June 12, 2024
Jones Soda JSDA Turning Around
Companies listed on the OTC/pink sheets can often be shell corporations and companies just frankly not worth owning. The listing requirements are different than the major exchanges. Jones Soda is a real company with substantial operations. They are headquartered in Seattle, WA but sell nationwide in grocery stores. I have seen their soda products on the shelf in my local grocery store here in North Carolina.
The company has always sold bottled soda drinks. They now have a fountain soda business for restaurants and customers. The more interesting developments lately have been their move into cannabis infused drinks in 2022 and craft alcohol mixers. The cannabis is under the Mary Jones brand in California and Washington. These products include 10mg and 100mg cannabis-infused soda.
There has been a push on the national level to get closer to decriminalizing marijuana just in the past year. A new federal rule announced in May will reclassify marijuana as a less-dangerous, Schedule III drug.
The trend also has been for more states to legalize marijuana and cannabis. The Florida Supreme Court made a ballot initiative earlier this year to legalize recreational marijuana in Florida. It could be on the ballot in November.
Cannabis is legal in some form, for either recreational or medical use, in more than 40 states. The fact Jones Soda is only selling their cannabis drinks in two states and Canada leaves a lot of opportunity for growth.
They say in the annual report they are planning to expand into other states. The cannabis drinks are a highly competitive market but the outlook is sure a lot better than the soda product line which they have had for years. The U.S. is 81% of their sales and Canada 19%. As of March this year they had 27 employees,15 are employed in sales and marketing.
Valuations
The company has a market cap of $40 million as of today June 12th. Trailing twelve month sales are $17 million.
The company is trading for roughly 2.3 times sales. Sales in the most recent quarter were up 29% year over year. This is a fair price for a company like this. Small companies can really grow sales fast. I think this valuation is more undervalued considering the new markets they are now in.
Gross margin improved by a nice 8% from proactive pricing adjustments, supply chain optimization, and increased sales of Mary Jones brand revenue which generally have higher margins. The company hasn't had positive free cash flow or positive earnings for a long time if ever. I see the entry into the cannabis and craft mixer drinks as a big turning point that will bring much more positive developments than prior years.
They also made some great new hires in key roles. A new CEO David Knight is joining at the end of this month! The current CEO is retiring. Mr. Knight worked at Pepsi as a vice president of marketing Gatorade and was vice president of marketing at Quaker Oats.
In March Eric Bittner joined Jones as its new Chief Operating Officer, bringing 20 years of leadership in the beverage industry to lead the company's operations. He most recently led turnarounds at Roar Organic's and Fever Tree, where he served as the SVP of North American Manufacturing. Additionally, he has held supply chain leadership positions at Keurig Dr. Pepper, Niagara Bottling, and PepsiCo.
Mary Money was named Director of New Product Development and Commercialization at Jones. Money is a highly experienced R&D scientist, with over 30 years of experience in Food and Beverage. She has worked for PepsiCo and ConAgra Foods. These are some amazing hires for a company this size and they look very lucky to have grabbed these from Pepsico together.
Final Thoughts
Usually when I look at companies this small they are at a deep value to assets on the balance sheet. Jones, however is not a deep value but the balance sheet sports a 2.36 current ratio which is an adequate ratio. Current ratio of 2 or higher shows a high likelihood of a company in general being able to pay it's short-term bills. The Company believes its cash on hand, projected cash generated from product sales and funds received from the committed revolving credit facility are sufficient to fund the Company's operations for a period of at least 12 months. The company in my opinion is in one of the best positions it's been in as long as I've known about it.
Technically, the price action has gotten momentum and the stock is up significantly this year and after their most recent quarter. It's currently in a bullish triangle pattern. I'd like to see the stock hit $.41 a share to make sure the momentum is still going to continue before buying the next couple months.
I don't currently own any shares. I may buy JSDA shares in the future. Stocks trading for less than $1 a share can be incredibly volatile and the prices can drop significantly without news or any events. If I buy it I will use limit buy orders and not a market order.
November 21, 2023
EV Charging Stocks Short Thesis
Another major factor is Tesla has a position in the EV charging space with their own charging stations and continue to get more major car manufacturers to sign on. This I believe was a big blow to these much smaller EV charging stocks that I mentioned. I don't see how these companies will compete with Tesla chargers if Tesla decides to try and corner the market. The stock prices continue to fall monthly making equity raises less and less helpful. Evgo EVGO was able to raise some capital recently. The cash burn is significant with them and BLNK. I recently added more BLNK puts and now have put options of various strikes as far out as January 21st.
