CASE STUDY: Macro Enterprises (MCESF)

(Image: Zen Buddha Silence, by Marilyn Barbone)

November 28, 2021

I first wrote up Macro Enterprises (MCESF) in January 2020, when the stock price was $2.79.  At the time, here were the five metrics of cheapness:

    • EV/EBITDA = 1.37
    • P/E = 3.72
    • P/B = 1.08
    • P/CF = 3.51
    • P/S = 0.26

Today the stock price is at $2.15.  Normalized earnings are $20 million.  And here are the five metrics of cheapness:

    • EV/EBITDA = 1.41
    • P/E = 3.35
    • P/B = 0.75
    • P/CF = 2.16
    • P/S = 0.30

The current figures are very similar to the previous figures, except that P/B and P/CF are both much lower.  Therefore, overall, Macro Enterprises is cheaper now than it was before.  Much of this is because the stock price has dropped from $2.79 to $2.15.

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

Macro Enterprises has a Piotroski F-Score of 7.  (The best score possible is 9, while the worst score is 0.)  This is a very good score.

Then we rank the company based on low debt and high insider ownership.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Macro Enterprises has TL/TA of 38%, which is fairly low.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  Macro’s founder and CEO, Frank Miles, owns approximately 30%+ of the shares outstanding.  This is excellent.

paid homework sites how does viagra work in men https://medpsychmd.com/nurse/order-viagra-pfizer-online/63/ generico do cialis preo 60 mg accutane results cheap university university essay advice bca 1st sem english question paper go to link buy college essays is bystolic safe to take research buy informative speeches on nutrition fevralt principio attivo viagra see url writing a good college essay kг¶pa billigt viagra ayn rand essay contest anthem winners top personal statement ghostwriter website ca enter site enter site 1000 word essay on importance of accountability in public administration levitra identify pill https://academicminute.org/paraphrasing/research-thesis-topics-nursing/3/ see help with biology homework readily available alternatives to viagra how to write a social commentary essay accountant certified essay management topic propecia deutschland "democrats first order of business: making it easier to vote and harder to by electrons essay continuum hypothesis explained source Intrinsic Value

Macro Enterprises has been in operation for over 25 years.  Over that time, it has earned a reputation for safety and reliability while becoming one of the largest pipeline construction companies in western Canada.

Intrinsic value scenarios:

    • Low case: Macro is probably not worth less than half of book value, which is $2.83 per share.  That’s 34% lower than today’s share price of $2.15.
    • Mid case: The company is probably worth at least EV/EBITDA of 5.0.  That translates into a share price of $6.57, which is over 200% higher than today’s $2.15.
    • High case: Macro may easily be worth at least EV/EBITDA of 8.0.  That translates into a share price of $10.29, which is over 375% higher than today’s $2.15.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Delta Apparel (DLA)

(Image: Zen Buddha Silence, by Marilyn Barbone)

November 21, 2021

From the company’s website:

“Delta Apparel, Inc., along with its operating subsidiaries, DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, Soffe®, and Delta… The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites.  The Company’s products are also made available direct-to-consumer on its websites… as well as through its branded retail stores.”

IMPORTANT:  DTG2Go is most important part of the company.  It is a “market leader in the direct-to-garment digital print and fulfillment industry, bringing technology and innovation to the supply chain of its customers.”  DTG2Go uses proprietary software to deliver on-demand, digitally printed apparel direct to consumers on behalf of the customer.

We bought DLA in late 2020 at an average cost of $15.26.  Today the stock is at $30.01, up about 96%.  But the stock is still quite undervalued.

Here are the original multiples for Delta Apparel from September 2020:

    • EV/EBITDA = 4.41
    • P/E = 7.38
    • P/B = 0.76
    • P/CF = 1.85
    • P/S = 0.28

Since then, the company has grown its earnings and cash flows.  Here are the normalized figures:  EBITDA is $75.3 million, net income is $38.2 million, cash flow is $120.3 million, and revenue is $597.9 million.

The market cap is $193.3 million, while the enterprise value (EV) is $320.5 million.

Here are the updated multiples:

    • EV/EBITDA = 4.26
    • P/E = 5.06
    • P/B = 1.23
    • P/CF = 1.61
    • P/S = 0.32

Delta Apparel has a Piotroski F-Score of 8, which is excellent.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  DLA has TL/TA of 63.4%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At DLA, insider ownership is approximately 16%.  This is good.

What is the intrinsic value?

See this very good writeup on Value Investors Club: https://valueinvestorsclub.com/idea/DELTA_APPAREL_INC/9696182477

(You may have to register at www.valueinvestorsclub.com, but it’s free.)

