Today you can buy a 54-year-old mattress fabric leader trading at 0.84x tangible book in year five of a bedding downturn. The restructuring is done, it’s back to breakeven adjusted EBITDA, and sales have grown two quarters in a row. Management values the real estate alone at roughly the market cap, an activist holds three board seats, and insiders keep buying. A return to fiscal 2020 sales implies ~20% a year for five years.

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Disclaimer: I own shares of Culp Inc ($CULP) at an average cost basis of $3.56. This write-up is for informational purposes only and does not constitute investment advice.

Snapshot:
Price: $3.56
Market Cap: $45.34M
Shares outstanding: 12.74M
Enterprise Value: $48.68MM
Tangible Book Value: $4.23/share
P/TBV: 0.85x

Business Overview

Culp has a simple business model: it designs and sells the fabric that covers mattresses and upholstered furniture.

It makes some of the fabric itself with their manufacturing footprint and buys the rest from partner mills that produce Culp’s designs to order.

It operates through two segments:

Bedding

This segment primarily manufactures mattress fabric. Think the knitted fabric that encompasses your mattress at home. It accounted for 57% of FY26 revenues, and as you can imagine is heavily tied to the mattress industry. They are the top 2 player in US mattress fabric/cover market with 20-25% share of a 500-600M market. Production runs out of an owned plant in NC and a cut-sew facility in Haiti along with manufacturing/sourcing in China, Vietnam, and Turkey. Some notable brands they sell to include Serta Simmons Bedding, Tempur Sealy/Mattress Firm (Somnigroup), Sleep Number, Purple.etc Main competitor is BekaertDeslee Textiles and Global Textile Alliance. This segment is lower margins but has been showing consecutive quarters of growth in an aggressive industry downcycle by taking market share and increasing pricing. High fixed costs in this segment will drive most of the operating leverage here.

Upholstery

Buys and sell furntiure fabric into three primary markets: Residential furniture (biggest market and heavily tied to housing), commercial Seating (office + healthcare). and Hospitality (hotels, restaurants, and theaters). This runs at double the margins of bedding due to its asset light nature. Culp designs the fabric in the US and China and have suppliers in China, Vietnam, and Turkey that produce it. They then inspect and warehouse it at two facilities in Shanghai. This contributed 43% of FY26 sales. They are a top 5 player in this space with 8-10% share of a 1.5-2.5B market. They are committed to steering into higher margin and less cyclical fabric types like performance and hospitality fabrics. Main brands they sell into include La-Z-Boy, Ashley, Flexsteel, Fushion. Competitors include Crypton, Dorrell, Morgan, Richloom, Speciality Textile, and ZhongWang.

Going forward in my analysis I am placing a heavier emphasis on the turnaround within the bedding segment as its more reliant on the replacement cycle and less sensitive to general economy/housing/interest rates of the upholstery segment. However, for the company to recover to its former glory a recovery in the upholstery division is required too.

Why does this opportunity exist?

1. Covid pull forward demand + Weak Housing

Now I won’t beat around the bush: this is a very cyclical company. Culp’s most recent investor presentation does a good job laying out the typical bedding cycle. There have been four major downturns in the mattress industry since the 1980s before this one. The average downturn in units lasted about two years, and none went past four, until now.

A perfect storm of COVID pull-forward demand, inflation, and a frozen housing market has produced a worse downcycle for US-produced mattresses than the Great Financial Crisis.

We're now entering year five, and 2026 is on track for another decline in units.

Weak housing hasn’t helped either. A lot of people buy new mattresses and furniture when they move, and people just haven’t been moving. I pulled together this chart, which shows existing home sales + new single-family home sales. That basically covers most of the scenarios where someone would need to furnish a home. As you can see, sales are down 31% from the 2021 peak and have been stuck around 4.7M a year since 2023, which is barely above 2011 levels coming out of the financial crisis. This hurts upholstery more than bedding, since you’re way more likely to replace an old mattress than a sofa for hygiene/sleep reasons, whether you move or not.

So how has Culp held up through all this? I wanted to know how well its bedding sales tracked the unit declines. Despite the vicious downcycle, Culp has gotten its sales per mattress back to its pre-COVID peak. Management points to three drivers:

1. Higher pricing to catch up with tariff and petrochemical costs

2. Product mix: the market has shifted to sewn covers, which earn Culp sales on both the fabric and the sewing

3. Share gains: Culp has been taking share while overall unit volumes decline

To me this shows real competitive ability and differentiation in the bedding markets they operate in.

Why is this changing?

Catalyst #1: The replacement cycle


The average mattress lifecycle is around 7-10 years. Which naturally places peak 2020/2021 mattress units needing replacement around 2027-2031. As you can see any kind of unit volume recovery to pre-covid level with the higher unit per sales CULP has now could have a torqued effect to sales.

Recoveries are slow, though. Historically, units have grown at about a 4% CAGR over the first three years of the upcycle, then picked up a lot from there.

Catalyst #2: Housing is bottoming

The home sales chart above also shows housing has stopped falling: 4.74M in 2024, 4.74M in 2025, and tracking about 4.7M in 2026. As seen in the housing chart above, Fannie Mae’s September 2026 economic forecast calls for an uptick to 4.88M in 2027 (+4%), even with mortgage rates flat at 6.7%.

Take both with a grain of salt. Fannie also expected 2026 to bring a rebound and sub-6% mortgage rates, and neither happened. Since the September forecast came out, the Freddie Mac 30-year rate has climbed to 7.03% (Sept. 24).

As you will see when I model things out in the valuation section, I assume almost no housing growth in year 1. Any upside in 2027 from sales going up + rate cuts would be accelerating the timeline I lay out.

2. Cheap Imports

Now my astute readers have likely already pulled up the last 10 years of 10Ks and said “Hey Phenom, bedding sales actually started declining in 2019 before covid dropping 25% in FY2019 and another 10% in FY2020 going from 193M in sales to 131M in sales over that span.

This can be explained in Q4 of FY2018 when cheap Chinese imports flooded the market in tandem with the rise of boxed, compressed mattresses which made container shipping from China practical.

In response, US found these imports unfair and followed with three rounds of anti-dumping duties. Rates ranging from 57-1732% were placed in December 2019 on these imports.

Chinese imports completely collapsed the following year but as expected, workarounds were found and duties were placed on another seven countries (Cambodia, Indonesia, Malyasia, Serbia, Thailand, Turkey, Vietnam) in May 2021.

A third round in 2023 targeted 13 more countries, and 12 ended up with duties in 2024, including Mexico, Poland, Taiwan and Burma. Only Indonesia avoided new duties. Indonesia’s 2021 order was then revoked in 2025 after a court ruling, and it’s now one of the largest exporters to the U.S.

Why is this changing?

