Market Masters II: Sequel

Investing

I’m trying something new…

I’m working on somewhat of a sequel to my National Bestselling Book, Market Masters (2016), however; it won’t be in book format this time…

All of these new interviews will be in streaming audio format (60+ mins each), and shared with you as they happen (same week), rather than months, or even a year later because it needs to go to the printing press. You’ll get em’ fresh on Patreon!

Plus, I love the audio format, because it means you can listen to these interviews while driving in your car, working out, or relaxing in bed after a long day.

Since the beginning of the year, I’ve uploaded seven (7) new exclusive audio interviews with Fund Managers, and Investors (as of March, 2019).

Here’s who I recently met, and interviewed:

– Jason Donville (DKAM)
– Gerry Wimmer (Investorfile)
– Aubrey Hearn (Sentry Small/Mid Cap Fund)
– John Ewing (Opportunities Fund)
– Martin Braun (JC Clark Adaly Fund)
– James Telfser (Aventine Canadian Equity Fund)
– Francois Rochon (Giverny Capital)

There’s more interviews coming throughout the year, but they’re only going to be released to my Patreon subscribers. My mission is to give my Patreon subscribers inside access to all of these investors’ strategies, stock picking processes, and best ideas. I hope these interviews can add value to your own investment process. Learn more.

Regards,

Robin

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Small Cap Ideas II

Investing

///  Update: One of My Best 15 Ideas for 2019 is up +124% YTD ///

I recently caught up with Gerry Wimmer, founder of Investorfile. Gerry is a DIY investor, and shares all of his stock picks online. I think he’s a very honest, and credible guy. Gerry runs a concentrated portfolio. Plus, he’s got a lot of conviction. Since 2012, Gerry’s only picked 20 top ideas (2-3 per year), and as of Dec 2018, his average current price return (with dividends): +185%. We also happen to have overlap in our portfolios (five of his current picks).

I first met Gerry a couple of years ago, and wrote about his stock selection process (short summary) in “Small Cap Ideas“. However, now that I’m working on my new Investor Interview Series (streaming audio), I invited Gerry for a follow-up conversation. It’s 60+ mins, and we discuss his scope & strategy (micro / small-cap), stock selection process, industry focus (technology, services, industrial), best ideas for 2019, and all 13 current ideas (seven companies were taken over since 2012) including his best performer; Questor Technology QST.v (+1215%; 13x return).

In the Interview, Gerry talks about his current top picks (among other topics):
– Sangoma Technologies (TSXV: STC)
– Avante Logixx (TSXV: XX)
– Caldwell Partners International (TSX: CWL)
– Questor Technology (TSXV: QST)
– Intrinsyc Technologies (TSX: ITC)
– Quorum Information Technologies (TSXV: QIS)
– Posera (TSX: PAY)
– Gatekeeper Systems (TSXV: GSI)
– AirIQ (TSXV: IQ)
– Intouch Insight (TSXV: INX)
– Destiny Media Technologies  (TSXV: DSY)
– Novra Technologies (TSXV: NVI)
– Titan Logix (TSXV: TLA)

It was definitely a fun interview. Lots of new insights.

P.S. Sangoma Technologies (TSXV: STC) was the #1 favourite punch-card project idea for 2019 (4 / 60 submissions).

Ideas for the 2019 Punch-card Project

Investing

///  Warren Buffett: “I always tell students they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision, they used up one of their punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven, and you can get rich off five or three or seven.” ///

There were 60 MicroCap idea submissions for the 2019 Punch-card Project. 50 Canadian, and 10 U.S.. Out of the 60 submissions, 9 stocks had overlaps, and the most popular idea was Sangoma Technologies STC.v (four overlaps).

Fellow DIY investors, and some from the industry submitted their ideas. It was the thrill of the treasure hunt! “Small companies; big dreams”…

Do you want to see all 60 Punch-card submissions?  Learn more here.
(P.S. I’m working on my first-ever list of U.S. Compounders and will be releasing that soon, as well as new in-depth audio interviews, and more..)