From the writeup:

DTG2Go’s proprietary software and logistics system enable it to seamlessly integrate with any of its customer’s websitesand for digitally printed apparel to be manufactured upon purchase, and shipped within 24-48 hours directly to the customer without them knowing DLA had anything todo with the process.  This model is simply a better mouse-trap for virtually any retailer, enabling them to lower costs, eliminate holding inventory, increase selection, and quicken delivery times.  Imagine how much more money a retailer would make if it could multiply the selection of printed apparel it offers on its website at no additional cost, and with no inventory?  Also imagine how much money a retailer could save by almost never having to write-down this type of inventory again?  DTG2Go’s platform allows them to do both – no-brainerThis platform can also give e-retailors future capabilities such as allowing consumers to customize their own clothing, which many say is a coming trend.  DTG2Go’s market opportunity is huge, and has barely entered its first inning of growth.  Digital impressions  only make up about 2% of total graphic impressions on clothing.  DLA believes the digital impression market could grow over 400% in the coming years, to 10% of graphic impressions on clothing.  Other commentators expect even greater penetration of digital printing.  Given the tremendous advantages of digital printing for many applications versus traditional screen printing, it seems highly likely that rapid growth of 30%+ will continue into the foreseeable future.  Many industry participants expect digital printing to eventually comprise 50%+ of the graphic impressions market due to its superior cost and selection characteristics. It is also important to note that digital printing is generally environmentally superior versus screen printing, because of the cleaner water based ink used in the digital process.
Intrinsic value scenarios:
    • Low case: If the company trades at a P/E of 10 based on trailing earnings, then the stock would be $29, which is 3% lower than today’s $30.01.
    • Mid case:  The company should trade for a P/E of at least 15 based on normalized earnings.  That would put the stock at $90 per share, which is 200% higher than today’s $30.01.
    • High case:  Normalized earnings could easily be closer to $52.3 million.  Given the huge growth opportunities for DTG2Go, the company should trade at a P/E at least 20.  That would be the stock at $150 per share, which is 400% higher than today’s $30.01.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Obsidian Energy (OBELF)

(Image: Zen Buddha Silence, by Marilyn Barbone)

November 14, 2021

Many oil and gas companies appear remarkably cheap if oil prices stay at $70 to $80.  Not only is it likely that oil prices will stay at $70 to $80, but it’s quite possible that oil prices will approach $90 or $100 (or even more).

Even at $60 oil, Obsidian Energy is undervalued.  But if oil prices are much higher than that, then Obsidian Energy—like some other oil companies—will likely be a wonderful investment.

 

OIL PRICES

Over the past 6 to 7 years, oil producers and oil-producing countries have significantly cut their capital spending due to lower oil prices.  As a result, many oil producers do not have much capacity to produce more oil.  Similarly, even OPEC+ appears to have much less spare capacity than it did in the past.

Check out this piece by Josh Young of Bison Interests, “OPEC+ Spare Capacity is Insufficient Amid Global Energy Crisis.”  Link: https://bisoninterests.com/content/f/opec-spare-capacity-is-insufficient-amid-global-energy-crisis

In recent years, shale oil companies have been able to boost production relatively quickly.  However, under pressure from investors, shale oil companies are now much more focused on generating free cash flow.  So they have yet to invest much in order to increase their production.

Thus, oil supply constrained.

Even more importantly, oil demand is very strong.

This is because massive monetary and fiscal stimuli have caused households to be flush with cash.  This has greatly increased demand for most goods and commodities.

See this recent note from Bridgewater Associates, “It’s Mostly a Demand Shock, Not a Supply Shock, and It’s Everywhere”: https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere

Bridgewater argues that the supply of everything is at all-time highs.  But demand across most areas is much stronger than supply.  Due to the large amount of money the Federal Reserve has been printing, coupled with large fiscal stimulus, a massive amount of cash has been transferred to households.  Consumer spending has created demand that cannot be met by the increased supply.

Bridgewater concludes that demand is outstripping supply by a wide enough margin that high inflation will probably be mostly sustained, especially because extremely easy government policy continues to encourage further demand rather than limiting it.

Finally, even if car manufacturers started making only all-electric vehicles today, oil demand would keep rising for many years, as Daniel Yergin points out in The New Map.

Oil demand is likely to increase for at least 10 to 20 years before a peak is reached.  The peak itself could last for another 10 to 20 years.

I am, of course, in favor of the transition to a post-fossil fuel economy.  But the global economy needs a lot of oil in order to make that transition over the next several decades.

The oil and gas industry will exist in close to its current form 10 or 20 years from now, as Jeremy Grantham has noted.  (As well, most oil companies do not have more than 15-20 years of reserves.)  The fact that some investors are no longer investing in oil and gas companies means that oil and gas stocks now have even higher expected returns.