Now, with duties on about 19 countries plus a layer of broader tariffs, what was once a crisis is now more of a nuisance and not the primary driver of softer market conditions. From the 2026 10K management states imports still “continue to retain solid market share.” But bedding sales have pretty much stabilized over the last 3 years.

Culp has been largely proactive during this time by shifting their focus to knit covers and focusing more on sewn covers to address the markets shift to boxed mattresses. They even generate higher sales per mattress since they produce and sew the covers as opposed to just selling the fabric before.

While tariffs had a harsh impact on CULP initially as they couldn’t push through price increases at the same pace and also initially had to deal with a 15% tariff on their Haiti operations which has since been removed. They view it much more positively going forward due to customer’s valuing flexibility in manufacturing location almost as much as pricing. The following quote from their Q3 FY26 earnings call explains it well:

Encouragingly, we’re seeing customers lean more and more into the various sourcing alternatives we offer as they are continually forced to factor the cost of new and changing tariffs into their models and build more flexibility into their strategies. Our global platform presents customers with what we believe is the best opportunity out there to source in multiple geographies and tariff regimes, but with the operational and administrative ease of dealing with a single turnkey supplier partner. Looking at that tariff issue from a pure cost perspective and how they directly affect our financials, we believe that the current go-forward tariff rates applicable to our business are manageable and, in some cases, improved versus what we’ve had to absorb in prior periods.

Tariffs still cause finished goods that consumers buy to go up, so I am hesitant to call this a win as demand in these end markets are already depressed and rising prices will do no favours. But Culp’s US and Haiti manufacturing footprint makes it the perfect example of a company these exact tariffs should benefit and positions it well compared to its competitors.

Overall, I think the overall landscape has gotten structurally a bit worse than the <2019 days so its hard to model a complete recovery to the companies peak sales level but even a normalization to 2019-2021 would provide huge upside from here.

3. Persistent losses/Restructuring/Dividend Cut

CULP share price has basically been range bound between $3-6 for the last 4 years as the vicious down cycle has taken place.

Since FY23, tangible book value has gone from $7.04/share to today’s $4.24/share. While producing net losses of $74.7M or $6/share.

At one point in time, CULP was a steady dividend paying stock that paid ~60M in dividends + special dividends from FY13 to FY22 when the dividend was ultimately suspended. On a per share basis, the $4.80 in dividends is greater than todays stock price.

Why is this changing?

Following this initial shock of the bedding downturn, CULP started moving to cut costs and consolidate operations. With activists 22NW going activist in April of 2024 this pushed CULP into fully enacting a restructuring plan.

Culp's restructuring, detailed in its Q1 FY2027 investor presentation, has delivered over $22M in annualized savings and other benefits, including pricing actions. Some highlights:

• Closed the Quebec plant: moved knitting to one consolidated plant in North Carolina, outsourced weaving to Turkey and sold the property.

• Combined the two divisions into one Culp-branded company (”Project Blaze”): closed the Burlington, NC and Knoxville, TN sites and moved upholstery distribution and window treatments into the owned North Carolina plant.

• Shrank the offshore footprint: merged the Haiti cover plants into one building and cut China from three facilities to two.

• Raised prices and cut overhead: price increases and surcharges to cover tariffs and oil costs, with overhead (SG&A) down from $38.6M in fiscal 2024 to $34.7M in fiscal 2026.
  

Management has emphasized multiple times that despite the restructuring and facility closures, they haven't given up any growth capacity. Reiterated at a research conference last week, CFO Mary Beth Hunsberger stated:

"We did this in such a way that it preserved 100% of our ability to grow. In no way have we limited our capacity or capabilities going forward, which was the part that made it complicated." CEO Iv Culp made the same point when Project Blaze was announced in April 2025, saying it involved "no curtailment of production levels."

Combined with two consecutive quarters of year-over-year sales growth, all from bedding, that brought Culp to roughly breakeven adjusted EBITDA in Q1: $0.57M excluding the tariff refund and insurance proceeds. Management has guided to break-even operating income and accelerating adjusted EBITDA in Q2. This implies a small step up from Q1. Another positive quarter would give Culp back-to-back positive adjusted EBITDA quarters. A feat not done since fiscal 2022 (the first year of the downcycle)

A Note on Activists & Insiders

One interesting note here is the activist involvement. Several value-oriented funds hold CULP, including 22NW (14.6%, with three board seats through its cooperation agreement) and Gate City Capital (5.8%, per the 2026 proxy).

22NW came in as a passive holder with a 5% stake in October 2021 then upping that stake to 9.7% in December 2023 then finally going active with a 13D in April of 2024 citing governance and “potential changes to the board.” The arrangement between CULP and 22NW has largely been cooperative. They now have 3 of their hand-picked directors on the board of 7 directors and a standstill agreement in place capping their ownership at 15% (currently at 14.6%).

The catalyst is the standstill's end: based on the agreement's terms, May 26, 2027. Until then, 22NW can push privately through the boardroom but can't act publicly. It can't buy above 15%, run a proxy fight, or publicly propose a sale, a major asset deal (such as a sale-leaseback of the real estate), or a recapitalization. After May 2027 all of that is on the table.

I also dug a bit into 22NW’s prior history and motivations to determine what kind of activist they were. Of the seven campaigns they led that have reached an outcome, three ended in a sale of the company (Performant, Huttig and Farmer Bros), and two gave it effective control: it replaced DIRTT's entire board in a 2022 proxy fight and remains the largest holder at ~30%, and it became Anebulo's dominant shareholder before the company went private. For the three companies that ended up being sold, the average time was 3.5 years since they filed a 13D. Its been ~2.5 years since they filed a 13D for Culp and based on their average purchase price are ~50% underwater. This makes me believe an imminent sale is unlikely but always on the table in the future based on their prior history.

Another interesting tidbit is that there has been 27 open market purchases from management since September 2024 with zero selling activity. Dollar amounts are small and the CEO purchases are part of a buying plan but current CFO has bought twice <$4, CCO has bought, and a couple directors.

Valuation:

Okay now the fun part, what is this thing worth? I have built out a couple scenarios to model where share price could be headed over the next couple of years. I will list out some of my assumptions.

- CULP carries around ~$96M in federal NOLs and $40.3M in state ones so I will assume negligible US cash taxes going forward (Some Chinese business so will be taxed on that)

Scenario 1: Bear

CULP misses guidance, fails to keep the current momentum, industry conditions continue worsening, they stop taking share etc. I find the likelihood of all of these happening at the same time extremely low. In that case, I will use the current 52 week low as a downside case. At this share price, stock would be trading at 0.64x TBV and 1.4x NCAV. From the current share price of $3.56 this would be a 24% drop.


