Looking for 'hidden gems' among small cap value stocks. Founder at Hidden Gems Investing. Founder & PM at Plural Investing. Posts are not investment advice.
Joined November 2020
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I write about ‘hidden gems’ in small cap value stocks based on extensive primary research.
This includes 30 page reports (with 1 page summary) after speaking with ~20 industry experts, and insights from attending trade shows.
Learn more at: hiddengemsinvesting.com
A high ROIC tells you a business has been good.
It doesn't tell you why, or whether that will last.
Customers, competitors and former employees usually can.
That's why I speak to ~20 industry sources before most writeups.
Chris Waller retweeted
Which country's stock market is the biggest bargain right now?
Mine: The UK. Yes the country keeps making mistakes, but there are some good businesses trading at single digit P/Es.
Which country's stock market is the biggest bargain right now?
Mine: The UK. Yes the country keeps making mistakes, but there are some good businesses trading at single digit P/Es.
A buyback can mean EPS is well above reported numbers.
Jet2 (JET2.L):
1. FY26 EPS was 208p
2. At today's share count it would have been 217p
3. If the buyback completes at the current share price, it would be 233p
4. On that basis the stock trades on 6.1x P/E
FY27 will be impacted by the Strait of Hormuz and higher fuel, but FY26 represents underlying earnings power.
The most important number in a results statement is often not in the headline.
Judges Scientific $JDG:
1. Order intake was -18% at the end of Q1
2. It improved to -12% at the end of H1
3. By September it was -1% year to date
4. If each quarter counts equally, that implies about +21% for Q3
I see H1 as a significant turning point in Judges' recovery.
See why in my article "The Clue Investors Missed in Judges Scientific's Earnings" on Hidden Gems Investing.
Here is the link to the article, one of my top 20 ideas: hiddengemsinvesting.com/p/my…
What's the best question you ask a management team on your first call with them?
Here's mine: "What do investors most underappreciate about your company?"
Chris Waller retweeted
Daktronics is a hidden gem.
Daktronics $DAKT makes the video boards and scoreboards in US stadiums:
1. 50-70% share of US major-league and college screens
2. Net cash is about 15% of the market cap
3. First outside CEO hired in its 58-year history
4. A plan to lift EBIT margins from 7.3% to 10-12%
5. Hardly any sell-side analysts cover it
The stock is not pricing in any structural improvement in my view.
⬇️ See the link in the first comment for a new writeup I published today.
Daktronics is a hidden gem.
Daktronics $DAKT makes the video boards and scoreboards in US stadiums:
1. 50-70% share of US major-league and college screens
2. Net cash is about 15% of the market cap
3. First outside CEO hired in its 58-year history
4. A plan to lift EBIT margins from 7.3% to 10-12%
5. Hardly any sell-side analysts cover it
The stock is not pricing in any structural improvement in my view.
⬇️ See the link in the first comment for a new writeup I published today.
At some point a marketplace becomes impossible to copy because of how strong network effects are.
Liquidity Services runs GovDeals, which 15,000 government agencies use to sell surplus items.
Its scale means more customers and so agencies get 15% to 20% higher prices selling there.
And vice versa, with more customers showing up because more agencies sell on the website.
Liquidity Services is a great business and you can read my writeup in the Idea Book, which sits at the top of Hidden Gems Investing.
A product with a lower margin can still earn a better ROIC.
Watches of Switzerland earns a lower gross margin selling Rolex than other watches.
But the Rolex section in a store sells 6x more volume per square foot than the other brands.
That is one of the reasons why it has a lower margin but higher ROIC.
You learn the most about a CEO during a crisis.
Ryan Pape became XPEL's CEO in 2009 when it had $10mm of revenue.
Pape guaranteed a $25,000 debt on his own credit card.
XPEL today generates $508mm of revenues and the stock is up about 1,000x since 2009.
Chris Waller retweeted
A small company needs to raise debt or equity for sell-side to cover it.
So the best small caps that funded by their own FCF are the least likely to be covered.
Ignored small caps that trade for 10x FCF and dominate a niche are what I write about.