In sum, oil supply is quite constrained, while oil demand is very strong.  This situation is likely to persist for some time, which means oil prices could easily be $70 to $80, or even higher.  Also, oil stocks historically have done very well in inflationary environments.  Due to massive monetary and fiscal stimuli, the gap between demand and supply is likely to persist in many areas, which means high inflation may last for some time.

 

OBSIDIAN ENERGY

Obsidian Energy (OBELF) appears very cheap because of the recent increases in oil prices.  Here are the multiples:

    • EV/EBITDA = 1.53
    • P/E = 1.04
    • P/NAV = 0.29
    • P/CF = 1.97
    • P/S = 0.98

(We use P/NAV instead of P/B.  The NAV assumes $70 WTI.)

The Piotroski F_Score is 6, which is OK.

The market cap is $289.5 million.  The company has $4 million in cash and $406.5 million in debt.  TL/TA is 48%, which is OK.  The company plans to continuing paying down its debt, which it can easily due if oil prices remain relatively high.

Insider ownership is 7%.  That is worth a bit more than $20 million.  Insiders can make $40 million or much more if oil prices are $70 or higher and if the company continues to execute.

We calculate NAV based on 2P reserves (proved plus probable).

    • Low case: If the oil price averages $50 WTI, then NAV per share is $4.55, which is 21% higher than today’s $3.74.
    • Mid case: If the oil price averages $70 WTI, then NAV per share is $12.71, which is 240% higher than today’s $3.74.
    • High case: If the oil price averages $90 WTI, then NAV per share is $20.87, which is over 455% higher than today’s $3.74.

In March 2019, the company appointed Michael Faust as CEO.  (The previous CEO had done a poor job on costs, on where to invest, and on others areas.)

Faust significantly cut costs and improved efficiency.  Faust also focused capex on the right wells.  Overall, he did a great job.  After making these operational improvements, Faust stepped down.  But he is still on the board of directors and is deeply involved.

The interim CEO is Steve Loukas, who works at a hedge fund with a large stake in Obsidian Energy.  Loukas is doing an excellent job so far.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Genco Shipping (GNK)

(Image: Zen Buddha Silence, by Marilyn Barbone)

November 7, 2021

Here is the performance of the Boole Microcap Fund this year and since inception (06/09/20).

  Boole Microcap Fund Russell Microcap Index S&P 500 Index
2021 net return (thru 11/09/21) 54.3% 31.5% 26.6%
2020 net return from inception (06/09/20) 21.1% 31.7% 16.3%
Compounded annual return (net) 36.7% 31.6% 21.3%
Overall gain (net) 86.9% 73.2% 47.2%

I first wrote up the idea of GNK in June 2020 here: http://boolefund.com/genco-shipping-gnk/

At the time, the stock at $6.94 a share was very cheap based on our five measures of cheapness:

    • EV/EBITDA = 4.60
    • P/E = 6.52
    • P/B = 0.34
    • P/CF = 2.07
    • P/S = 0.70

Now the stock is up to $15.81.  There has been a huge increase in dry bulk shipping rates.

Dry bulk shipping rates are highly volatile.  But the supply of dry bulk ships is at a historic low.  Very few new vessels will come into the market over the next couple of years.  If someone wanted to order a new dry bulk ship, they would have to wait until early 2024 to get it.  There are far fewer shipyards than has been the case historically, and most of those shipyards already have orders, much of which is for container ships rather than dry bulk vessels.

Global GDP is expected to be 4% to 5%, which when coupled with the historically low supply, will probably lead to higher dry bulk shipping rates going forward.

Also, the company has a barbell approach to fleet composition: The minor bulk fleet provides stable cash flows, while the Capesize vessels provide meaningful upside and operating leverage if rates continue to move higher.

The market cap is $662.8 million.  EV is $915.1 million.  Normalized estimates: Revenue $620 million, EBITDA is $320 million, net income is $250 million, and cash flow of $360 million.

Here are the multiples based on normalized estimates:

    • EV/EBITDA = 2.86
    • P/E = 2.65
    • P/B = 0.53
    • P/CF = 1.84
    • P/S = 1.07

(P/B is based on P/NAV.  Vessel values have increased due to the increase in shipping rates.)

Because of the large increase in rates and the expectation that rates will remain volatile but high, GNK looks cheaper now than it was in June 2020.

Insiders own about 7.4% of the shares outstanding, which is worth about $49 million (at today’s stock price of $15.81).  Insiders will obviously do well if they successfully lead the company forward.

Genco Shipping has a Piotroski F_Score of 6, which is OK.

Debt is fairly low at $296.8 million.  TL/TA is 29%, which is good.  Also, the company is targeting total debt of zero.