Scenario 2: Base

In this scenario, company demonstrates they can sustain Q1s level of EBITDA for the year and with 2.5m in CAPEX minimal cash taxes/interest and WC swings they prove they can stop burning cash with improving industry outlook. I think stock should trade at 1x TBV.

At $3.56, the stock has +19% upside to reported tangible book ($4.24). This is roughly where the stock was trading at from July-October of 2025. Factoring in managements “40M estimate for their US owned real estate” and haircutting it by 20% gives me a +63% upside to real-estate-adjusted tangible book ($5.81).

Scenario 3: Cycle Recovery

Now this is where things get interesting. I will model out a 5 year scenario under the following assumptions:

- From the Q3 fiscal 2026 earning call the CEO stated: "We estimate that with our revamped lower cost platform, any increase in our revenue numbers flows to the bottom line at an approximately 25% rate." - I will use this to determine incremental EBITDA

- Assume US mattress unit declines stop declining going into 2027 and overall unit growth goes to 2% for 2027, then goes to 5% a year in years 2-3, then up to 6% in years 4-5

Breaking this down further, I basically assumed that 1st half of 2027 would still decline but by 2H we start seeing recovery. I then used the 4% average 3 year recovery with it starting slower then ramping up.

- Assume upholstery unit is flat YOY, then starts growing 4% in years 2-3 and 5% in years 4-5

Breaking this down further, I assumed housing shows no recovery and sales stay flat but in 2nd half of 2027/1st half of 2028 rates start getting cut and recovery begins.

- Ill assume they sustain their current $8.88 per mattress unit rate, which bakes in 0 share gains or further pricing increases

- Capex for FY27 is 2.5M, over FY19-25 it averaged 4.1M, I will assume it gradually climbs up to this level over 5 years

- Negligible net interest (already low and as cash builds with neutralize/become positive)

- Working capital build takes up 10% of added sales

Applying a 7x multiple to my year 5 estimate of 15M in ebitda and adding in net cash brings total share price to $8.80 or ~150% upside and a 20% IRR from todays share price. All for a company that trades below tangible book value. Historically, the company has traded at 8-10x EBITDA so I believe my multiple is conservative as well.

As a sanity check, compared to the company during FY2020 and FY2021, which were down years comparatively to the highs the company achieved in 2018. The company posted 5.7% and 6.5% EBITDA margins with 14.5$M and 19.4$M in EBITDA respectively. My model projects a similar year to 2020 in Year 5 running at a 5.7% EBITDA margin. In FY2020, the averaging closing share price was $14.40 my model uses a EBITDA multiple of 7x which is lower than the company traded historically when it paid a dividend.

Risks

1. Foreign imports keep taking share

2. Liquidity of customers

3. Oil prices

4. Housing recovery delayed

Housekeeping

I been thinking a lot lately about stocks I want to write about. I tend to put a lot of pressure on myself to find “exceptional” ideas to make long form write-ups on. I discuss this criteria at the start of my writeup on Richardson Electronics but a lot of it stems from providing the best value to my readers. Often times I do find/get pitched really good ideas but don’t feel like I can add much value doing a deep dive on them.

Thinking throughout the years, I think I find on average two “exceptional” ideas a year. Stocks that the more I do research and think through the more obvious it is to be buying hand over fist. In recent times:

2023: $USAP, $GIFI
2024: $PBI
2025: $CNRD, $ICCC
2026: $RELL

Common theme seems to be industrials undergoing an industry inflection (USAP, GIFI, CNRD, RELL) and Goodco-badco setups (GIFI, PBI, ICCC) with a catalyst to get rid of the badco. Of course I have made and lost money on hundreds of other situations but it does seem like I understand and generate most of my alpha in these particular situations.

I do alot of short-mid term trading outside of these core ideas so I still feel like I can provide value through discussing these. Although I know alot of people enjoy the long-form writeups I still prefer being picky about what I dedicate lots of research on. But hey while I write these portfolio updates I usually will notice one of the ideas are worth digging deeper into; ala and $RELL. So maybe magic strikes again here.

Its been a very busy year so far and it continues to be the most turnover I have ever had in my portfolio. Most of the trades I make are boring and not noteworthy but I have highlighted the main updates across my portfolio using my last update as a baseline. As noted in my last writeup I am also taking a concerted effort to reducing the number of positions I need to actively monitor.

Portfolio Updates

Added

DLO - Dlocal Ltd. (Avg cost basis: $11.82)

I initially held the stock and then sold it when I was consolidating my portfolio. Did some more thinking around the name and bought back in → 20% growth running at around 14x forward earnings with management guiding to significant operating leverage in the 2nd half of the year1 as the investment cycle moderates. Also watched an interview with the CEO in it, who worked at MecardoLibre for 24 years including 12 as the CFO. Was impressed by how he viewed the business long term and addressed several of the bear cases around the stock - emerging markets, stable coins etc in a very thoughtful balanced manner. The payment sector in general looks interesting as several threats have emerged which has caused the entire space to crash to me some of it is warranted but a lot of the more durable quality names are getting thrown out with the bath water.

SPT - Sprout Social Inc (Avg cost basis: $7.55)

A beaten up SAAS company that provides social media management, I bought this when it was trading <1x sales and 6-7x earnings (non gaap) while growing 10%+. Did some work around the product and their offering and it seemed niche/sophisticated enough for the current valuation to feel like it was over exaggerating AI impact. They released earnings recently which caused the stock to pop - growth looked decent but management announced 50m in annualized non GAAP cost savings2. They have a SBC problem here but its come down from 18% of revenues to 13% yoy and they are doing a 20% workforce reduction to further bring it down. Founder came back as CTO3 and managements super voting rights expire on December 17th this year which can prompt some further fireworks. Overall, great valuation + story makes this continue to look interesting.

XLY.TO - Auxly Cannabis Group Inc (Avg cost: $2.31CAD)

Trading around 6x adjusted EBITDA for a 20%+ grower and the 3rd biggest LP in Canada by market share. Buying back shares and just finished a 14:1 reverse split. Also had a bunch of warrants issued when they were paying off debt over the years that have apparently largely been liquidated4. I continue to believe that alot of the cannabis sector is mispriced due to a lack of institutional investment and horrible sentiment.

ADBE - Adobe Inc (Avg cost basis: $204.44)

Everyone’s favourite fin twit value trap, ADBE got as cheap as 10x gaap forward earnings, at that price it felt like the AI driven risks toward the business were overblown. Up ~30% from there around 14x forward earnings now business is still trading historically cheap for the scale, margins, and growth. Not in love with the name - bad capital allocation (buybacks at way higher prices), huge turnover of the c-suite (maybe good as they were leading these poor cap alloc decisions) but just cheap + moaty enough for me to continue holding.

