maj soueidan oct 2016 microcap conference philly presentation
TRANSCRIPT
Maj SoueidanFounder GeoInvesting
@GeoInvesting@MajGeoInvesting
with
Siegfried EggertEquity Analyst, GeoInvesting
@GeoInvesting@SGEggert
What We Do
• Help micro-cap investors gain a competitive advantage in an increasingly challenging investing environment.
• Educate• Find undiscovered opportunities, long and short• Perform time-intensive research
• Subscriber Network
• Executive Cast
• Institutional Research
Oct 2016 Microcap Conference Philadelphia
What we have done
• Built two affiliated Hedge Funds around our research: Market’s Edge, FG Alpha
• In 10 years we uncovered over 50 multibaggers and
dozens of China Frauds
• Over 10 years featured in Financial Media
• Current team: 2 Partner, 7 Analysts, 2 Trader,
3 Marketing & Administration,
5 on-the-ground researcher in China
Oct 2016 Microcap Conference Philadelphia 3
Playing Field Has Shifted
Microcap Attrition
Institutions
Brokers
Retail investor
Holding period: from years pre-2008 to days now.
Oct 2016 Microcap Conference Philadelphia
Playing Field Has Shifted
Oct 2016 Microcap Conference Philadelphia
Playing Field Has Shifted
Pre-2008 the retail investor accounted for 2/3 of trading volume. Now, program trading accounts for 2/3 of trading volume.
(Sources: https://en.wikipedia.org, http://etfreference.com/)
Oct 2016 Microcap Conference Philadelphia
Playing Field Has Shifted
Holding Period has dramatically decreased
0
10
20
30
40
50
60
70
80
90
100
1960s 1970s 1980s 1990s 2000s Now
Average Holding Period in Months
Oct 2016 Microcap Conference Philadelphia
Find Near/Medium-Term Baggers
• Look for inflection points before others process them to get a first mover advantage
• Find stocks before they:
• enter a growth cycle
• built a competitive moat
• improve risk profile
• get acquired
Oct 2016 Microcap Conference Philadelphia
Advantages
• Less market exposure risk in much more volatile times
• Less business risk that longer term investing can expose you to
Oct 2016 Microcap Conference Philadelphia
Monster Beverage Corp
Oct 2016 Microcap Conference Philadelphia
Mega-Baggers I Sold Too Early
• MNST- Locked in 100% in few months in 2004
– Current Return- 16,800%
– Inflection Catalyst- New Product
• CHTR- Locked in 77% in two years in 2012
– Current Return- 709%
• PATK- Locked in 61% in 6 Months in 2012
– Current Return- 1100%
Oct 2016 Microcap Conference Philadelphia
Multi-Bagger Round Trip Busts
• WTT - Locked in Multi-bagger returns in 1990s in few months – Down 87% since then
• TAC - Locked in Multi-bagger in 1990s– Out of business
• ALGI -Locked in Multi-Bagger in few Months in 1997/98 when stock went from $13.00 to over $100.– Basically out of business
• PFHO - Locked in 1800% on half my position by time shares hit $73.00. Sold rest by time was back to $11.
Oct 2016 Microcap Conference Philadelphia
NYSE Study
• 4,229 companies in total
• 31 at leastdoubled in the last 6 months
• 82 companies (2%) at leastdoubled duringlast year
Double, 59
Triple, 15
Quadruple, 4
Six-bagger, 3
ten-bagger, 1
NYSE’s 12-months Multibaggers
Oct 2016 Microcap Conference Philadelphia
OTC Study
• 22,282 OTC companies, 11,263 with a market cap over $2m
• Of the 11,263 companies, 222 (2%) at leastdoubled over the last 12 months
Double, 98
Triple, 39
Quadruple, 50
Six-bagger, 19
ten-bagger, 16
OTC 12-months Multibaggers
Oct 2016 Microcap Conference Philadelphia
OTC Return Study
• North American Companies that 5 folded in 3 years (if picked at low): 945
• North American Companies that 11 folded in 5 years (if picked at low): 582
• North American Companies that 101 folded in 10 years (if picked at low): 129
Oct 2016 Microcap Conference Philadelphia
Challenges of Inflection Point Investing
• Time and work load are intense
• You need a good understanding of the business to understand impacts – follow many businesses for a long time
• Strong Selling Strategy
• Strong understanding of intrinsic value
• Inflection point might not be recognized by the market for an extendedperiod of time
Oct 2016 Microcap Conference Philadelphia
How we implement it
• Don’t get obsessed about one company
• Turn many rocks and keep following companies
• Average up as conviction grows and prepare for a rollercoaster ride
• Strong sell discipline and definition of intrinsic value
• Define time horizon for investment thesis, precommit
Oct 2016 Microcap Conference Philadelphia
How we implement it
• Catalysts are reinforced through research publication – research activism
• Make post mortem before initiating investment
• Do the Due Diligence: Interview management, suppliers, employees, customers, competitors, industry experts, etc.
• Be patient and be prepared for opportunities
Oct 2016 Microcap Conference Philadelphia
Thank you!
www.geoinvesting.com