Quarterly Portfolio Recap

I enjoy taking a look at my portfolio at the end of each calendar quarter to put the progress of each of my portfolio companies into perspective. With Q1 2016 now behind us, it is a good time to pause and reflect, and to ensure that each company I own has not deviated away from my original investment thesis. 

Let's review my portfolio companies from my largest to smallest positions:

Ackroo (AKR.V): Ackroo continues to be a company that my conviction level is as high as it was when I first starting buying the stock in July, 2015. I have no problem continuing to accumulate a position in which the investment thesis hasn't changed yet the stock continues to decline. That has absolutely been the case with Ackroo.  It has certainly tested my patience at times, but once I re-focus and put in perspective the fact that the company has never been stronger operationally, I get pretty excited about what is ahead. As I have mentioned before, if Ackroo can get the current open $2M Private Placement fully subscribed...watch out. Cash is the only thing, in my opinion, holding this company back. Once the company is capitalized it can further execute on its gameplan and get the company to a cash flow positive/profitable situation (they may already be!), thus not having to rely on raising significant capital for growth in the future. An extremely high customer retention rate, massive gross margins, the ability to acquire and absorb into the Ackroo platform and cut significant costs (up to 75% of costs of the acquisition company!)...all a recipe for long-term success. Coupled with 20%+ organic growth alone, the company is well on its way and the market will take notice, in my opinion, once this PP is complete. 

Ivrnet (IVI.V): Patience is the name of the game with Ivrnet. This company is completely flying under the radar, yet continuing to execute, and on the verge of massive growth in my opinion. The company has been announcing new customers for its Ivrnet Central product (a major source for the company's recurring revenues) but the incredible potential lies with the company's AdCentral (Nextext) and Telepay/Safepay products. I suspect there have been great developments on the sales side with these products, but my understanding is that announcing new business wins in which one party is the government is very time-sensitive and can only be published when the government entity gives the "ok". Remember, with the AdCentral product, the initial targets are governmental entities but the technology can be scaled quite simply. The technology is amazing. As I discussed in my original report on Ivrnet, this company has an amazing margin of safety with the recurring revenues generated from its legacy products. I have used this margin of safety to my advantage, continuing to accumulate shares as the company continues to aggressively sell its new product offerings. Once the market is provided some news flow I think the company will begin to receive the recognition it deserves. 

RYU Apparel (RYU.V): I recently published my investment review/thesis for RYU, so there is nothing really new for me to add at this time. Since the thesis was published the company closed on a Private Placement that saw Marcello Leone add to his stake in the company with an additional $400k invested. The revenue numbers that the company has released relating to its limited number of current products in its single flagship store, and online, are incredibly promising. The question that remains, which is the biggest risk pointed out in my investment thesis, is how will the company continue to finance its store growth. I suspect we will learn more on this soon, but in the meantime I will be watching the numbers closely as the company is now moving past the "beta testing" phase and will begin to roll-out many more SKUs, both in-store and online. Again, my fascination with this company isn't only in the revenue growth from the single store. It is about the DNA/Culture that the CEO has built within the company that is now permeating among the Vancouver community. Building the company through the community, after the foundation was put into place, can be a very powerful thing. This is exactly how Lululemon embarked on significant growth after the company opened its first store in 1998, just down the street from the RYU flagship store. 

Kraken Sonar (PNG.V): Karl Kenny and the Management Team at Kraken are building what could be one of the most fascinating companies I have ever had the pleasure of investing in. Part of the allure is the fascination with the industry as a whole... but this is more than a "story". With the fairly recent announcement of the partnership with Elbit in Israel, Kraken has now gotten the "endorsement" of a $3B Israeli defense supplier. In anticipation of this partnership, Kraken moved its manufacturing operations into a larger space so that it could increase its capacity for the manufacturing and assembly of its KATFISH product. There is no doubt that continued developments throughout 2016 will be quite exciting as the company really is in the midst of its "inflection point"...and turning a lot of heads in the process.

Memex (OEE.V): I was fortunate enough to com across this company and begin building my position around $.10/share back in February. Since that time it has been nothing but great news flow and recognition for the company. The key drivers for future growth aren't only new clients, but the full roll-out of the company's MERLIN product to existing clients. It's an easy product to sell as it consistently achieves payback for manufacturers in less than four months with an Internal Rate of Return (IRR) greater than 300% based on just a 10% increase in Overall Equipment Effectiveness (OEE). 

Beamz Interactive (BZIC): The NDA that I entered into with Beamz just recently expired so you may see me talking about this one a bit more. My investment in this company is an investment in Charlie Mollo, a CEO who previously led iGo from literally nothing to very significant revenues, and an eventual buy-out. I can say that the business plan that Mollo has been looking to execute has not quite played out as planned, but he is looking to do other things to monetize on the strong IP that the company currently owns in order to capitalize the business and get things moving in the right direction. 

A few odds and ends:

  • I sold almost all of my Jernigan Capital (JCAP), although I have kept some shares to keep me interested. I began selling recently to raise cash to invest into other opportunities, and fortunately I was able to sell before this notice came out. This is a big deal and quite scary, but hopefully nothing that the company cannot work through. I look forward to continuing to follow the company's progress and to potentially build a large position again in the future. 
  • I recently reached out to the CEO of a company that I have been doing some deep due diligence in. The company shall remain unnamed, but the initial email response I received from the CEO was unlike anything I have ever received from a CEO. After the initial reaction of "what the f%#&", the response kind of grew on me. I like it :) 

"I should get to your questions  in 3-4 years, come on we trade for pennies...get real, my small team works our ass off building a company at the grassroots level. We have never been so busy taking orders and had so many irons in the fire on the world stage. Now you know."

Remember, don't let another person's lack of conviction in a company influence you to do something irrational with a current position. Stay focused, learn all you can about what you own, and take advantage of investor irrationality to build positions in great companies. 

Comments? Thoughts? What are your highest conviction microcap positions?