OESX (sold) - Orion Energy Systems, Inc. (Avg cost basis: $11.38)

Kind of a boring LED installation/service business with a random EV Charging segment as well. I looked at this for 15 min and thought it was a buy based on margins and backlog all going in the right direction and a recent DC win + insider buying

Stock basically doubled on a great quarter but I had issues with the fact they beat so big but didn’t raise guidance which kind of implies they expect next couple quarters to come in slightly worse. Already having trouble seeing how growth comes in outside of more DC wins so opted to just flip my entire position for a nice gain. Wanted to initially write this as a long as I find the numbers and story intriguing but couldn’t pass up on the big spike. Would be interested again on a pullback or a bit more clarity on the growth strategy going forward.

CELH (sold) - Celsius Holdings Inc (Avg cost basis: $30.00)

I also no longer own this, but decided to keep this in for transparency since I only sold it a few days ago. All the organic growth in the business is done, which is the entire issue here, however, their Alani remains exceptionally promising and continues to move the story. Management still is guiding to a return in growth for the Celsius brand once SKU rationalization is done but its become a wait and see story for me. Following the poor earnings the former CEO of Rockstar came forward with a ~4.7% position and is directly pushing to replace the current CEO with himself5. I sold on the initial earnings dump just for this news to pop up the next day and send the stock up 16%. Markets are hard.

OCC - Optical Cable Corp (Avg cost basis: $15.72)

Manufacturer of fiber optic and copper data communication cables. When people talk poster child downfalls from the dot com bust, OCC has to be at the top of the list. Peaking at $360 at the height of the bubble and falling >99% to $1.65, it insane how 24 years later we are talking about it again. But here we are with multiple signs that point toward another strong boom cycle.

The model has a lot of operating leverage, a significant backlog, and management is guiding towards continued growth going into the second half of the year. What makes it even more intriguing is the fact that Lightera owns 7%+ of the stock and OCC now can sell their products6. In addition, there is even talk about a possible Chinese optical ban from the Trump administration7, adding further pressure on domestic supply. 1.8x sales for a backlog that grew 82% y/y and tremendous operating leverage does not seem expensive to me.

CGX.TO - Cineplex Inc (Avg cost basis: $12.80CAD)

Are movies finally fucking back? The domestic box office is currently running 19% above 2025 ytd with possibly the biggest release in Avengers Doomsday still not in the numbers. This is the biggest year since 2019. I wanted some more exposure to the theme of box office recovery, and in that case Cineplex is clearly a laggard relative to its peers, which made me interested. This recovery appears to be real because June was the strongest month since 20198, while the performance continued in July and August with the Odyssey and Spider-Man: Brand New Day performing to monster numbers (the latter had the best domestic opening ever)9. Besides the ongoing recovery in operations, have a company that has historically been dangled in takeouts10 and a meaningful debt load that can be delevered with cashflow. The valuation is not at all demanding compared to peers, and 2027 is projected to be another great box office year11.

Undisclosed (Avg cost: $21.99)

A friend pitched this to me so for now keeping it undisclosed but the setup ticks a lot of boxes for me. Multiple segments in seemingly random areas with differing growth and margins. But there’s a segment tied directly to the AI trade that the market isn’t fully aware of and a CEO who came over from running a hedge fund and has been buying back shares aggressively while owning 20% of the company. Company trades way too cheap for the potential of this segment. Involvement in a major data center project and a backlog that’s growing like crazy.

Closed

NLST - Netlist Inc

Small weighting, wanted to reduce AI exposure flipped out. In hindsight, was a mistake.

SNAP - Snap Inc

I don’t think Evan is taking the activists serious at all here and seems hellbent on making specs work. I was lucky to basically flip my shares for close to breakeven on the initial pop from the specs presentation. I thought long and hard about this as even though I see strong tailwinds in the 2H of the year for the core business, its overshadowed by incredibly slow execution, poor capital allocation, and headwinds from the U16 social media bans12 that have been rolling out across the world. At current levels this might be a good trade but I am staying out for now.

TPCS - TechPrecision Corp

Another stinker quarter but management gave formal guidance for the first time ever. 10% topline growth and 3-4m in EBITDA for FY2027. Stock ran up 50% on this and I sold my position for the following reasons. Management historically has been incredibly poor at forecasting13. They also said they still have two legacy contracts that will be a drag14 and I don’t like where steel prices are right now in general. If anyone is familiar with my work on CNRD, I know how much of a drag legacy fixed contracts can be on bottom line. I still think future is bright here but I have no belief in managements ability to make short term forecasts here and see a good chance at them missing. Could be overthinking this with the timing but when things like $CNRD which had similar issues but was a net-net existed in the market I think better opportunities exist out there considering TPCS’s balance sheet.

VISN - Vistance Networks Inc

Bought on cheap valuation and flipped out for a quick gain. Still cheap but need to do more work on the medium/long term prospects of the remainco before I can feel comfortable holding it out. I sold before recent earnings, which sent the stock down on a guidance cut for EBITDA and lower special dividend distribution than expected15

MAPS - WM Technology Inc

Essentially, same thing as VISN thought it was way oversold and flipped my position for a quick profit. Again not much in terms of catalysts so will revisit in the future. Absurdly cheap still.

MNTN - MNTN Inc

Again I bought very cheap and flipped out for a quick gain. Seeing a trend here? Hard for me to see the long term durability of an AdTech type business with potential AI headwinds to make me comfortable holding it.

EVC - Entravision Communications Corp

The late CEOs widow slamming the stock price with her forced selling of millions of shares16 made an interesting entry point for me and I bought and flipped for a nice profit. Not much insights on the actual business but thought valuation + growth and forced selling made it a nice trade.

ODD - Oddity Tech Ltd

I took the L on this one. The lesson I’m carrying forward is a wariness of growth businesses where I cant clearly see where the growth is coming from or how durable it actually is. If I am unable to answer these two questions with confidence I have no business sizing the position.

DRAM - Roundhill Memory ETF

Straightforward one. I wanted to trim my exposure to the AI trade and this was an easy one to let go. The SK Hynix Nasdaq ADR listing felt like a local top in the memory trade so decided to close my position around then.

TSM - Taiwan Semicndctr Mnufctrng Co Ltd

Again just reducing exposure to some of the hot AI names, still probably a good bet from here but feels like fairish value right now.

KELYA - Kelly Services Inc Class A

This one was a difficult one to sell as despite an 80%+ run up from the bottom, stock looks cheap and has the added kicker of having Hunt equity having a controlling stake in it17. For me getting a quick 80% return like that ahead of earnings without substantiative news and on more of a factor move with peers was ground for me to close the position. Still find the name very interesting and see a high likelihood of a take private transaction.

One Small Ask:

I work full time as an engineer and spend a lot of my free time researching and working on these writeups

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I was wrong.

