A Quick Review of My Portfolio Heading into 2016

Heading into 2016 I thought it would be helpful for me, and hopefully you, to recap the current portfolio as it stands today. I am going to make it a point to do this at the end of each quarter so that we can take a look at the returns of each position every 3 months. Since these positions are all long-term holdings (and volatile microcaps!), looking at overall performance any more frequently than quarterly is not necessary. 

One quick note about my portfolio: Currently I own 7 different companies. Never have I owned this many stocks at one time. I am most comfortable when I own 4-5 companies. However, given what happened to microcaps in the 2nd half of 2015 I wanted to position myself in a few more companies given the compelling nature of some of the prices. As a result, I am also not as highly concentrated in my holdings as I typically like to be. 

Let’s take a look at the current holdings, from my largest position to the smallest: 

Ackroo (AKR.V)
Current % of Portfolio: 20%
Overall Return Through 12/31/2015: 4%
Most Recent Write-up on Ackroo: Click Here

Ackroo has been a trying position but I believe it’s time has come. After clearly buying into the company a bit too early, I took advantage of the volatility in the 2nd half of 2015 to lower my cost basis to around $0.23. At one point in the year I was down 50% on the position, but I did not worry because my investment thesis was intact. In fact, the company performed very nicely in 2015. Now the company is the verge of becoming cash flow positive, profitable, and soon to be in a position to raise cash via warrants being exercised. With the CEO’s astute ability to acquire unprofitable competitors and integrate them into the Ackroo model for immediate profitability, 2016 is setting up to be the most significant year in the company’s history. By the end of 2016 Ackroo should be a much larger company than it is today, and once the market begins to recognize the progress being made at the company I suspect the stock will be trading significantly higher. 

 

Kraken Sonar (PNG.V)
Current % of Portfolio: 20%
Overall Return Through 12/31/2015: 60%
Original Investment Thesis: Click Here

Kraken Sonar has been the most “unusual” yet exciting position I have ever owned. It has been really fascinating learning about their industry (underwater sonar and unmanned underwater vehicles) and I believe the industry as a whole is in the infancy of an explosive growth cycle, just as the aerial drone industry was in a similar place 10 years ago. 

The company is really starting to deliver results. In late 2015 the company announced its first order for the $1.5M KATFISH UUV product and said it expects more orders to follow. A $1.5M order is quite significant for a company as small as Kraken, and several more of these orders literally changes this company. Factor in all the additional sensor-related products and technologies that Kraken has, and the company truly presents a complete package for the world of underwater systems and technologies. We should expect additional R&D grants as well, all of which will continue to strengthen the balance sheet. With gross margins at 55+% and likely a robust sales pipeline ahead, it is very rare to find a company this small that will not need to raise operating capital and thus dilute shareholders.

 

Innovative Food Holdings (IVFH)
Current % of Portfolio: 20%
Overall Return Through 12/31/2015: -4%
Original Investment Thesis: Click Here

If you read my investment thesis on IVFH you will know that this company did not become investable to me until after the announcement of The Fresh Diet spin-off. The company was having to throw good money after bad in attempting to grow The Fresh Diet, which has seriously crippled IVFH. But kudos to management for recognizing this and announcing the spin-off. The core business of IVFH is able to grow off its cash flow and profits and presents a pretty compelling investment opportunity from current levels. Once further details of the spin-off are announced I would quickly expect IVFH to rebound to $1+. 

 

Ivrnet (IVI.V)
Current % of Portfolio: 15%
Overall Return Through 12/31/2015: 0%
Original Investment Thesis: Click Here

With legacy products that provide significant recurring revenues and gross margins to the company, this investment has a significant “margin of safety” as its new products are taken to market. Three of their key products (ICental, Telepay, and AdCentral) have enormous potential to penetrate markets, and should one of them pick up significant traction there is tremendous upside to current share price levels. The company has been heavily engaged in discussions with the British Colombia Government regarding its PCI-Compliant Teleplay product, so I suspect that news on this front could be the catalyst that really starts to attract a more mainstream interest level in the company. 

 

New Jersey Mining (NJMC)
Current % of Portfolio: 10%
Overall Return Through 12/31/2015: 73%
Original Investment Thesis: Click Here

This position is a pure bet on the President of the company, John Swallow. He has taken several similar companies in the past from rags to riches and I am betting he will be able to do it with NJMC as well. He continues to buy shares on the open market and takes little to no salary. 

NJMC has a tremendous working asset in the Golden Chest Mine and has been able to operate profitably even in a terrible commodity environment. Having a working mine and mill greatly sets the company apart from others in the industry attempting to do the same thing. Should the price of gold start moving upwards the company can scale up production to take advantage. Should the price of gold continue falling, the company has several options for waiting things out. With a good margin of safety and with a CEO who continues buying shares on the open market, I am more than willing to hang onto this investment for quite some time as I am confident that John can be very successful…and make shareholders a lot of money. 

 

Xpel Technologies (XPLT)
Current % of Portfolio: 20%
Overall Return Through 12/31/2015: 15%
Original Investment Thesis: Click Here

For a full explanation of why I recently took a position in Xpel, please read my investment thesis. This is a very risky play right now given the 3M lawsuit, but in my opinion the fear is overdone. As Xpel communicates with shareholders on its plan to move past the 3M issue, I suspect we will see a pretty rapid increase in share price. However, should 3M have a stronger legal case than I am anticipating this could be deadly for the company. Tread lightly for now.

 

Beamz Interactive (BZIC)
Current % of Portfolio: 5%
Overall Return Through 12/31/2015: -60%
Original Investment Thesis: Click Here

Given the NDA that I executed with the company I do not feel comfortable making any new comments on the company until the expiration of such NDA. Read my original investment thesis for a solid overview on the company.