Intrinsic value scenarios:

    • Low case: GNK is probably worth at least 50% of NAV.  NAV/share is $29.72.  50% of that is $14.36, which is 9% lower than today’s $15.81.
    • Mid case: Dry bulk rates are likely to stay relatively high, due to limited supply.  Also, the company will soon have no debt and plans a substantial dividend.  In this context, GNK is probably worth at least 140% of NAV.  That works out to $41.61, which is over 160% higher than today’s $15.81.
    • High case: If dry bulk rates continue to move higher over the next few years, GNK could be worth a P/E = 10.  That works out to $59.62, which is over 275% higher than today’s $15.81.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Ranger Energy Services (RNGR)

(Image: Zen Buddha Silence, by Marilyn Barbone)

October 31, 2021

I first wrote up the idea of RNGR in January 2020 here: http://boolefund.com/ranger-energy-services-rngr/

At the time, the stock at $6.83 a share was very cheap based on our five measures of cheapness:

    • EV/EBITDA = 2.96
    • P/E = 17.51
    • P/B = 0.53
    • P/CF = 2.20
    • P/S = 0.31

Since then, Ranger has made a series of acquisitions at low multiples.  Here are the estimates for 2022 figures:  EBITDA of $125 million, earnings of $45 million, cash flow of $120 million, and sales of $500 million.

Here are the multiples based on the 2022 estimates:

    • EV/EBITDA = 1.75
    • P/E = 4.45
    • P/B = 0.44
    • P/CF = 1.48
    • P/S = 0.36

The company named Stuart Bodden as the new CEO effective September 1, 2021.  (Bill Austin, Chairman of the Board of Directors, was interim CEO. )  Bodden has 20+ years of experience in various executive roles in the oil and gas industry.  Bodden was a Partner at McKinsey & Company, leading projects in the oilfield services and upstream oil and gas sectors.  Bodden received his Bachelor of Science degree from Brown University and his Master of Business Administration from The University of Texas, Austin.

Insiders own 19% of the shares outstanding, which is worth about $34 million (at today’s stock price of $9.95).  Insiders can make a lot of money if they successfully lead the company forward.

Ranger Energy Services has a Piotroski F_Score of 3.  This is low because the company has recently made a series of acquisitions.  As the company moves through 2022, its F_Score will rise.

Debt is low at $49 million.  TL/TA is 30%, which is good.  Also, the company is targeting debt of zero.

The oil price (WTI) is $83.57.  If oil prices stay around this level, Ranger Energy Services will comfortably hit its targets for 2022.

For a good take on how tight oil supplies are currently, check out this piece by Josh Young of Bison Interests, “OPEC+ Spare Capacity is Insufficient Amid Global Energy Crisis.”  Link: https://bisoninterests.com/content/f/opec-spare-capacity-is-insufficient-amid-global-energy-crisis

More importantly, demand is very strongly increasing, which will continue.  See this recent note from Bridgewater Associates, “It’s Mostly a Demand Shock, Not a Supply Shock, and It’s Everywhere: https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere

Bridgewater argues that the supply of everything is at all-time highs.  But demand across most areas is much stronger than supply.  Demand is being driven by the MP3, which is a combination of monetary and fiscal policy.  Due to the large amount of money the Federal Reserve has been printing, coupled with large fiscal stimulus, a massive amount of cash has been transferred to households.  Consumer spending has created demand that cannot be met by the increased supply.

Bridgewater concludes that demand is outstripping supply by a wide enough margin that high inflation will probably be mostly sustained, especially because extremely easy government policy continues to encourage further demand rather than limiting it.

Finally, even if car manufacturers started making only all-electric vehicles today, oil demand would keep rising for many years, as Daniel Yergin points out in The New Map.

Intrinsic value scenarios:

    • Low case: RNGR is probably worth at least 50% of book value.  That is $11.30, which is over 10% higher than today’s $9.95.
    • Mid case: The P/E = 4.45 relative to 2022 earnings.  But the P/E should be at least 15.  This implies over 335% upside from today’s $9.95, or an intrinsic value of at least $43.50 per share.
    • High case: Oil prices could exceed $100 (WTI).  In that case, RNGR could be worth $70 per share.  That is 600% higher than today’s $9.95.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Karora Resources (KRRGF)

(Image: Zen Buddha Silence, by Marilyn Barbone)

October 24, 2021

Here is the performance of the Boole Microcap Fund this year and since inception (06/09/20).

  Boole Microcap Fund Russell Microcap Index S&P 500 Index
2021 net return (thru 10/27/21) 45.6% 21.9% 23.0%
2020 net return from inception (06/09/20) 21.1% 31.7% 16.3%
Compounded annual return (net) 32.8% 26.7% 19.6%
Overall gain (net) 76.3% 60.5% 43.0%

Although the stock price has moved up from $2.62 to $3.50, our investment in Karora Resources (KRRGF) is still quite undervalued under most scenarios.

