Active Portfolio (AP) Alert
Adding Another Stock to the AP + First Access to Cliff Note #134
New Stock Added to the Active portfolio
We are initiating Active Portfolio exposure to a stock already in the Microcap Quality Index (MSMqi), with a 5% weighting.
The MSMqi is a passive, equally diversified index that currently holds 133 stocks. The Active Portfolio selects certain stocks from the index to build a weighted model portfolio of 10 to 20 stocks from the MSMqi.
Most investors ignore apparel for good reason: low margins, cyclical demand, and little differentiation. The only time it’s interesting is when it isn’t really apparel at all.
This company looks like a clothing business but functions more like a technology platform. A profitable legacy segment funds a fast-growing, applied-science division with a regulator-validated flagship technology, early traction with a top-tier retailer, and triple-digit growth. Operating leverage is emerging, with multiple expansion paths across retail, healthcare, and industrial markets.
Despite this, the market still values it like a basic apparel company, missing the platform optionality underneath.
New Cliff Note #134
Cliff Notes are short write-ups written when a stock is added to the MSMqi
A new Cliff Note is ready and will be added to our Microcap Quality Index. It is actually a stock I have owned since around 2019, but not as much as I used to. I sold a bunch during its first mult-year multibagger move from around $3.70 to $24.00.
Over the last 3 years, the stock pulled back 36% from its highs due to changes in the way the products & services it sells are sold and priced, as dictated by its product partner. While this shook up the industry in the short-term, the situation is causing smaller competitors to shut down or be acquired. I just love this. Along with the Cliff Note, we will be publishing the original article published on Geoinvesting in March 2019. This will give you some good color on the company’s strategy, industry trends, leadership position, and the multibagger inflection points.
The company is already a top-tier industry player, and now its competitive position is only going to get stronger.
How much will investors pay for a stock that just doubled its EPS in its last quarter, that might be ready to resume growth, trading at a run-rate P/E of around 5x, and has a history of superior capital allocation (where its already leading competitive position just got stronger)?
(Subscribers to the AP gain first access to Cliff Notes published at the Microcap Investing Cliff Notes Substack.)