Punch-card Project

Investing

/// Submit your stock idea ///

Let’s try something fun. I call it the “Punch-card Project”, where DIY investors from around the world come together to share stock ideas (there’s 4,400 of you who subscribe to this newsletter).

I’m inspired by something that Warren Buffett said years ago:

“I always tell students they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision, they used up one of their punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven, and you can get rich off five or three or seven.”

So, how does this work?

Let’s take it to the next level….
You get one punch, and must pick among the MicroCap universe:
– U.S.; under $300M market cap; or
– Canada; under $100M market cap

Small companies; big dreams. It’s the thrill of the treasure hunt!

Reply to me via email (r.speziale@gmail.com), submitting your one Punch-card stock idea. You just need to provide the name of the MicroCap stock to enroll in the project; no explanation/thesis is required. I will compile ideas from everyone who enrolls. Once the list is compiled, all those who enrolled will get to see the list (via email), as well as any of my Patreon members. The full list, plus performance updates will then be shared here throughout the year. If you do not wish to disclose your identity for any reason, you’ll have the option to pick an alias.

Please send me an email (r.speziale@gmail.com) in the following format by March 6, 2019:

Punch-card Project Stock Idea: Insert a MicroCap stock
Identity: Insert First Name & Last Name or Alias name

I’m looking forward to seeing everyone’s ideas, and sharing them all back with you in the month of March… maybe this will become an annual tradition.

Top 5 Investment Ideas from Cantech 2019 (Guest Post)

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My friend, and fellow DIY Investor, Liam Zerter, visited the Cantech Conference in Toronto this year (2019), and wrote about his thoughts on five of the MicroCap companies that were there (three of which are included in my Future 60 MicroCap stocks list – Good Life Networks, Kraken Robotics, and Patriot One Technologies).

***

(Updated on February 27, 2019)

By Liam Zerter:

I got a chance this year to participate in the 2019 Cantech Investment Conference, a showcase of multiple innovative and relatively unknown small cap technology companies. Here is my quick review and ranking of the most interesting companies on my visit.

1. Good Life Networks – “A digital advertising company that operates the world’s highest-speed programmatic video ad exchange”. Unfortunately, I did not get to speak to anyone from this company, but it was fellow Capital Compounder member Thomas Birnie that brought it to my attention. When he mentioned it was trading at 2x EBITDA, my Spidey senses picked up immediately (Even though I am not a fan of adjusted EBITDA as a metric). My first introduction to this company was from diving into the latest conference call in which the CEO’s voice appeared to have been subbed in by the voice guy from all those movie commercials. I quickly found out this was the actual CEO Jesse Dylan. He just happened to be a radio show host in his past life. Apparently completing his work day at 9:30 a.m. led him into becoming a proficient business dealer and negotiator, simply because at 9:30 a.m. there “was no one around to play with”. There is a lot more to dig into for assessing the talent of this company, but at first glance, it looks promising with competencies in sales and programming capabilities.

If the company The Trade Desk is a stock market equivalent of a broker, just in selling online video advertisements, then Good Life Networks would be the actual technology integrating and providing the activity for the act of selling and buying. Consider it as the stock exchange equivalent, but for online video advertisement. The competitive advantages right now are in the speed to make advertisement video streaming decisions, the ability to weed out false advertisement space, protecting the anonymity of user identity (which has become a significant issue for the likes of Facebook and Google that are under fire for this by governments), and higher quality audience targeting through the use of AI learning. Of their two acquisitions of Impression X and 495 Communications, it is my opinion that Impression X is the more accretive acquisition to Good Life Networks strategy. Impression X connects video streaming to smart TV’s and devices like Roku, and Apple TV, which could be a great expansion avenue.