The cracks are now starting to emerge in the industry as Chargepoint's CHPT CEO and CFO both announced their resignation on the same day as revenue forecast was slashed! Here is an article. Apparently, Chargepoint is "the leader" in this space which is sure something telling.
I got this graph from another account on Twitter that highlights cash burn at Chargepoint and EVgo. The recent overall stock market rally has caused minor rallies in BLNK and EVGO stocks that I see as better prices for long dated puts. There has been a turn in the press and I'm seeing negative press on these chargers. The Wallstreet Journal had an article a week ago on how the stations are not working.
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Disclosure: I am long put options in CHPT BLNK EVGO and will continue to add more.
August 5, 2023
Spok Holdings (SPOK): Healthcare IT Company With a 9% Dividend Yield
Spok (SPOK) provides healthcare communication solutions in the United States, Europe, Canada, Australia, Asia, and the Middle East. They offer subscriptions to one and two-way messaging services, voicemail, and equipment loss or maintenance protection services. They serve over 2,200 health care facilities and 83% of their revenue is re-occurring in nature. The current market cap is $271 million with the stock price at $13.60 a share.
Valuation and Metrics
The trailing twelve month PE ratio is 8. Price to sales ratio is around 2. I find this to be a compelling valuation in the current market. Free cash flow has been positive since 2019, except for 2021 which was driven by unusually large capex.
The company has been profitable since the second quarter of 2022. In 2019 to 2021 net income was negative. I didn't look at any years before 2019.
Return on equity has been trending upward the past few years. The current ROE is 13% for Q2 2023.
Strong Dividend History
From 2018 to 2021 the company payed $.50 in dividends per share. In 2022 the dividend was raised to $1.25 per share.
In the years prior to 2018 the company made a total of $467 million in dividend payments.
The current quarterly payments are $.3125 per share.
With the stock at $13.60 a share the dividend yield is 9% well above the risk free rate.
In addition to shareholder friendly dividends the company also has a history of returning value through share repurchases. In 2018 and 2019 they spent a combined $40 million on sharebuybacks.
Industry Long-term Outlook
The prospects for health IT is strong.
Gobal healthcare information system market size was valued at USD 406.4 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 13.3% from 2023 to 2030. Rise in healthcare expenditure and advancements in its IT infrastructure are some of the primary drivers boosting the market. High demand for remote patient monitoring is also significantly driving its adoption rate.source: https://www.grandviewresearch.com/industry-analysis/healthcare-information-system-market
Other sources share similar growth rates. While the company has not experienced rapidly growing sales the industry growth does provide good defensive stability. The nature of the business doesn't require large debt loads and margins are healthy and stable. This lends to the prospect of meeting future dividend payments.
Technical Analysis
The stock price has been uptrending since the summer of 2022. It formed a base and recently broke out to a new 52 week high on earnings.
It has good short-term technicals with a clean bull flag on the daily chart highlighted in red.
If you like this keep it simple analysis be sure to subscribe to my free Substack where I do analysis on deep value stocks trading below net tangible and net current asset value.
Full disclosure: I have no position at the time of writing. I many take a long position in the future.
July 30, 2023
More Fast Growing Technology Companies
They have been free cash flow positive for the last four years. In 2022 free cash flow came in at a robust $103 million. 2021 had $142 mil in free cash flow, 2020 saw $64 mil.
Yalla is trading at 12 times earnings with forward growth forecasted significantly higher.
The price action is resembling the overall Chinese stock market. It just broke over a resistance level.
The technicals combined with valuation, fundamentals and recent strength in China make this a good long watch.
Nerdy, Inc. (NRDY) an $811 million company in the online education industry that utilizes AI. The companies CEO is the founder. Revenue is forecasted to grow 29%. Earnings are estimated to turn to profitablity next year.
On the balance sheet current ratio is 3. The largest mutual fund holder is Franklin Strategic Series-Franklin Small Cap Growth Fund. Goldman Sachs, Vanguard Group and Blackrock all hold over 2% of the stock each.
April 13, 2023
Quality High Yield Dividend ETF's and Stocks
How To Invest In Dividend Stocks For High Yield
With high inflation the search for yield protecting from inflation becomes more challenging. Everyone knows about bonds but I'd like to dive into some vehicles I believe have a good shot to beat the risk free rate.