I thought the best strategy for me was too buy as many ideas as possible and diversify. I quickly realized a big part in my edge is my ability to track companies closely to see how closely they track my thesis. With so many positions I felt like I was borrowing conviction and not comfortable with the ebbs and flows of the stock prices.

In an ideal world, I could sit at my computer and manage 100s of positions at the tip of my finger. Considering, I work full time and also have been studying for the CFA on the side while writing in my free time, it quickly got overwhelming. Thus, going forward I want to stick with my old strategy of staying concentrated in my best names.

The numbers have been backing it up too, my highest conviction and most researched ideas have done exceptionally on average. Today I write to you with 28 positions. Still too many, I want to aim for 15-20 of my best ideas. Its a work in progress but I think I am on the right track here - why put money into my 25th best idea?

Now in terms of the current markets - it feels like there is a massive dislocation in where capital is flowing. With some historically boring large caps like Intel and Dell getting billions added to their market cap off recent developments. As all the money flows into these AI adjacent names more and more opportunities seem to be presenting themselves elsewhere for anyone that cares. I am not here to write bear porn, I work as a software engineer who uses AI everyday in my workflows the impact has been incredible and this is the worst its ever going to be. At the same time, could this all end up in a massive bubble that pops and sends everything crashing? Anyway, its not my job to underwrite this but to find names that can benefit on both sides and to make money so thats how I view portfolio construction.

Here is the rundown of the portfolio.

One Small Ask:

I work full time as an engineer and spend a lot of my free time researching and working on these writeups

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Share

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AI Basket

Richardson Electronics – $RELL (11.28%):

Might be a little cheeky putting this under my AI basket but I do believe is positioned well as an indirect beneficiary of the AI boom.

My most recent long form writeup, check it out here if you haven’t already.

When I bought shares around $11, RELL presented the best asymmetric opportunity I could find in the market with nearly 80% of its market cap in current assets and 20% net cash. Exposure to semi demand through its relationship with LAM research and a recovering fast growing GES business + a host of moonshot opportunities like their new BES solutions it felt like a no brainer longer. The Q3 numbers basically validated my thesis strongly with the backlog growth and profitability. I think we will see $1-1.50 in run rate earnings potential over the medium to long term. So for a company that has been losing money for the last few years to show that earnings potential while historically trading around 20x+ earnings - you can see where they stock could be headed. In addition, I think all incremental information in the next couple quarters should be positive, with comps being clean Q4 onwards without their Healthcare division, remaining healthcare SG&A rolls off Q4/Q1, inventory buildup done and should be a tailwind to build up cash moving forward, and the obvious ramp with LAM allowing them to hit op leverage. I can see a clear inflection in hiring on their LinkedIn as well with “2nd shift opportunities” and positive employee growth.

Taiwan Semiconductor – $TSM (3.52%):

The backbone of the AI trade, as they pretty much manufacture everyone’s chips. By far the market leader and pretty much the only company that can make the most advanced chips they have a strong moat. Based on forward EPS, of $15.35 and expected to grow 20-25% over the next 5 years - 27x forward earnings feels cheap. I think all the Taiwan invasion stuff is overblown - it helps that they have been actively diversifying geographically too.

Roundhill Memory ETF - $DRAM (2.07%):

Memory prices continue going up, demand is incredible, seeing some smart people still in memory names, if prices how more room to run there is probably still a good amount of upside left in these names. I wanted the SK Hynix exposure so I opted for this ETF. I know this time is probably not different but the demand and length of this cycle is hard to gauge.

Netlist - $NLST (0.48%)

Depressed Cyclicals/Turnarounds

Bridgford Foods – $BRID (4.38%):

I actually been adding more to my position after seeing the Q1 results, pretty substantial improvements to costs and sales even with rising beef prices. Their recent shareholder meeting was a great listen as they are planning further cost cuts and another price increase which I believe should swing them into profit in the upcoming quarters. They are pretty confident that even in this inflationary environment they can be profitable. I think the rate of increase of beef will start to slow down this year and hopefully when it starts coming down they should really start seeing benefits.

Conrad Industries – $CNRD (4.14%):

The Q1 2026 quarter was a mixed bag honestly. Backlog is sitting at a massive $334M providing strong visibility for future Qs. This includes the big $134M deal they signed with the US Navy for 4 more YRBMs at Q end.

This is also super clean backlog that should all be very profitable (high margin repeat builds). The actual Q itself was disappointing, revenues came in soft due to lower volumes. Steel plate prices are not in a good spot right now from what I can see this is causing customers to further delay new builds. Actual inland barge activity continues to do well based on Kirby Corp’s comments but they are pushing the existing fleet to the absolute limits. Again, all this will do will extend the replacement cycle and the current backlog gives us good visibility for several quarters already. Not much details on the Blue Autonomy deal or data center fabrication work. They seem to be keeping it hush hush - maybe to not give competitors an edge? But seems to be progressing well. Company still trades dirt cheap - if tariffs weren’t a thing and steel prices would cooperate this would probably already be a >$40+ stock but alas in the current environment I still think the upside outweighs the downside and continue holding.

Snap Inc – $SNAP (2.94%):

Share price still feels completely disconnected from fundamental developments. Since my last update, there has been ~16% layoffs announced, Irenic capital going activist (not really going to do anything due to the share structure but they layout a very straightforward path to a multi-bagger), specs slated to release in the second half of the year. I think we are set up for a big 2H with the window for free memory storage expiring and a decision around specs (either we moonshot or we discontinue hopefully?).

Kelly Services Inc Class A - $KELYA (2.90%):

Pretty much the cheapest staffing company I can find on screeners right now, trading at a forward P/E of 5.75, 0.08x sales, and roughly ~0.65x tangible book value ($355M market cap vs $548M TBV). Major catalyst here is Hunt Equity group buying 92% of the voting shares from the trust of the Adderley family. These guys seem like a serious PE group achieving high teens return from 1977 through 2025. There is also a payout in the deal, where the trust gets an additional $15.2M if KELYA’s public market cap hits $1.2B by early 2030. That gives the new PE sponsor an extremely clear 48-month runway to force a ~3.4x return. New chairman and CEO are buying shares in the open market, and this very interesting snippet from a recent 13D filing hinting at potential “transactions”.

Leatt Corp - $LEAT (2.75%):

This is a name I been warming up to a lot lately, a pretty strong brand + management that got hit hard post covid due to de-stocking. Seems like industry is normalizing and numbers the last few quarters have really started showing momentum. Trading around 9x earnings and growing double digits, I like the stock and expectation is that growth should still keep going so looks super cheap here.