I first wrote up the idea of KRRGF in December 2020 here: http://boolefund.com/karora-resources-inc-krrgf/

At the time, the stock at $2.62 a share was cheap based on our five measures of cheapness:

    • EV/EBITDA = 4.50
    • P/E = 13.04
    • P/NAV = 0.29
    • P/CF = 5.95
    • P/S = 2.12

The mid case scenario for intrinsic value was that KRRGF was probably worth $9.08 based on NAV.

How much is KRRGF worth today?

    • EV/EBITDA = 1.74
    • P/E = 4
    • P/NAV = 0.20
    • P/CF = 2.50
    • P/S = 1.23
  • These figures are based on 2024 production of roughly 200k ounces of gold per year.  The gold price is assumed to be $1,750.  (Note that Karora’s operations are in Western Australia, so there is very little political risk.)

Karora Resources is exceptionally well-managed, led by CEO Paul Andre Huet and head of Australian operations Graeme Sloan.  The Karora team—despite numerous external headwinds—has met or exceeded every target it has set since its acquisition of HGO Mill in mid-2019.

Also, management owns 2% of the shares outstanding, which is worth $10 million (at today’s stock price of $3.50).  That $10 million could become $30 or $40 million (or more) if Karora keeps executing.

Karora Resources has a Piotroski F_Score of 7, which is good.

Net debt is low:  Cash is $82.2 million.  Debt is $30.8 million.  TL/TA is 40%, which is good.

Very importantly, Karora’s growth is internally funded by existing cash and cash flow.  Karora is not relying on debt for growth.

Furthermore, the company is increasing its production steadily each year until it reaches 200k gold ounces per year in 2024.

Finally, Karora has massive exploration potential.

Intrinsic value scenarios:

    • Low case: Gold prices could fall.  Also, there could be a market correction or a recession during which the stock could temporarily fall by 50% or more (from today’s $3.50 to $1.75).
    • Mid case: The P/E = 4 relative to 2024 production, assuming the gold price stays around $1,750 per ounce.  But the P/E should be at least 16 for a mid-tier, multi-asset gold producer in a top tier jurisdiction (Western Australia).  This implies 300% upside from today’s $3.50, or an intrinsic value of $14 per share.  This does not factor in the continued lowering of AISC (which could reach $935/oz or lower).  Keep in mind that the company has met or exceeded all targets thus far and that its growth will be internally funded from existing cash and cash flow, and not debt.  Also, Karora has huge exploration potential.
    • High case: Gold prices could be much higher in an inflationary scenario.  Fair value could easily be $21 per share, 500% above today’s $3.50.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Tidewater, Inc. (TDW)

(Image: Zen Buddha Silence, by Marilyn Barbone)

October 17, 2021

Here is the performance of the Boole Microcap Fund this year and since inception (06/09/20).  These figures are through 10/20/21:

  Boole Microcap Fund Russell Microcap Index S&P 500 Index
2021 net return (thru 10/20/21) 49.4% 24.1% 22.6%
2020 net return from inception (06/09/20) 21.1% 31.7% 16.3%
Compounded annual return (net) 34.5% 27.8% 19.4%
Overall gain (net) 80.9% 63.4% 42.6%

Our investment in Tidewater, Inc. (TDW) has been one of our best ideas thus far.

I first wrote up the idea of TDW in May 2020 here: http://boolefund.com/tidewater-tdw/

At the time, the stock at $5.12 a share was extremely cheap based on our five measures of cheapness:

    • EV/EBITDA = 3.85
    • P/E = 2.95
    • P/B = 0.21
    • P/CF = 2.06
    • P/S = 0.43

Since then, TDW stock is up to $12.49.

How much is TDW worth today?

On a normalized basis: revenue is approximately $600 million; cash flow is $300 million; EBITDA is $260 million; earnings are $120 million.  (The market cap is $531.1 million.  Enterprise value (EV) is $555.9 million.)  NAV per share is about $40.

    • EV/EBITDA = 2.14
    • P/E = 4.43
    • P/B = 0.31
    • P/CF = 1.77
    • P/S = 0.89
  • (I used P/NAV instead of P/B because P/NAV is more accurate.)  TDW is still very cheap assuming that the industry experiences some normalization—i.e., reversion to the mean.

The oil price (WTI) is $82.17.  If oil prices stay around this level, Tidewater will achieve normalized revenues and earnings.  But the oil price could move quite a bit higher, in which case Tidewater could approach peak earnings within a couple of years.