Good Life Networks currently trades at trailing 1x sales, and 0.5x sales after adjusting in the two new acquisitions. 2019 and 2020 are forecasted to hit $67 million and $100 million in revenue respectively. Good Life somehow picked up a very good deal in debt financing at prime +1 ¼% (This blows my mind! It should not be possible for such a small company with little history to get such a good rate). Dilution to acquire the two new acquisitions caused the share count to jump up to 93 million with all warrants and options factored in. It has 0% attrition of clients (though the company has only been around a short time). I expect further acquisitions as this company attempts to string together a full-service company, perhaps similar to that of its competitor AppNexus which was bought out for $1.6 billion. At a market cap of just over $20 million, there is a lot of potential for this company, and it is clearly mispriced when considering its potential and quick success. By the end of 2019, the company could reasonably trade at 1.5x to 2x sales if it hits its targets, putting a price target on the company between $1.09 to $1.45 (Which….is a price target that makes me sound like a complete and utter nutcase as it trades at $0.31). The concern I have is how defendable a moat it currently has. A company like AppNexus or The Trade Desk with significantly more resources could move into Good Life’s space and crush their main business. I currently hold a new position in Good Life Networks.

2. Xebec Adsorption – A manufacturer of equipment that transforms raw gasses, such as the emissions from landfills, wastewater treatment facilities and farms into renewable natural gas and hydrogen. The company has a strong backlog of business contracts to fill in Italy and France as a result of EU governments’ pursuit to reduce the impacts of climate change. Strong future growth potential exists in the U.S. and Canada through contract wins for new builds and tuck-in acquisitions of smaller companies in the $1-$5 million range. This will allow Xebec Adsorption to build out its recurring revenue servicing arm. The company’s competitive advantage is in its technologies’ ability to recover gasses more efficiently than its competitors, leading to more profitability by its users who collect higher gas volumes for resale. The company currently trades at $1.05 with a $71.4 million backlog, and a market cap of $68 million. Revenue in 2017 of $14 million growing to a projected $28 million to close out 2018 shows the company has finally hit an inflection point. 2019 revenue targets are $40 million with 25% as recurring revenue.

Management has a target for EPS of $.05 – $.07 for 2019. My favorite insight into this company came from my discussion with CEO Kurt Sorschak about his greatest fear. His concern was if his company gets taken out before it gets to realize its full potential. If a takeover offer occurred, let’s say 50% above market price, his 14% ownership won’t be enough to defend against the instant gratification that shareholders would most likely accept if such a scenario occurred (Kurt is hungry, I like this guy!). In my opinion, considering the defensiveness of the industry and the growth Xebec could experience, trading at 20x 2019 eps would be a fair valuation. If Xebec can deliver, and come out of 2019 with $.06 cents in clean diluted EPS, I see no reason for the company not to trade at $1.20 at a minimum. However, on the risks side, Xebec could experience cost overruns during this high growth period. I currently hold a new position in Xebec Adsorption.

3. Kraken Robotics – “A marine technology company engaged in the design, development and marketing of advanced sensors”, software and underwater robotics for Unmanned Maritime Vehicles used in military and commercial applications. I spoke with Greg Reid, CFO and their Investor Relations Consultant at the conference – this company is easily the smartest collection of people attending the conference. I heard a stat once that there were over 450 separate air based drone manufacturers. Think of Kraken Robotics as underwater drones that sell for $1 million plus, and in most of the different forms of servicing there are really only 2 competitors that can provide any one type of service effectively. The reason behind this is that lithium batteries under a great deal of pressure are going to explode at major ocean depths. Their acquisition of a German company manufacturing lithium gel batteries was transformational in that this allowed Kraken to fully manufacture a subversive drone, and now at a cost far less than the competition.

Kraken robots are more efficient than their competitors at scanning the bottom surface of the ocean, and one unit can be built and sold with a healthy margin. Talking to the CFO, his big dream in 5 years is to have revenue at a stable minimum of $100 million a year with 30% coming from recurring revenue projects. I believe this is one to watch for a dip in order to get a position, as at a market cap of $93 million the company might be a little bit ahead of itself. I like management and I think it has a great defensible niche where it is positioned to dominate its market. If their devices start getting used in military applications at just a fraction of the scale that air based drones are used, this company could take off. Kraken Robotics is on my watch list.

