Why I am Buying Innovative Food Holdings (IVFH)

While Innovative Food Holdings (IVFH) has been a long time favorite of many well-esteemed microcap investors, I personally never saw the value. The company has a division called "The Fresh Diet" that it acquired in 2014 that consistently consumes the company's cash flow generated from its "Direct to Chef" division, meaning the company was throwing good money after bad. I never saw the long-term investable thesis in such a scenario. 

But, the game has now changed. IVFH is spinning off "The Fresh Diet" so its core business won't be burdened by "The Fresh Diet's" woes. Take a look at the chart's below and you can see how "The Fresh Diet" has almost crippled IVFH.

Now, let's take a look at Innovative's key numbers from its core business called "Direct to Chef". 

Simply stated, IVFH's core business of "Direct to Chef" is a self-funding machine, growing revenues quarter over quarter, year over year, with significant CAGR and ROE. Without being burdened by "The Fresh Diet" the story, and numbers, are pretty darn good. 

Post spin-off, Innovative will retain a 10-15% stake in "The Fresh Diet", so if they do turn that business around than IVFH will stand to benefit some...as well current IVFH shareholders who will be provided shares in "The Fresh Diet" when the spin-off occurs. 

Additionally, IVFH also recently announced a $1 million share repurchase authorization as they feel their core business is significantly undervalued. 

I personally believe shares will remain somewhat volatile as we move into tax selling season, but I do think shares will fairly quickly rise back to the $1.20 level or so as the market realizes the value in IVFH without the burden of "The Fresh Diet". For that reason, I am very comfortable investing at the current level around $0.70.