For an interesting take on how tight oil supplies are currently, check out this piece by Josh Young of Bison Interests, “OPEC+ Spare Capacity is Insufficient Amid Global Energy Crisis.”  Link: https://bisoninterests.com/content/f/opec-spare-capacity-is-insufficient-amid-global-energy-crisis

Intrinsic value scenarios:

    • Low case: The current book value per share is $18.51.  TDW could be worth 50% of book value.  That’s $9.25, which is 25% lower than today’s $12.49.
    • Mid case: TDW is probably worth the current NAV of $40 per share.  That is 220% higher than today’s $12.49.
    • High case: TDW could be worth 150% of the current NAV ($40 per share).  That is $60 per share, which is 380% higher than today’s $12.49.  (NAV itself could be revised upward significantly in a recovery scenario.)

The Piotroski F_Score is 4, which is not very good.  But this is a cyclical company whose trailing revenues, cash flows, and earnings are far below normal.  As the industry recovers, TDW’s F_Score will also recover.

Insider ownership is 2.6%, which is low.  But that’s still about $14 million.  So insiders have an incentive to maximize the value of the company over time.

Note: Robert Robotti, through his investment management firm, owns a stake in TDW.  Robotti has a long history of successfully investing in energy companies.  Also, Robotti is on the board of directors of Tidewater.

Debt is low.  Net debt is zero.  TL/TA is 33%.  This is excellent.  One of Tidewater’s advantages is that it has much lower debt than most if its competitors.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: Global Ship Lease (GSL)

(Image: Zen Buddha Silence, by Marilyn Barbone)

October 10, 2021

Here is the performance of the Boole Microcap Fund this year and since inception (06/09/20).

  Boole Microcap Fund Russell Microcap Index S&P 500 Index
2021 net return (thru 10/08/21) 42.2% 22.3% 18.7%
2020 net return from inception (06/09/20) 21.1% 31.7% 16.3%
Compounded annual return (net) 31.2% 26.9% 17.5%
Overall gain (net) 72.2% 61.1% 38.0%

Our investment in Global Ship Lease (GSL) has been one of our best ideas thus far.

Shipping is a terrible business.  It is asset-intensive, with low returns on capital.  There are short-lived booms and sustained busts.  Also, the booms are impossible to predict with any precision.  However, if you can be roughly right about when the next boom will start, you can do well investing in shipping.

I first wrote up the idea of GSL in June 2020 here: http://boolefund.com/global-ship-lease-gsl/

At the time, the stock at $4.62 a share was extremely cheap based on our five measures of cheapness:

    • EV/EBITDA = 5.28
    • P/E = 1.93
    • P/B = 0.20
    • P/CF = 0.81
    • P/S = 0.29

These figures made Global Ship Lease one of the top ten cheapest companies out of over two thousand that we ranked.

We bought GSL stock in June 2020 at $4.57.  Today the stock is at $21.48.  The position is up 370% so far, which makes it our best-performing idea.

But there still appears to be substantial upside for GSL.

Shipping rates now are at record highs.  They could stay this way for 6 to 12 months and maybe longer.  That’s because demand is strong, while supply is quite constrained.

Demand

Demand is strong and likely to remain strong because global GDP is strong.

Moreover, 70% of global containerized trade volume is in non-mainline routes—and these routes are growing faster than mainline routes.  As well, these routes are served by mid-sized and smaller containerships.  This is where GSL focuses.

Supply

The supply of container ships is constrained.  There are not many new ships coming into the market in the next couple of years.  It takes two to three years for shipyards to make a new ship, and there are only 120 shipyards (compared to 300 in 2008).

Furthermore, the supply of mid-sized and smaller containerships is even more constrained that the supply of larger ships.  There are very few orders of mid-sized and smaller containerships coming into the market in the next couple of years.

What is the intrinsic value of GSL today?

EBITDA based on 10-year average rates is about $350 million.  Normalized net income is ~$150 million.  Normalized cash flow is ~$160 million.  Based on normalized figures:

    • EV/EBITDA = 4.23
    • P/E = 5.33
    • P/B = 0.46
    • P/CF = 5.00
    • P/S = 1.33

NOTE:  I use P/NAV instead of P/B.  A conservative estimate of NAV is approximately $47 per share.  A more realistic estimate of NAV is around $62 per share.  See this analysis by J. Mintzmyer on Seeking Alpha: https://tinyurl.com/39jx5fey

George Youroukos, Executive Chairman of the Board, recently acquired approximately $10 million of GSL’s stock.  Youroukos clearly believes GSL’s stock is cheap.   This brings Youroukos’ total position to 6.4% of GSL’s outstanding shares, worth over $50 million.