Key Tronic Corp - (2.73%):

I have traded this name before, its always been a “show me” story, but a new CEO has taken over and aggressively cut costs by downsizing their footprint in China and emphasizing their US, Mexico and Vietnam facilities. The full closure of their China facility is expected to add 1.2M in quarterly savings once completed. Working capital has also improved a lot with debt down YOY, inventory down, DSOs at 85 days from 92 days. Despite a 20%+ revenue drop YOY, gross margins are actually up as lower margin work is gone and new projects are expected to ramp with management guiding to profitability next Q. This has always been touted as a re-shoring beneficiary but if this actually materializes and top line grows off this much improved cost base their should be lots of operating leverage here and stock is cheap at these levels. They have also allegedly secured contracts in industrial power management and have grown traction in utilities and data centre equipment. I am always skeptical with this company as it always looks like its turning but around these levels I think upside outweighs the downside.

TechPrecision – $TPCS (2.62%):

I feel like everyday I see new orders for Virginia/Columbia submarines and CH53Ks. TPCS acts as a sole supplier for parts that go into these through their Ranor and Stadco subsidiaries respectively. Hard to say when we hit the true inflection point here but my read continues to be if they can survive their liquidity issues during the next 6-8 months I cant see how this isn’t a clear multibagger. Good news with the recent credit facility extension from May 15th to September, 15th, which gives them a couple more months of breathing room but they need to execute close to perfect here. I tend to think of it in the same frame as which I passed on and it became a multi-bagger, I see the same upside here.

Special Situations

Blue Ant Media - BAMI.TO (4.16%):

A pretty interesting reverse takeover and then the acquisition of Thunderbird Entertainment. Blue Ant did $37m in EBITDA while Thunderbird did $18m, this was the 2025 numbers. Assuming no growth, the combined entity would do $55m in EBITDA plus $7m in expected synergies, totaling an estimated $62m in EBITDA.

On the capital structure side, the company has 27.7 million basic shares outstanding giving a $163m market Cap at $5.86. Their $50.7m cash balance was bolstered by a $34.7m post-quarter RTO cash infusion tied to performance targets, bringing their adjusted cash to $85.4m. Against this, they carry $96.8m in total debt (includes $55.1m in intermin production financing)

Factoring in the adjusted cash against the total debt leaves roughly $11.4m in net debt. That’s $62m in trailing/synergized EBITDA on a $163m Market Cap + $11.4m net debt = $174m Enterprise Value. That’s a 2.8x EV/EBITDA multiple for two companies that consistently grew revenues and EBITDA and should achieve lots of benefits from scale. CEO is also best in class, that wants to drive Blue Ant into a billion dollar company, a feat he already achieved when he sold his previous media company for 2.3 billion. Numbers are a mess right now due to integration expenses, and there were two lockup periods in February and May that caused mechanical selling. I think there is a lot of dislocation in the price here that is non-fundamental. If this rerates to a 6-8x EBITDA on trailing numbers, it’s still a multi-bagger.

Vistance Networks Inc - VISN (3.07%):

Remainco of Aurora segment is trading <5x EBITDA post divesture of Ruckus, with a good chunk of that likely being paid out in a special dividend.

Virtra Inc – $VTSI (2.61%):

Another kind of free call option type company where the company just posted two stinker quarters in a row but trades with 10m in net cash versus a 38M market cap and as a heavily project based company with record high backlogs (25.2M) right now and an improving federal funding environment looks like any Q could see a big pop in the stock price. Insiders are buying and “qualified leads” apparently doubled last Q. Even though the last 2 Qs looked horrible - multiple pieces of forward looking information look positive so I remain a shareholder. Also possibly linked to a major military contract as investigated here:

Byron Street Research

Army Training Modernization to Elevate VirTra to Prime Contractor Status

A review of federal procurement databases and military program developments shows VirTra, Inc. (VTSI) is likely months away from securing its first prime military award. As the military shifts to commercial off-the-shelf synthetic training environments, the company is competing for a pipeline of defense contracts, including within a $22 billion Army ini…

Read more

6 months ago · 8 likes · Liger Cub

Franklin Street Properties – $FSP (2.32%):

Some incrementally positive updates for since I last wrote about it. Added JLL Securities to their strategic review (what they were doing for a year before this idk?) and are actively negotiating the sale of their Greenwood Plaza property. This has been a big loser for me, stock has been left for dead I just struggle to see how the assets here are not worth at least $1/share. Still hoping for a timely sale here but management does not really have the incentives for it. A lot of lessons to learn here.

Reading International Inc Class A - RDI (1.87%):

RDI presents an asymmetric “stealth liquidation” opportunity where its ~$39.7M market cap significantly discounts the value of its historic, marketable real estate portfolio. Forced by upcoming debt maturities to aggressively monetize these assets, the sale of their Cinema123 property alone could exceed their current market cap. This dynamic effectively creates a floor for the debt stack, leaving equity holders with pure, unencumbered upside as the broader movie industry experiences a positive macro inflection. This is a name that I have always avoided as a value trap for a years but with the movie business inflecting and major asset sales in the pipeline the risk reward feels good here.

Team Inc – $TISI (1.57%):

Super levered company, pretty binary outcome with the debt load aggressively cost cutting and aiming for 10%+ adjusted EBITDA margins. Based on their Q1 guidance for 2026 they expect to hit roughly 22m in cash flow for debt repayment after capex and they are going to hit 7.6% margins at the midpoint of guidance. At 10% EBITDA margins they could double this cash flow and things get really interesting. What makes things really interesting is 1/3 of their debt is held by Corre partners management who is aggressively buying shares in the open market. Would be an easy multi-bagger if the turnaround happens and one of the more interesting equity stubs I could find. Obviously sized based on a binary outcome.

WM Technology Inc - (0.63%):

Trading at like 1x EBITDA and delisting created a lot of forced selling that should now largely be over. Shady management but incredibly cheap and delisting also allows them to expand their current product as it removes restrictions around “plant facing operations.”

GARP/Quality

Pro-Dex Inc – $PDEX (4.47%):

I already covered this company in my last writeup, but I want to dive deeper into their relationship with Zimmer Biomet. When Zimmer acquired Monogram, PDEX effectively stumbled into becoming the exclusive supplier for Zimmer’s new robotics product line, which is expected to start generating revenue by early 2027. This acquisition created a massive dual-catalyst for PDEX. First, as an early Monogram shareholder, they are receiving millions in upfront and ongoing cash payouts through Zimmer's CVR milestone structure. Second, through their supplier agreement, PDEX stands to realize >$100M+ in recurring annual sales as the robotics program ramps up—at gross margins substantially higher than their current portfolio average.

