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Micro-Cap Insider
Micro stocks. Maximum profits

February 24, 2021

Judging by some headlines and my Twitter feed, you would think the markets are in meltdown mode. But I just checked and the S&P 500 is only 1.9% down from its all-time high. And the Russell Micro-Cap Index is down 4.0% from its all-time high. It’s important to remember that it would be totally normal if the market did continue to pull back, judging by previous bull markets.


This week, my family and I are back from our vacation to Sanibel Island, Florida.

While I enjoyed a break from the cold, it is great to be back working a full week—especially because I’m back in my basement office, which was out of commission for a week due to a leaking washing machine.

Judging by some headlines and my Twitter feed, you would think the markets are in meltdown mode.

But I just checked and the S&P 500 is only 1.9% down from its all-time high.

And the Russell Micro-Cap Index is down 4.0% from its all-time high.

It’s important to remember that it would be totally normal if the market did continue to pull back, judging by previous bull markets.


While most of our open recommendations have hung in there, they have pulled back slightly.

Medexus Pharma (MEDXF) is the exception; it’s pulled back over 20%. While we are still up 220% from our initial recommendation, it is never fun to see a large correction.

But in this case, I think it’s healthy.

Medexus has come a long way in a short while and was due for a pull back.


The stock is approaching its 50-day moving average, which I believe should provide some support.

But more importantly, the fundamental story with Medexus remains on track.

The company recently announced that it has entered into a licensing agreement with medac, a German company.

Medexus agreed to pay $5MM upfront, up to $55MM in regulatory milestone payments, and up to $40MM in sales-based milestone payments. Medexus just announced that it closed its equity offering to fund the deal.

For those payments, Medexus will have the right to sell a drug called Treosulfan, which is given to patients with acute myeloid leukemia (“AML”) and myelodysplastic syndrome (“MDS”) prior to stem cell transplantation.

Patients who received Treosulfan lived longer and had fewer side effects than patients treated with the generic alternative. Medexus believes the drug will ultimately generate more than $126MM in sales.

Medexus’ current drug portfolio (including Treosulfan) has peak sales potential of $275MM to $325MM CAD.

Assuming the company can trade at 3x this revenue estimate (the company will execute additional licensing deals so I expect revenue to ultimately grow even higher) in line with slower-growing peers, MEDXF would trade at ~30 per share, implying significant upside from here. Buy under 8.00.

Another company I want to mention is Dorchester Minerals (DMLP).

Oil prices have rallied sharply. The following passage from a recent Barron’s article sums up why.

“Analysts had come into the year anticipating a slow recovery, with oil prices hovering somewhere in the $50s or perhaps reaching the $60s. But the price recovery has been faster than expected — in part because of the success of vaccines in containing Covid-19 in some parts of the world and in part because of the decision by many producers to keep production low even as prices rise. In the past, the cure for high prices has been high prices — producers simply ramp up production and the increasing supply causes prices to drop.

“These days, however, companies have been holding back on adding new wells, because investors have been demanding that they keep capital expenses low and focus on growing their dividends. OPEC has also been remarkably cautious in restoring production after reducing collective output by 9.7 million barrels per day last year, or about 10% of total global production. Saudi Arabia unilaterally took another 1 million barrels out of production early this year, giving the market an even larger tailwind.”

In the current market, I think it makes a lot of sense to have exposure to oil and gas stocks and Dorchester Minerals is an excellent option. The stock has returned 41% (including dividends) since we initially recommended it in October, but it’s still trading below its pre-pandemic levels.

Further, it is a direct beneficiary of higher prices as it receives royalties on oil and gas sales and then pays out what it receives as a distribution.

Finally, insiders have been gobbling up shares.


Given the attractive setup for the stock, I’m raising my buy limit to 15. Buy under 15.

For updates on our other recommendations, read on below!

The next issue of Cabot Micro-Cap Insider will be published on Wednesday, March 10. As always, if you have any questions, don’t hesitate to email me at

Changes This Week

Increasing limit on DMLP to Buy under 15


BBX Capital (BBXIA) had no news this week. The company filed an 8-k in January which disclosed that Angelo Gordon owns 4.9% of the company and that BBX Capital had granted Angelo Gordon permission to buy up to 10% of the company. Recently, Angelo Gordon filed a 13D to disclose that it owns 6.4% of shares outstanding. I view this as bullish given 1) Angelo Gordon is a sophisticated investor and sees significant value and 2) management was open to taking on outside investment. I recently spent considerable time reviewing my investment thesis for BBX Capital. All in all, the investment case remains on track. Despite strong performance, the company trades at just 38% of book value. It should generate significant earnings and free cash flow in 2021. In October 2020, the company announced that it had authorized a $10 million share repurchase, representing 9% of its market cap. The company also recently announced that it has purchased Colonial Elegance, a supplier and distributor of building products, including barn doors, closet doors, and stair parts for 5.6x EBITDA, an attractive price. Despite poor historical corporate governance, we are aligned with management as the Levin family (controlling shareholders) own 42% of shares outstanding. I see 20%+ upside. Original Write-up. Buy under 5.00.