Marc Lichtenfeld's book Get Rich with Dividends: A Proven System for Earning Double-Digit Returns really opened my eyes to the possible returns from the right dividend stocks. I had read of famous portfolio manager Peter Lynch's study on an all stock retirement portfolio beating any bond portfolio. I was just naturally inclined to view equities as riskier than bonds though.
I now conceptualize a diversified equity portfolio as equal or superior to bonds. Not that there is never a place for bonds but with smart stock selection I think there is edge in dividend stocks. I am going to touch on some interesting dividend ETF's and a stock with a stable history of dividends. I like to invest for quality and above average yield and steady returns.
The first high yield ETF we will look at also has the highest yield at a 19% dividend yield paid monthly. Cornerstone Strategic Value Fund (CLM) is a $1.6 billion closed end fund started in 1987 with diversified assets. By diversified I mean everything practically. From large-cap tech, healthcare, energy, MLP's, foreign equity, and other ETFs. Ten year total returns have been pretty much on par with the S&P 500 index. It underperformed the S&P by about 1%. CLM's management was smart to be overweight tech going into 2023.
Highland Global Allocation Fund (HGLB) is the next ETF with an 11% dividend yield payed monthly. 10 year returns were 5.3%. It is a discretionary fund designed to have low correlation to the U.S. equity market and they have done well with that objective. It holds an unconventional portfolio of equities and debt. One of it's largest holdings is communications company TerreStar Corp. via their stock and debt. They also have a variety of REIT's, MLP's, energy warrants, utilities, sovereign debt and preferred stock.
High Income Securities Fund (PCF) has a long track record having started in 1987 and sports an 11% dividend yield paid monthly. The share price has had very low volatility since it started and 10 year returns at 5%. It primarily invests in discounted closed end funds. It holds an extrememly diversified portfolio with 57% of assets in funds, 20% in preferred stocks and 16% in business develpment companies. It holds a whopping total of 45 closed end funds from global equity to corporate bonds. It also holds some RETI's and a steel company preferred Steel Partners. It has some minor allocattion in other sectors. Though the long-term returns are nothing overly impressive I like the share price stability over the years and consistent dividend.
Ternium S.A. (TX) is an $8 billion steel company that sells steel in many Latin American countries and the U.S. It has a 7% dividend yield and the stock has returned 13% over the last 10 years. Free cash flow has been stable and has even grown since 2019. Total shares outstanding has been unchanged at 1.9 million over the last 4 years. They have payed dividends since the 1990s and increased the dividend since the late 90s.
I believe these ideas can provide some high grade unconventional diversification to an income portfolio. I also highly recommend the Lichtenfeld for learning how to invest in high yield dividend stocks.
September 4, 2022
Long and Shorts Continue To Work
I recommend Tradersync if you are investing even as it tracks your performance. The other popular one is Tradervue. You can just save your trades from your broker with a couple clicks and upload directly to Tradersync or Tradervue.
On the long side CLAR stock dropped over 40% on no news or catalyst. Management came out with a statement that they intend to buy back stock. I see some rotation into fertilizer plays like LXU CF BIOX now. I like the fundamentals on NU going forward. Looks like they will grow earnings very well.
August 12, 2021
TLT Short Setup
January 7, 2020
Net Tangible Asset Play AQMS
October 5, 2019
Coffee Holding Company (JVA) Deep Value Play
November 10, 2016
This Is Sector Rotation
The call I made here on the blog to buy biotech and financials was pretty epic the other day. Biotech is outperforming big-time. The other macro thing going on here is long term US treasuries are continuing to crash. Ticker TBT is the way to go as I have been talking about here for some time.
After surveying some scans and putting things together I have a great watchlist. I really like this small-cap Scorpio Bulkers SALT. It's a shipper. Breakout on trend on high unusual volume, earnings guidance is trending up and is improving. "I have to be able to draw it in crayon" -Peter Lynch
HEAR needs 1.45 to start to clear this long flag.
On the short side I like HADV EA GORO short. From Twitter Marc Lehman @markflowchatter Sell side desk indicating 2 leading $EA titles are being discounted 40% at Target and Walmart = slow pre orders for holiday sales
November 9, 2016
Net Current Asset Stock STLY
Net current assets are 19.2 mil. Market cap is 16 mil. I read the last quarterly and its just not being managed well. They have some apparently short-term supply chain issues. It's a decent net-net especially if they can turn it around any. Things are going poorly at the moment. They have cashed out life insurance policies to raise cash. This is as much a turnaround play as a value play. That's something to keep in mind.