4. Patriot One Technologies – Covert weapon detection systems. This is simply a great idea. This company has built a smart scanning system that scans to pick up trace metals and signature patterns that make up the identity of dangerous weapons. When it scans for signals, it measures all items across a database and alerts security when it comes across a dangerous object. The great thing about this product is that you can hide it inconspicuously. Patriot One also entered into a joint venture to develop a chemical detection scanner for narcotics, chemical agents, and volatile organics. Furthermore, the business has a smart video surveillance system leading to a potentially even broader service offering.

Currently, the PATSCAN covert weapons detection system is still in the research phase. The true positive rate is only at 91.6% and the true negative rate is at 94.4%. I see the true negative rate as a bit of an issue. If 1/20th of the signals are ghost signals identifying that something dangerous has passed through an area, the system will essentially be “crying wolf” too frequently to be trusted. However, this technology is still in the early stages and likely will improve in time, and the video monitoring AI is a great complement to follow up and reassess the potential threat. At a market cap over $300 million, the market has already priced in some big expectations for this company. Patriot One Technologies is on my watch list.

5. Timia Capital – Recently I came across a podcast on esoteric lending on Patrick O’Shaughnessy’s Invest Like the Best. Essentially esoteric lending is the process of using different data metrics to identify clients that were deemed risky by traditional banking risk measurement procedures, but in reality are actually low risk clients. Timia Capital has an interesting niche in lending out with credit terms of 20% interest to high growth technology companies. When you think about a technology company’s assets in today’s world, they essentially don’t have any hard assets. A technology company’s patents, goodwill, and people are what make up the value of these companies’ balance sheets, which is not the kind of asset make up that a traditional bank considers high quality.

Using complex algorithms Timia Capital invests in companies that are growing very quickly with high cash flows, but have little in real assets, and subsequently have nowhere else to turn to for getting the working capital needed to expand. Timia also structures the deal so that they get payments to the loan as a percentage of the revenue that comes in. If the company theoretically defaults they would take ownership and could sell the company off at a decent return.

This company has a great concept; however it’s a bit too small. It needs to grow a larger lending book to have the economies of scale to show decent profitability before I’ll invest. Management mentioned they were planning to meet with Constellation Software that week in Toronto for reasons they did not divulge, which caught a bit of my attention. Timia Capital is on my watch list, and I expect it to take some time until it can become attractive.

***Information above was pieced together using company websites, yahoo finance, presentation materials, and discussion with management. The accuracy of information is to the best of my knowledge.

Future 60 Canadian MicroCaps – Update (2019)

Investing

/// Top 10 Winners +55% Since Inception (July 10, 2018) ///

Let’s check in on the Future 60 Canadian MicroCaps that I wrote about in the Summer of 2018; “Small Companies; Big Dreams“. It was a fun newsletter (and one of the most popular, breaking through the top 5 most-viewed issues of all time).

Some stats, since inception (July 10, 2018):

Future 60 MicroCaps: -8.4%

  • Top 10 Winners: +55.5%
  • “Highest Growth” (1/3): +5.2%
  • Takeovers (3): + 61.6%

S&P/TSX Venture Index: -17%
S&P/TSX Composite Index: -5.5%

Shortly after writing “Small Companies; Big Dreams”, markets around the world started to correct, and so -8.4% since inception (Future 60 MicroCaps) doesn’t concern me. These are very small companies (< $100M market cap), and mostly listed on the TSX Venture, which was down -17% over the same period (July 10th – Feb 12th). What excites me is the growth potential in some of these small companies. In the original issue, I segmented 1/3 of the Future 60 into a “Highest Proven Growth” sub-list, because those 21 out of 60 stocks had all achieved the following hurdles:

  • >= 0% Latest Quarter YoY Revenue Growth (Average = 26%)
  • >= 0% Latest Annual YoY Revenue Growth (Average = 39%)
  • >= 0% Last 5-Year Revenue CAGR (Average = 21%)
  • >= 0% Cash Flow Yield (Average = 8.6%)

Here’s how those “Highest Proven Growth” stocks have done since July 10, 2018:

Company  Ticker Since Inception
Bevo Agro* BVO 163.5%
Evergreen Gaming TNA 73.9%
Xpel Technologies DAP.U 25.6%
Redishred Capital KUT 21.0%
Caldwell Partners International CWL 18.2%
Hamilton Thorne HTL 16.9%
Sunora Foods SNF 16.7%
Cortex Business Solutions* CBX 12.3%
Namsys CTZ 9.7%
Symbility Solutions* SY 8.9%
Intrinsyc Technologies ITC 5.7%
Quarterhill QTRH -8.5%
Avante Logixx XX -12.4%
Titanium Transportation TTR -15.5%
Swiss Water Decaffeinated Coffee SWP -17.3%
Wi2Wi YTY -25.0%
AirIQ IQ -26.3%
Partner Jet PJT -34.3%
Diamond Estates Wine & Spirits DWS -38.2%
Nanotech Security NTS -43.1%
Organic Garage OG -43.5%
Average  +5.2%

The above “Highest Proven Growth” sub-list of Future 60 MicroCaps gained +5.2% (v.s. -17% for the S&P/TSX Venture Composite Index), and contained all of the companies (3) from the Future 60 list that were taken-over(*) since July 10, 2018: Bevo Agro (+163.5%), Cortex Business Solutions (+12.3%), and Symbility Solutions (+8.9%). Naturally, I expect more of these MicroCap stocks to be taken over. Note: I wrote about Bevo Agro (BVO) for the first time in an earlier issue (Aug, 2017), and since then it’s gained +345%.

There were some surprises in the Top 10 Winners (+55.5%), which I recently posted on Patreon, along with the complete spreadsheet of Future 60 MicroCaps that you can check out, and follow as the list evolves. There’s 85+ members now, and more goodies, including new audio interviews with Jason Donville, and Francois Rochon (more coming soon…), My Top 15 Best Ideas for 2019 (+14.6% YTD), and more.

$5 VIP Investing Package (Patreon) – Join Now

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I’ve partnered with Patreon to give DIY Investors & Readers the VIP Experience. For only $10 $5/month, I will provide you with exclusive access to the following:
  • Best 15 Ideas for 2019 (+14.6% YTD – Jan)
  • Seven (7) Model Growth Portfolios
  • In-Depth Investor Interviews (audio) – Jason Donville, Francois Rochon, plus more coming soon
  • Capital Compounders Club (700+ Members)
  • Talkin’Stocks Private Chat Group – Discord
  • One-on-One Conversations
  • $19.95 CAD Free Paperback Book – Capital Compounders
  • $25.00 CAD Free Audiobook – Capital Compounders
  • $9.95 CAD Free eBook (ePub) – Market Masters
  • $72.00 CAD Free Wealthica Premium Sheet (see all investments in one place)
  • Subscription to My Investment Newsletter
  • Events and Get-togethers
  • Other Freebies, and More!

Update (Feb, 2019): I recently uploaded a bunch of new content for on Patreon.com/RobinSpeziale. My Best 15 Ideas YTD Performance (+14.6%), Audio interview with Francois Rochon, Jason Donville’s Top 10 Ideas for 2019, and a 1 Year Free subscription to Wealthica’s Premium Sheet.

How to Join:

Click on ‘Become a Patron‘ now! You’ll immediately get access to everything. Plus, you can easily cancel anytime. If you have any questions, email me at r.speziale@gmail.com.

Jason Donville II (2019)

Investing

/// My Follow-up Interview with Jason Donville (2019) ///

I featured Jason Donville (hedge fund manager), among other top Canadian investors, in my National Bestselling Book; Market Masters (2016). Since then, we have been in touch, but haven’t done an official follow-up interview… until now.