Donnelly Financial Solutions (DFIN) had no news this week. The company will report earnings on Thursday, February 25. It will be good to get an update on the company’s progress with its turnaround. Donnelley Financial Solutions (DFin) is a 2016 spin-off that is in the process of transitioning from a mainly print focused business to a software/tech-enabled services business. Despite strong cash flow generation and debt paydown, the stock still trades at a draconian valuation. Simcoe Capital, an activist investor, owns 10% of the stock, ensuring we are well aligned with insiders. With modest earnings growth and multiple expansion, coupled with significant debt paydown, the stock should hit 40 by 2024, implying over 90% upside. The stock has performed well but still only trades at 9.5x free cash flow and 7.0x forward EBITDA. Original Write-up. Buy under 22.50.

Dorchester Minerals LP (DMLP) see update above.

FlexShopper (FPAY) has performed well. I continue to like the stock. It is a rapidly growing company in the virtual lease-to-own market. Despite rapid growth and margin expansion, it is only trading at 9.9x 2021 earnings. Importantly, the Chairman of FlexShopper owns over 20% of the company and has been buying more stock as fast as he can in the open market. Recently, H.C. Wainwright published an initiation report on the company with a 4.00 price target. Also, I recently had a chance to talk to management (both the CEO and CFO), and it increased my conviction in the idea. My 12-month price target for FlexShopper is 4.70. Original Write-up. Buy under 3.00.

Greystone Logistics (GLGI) reported earnings recently. The stock has been a little volatile, but I still have long-term conviction in it. Revenue declined by 20% in the quarter. The biggest challenge that Greystone currently has is meeting demand from its customer base. As a result, one of the company’s customers (a major beer company) gave notice that it will be diversifying purchases of case pallets between Greystone and another vendor. Greystone will continue to be the sole provider for the keg pallets. Greystone believes that it will not have a material impact on its financials. On the one hand, a 20% decline in revenue is worse than I had anticipated. But on the positive side, net income increased by 187%. How is that possible? The big driver was a strong improvement in the company’s gross margin. It increased from 11.0% last year to 19.9% in the most recent quarter. Greystone has been investing in improving its manufacturing efficiency and clearly that has paid off. The gross margin expansion is all the more impressive given that revenue declined. Usually, gross margins shrink as revenue shrinks given diseconomies of scale. The key question in my mind is, Will revenue ever start growing again? I have high conviction that it will. From 2016 to 2020, revenue grew at a compound annual growth rate of 30.4%. Once vaccines are broadly distributed and Greystone has its workforce back up to full capacity, the company should start growing quickly again. In the most recent quarter, the company generated $0.03 of EPS or $0.12 on an annualized basis. Thus, the stock is trading at a P/E of 7.6x. This represents a good value for a company with such a strong long-term growth outlook. Original Write-up. Buy under 1.10.

HopTo Inc (HPTO) had no news this week, but the stock has generally been weak since reporting earnings in November. In the quarter, sales declined by 6%. However, just as we didn’t get too excited last quarter when sales jumped 49%, we aren’t going to get too down this quarter. On a quarterly basis, sales are lumpy. Year to date, revenue is up 3% and operating profit is up 5%. The stock has pulled back and looks attractive. I believe HTPO is worth ~0.86 per share. HopTo is currently trading at an EV/EBIT multiple of 5.8x. This is too cheap. To put it in perspective, the software and internet industry trades at an average EV/EBIT multiple of more than 50x. Original Write-up. Buy under 0.55.

IDT Corporation (IDT) is my newest recommendation. IDT Corporation is a mini-conglomerate run by Howard Jonas, one of the best value creators in the world. The stock is trading at a big discount to its sum-of-the-parts valuation, but the imminent spin-off of one or more of its high-growth technology subsidiaries will unlock that value. Insiders own 25% of shares outstanding ensuring we are well aligned with management. My price target implies over 50% upside. Original Write-up. Buy under 23.50.