Here is GSL’s Q2 2021 earnings presentation: https://www.globalshiplease.com/static-files/a226750c-bb27-45e2-8017-a0183e07ad26

Intrinsic value scenarios:

    • Low case: Global Ship Lease may be worth 50% of NAV.  (A conservative estimate of NAV is about $47 per share.)  That works out to $23.50 a share, which is over 9% higher than today’s $21.48.
    • Mid case: Global Ship Lease is likely worth at least NAV of $47 per share.  That’s about 120% higher than today’s $21.48.
    • High case: NAV may be closer to $62, which is over 180% higher than today’s $21.48.

So far in 2021, GSL has increased its fleet by 53%.  It paid prices in the range of 3.6 to 4.0 times EBITDA.  These deals are immediately accretive because most of then already have charters attached.  GSL will have most of its fleet contracted by the end of the year.

The Piotroski F_Score for Global Ship Lease is 6, which is OK.

Bottom Line

GSL is one of our best-performing stocks, up over 370% since we bought it in June of 2020.  The Boole Microcap Fund continues to hold most of the position because GSL is still undervalued compared to NAV.   If GSL hits NAV of $47, it will be up over 925% since we bought it.  That said, NAV may be closer to $62, which is over 1,255% higher than where we bought it.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

CASE STUDY: TravelCenters of America (TA)

(Image: Zen Buddha Silence, by Marilyn Barbone)

October 3, 2021

Here is the performance of the Boole Microcap Fund this year and since inception (06/09/20).

  Boole Microcap Fund Russell Microcap Index S&P 500 Index
2021 net return (thru 10/01/21) 39.8% 23.6% 17.6%
2020 net return from inception (06/09/20) 21.1% 31.7% 16.3%
Compounded annual return (net) 30.1% 27.6% 16.9%
Overall gain (net) 69.3% 62.8% 36.8%

Our investment in TravelCenters of America (TA) has been one of our best ideas thus far.

I first wrote up the idea of TA in May 2020 here: http://boolefund.com/travelcenters-america-ta/

At the time, the stock at $9.29 a share was extremely cheap based on our five measures of cheapness:

    • EV/EBITDA = 2.55
    • P/E = 2.90
    • P/B = 0.14
    • P/CF = 1.40
    • P/S = 0.01

These figures made TravelCenters of America one of the top ten cheapest companies out of over two thousand that we ranked.

However, just because a stock is quantitatively cheap does not mean that it’s a good investment.  In fact, before launching the Boole Microcap Fund on 6/9/20, I had bought TA at quantitatively cheap prices.  But the company was being chronically mismanaged and so the stock was deservedly cheap.  I ended up selling at a loss.  But this experience is what prepared me to buy TA for the Boole Microcap Fund.

Studies have shown that if you systematically buy quantitatively cheap stocks, then your portfolio will beat the market over time.  This is called deep value investing, which is what the Boole Microcap Fund does.  See this classic paper: http://scholar.harvard.edu/files/shleifer/files/contrarianinvestment.pdf

However, if you’re doing deep value investing, roughly 57% of your quantitatively cheap stocks will underperform the market.  It’s only because the other 43% increase a great deal that the overall deep value portfolio beats the market over time.

But there are ways to decrease the number of cheap but underperforming stocks in your deep value portfolio.  This will boost your long-term performance.

One example is the Piotroski F_Score, which the Boole Microcap Fund uses.  A high F_Score indicates improving fundamentals.  See: http://boolefund.com/piotroski-f-score/

Another thing that can greatly improve your odds is if new management with a track record of success is brought in to turn around an underperforming company.  This is what happened with TravelCenters of America.

Turnaround specialist Jon Pertchik was named CEO of TravelCenters of America in December 2019.  Pertchik has a track record of significantly improving the performance of underperforming companies.

With Pertchik in charge, it now seemed probable that TravelCenters of America would be worth at least book value of $66.54 per share, which was 615% higher than its May 2020 price of $9.29.

Furthermore, the company could be worth close to $100 a share if Pertchik’s turnaround efforts exceeded expectations.

We bought TA stock in July 2020 at $13.04.  Today the stock is at $53.14.  The position is up over 300% so far.  We sold some along the way, but have kept most of it because Jon Pertchik has set very aggressive goals and is meeting or exceeding those goals.

Normalized EBTIDA is approximately $300 million (trailing EBITDA is $190 million).  Normalized earnings are about $200 million.  Normalized cash flow is close to $300 million.  The current market cap is $657 million while current enterprise value (EV) is $599 million.  That means that:

    • EV/EBITDA = 2.0
    • P/E = 3.29
    • P/B = 1.17
    • P/CF = 0.29
    • P/S = 0.14
  • TA stock is still cheap.

But how cheap is it?   What is TA’s intrinsic value?