I met Jason sometime in January 2019 in his downtown Toronto office. Here’s what we talked about (90+ minute conversation):

  • Current strategy and stock selection process
  • New ideas
  • Portfolio breakdown – industries, trends, company size
  • Long-term winners
  • Stock market outlook and observations
  • Beating the market over the long run
  • 10-year punchcard
  • Thought process for DIY investors
  • Risk management (including shorts)
  • Future plans
  • Random facts, and more…

I’ve already posted this full 90+ minute audio interview w/ Jason Donville on Patreon, for all members. Are you interested in listening? Join Now (there’s more goodies too..)

YTD 2019 (January) Performance – My Best 15 Ideas

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/// My Best 15 Ideas Up +14.6% in 2019 (YTD January) ///

I just posted an update on Patreon;

My Best 15 Ideas: +14.6%
TSX Composite: +8.26%
S&P 500: +7.97%
DJIA: +7.44%

Do you want to see my Best 15 Ideas?Learn more. There’s lots more goodies, including a new 60 min in-depth audio interview with Francois Rochon (Giverny Capital), Jason Donville’s “Top 10 Picks for 2019” (source: DKAM Presentation in Toronto, Jan 30th, 2019), and Wealthica’s Premium Sheet, where you can see all of your investments in one place.

More coming soon…

(P.S. You can still grab a complimentary copy of my new book, Capital Compoundershere)

2019 and Beyond

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*** Update: My Best 15 Ideas for 2019 are up +14.6% YTD (Jan). Learn more. ***

It’s that time of the year again. I just posted the Best 15 Stock Ideas for 2019 on Patreon. If you’re interested in joining and becoming a member (there’s 45+ now!), learn more here. On Patreon, you’ll get access to the 2019 Best Ideas list, as well as many more goodies…

I’ve even thrown in a “lottery ticket” idea for 2019 and beyond — Bitcoin. I’ll be called crazy for believing in cryptocurrency, but I now think there’s a future for Bitcoin (and maybe some others such as Ethereum…). However, that doesn’t mean Bitcoin will go to the moon. Some readers will remember that in last year’s “2018 Ideas” newsletter, I said that Bitcoin’s parabolic run-up to $20,000 USD, and the entire cryptocurrency market had “gotta be a bubble”.

I was right. The latest cryptocurrency bubble (2017) popped, and Bitcoin lost 85% of its value through 2018. It’s currently in a bear market. Most crypto-coins will never rebound (similar to what happened in the 2000 dot-com bubble). But I have a hunch that some institutions, hedge funds, and family offices are now accumulating Bitcoin during this bear market. It’s impossible to ignore now; they won’t want to miss the next rally, and a direct stake in cryptocurrency can potentially hedge a portfolio in the future.

It’s a possibility. I was reading the latest edition of The Economist, and they featured a UBS/Campden report, which surveyed 311 Family Offices (Feb-May 2018); here’s the current asset breakdown (average portfolio %):

28.0% Equities
18.1% Property
16.2% Bonds
14.0% Direct Investment (Private Equity)
7.6% Funds (Private Equity)
7.0% Cash
5.7% Hedge Funds
3.4% Commodities
(X% Cryptocurrencies?… maybe soon)

There’s a lot to like about Bitcoin: Decentralized. Non-inflationary. No middleman (e.g. financial institution), etc. I wouldn’t be surprised to see Bitcoin accepted one day at McDonald’s, and in the future — everywhere. Apparently, 8% of Americans currently have a cryptocurrency wallet (based on a survey), and that’s expected to grow (to ~100%?). Imagine… a global, trusted cryptocurrency that can be used anywhere, by everyone.

Ok, maybe I’ve had too much rum n’ Eggnog today. But if you are intrigued at all, and want to dabble (cautiously) in cryptocurrency, you can use this link to get $10 USD in Bitcoin on Coinbase. Merry Christmas, and Happy Holidays!

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