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Micro-Cap Insider
Micro stocks. Maximum profits
Issues
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!

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!
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!
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!
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!
Today, I’m recommending a company that has grown revenue at a 30% CAGR and EBITDA an 80% CAGR over the past 10 years. Despite this impressive growth, the company trades at just 5.3x EBITDA.
Other key points:

    •Top 3 player in the U.S. paper shredding industry.•Massive opportunity for organic and acquired growth.•High insider ownership (over 30% of the company).

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


Today, I’m recommending a company that will benefit from the post-pandemic travel boom.
Other key points:
•145% quarterly revenue growth
•Cheap valuation: 5.7x EBITDA
•Hidden high-growth payments division
•High insider ownership (21% of the company).
All the details are inside this month’s Issue. Enjoy!
Today, I’m recommending a company that provides the “picks and shovels” to the massive Alzheimer’s market.
Other key points:


    •High insider ownership (30% of the company).•45%+ revenue growth this year.•Secular winner trading at P/E of 33x.

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


Today, I’m recommending an app developer that I previously recommended (we exited for a 114% gain last year). The business is growing like crazy yet trades at a dirt-cheap valuation.
Other key points:


  • High insider ownership (19% of the company).
  • 25%+ revenue growth this year.
  • 34% of its market cap in cash and no debt.

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


Today, we are making a “jockey bet”. In other words, we are betting primarily on the management team. The management team that we are betting on is responsible for some incredibly value creation in public markets (hint: it’s the same management team as P10 Holdings (PX), a stock that is up over 300% since or original recommendation in 2020).
Other key points:


  • Trades at a cheap valuation.
  • Paid a special dividend worth over twice its current stock price last year.
  • High insider ownership.

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


Today, we are recommending a special situation. The stock is a closed-end fund that is in the process of transitioning to a real estate investment trust (REIT). Once the transition is complete, the universe of investors that can buy the stock will double, driving indiscriminate buying pressure. Other key points:




  • Trades at a 40% discount to NAV.
  • High insider ownership (CEO owns 14% of company).
  • Relentless insider buying.

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

Today, we are recommending a rapidly growing bank that is based in Nashville, Tennessee. It looks like a very attractive long-term holding:

  • High insider ownership (insiders own ~20% of shares outstanding).
  • Strong momentum (stock is near 52 week high).
  • ~17%+ historical earnings growth.
  • Low valuation: P/E ratio of 13x.
  • ~43% upside to fair value.


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

Updates
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.
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).
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.
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.
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.
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.
This week, we had limited news but there was one update that I wanted to highlight:
RediShred (RDCPD) completed a reverse split on August 18th. For every five shares that you previously owned, you now own one share. The stock price adjusted up to account for the reverse split. The reverse split has no economic impact on RediShred. You still own the same percentage of the company.
After a very strong summer rally, the S&P 500 has pulled back sharply.
The cause for concern appears to be Jerome Powell’s guidance from his speech last Friday.
After quite a strong rip higher the first half of August, U.S. markets have pulled back sharply.
The S&P 500 touched its 200-day moving average last week and then immediately started to retreat.



Retail investor sentiment has started to creep up but it still feels to me that sentiment among professional investors remains quite low.

Alerts
Today is a sad day, in a way.

Why?

Because I’m parting ways with Dorchester Minerals (DMLP).
I originally recommended buying BBX Capital (BBXIA) in October 2020 at a price of 3.17, shortly after its spin-off from Bluegreen Vacation Holdings (BVH).
I was recently able to speak to Laurie Sims, President at Libsyn. We had a nice conversation, and I got some good insights into the business. See my notes at the end of this update.
Greystone Logistics (GLGI) filed its 10-K recently, and I was surprised that sales declined in the 4th quarter by 5%.
I recently downgraded Donnelley Financial (DFIN) to Hold as I had concerns that the company was overearning given buoyant capital market activities which tend to be cyclical.
This morning, we received bad news from Medexus. Medexus announced that it has received a complete response letter from the FDA related to Treosulfan, its newly in-licensed drug that was expected to drive substantial revenue growth. What is a complete response letter?
I will keep this update short and sweet.
As the Cabot Micro-cap Insider recommendation list has swelled in size, I’m realizing that I have too much capital allocated to previously disclosed ideas.
Aptevo filed an 8-K disclosing that Proposal 4 (Company Sale) passed. However, as you can see in the screenshot below, the company made a special point in the footnote that the majority of non-Tang shareholders voted against the immediate sale.
U.S. Neurosurgical Holdings (USNU) recently filed a 10-Q to report first-quarter earnings.
Last night, Medexus Pharma (MEDXF) reported excellent results. Revenue increased 70% y/y to $31.5MM in the quarter. While that top-line number benefitted from ~$3MM of sales that slipped from last quarter to this quarter, it was nonetheless a very positive report. Adjusted EBITDA increased to $5.1MM from a mere $700,000 a year ago.
Zedge (ZDGE) has appreciated a lot faster than I had anticipated. It is up over 100% since we profiled the name last month and is trading above my fair value estimate of $9.80.