Intrinsic value scenarios:

    • Low case: The current book value per share is $45.63.  That is about 14% lower than today’s $53.14.
    • Mid case: Normalized EBITDA is about $300 million.  A conservative EV/EBITDA is 5.0.  That puts EV (enterprise value) at $1,500 million.  The market cap would be $1,558 million, which works out to $106.86 per share.  That’s over 100% higher than today’s $53.14.
    • High case: Normalized EBITDA could reach $350 million.  At an EV/EBITDA of 6.0, the EV would be $2,100 million.  The market cap would be $2,158 million, which works out to $148.01 per share.  That’s over 175% higher than today’s $53.14.

Insider ownership is 15%, which is pretty good.

The Piotroski F_Score is 5, which is mediocre.  But the company is improving fast and is investing heavily to create the best customer experience.

 

BOTTOM LINE

Since the Boole Microcap Fund bought TA stock at $13.04, the stock is up over 300%.

Today, thanks to the great performance of the new CEO Jon Pertchik and everyone at TA, the stock still appears cheap.  $106.86 a share is 100% higher than today’s $53.14.

Also, $106.86 is about 720% higher than $13.04.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

The Best Way to Build Wealth

(Image: Zen Buddha Silence, by Marilyn Barbone)

September 26, 2021

The best way to build wealth is through long-term investing.  The more wealth you have, the more freedom you have to achieve your goals in life.

A smart long-term investment for many investors is an S&P 500 index fund.  It’s just basic arithmetic, as Jack Bogle and Warren Buffett frequently point out: http://boolefund.com/warren-buffett-jack-bogle/

But you can get much higher returns—at least 18% per year (instead of 10% per year)—by investing in cheap, solid microcap stocks.

Because most professional investors have large assets under management, they cannot even consider investing in microcap stocks.  That’s why there continues to be a wonderful opportunity for enterprising investors.  Microcaps are ignored, which causes most of them to become significantly undervalued from time to time.

Warren Buffett obtained the highest returns of his career when he invested primarily in microcap stocks.  Buffett says that he could get 50 percent a year today if he were managing a small enough sum so that he could focus on microcap stocks: http://boolefund.com/buffetts-best-microcap-cigar-butts/

Check out this summary of the CRSP Decile-Based Size and Return Data from 1927 to 2020:

Decile Market Cap-Weighted Returns Equal Weighted Returns Number of Firms (year-end 2020) Mean Firm Size (in millions)
1 9.67% 9.47% 179 145,103
2 10.68% 10.63% 173 25,405
3 11.38% 11.17% 187 12,600
4 11.53% 11.29% 203 6,807
5 12.12% 12.03% 217 4,199
6 11.75% 11.60% 255 2,771
7 12.01% 11.99% 297 1,706
8 12.03% 12.33% 387 888
9 11.55% 12.51% 471 417
10 12.41% 17.27% 1,023 99
9+10 11.71% 15.77% 1,494 199

(CRSP is the Center for Research in Security Prices at the University of Chicago.  You can find the data for various deciles here:  http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html)

The smallest two deciles—9+10—are microcap stocks, which are stocks with market caps below $500 million.  What jumps out is the equal weighted returns of the 9th and 10th size deciles from 1927 to 2020:

Microcap equal weighted returns = 15.8% per year

Large-cap equal weighted returns = ~10% per year

In actuality, the annual returns from microcap stocks will be 1-2% lower because of the cost of entering and exiting positions.  So it’s better to say that an equal weighted microcap approach has returned 14% per year from 1927 to 2020, versus 10% per year for an equal weighted large-cap approach.

 

VALUE SCREEN: +2-3%

By consistently applying a value screen—e.g., low EV/EBITDA, low P/E, low P/S, etc.—to a microcap strategy, you can add 2-3% per year.

 

IMPROVING FUNDAMENTALS: +2-3%

You can further increase performance by screening for improving fundamentals.  One powerful way to do this is using the Piotroski F_Score, which works best for cheap micro caps.  See:  http://boolefund.com/joseph-piotroski-value-investing/

 

BOTTOM LINE

If you invest in microcap stocks, you can get about 14% a year.  If you also implement a simple screen for value, that adds at least 2% a year.  If you then screen for improving fundamentals, that boosts performance by at least another 2% a year.

In brief, if you invest systematically in undervalued microcap stocks with improving fundamentals, you can get at least 18% a year.  That compares quite well to the 10% a year you could get from an S&P 500 index fund.

What’s the difference between 10% a year and 18% a year?  If you invest $100,000 at 10% a year for 30 years, you end up with $1.7 million, which is quite good.  If you invest $100,000 at 18% a year for 30 years, you end up with $14,3 million, which is significantly better.

Please contact me with any questions or comments.

    • My email: jb@boolefund.com.
    • My cell: 206.518.2519

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.