Liberated Syndication (LSYN) announced that it has acquired Auxbus, a podcast creation software company. Terms of the transaction weren’t disclosed, but I imagine the purchase price was quite low seeing as the company has been for sale for over a year. The acquisition will marry Auxbus’ podcast creation platform with Libsyn’s hosting platform, a move that allows it to keep up with a growing shift toward offering a full-service experience to producers. The addition of Auxbus will help Libsyn compete against companies such as Anchor. The Spotify-owned company allows podcast newcomers to create a show, host it on its platform, and then distribute it with a few clicks on Spotify. Libsyn continues to be a very attractive company benefitting from several secular tailwinds. Original Write-up. Buy under 4.25.

MamaMancini’s Holdings (MMMB) announced that it has submitted its application to list on the Nasdaq in order to increase the number of investors that can invest in the stock. This is a significant positive for the company. MamaMancini’s reported earnings in early December. Revenue grew 6.8% while EPS grew 100% to $0.02 as the company continues to leverage its fixed cost base. Sales growth decelerated slightly due to COVID headwinds, but I’m confident sales will reaccelerate in 2021 and beyond. Additionally, the company is currently running a strategic review which could result in the company being sold. Whether or not the company is sold, I believe returns should be strong going forward given the company will continue to grow and generate strong earnings growth. It has historically grown revenue at a 24% CAGR yet only trades at 11.0x forward earnings. Management owns over 50% of the stock, ensuring that incentives are aligned. Further, the company has a clean balance sheet. Original Write-up. Buy under 2.00.

Medexus Pharma (MEDXF) update covered above.

NamSys Inc. (NMYSF) recently announced that it has terminated its long-term incentive plan. The plan was originally put in place in the mid-2010s to incentivize the team to help transition NamSys’ software from on-premise to a cloud-based offering. However, the long-term incentive plan had no limit as participants in the bonus plan are entitled to 15% of the value of the company, no matter how high it’s valued. The payout for the termination of the bonus plan will be made in cash and stock. This is a major positive as it will increase the company’s earnings growth rate going forward. Further, it’s possible that this announcement could be a prelude to a sale of the company. Despite historically growing revenue and earnings at a compound annual growth rate of 20%+, the stock only trades at 22x 2019 earnings. It has a pristine balance sheet with significant cash and no debt, and insiders own over 40% of the company, ensuring strong alignment. Original Write-up. Buy under 0.80.

P10 Holdings (PIOE) closed its acquisition of Enhanced Capital Group, a premier impact investment platform, in December. Since its inception, Enhanced has deployed over $2BN of capital into impact credit and impact equity investments. Areas of focus include small business lending in impact areas and to women and minority-owned businesses, renewable energy, and historic building rehabilitation. My estimate is that this transaction will increase run rate EBITDA to ~$75MM. As such, P10 is trading at an EV/EBITDA multiple of 13.0x. As I have said before, the stock is no longer dirt cheap. Nonetheless, it still trades at a sharp discount to its closest peer, Hamilton Lane (HLNE), which trades at an EV/forward EBITDA multiple of 28.3x. Catalysts for P10 Holdings going forward include: 1) additional deals and 2) a potential up-listing to a major exchange. Given the stock is not dirt cheap anymore, I recommend holding a half position. I want to keep exposure to the name but think it’s prudent to book some profits. Original Write-up. Hold Half.

U.S. Neurological Holdings (USNU) reported earnings in November. Revenue grew 0.6% y/y and 11% q/q as procedures and price per procedure both rebounded. Year to date, the company has generated EPS of $0.05 or $0.067 on an annualized basis. As such the company is trading at just 5.2x earnings. In addition, the company has $1.5 million ($0.19 per share) of cash and no debt on its balance sheet. It also has $1.1MM (due from related parties) and has generated over $500,000 in free cash flow year to date. U.S. Neurological Holdings operates as a holding company in the United States. It is engaged in providing medical treatment and diagnostic services that include stereotactic radiosurgery centers, utilizing gamma knife technology, and it holds interests in radiological treatment facilities. Original Write-up. Buy under 0.25.


Buy means accumulate shares at or around the current price.
Hold means just that; hold what you have. Don’t buy, or sell, shares.
Sell means the original reasons for buying the stock no longer apply, and I recommend exiting the position.
Sell a Half means it’s time to take partial profits. Sell half (or whatever portion feels right to you) to lock in a gain, and hold on to the rest until another ratings change is issued.
Disclosure: Rich Howe owns shares in BBXIA, GLGI, HPTO, LSYN, MMMB, MEDXF, PIOE, FPAY, and IDT. Rich will only buy shares after he has shared his recommendation with Cabot Micro-Cap Insider members and will follow his rating guidelines.