CareCloud – $CCLD (3.46%):

I feel fundamental developments and stock price continue to diverge with this stock. Lowered cost of capital by replacing their CCLDO prefs with bank debt and are projecting 25+M in free cash flow on a 97M market cap. Even using the fully diluted share count accounting for warrants, that’s 4-5x FCF for a growing company with strong ROIC on further acquisitions. Just way too cheap and new CEO feels like he’s been consistently executing and turning the company around since the start of his tenure.

MNTN Inc – $MNTN (2.97%):

This is a performance marketing company for connected TV. They basically invented the category and are the leader in it. Ryan Reynolds backs them. As a SaaS + ad-tech company, it’s completely out of favor. Top that off with it being a recent IPO, and it’s as hated as it gets. The numbers are phenomenal, though. Active customer count continues growing Q/Q, they are backing out of their service revenues, and margins have expanded to 80%+. They issued guidance for 2026 which implies 24% YoY growth, yet the stock trades at an EV/Adj. EBITDA of just 4.46x. At 8–10x EBITDA, I see a fair value of around $12.70–$15.20/share.

Reddit Inc - $RDDT (2.78%):

My thesis here is pretty simple, one of the most viewed websites in the world with real human interaction that is so early in their monetization pipeline. Stock is around 32x forward earnings while growing 40-50%+ historically. I think for an asset as valuable as Reddit with their ability to continually post great quarters and with the runway so early here I think buying and holding this will be really beneficial.

GrabAGun Digital Holdings Inc - $PEW (2.73%):

Shares are currently trading at $2.90, but the company sits on $110.4M in cash against basically zero debt, shaking out to $3.45 per share in net cash. That’s a 19% upside just for the stock to trade at the cash on its balance sheet. Business is growing, management is buying back shares and there is currently 10% short interest. You can check out this great article by EHP to illustrate the full investment case here:

Everyone Hates Poetry Research

GrabAGun Digital (NYSE: PEW)

TLDR PEW trades at a 20% discount to the cash on its balance sheet…

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6 months ago · 38 likes · 5 comments · everyonehatespoetry

High Tide – $HITI (2.48%):

This is a name I have talked about a fair bit in the past so I want go too in-depth. I am happy with the continued execution here even though stock price refuses to rerate. Almost all incremental information I am seeing here looks positive (growth reaccelerated, consolidation continues happening, Remexian deal in Germany looks like a complete steal, TD Cowen analyst coverage, and lower cost of capital through bank deal) - yet stock has gone nowhere cause its a marijuana company. This will change eventually - US just rescheduled so sentiment should directionally get better. Either way I am setting and forgetting - if you are a Canadian like me you will know these guys have a big footprint here.

Global Payments – $GPN (2.45%):

A serial acquirer that just did a massive acquisition and are digesting it. Trading at <6x adjusted 2026 earnings while growing mid single digits organically. Margins have expanded, they are hammering the buyback with 2.5B committed and they are aggressively paying down debt while also paying out a dividend. Management thinks its cheap and is willing to look at strategic alternatives at these levels so a decent shot this gets taken out by private equity.

During the last earnings call my CEO stated: “if we get to a point after a period of time of integrating the businesses, producing results, returning capital, if the public markets continue to not fairly value the business, I think we owe it to ourselves to look at all alternatives and evaulate all alternatives…there’s an enormous amount of private capital that’s obviously on the sidelines, and then you’re seeing bigger and bigger deals getting done. So it feels like a more feasible option now than it ever has been”.

Not some huge conviction play for me but looks like one of the better names in the bombed out payments space.

Haivision Systems – $HAI.TO (2.36%):

Absurd customer list, including DOD, SpaceX, NASA, Microsoft, Meta - you don’t see those kind of customers everyday for a small cap. Stock looked like it was finally inflecting with 20%+ growth and great guidance from management expecting 15% EBITDA margins in 2026 and 20% in 2027. Stock looked pretty cheap based on those expectations when I first bought. Iran war messed up near term funding and they expect a softer next Q and a big 2nd half weighting. Memory prices are also causing some near term margin pressure, but they are proactively raising prices to protect margins. Likely some near term noise but I like this as a long term holding.

Entravision Communications Corp - EVC (1.94%):

I am kind of kicking myself over this one as I have looked at it several times but passed on it because of concerns over the growth rate sustainability and the fact the biggest customer is Tencent. Core biz has several political tailwinds coming up and seems like their reach in the hispanic community is a bit of a moat for sustained growth in their Adtech division. Forced selling from the widow of the late founder gave me an entry and I am willing to punt a couple % here.

Oddity Tech – $ODD (1.30%):

My biggest loser of the year by far and likely the biggest blowup of my investing career. I think there were a lot of red flags around the company, with the short report and in hindsight company did feel like it was just throwing a bunch of buzz words which I didn’t do any analysis on the efficacy of. I think a lesson here as I aggressively averaged down here despite it not having enough of a margin of safety. After being a consistent 20%+ grower, company shocked everyone with a -30% revenue guide due to increased CAC linked to a Meta algorithm change. Definitely raises a lot of questions on the durability of their business model if a single change like that can completely shake the growth. I didn’t cut my shares for the following reasons, management thinks they can fix this issue, CEO bought 10M of stock in the open market, and company continues to buyback shares. If issue is truly temporary, then I expect it to recover but I have no read into that.

Cash (17.02%)

• V-shaped recovery in high-margin semiconductor wafer business; projecting 100% revenue growth ($20M to $40M) with significant operating leverage.

• GES segment driving double-digit growth, fully exposed to massive secular themes: Grid Modernization, Energy Storage (ESS), and Wind Energy.

• Strategic divestiture of unprofitable Healthcare unit complete; removal of margin drag creates a structural profitability tailwind beginning Q4 FY2026.

• Trades at <1x Sales, 1x Tangible Book, and <8x Normalized Earnings with adjacent peers trading multiples higher

One Small Ask:

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Disclaimer: I own shares of Richardson Electronics ($RELL) at an average cost basis of $11.43. This write-up is for informational purposes only and does not constitute investment advice.

It’s rare nowadays that I get the “asymmetric itch” when researching a new stock. With the market at all-time highs and valuations elevated, most names are missing at least one key ingredient of a true “fat pitch.”

I look for four criteria:

1. Significant Downside Protection: Supported by tangible assets and a clean balance sheet (trading close to TBV or NCAV). Even if my thesis is wrong, permanent capital loss is unlikely.

2. Proven Earnings Power: A history of proven earnings power currently obscured by cyclicality or “temporary” issues. (Note the word temporary - need to be confident this is the case).

3. Clear, Hard Catalysts: Visible short-to-medium term events that will significantly inflect earnings and force a market re-rating.

4. Asymmetric Upside: A realistic path to at least 2–3x the stock price in <2 years.

I believe Richardson Electronics fits the bill for all four, and I have made it my largest position heading into 2026.