September 29, 2016
PSG Ripe for a Short
Shares of Performance Sports Group (PSG) were surging 29.44% to $2.33 on heavy trading volume late Friday morning as the sports equipment maker nears a deal to receive a 60-day extension to meet its loan covenants, sources told the New York Post. If the Exeter, NH-based company fails to reach such a deal, it will reportedly default on August 29 and consequently become vulnerable to creditor action. Certain creditors hope to swap their debt for equity and assume control of the business, the Post reports.
A quick peek reveals it doesn't seem to be going well financially for the company. I ask myself is a move from $1.80 to $4 logical given what I see here. I think this run-up is overdone. Technically, it has printed a couple doji candles back to back and the last two trading days have been red. It looks ready to roll over if $3.88 fails to hold. I have a stop order to short sell PSG at $3.87.
September 2, 2016
Short Setup On NTP
Initially, I only noticed the chart but digging deeper into the company I discovered this is a Chinese company. There was some news before the move up about a share buyback. I couldn't find any other substantive news on the stock around the beginning of the run.
Full Disclosure: I have a short position in NTP
May 9, 2016
Pet Stocks Make the Portfolio Purrr, More BUFF FRPT
In 2011, households spent more on their pets annually than they spent on alcohol ($456), residential landline phone bills ($381), or men and boys clothing ($404).
Despite the recession, families continued to spend consistently on their pets between 2007 and 2011. Spending on pets stayed close to 1 percent of total expenditures per household, despite the recession that occurred during this time.
Spending on pet food stayed constant or increased during the recession, even while spending at restaurants fell. Married couples without children living at home spent the most on their pets out of any household configuration in 2011.
Blue Buffalo Pet Products (BUFF) is another good one in this business. Revenue growth is great and there is $129 million in free cash flow. The valuation is fair considering their growth. It ain't cheap but its growth at a reasonable price. The PEG ratio is about 1.6 and earnings forecasts have consistently been getting bumped higher. They report earnings tomorrow on the 10th. This is one to keep an eye on.
As more of a distressed play we have FreshPet (FRPT). This one has been beaten down for awhile. However, the analyst consensus is they will be swinging into profitability next year. I've seen the brand in Walmart so they have a fair chance at success.
I really hope the stock market has a semi-crash this year so I can buy a basket of all these pet stocks and any profitable pet or veterinary related company.
February 16, 2016
Jones Soda JSDA
This is a $21 million company. Looking at the balance sheet everything is fine. No long-term debt and a 1.5 current ratio. Hardly your typical penny stock. Something must be wrong. Yes, revenues have been flat to down the past couple years. Gross margins are stable now though. I think this is one of those companies where expectations are so bleak that anything positive boosts the stock. I see that likely hood a lot more than I see the revenue and earnings getting worse. With the balance sheet the way it is they have plenty of time to get it together. Technically, the stock has bottomed. It looks like a high bull flag going on here. If it breaks over $.56 again it's off to the races.
February 3, 2016
A Good Resource
Their newest article is on Monster Beverage (MNST). No big smoking gun here. Just simple overvaluation. The stock looks a little expensive. The entire case is in this article here on Monster Beverage (MNST).
December 2, 2015
MSN and JVA Revisited
They squeaked out a small profit last quarter though revenue doesn't look good. Who knows what is to come. I am going to put a limit order to buy some shares around 1.11 or lower. If the price drops below .90 the thesis doesn't work anymore and I'll take the loss.
Coffee Holding JVA is very close to being a net current asset stock. It's been a net tangible asset value stock for awhile. The price has just been in free fall this year. It appears technically it could be bottoming. I hope it keeps dropping though. I see this as the best net current asset value if we get there. It almost got there in early October this year in the 3.80s. That was the bottom though and it got picked up on strong buy volume. This one really just needs an activist investor I think. Something like that. I don't know a whole lot about this company but wholesale coffee can be consistently profitable.
September 10, 2015
Video Blog #2
This is my second video blog ever. The first one I posted on my other blog . I was looking for a good desktop recording software and ran across this one called HyperCam. I'm still working out some bugs with the audio to video sync. I forgot to mention the rounding top that Under Armor has. In the video I discuss my UA short and look at crude oil and natural gas. Which way will crude go from here? Watch and find out.
