Welcome to this week's edition of our "Week in Review"...and what a week it was! The global markets are a mess but the microcap world is doing its thing. With our portfolio up significantly this week (thanks Kelso!), it is a good reminder that as microcap investors it's always best if we tune out all financial media outlets and just focus on our holdings.
The portfolio can always be viewed by clicking on "Portfolio Positions and Performance" on the right hand side of the page. You will notice that my portfolio is now being tracked separately than Matthew's for ease of discussion and clarity. And thanks for one of our members who suggested we add the weight of each position in our portfolio, so now you will see that as well. Additionally, you can always view our watch list by clicking on "Watch List" on the right hand side of the page.
Both pages can be accessed using the same password that you use to access this member's blog.
Note: If you know of anyone who you feel would benefit from UnusualStocks, please email me and let me know. We are aggressively pursuing other serious investors to be a part of our member community, and any help from our current members would be most appreciated as it will enhance the experience for all!
Portfolio comments from this past week:
- Brekford (BFDI)
- As first disclosed in Brekford's Q2 Earnings report, but officially confirmed this week in a press release, Brekford now has received proper certification in the state of Maryland to be able to bid on up to $57 million in business within the state. Only a few other companies have such certification. This is very positive news!! And this is only one state!!
- One thing to note...this past week there was a court ruling by the Supreme Court of Missouri that is a setback to the use of red-light cameras in the state. Read more here. Other states have upheld the use of the cameras, so there is some conflict among the states as to the appropriate processes and interpretation of the "burden of proof" surrounding tickets issues by the cameras.
- This uncertainty is why the company decided to quickly expand internationally. I am most excited about the continued expansion of Brekford's red light automation installations in Mexico. This is going to kick in significant recurring revs to the company, with 60+ plus in gross margins.
- Kelso Technologies (KIQ, KLS.TO)
- On Tuesday I initiated a position in Kelso based on discussions with Matthew and our optimism about the stock hitting a bottom with several catalysts upcoming. I knew buying at the $1.45 level would prove to be an awesome long-term entry, but little did I know that I would be up close to 60% within two trading sessions! The timing of the addition couldn't have been better as the next morning Kelso put out a press release to announce the AAR approval of the field trials for the bottom outlet valve (BOV). This is a good news because the next step is commercialization. There's no doubt they will pass the trials with flying colors given that their products are superiorly engineered and the fact that they haven't failed a field service trial to date. The only problem is that the trial period is normally two years. This time, Kelso has a number of ways to expedite the process to simply a few months which is why analyst revenue estimates for 2016 are at very impressive $80M.
- Microbix (MBX.TO)
- Microbix saw incredibly high volume this week. Our intelligence leads us to believe that a Canadian investor who has been very bullish on the company added significantly around $0.40 this past week; however, there was selling resistance also as the stock did not spike as significantly as it should have given the buying volume. The churn is a great thing though as it typically clears out overhead resistance and creates less resistance for upward movement going forward.
Chart Below: Look at this one year chart of Microbix...not very pretty. But look at the volume that came into the stock over the past few days. It was only surpassed 3 or 4 times during the past year. Microbix is incredibly undervalued at these levels and I continue to believe the next few weeks we will see some significant upside movement.
- BioSyent (RX.V)
- On Tuesday, BioSyent announced the acquisition of the exclusive rights for Cysview in Canada. The product aids in the diagnosis and management of bladder cancer, and is a product that fits well with the others in the current pipeline (i.e. already fits with hospital business or existing consumer/doctors they sell products to). More importantly, the product is already Health Canada approved, meaning it can start being commercialized immediately. This event marks a turning point for the company -- it shows us management is willing to in-license already Health Canada approved products (and even revenue generating ones) in the future with terms favorable for the company. The peak sales potential for Cysview is $3.5-6M.
The Week Ahead:
- Xpel Technologies (XPEL, DAP-U.V)
- We expect Xpel Technologies to release their Q2 results sometime this week since they came out on the 27th last year. Management is targeting 50% YoY growth as per the Q1 conference call, and given that Q2 is seasonally their strongest quarter and management has consistently executed over the last few years, we think it's very likely they will generate in excess of $12M in revenue. Matthew is especially confident as he has ~60% of his portfolio allocated in the company.
- Should the company do $12M+ in sales, we are fairly certain there could be a significant movement in the share price (despite the recent global market declines, investors will have a difficult time ignoring a jump in sales from $8.1M to $12M+ sequentially and $8.4M to $12M+ YoY). History tells us that an immediate 100% gain is not out of the question -- the stock doubled last year after Q2. Matthew expects a more modest 30% gain.
Have a great week everyone! We will, as always, be putting out some relevant content/updates as events unfold.