The market performed well during the holiday-shortened week.

The S&P 500 is brushing up against its 200-day moving average, and if I had to guess, I would expect it to reverse from here.

While I’m not a technical analyst I wouldn’t be surprised if we saw some weakness, similar to what happened in August after the index brushed the 200-day moving average.
There are a couple of things that I’m thinking about this week.

First, the yield curve is inverted. An inversion of the 10-year – three-month yield curve has predicted all of the last recessions, and so I have high confidence that we will see a recession in 2023.

With that being said, usually, the market performs better in the year of the recession than in the year before the recession (markets are forward-looking!).

As such, I’m relatively optimistic.
The answer to the question “what are micro-cap stocks?” is simple, but what’s more important is why they belong in investors’ portfolios.
Knowing when to sell a stock is a critical consideration for investors. My favorite investor, Joel Greenblatt, has some tips to help.
Energy has been one of the few sectors in the green this year, and this micro-cap energy stock is one of my favorite ways to play it.
Over the past couple of weeks, there have been a couple big news items:
  • The collapse of crypto exchange, FTX.
  • The market rallying on lower-than-expected inflation.
The collapse of FTX has nothing to do with micro-caps, but it’s a fascinating story. I can’t wait to read the Michael Lewis book on it (apparently, he’s been working on the book for the last 6 months).
Today, I’m recommending a financial that is taking advantage of a special opportunity that is only available to small community banks.

Key points:
  • Due to a special program (Emergency Capital Investment Program), earnings are expected to grow by 250% over the next three years.
  • Cheap valuation. Stock trades at current P/E multiple of 13.2x.
  • Downside is limited given high cash levels on bank balance sheet.
All the details are inside this month’s Issue. Enjoy!

The biggest news over the past couple of weeks has been the disappointing results from big tech.
This week was another relatively slow one. However, we did have two companies report earnings.
Micro-cap stocks can sometimes be volatile due to lower trading volumes, but these three companies are built for the long term.
Small-cap stocks are trading at historically depressed valuations, and these three look particularly attractive right now.
This week was a slow one with few updates to CMCI companies.
It’s earnings season for many large-cap companies, but we will have to wait until November or later to get updates from most micro-caps.
Today, I’m recommending a real estate company that is 86% owned by insiders.
Key points:
  • Stock is trading at 100% discount to fair value.•Company has 87% of its market cap in cash.•Majority shareholders will likely attempt to buy out minority shareholders at a premium shortly.
All the details are inside this month’s Issue. Enjoy!
I love Twitter. The social media platform, not the stock.
While it’s easy to get lost “doom scrolling” on Twitter, I find it to be an incredibly helpful investment tool.
This small-cap stock has been a favorite of mine for years and remains a deeply undervalued pure play on private equity growth.
Anyone can learn how to invest and profit, but it requires discipline and focus. My favorite investment books can get you started.
As I think about where we are in the economic cycle, I think financials should be relatively well positioned.
Given the volatility of September, I want to revisit my “bear market” analysis.
Investing in stock spin-offs is worth the risk. But you need to know what to do with shares you receive when your larger holding is spun off.
Today, I’m recommending a company that’s benefiting from “green” initiatives.
Key points:
  • •27% revenue growth last year, and 17% expected growth for the next 5 years.•256% EPS growth last year.•A strong balance sheet with net cash.•High insider ownership.
All the details are inside this month’s Issue. Enjoy!
By using LEAPS options you can add portfolio exposure to this undervalued spin-off company for half the price of buying shares.
Want to construct the “perfect stock”? Here are the 13 attributes to look for, according to legendary investor Peter Lynch.
Today is a sad day, in a way.

Why?

Because I’m parting ways with Dorchester Minerals (DMLP).
Today, I’m recommending a liquidating real estate trust with significant upside.
Key points:
  • •Its assets are conservatively worth 50% more than its current market cap (it has no debt).•It pays a 10% dividend yield.•Ongoing asset sales will create even more income and the trust will be completely liquidated within 5 years.

All the details are inside this month’s Issue. Enjoy!
Few sectors have a ton of momentum right now. But micro-cap financials are starting to look intriguing. Here are three worth your attention.
I once attended a lecture by Richard Pzena, and was blown away by his investing lessons. Here are three that really grabbed me.
Large-cap stocks are a crowded field. To beat the market, you need to find an investing niche. Micro-cap stocks are mine.
Negative enterprise value stocks are hard to find. But having outperformed the market by more than 5-to-1, they’re worth hunting for.
Today, I’m recommending a U.K. natural gas company that is trading at a ridiculously cheap valuation and is run by capable operators who generated a 40x return on their last natural gas company.
Other key points:
  • •It’s benefitting from the booming natural gas market in Europe.•It’s trading at 1.5x free cash flow.•It has high insider ownership (20% of the company).

All the details are inside this month’s Issue. Enjoy!