August 6, 2015
Lands End (LE) Fashion at Clearance Prices
The first thing I noticed about Lands End currently is the price to earnings multiple is pretty low. The PE is 15. The very next thing I did is look at the yearly cash flow statement. There was $211 million in cash flow from operating activities. There was $16 million in capital expenditures. I take 211 minus 16 and we get $195 million in free cash flow. Free cash flow is the money the company has left over after it pays bills. They can either re-invest it in the business or return money to shareholders. It is always good to see robust free cash flow numbers. I'm about to run one more calculation and we are about to discover just how cheap Lands End really is.
The market cap of the company currently is $762 million. That number divided by the $195 in free cash flow give us a price to free cash flow multiple of 3.9. So the price to free cash flow of Lands End is about 4. Wow! Just wow. That is a super low multiple for a company like this. A lot of investors will actually put a lot more weight on cash flow figures. Some people run extensive spreadsheets that do discount free cash flow projections. With these kind of low valuations I wouldn't be surprised if a Lands End file isn't being emailed around the office of some private equity or one of Lands Ends competitors. I'm not saying there is or will be I just could imagine it.
So I saw this valuation and kept looking around the financials expecting to see a company on the brink of destruction. Earnings are down recently and earnings guidance is down from $2.00 to $1.46 per share. Pretty bad but how bad? I looked at the income statement again. I looked at sales over the past couple years. The past couple of years had flat sales growth. Sales were almost exactly the same as last year. Net income is flat too. This isn't great but they are holding in there. It's almost a billion dollar company too. It's harder to grow sales fast at giant companies.
I read about their customer base. "We believe our customer base consists primarily of affluent, college-educated, professional and style-conscious women and men. In fiscal 2014 our customers had average household income of $105,000 and approximately 42% of our customers were within the 35-54 age group. "
Looking at more valuations and ratios we have a price to sales ratio of .48. Obsurd. We have return on equity of 17%. A return on equity over 10% is very good. Pushing 20% we have a one of a kind golden business. If they can do 17% ROE in a mediocre year they can do 19-20%. A solid return on equity is meaningless, however, if low debt levels are not maintained. You will see high ROE numbers in a lot of industries like auto's and manufacturing but they blow up huge debt bubbles. Lands End's liabilities are stable. Long-term debt is actually down some even this quarter. Long-term debt is down $4 million since Aug 2014. They do carry a lot of debt with debt to equity around 1 but this debt is manageable. Lands End also has $181 million in cash on the balance sheet.
Trying to do a relative valuation is a little pointless. Some companies in this industry do well and have high valuations. Some do poorly and have low valuations. The industry is so competitive I'm not sure looking at other companies helps. I looked at a few though. Companies doing well like Under Armour (UA) has a PE ratio of 90! It has a price to sales ratio of 6. I think Columbia Sportswear (COLM) is pretty apples to apples with Lands End. Columbia has a price to sales ratio of 2 and PE ratio of 30.
The bottom line is will these bad results Lands End has been experiencing lately with sales continue? I don't think the valuation makes since. If sales improve just marginally the valuation could be 20,25 times earnings easily. This is the kind of company that can fetch a 20 PE in a bull market easily. So the way I look at it is over the next few years if things are going well for the company earnings could be $2.00 a share. The stock could be $40 to $50 a share and the compounded yearly return from the current stock price of $23 to $40 or $50 is worth it. There is a brand "moat" in this one and I see them defending the castle through this battle.
August 4, 2015
Net Net SORL Is Cheap
The stock is cheaper relative to NCAV than in 2013 with the market cap back at $50 million, NCAV at $141 million and the stock at 2.72. It is priced at 36% of net current asset value. I do believe this would even meet Benjamin Graham's margin of safety requirement! Sales have grown steadily every year since atleast as far back as 2012. Yet the current price to sales multiple is .23. Below 1 is low for about any decent company. The company is profitable yet the PE ratio is 3. On the balance sheet the current ratio is 3.6. Healthy. A cool $18 million in free cash flow in 2014.
I'm very bullish on China over the long-term and I would expect this correction currently going on in the overall China market to end sooner than later. The current PE multiple on the stocks in FXI is around 10-11. If you can get major Chinese companies for single digit PE's that is cheap. Not to mention some dividend yield too. SORL has a lot of support until 2.50. I think the fundamentals make it a compelling buy here.