I’m amazed at how many small growing profitable companies trade for less than working capital or for less than 5x FCF. Its one of the strangest pricing environments I can remember. also amazed at how most of these keep declining for the past 2 years as small cap gets liquidated
POLA is at working capital, grew revs 60% YoY, profitable, insiders own like 60% and has buyback. Demand is unlimited, only constraint is their ability to ramp production
EMGC is at less than NPV with their debt situation stabilized, insiders own like 80% now. Could easily be worth a few dollars in 5 years as their portfolio runs off. Big insider buying for past 2 years from new mgmt team that turned it around
ASPS likely starts growing soon (yea I know—contrarian view) 3x FCF counter-cyclical, stupid high ROIC biz.
BTU now under $1b market cap is a small cap. Net debt is less than 1x TTM FCF. Trades for slightly more than half of 1x 2017/2018 FCF. Buying back 5-7% of company each quarter. Global thermal coal demand increasing (bet you didnt know that). Coking coal demand also increasing.
SD trades at ~$200m EV. HQ worth $75-100m. Has $200m EBITDAX. .5x EV/EBITDAX net of HQ. PDP-10 is like $600-800m depending on what energy prices you use.
STNG has a clear path to $25/shr in FCF based on $50k LR/$30k MR. Will it happen? Who knows. Why can’t they earn at least $10-15/shr putting them at 2-3x FCF. Still at a discount to NAV. You dont even have to dumpster dive. It’s at $2b market cap.
LPG is like 3x FCF. Massive buyback. Trades at .6 NAV. Do you think shale guys have more or less NGLs next year?
SHIP will earn half its market cap each Q if capes stay in the mid- $20k’s. Sure, its leveraged as all hell and they just did a death spiral, but if rates are elevated, that may not matter in a few quarters. Insiders own a ton.
If shipping aint your thing, plenty of “compounders” at 5x FCF too. RICK?
Look-these all have some hair, nothing is every squeaky clean under 5x FCF and especially at .5-2x. Please don’t lob a “well Kuppy, this is why you’re wrong on XYZ” I ain’t stupid about what I own. I know there are problems. I think that’s priced in (sometimes they ain’t).
Winners should out-perform the inevitable mistakes here b/c the winners are multi-baggers.
@iancassel is right. If you complain there aren’t bargains, you’re looking in the wrong places or maybe not even looking. I expect to find more bargains, but I’m never saying they dont exist. All the above are potential multi-baggers. (Assume I have positions).
To @iancassel other point, if you are looking for 10%, don’t do small cap. A 10-20% gain means you got it wrong. You need 300-500% gains to cover for your mistakes. Sometimes you get a 1000-2000%. Big winners are how I hedge my downside...(bet you haven’t heard that before..?)
Sorry for the tweetstorm. I’m on a patio in Montserrat looking at the ocean, surrounded by rainforest. My mind suddenly feels clear. Find small cap bargains with tailwinds from the macro. Stop trying to short frauds when they intend to print money...
Now back to my previously scheduled vacation...