Business Overview:

Richardson Electronics is an electronics component manufacturer, designer, and distributor. A 79 year old company they focus on niche end markets and industries with minimal competition and provide specialized “engineered solutions” to their customers.

They are executing a strategic pivot from a traditional logistics-focused distributor to a vertically integrated provider of 'Engineered Solutions.' By designing and manufacturing proprietary products to solve specific customer challenges, RELL captures higher value-add and deeply integrates itself into client product cycles. This entrenchment creates a wide moat, significantly increasing switching costs and supporting superior long-term margins.

Essentially companies come to them asking them to design a “specialized” device to solve some problem for them. With over 100s of engineers, RELL gets to work designing potential solutions, most go no where but occasionally they hit homeruns and are able to successfully commercialize and grow the solution.

After divesting their money losing healthcare business in 2025, they now operate in three segments moving forward:

1. Power & Microwave Technologies (PMT)

This is the largest business unit within Richardson Electronics. This segment consists of the legacy Electron Device Group (EDG) which contains the power grid tube and semiconductor wafer fab business. Major customers in the fab business include: LAM, MKS, Tokyo Electron, and Applied Materials. RELL considers themselves “exclusive” in the products they make and sell. The other part is Power and Microwave group (PMG) which is newer and focuses on 5G related components such as RF, wireless semiconductors, modules and power components. They focus on component distribution in this segment and work with technology partners such as Qorvo and Maycom. The repaired Siemens CT X-ray tubes part from the divested healthcare business was also retained under this segment.

2. Green Energy Solutions (GES)

This segment is the primary driver of revenue growth and their newest segment. Born as a pet project within the PMT division, the business was launched into a separate business unit in 2023 once commercial sales started taking off. The core revenue generator is the Wind Energy business, anchored by the ULTRA3000 pitch energy module. This module is a drop-in replacement for standard lead-acid batteries in wind turbine pitch systems. There is a clear value add for customers as while traditional lead-acid batteries fail every 6–24 months due to environmental stress, RELL’s ultracapacitor modules have a service life of 10+ years. This reliability significantly reduces downtime and eliminates hazardous maintenance costs for operators, securing a long-term retrofit cycle for the company. Since the ULTRA3000 was tailored for GE turbines, RELL has recently launched the ULTRAPEM which allows them to cover all other OEM turbines - a significant tailwind going forward.

In addition to wind, they also pursue opportunities in EV locomotives and synthetic diamond manufacturing. In the rail sector, the company is transitioning from beta testing to production orders with major partners like Progress Rail (Caterpillar), supplying “StartSaver” modules to replace legacy starter batteries in diesel-electric locomotives. Concurrently, the industrial division applies the company’s legacy microwave expertise to power Chemical Vapor Deposition (CVD) reactors, which are critical for manufacturing synthetic diamonds.

One important thing to note is that GES has zero exposure to offshore wind development. They focus exclusively on retrofitting the existing global fleet of onshore turbines, hence the business remains insulated from subsidy volatility and relies on mandatory maintenance expenditures rather than discretionary government infrastructure spending. While the current Administration has moved to block new offshore wind projects due to a general distaste for the sector, RELL faces zero impact from this as they are 100% aftermarket.

3. Canvys

The stable and less “sexy” part of the business. Canvys manufactures custom display solutions for Original Equipment Manufacturers (OEMs) in the medical, industrial, retail, and transportation sectors. Unlike standard monitor distributors, Canvys engages in deep engineering collaboration to modify off-the-shelf panels or design fully custom units that meet strict regulatory standards such as surgical suites and patient monitoring systems.

Snapshot:
Price: $11.36
Market Cap: 164.92M
Shares outstanding: 14.3M
Enterprise Value: 131.07M
Tangible Book Value: $11.05
P/TBV: 1x

Why does this opportunity exist?

1. Cyclicality in Semi-fab business

The core focus of my thesis surrounds the Semiconductor Wafer Fabrication Equipment (WFE) support business embedded within the PMT division - more specifically the Electron Device Group (EDG) part. Crucially, RELL does not manufacture the silicon wafers; instead, they manufacture RF power tubes and microwave generator that are critical for the etch and deposition processes used to manufacture semiconductor wafers (Basically they make the things that go into the things that make the chips)

The semi fab business within the PMT division has historically been a very cyclical business. In the table above, you can see the massive drop in PMT sales from 2023 to 2024.

“Fiscal 2024 was a difficult year for Richardson Electronics, as a result of challenging conditions within our semiconductor wafer fab market... Sales decreased $35.6 million or 21.7% for PMT... primarily due to lower sales of manufactured products for our semiconductor wafer fabrication equipment customers.” — FY2024 Earnings Press Release (July 24, 2024)

Management doesn’t explicitly break out the sales for the semifab business but share tidbits in PRs and earnings call that give you some context directionally of how the business is doing. During the global chip shortage in 2022-2023 they experienced a strong upcycle in this business as the components they manufactured were in high demand as they were critical to build the equipment used for making these chips. Around Q4 2023, they started experiencing the softening demand in this segment as similar to a lot of industries coming out of covid customer inventories had overshot expectations and destocking was necessary to chew through this excess inventory slamming RELL’s PMT sales in the process.

Why is this changing?

With AI creating another massive boom in semi demand, the company has sharply rebounded from its trough semi fab sales with management forecasting returning to peak semi sales and even higher. The company saw an unprecedented V shaped recovery in this business after experiencing the trough in Q2 of FY2024.

However, we saw semi-fab demand increase during the quarter as we experienced higher shipments and bookings. In fact, Q4 FY 2024 was our largest revenue quarter this year for the semi-wafer fab business, up 71% over Q3. We expect to see year-over-year growth for our semiconductor wafer fabrication equipment business in FY 2025, based on customer feedback and market predictions. - Q4 FY 2024 Earnings Call

Management continues to be extremely bullish on the incoming demand in the 2H of 2026 and beyond as demonstrated in their most recent earnings call:

Finally, we are expecting stronger demand for our engineered solutions within the semiconductor wafer fab equipment market well into calendar year 2026 and beyond. This growth is tied to the ongoing benefit of AI on equipment demand throughout the world. We are well positioned to benefit from growth in memory-related applications. This growth takes advantage of our existing resources and manufacturing facilities as well. - Q2 FY 2026 Earnings Call

So as I mentioned, we're starting to see stronger forecasts for our Q3 and Q4. Bear in mind that the forecasting is not always the best, and it tends to bounce around a lot, as we've been discussing really for the last couple of years. But we do see, again, across multiple customers within that channel, their input to us is, "Get ready. We are ready. We have the resources. We have the space. It's not going to cost us a lot of money in terms of realizing upside." I also want to point out that on a year-to-date basis, so Q1, Q2, we're still up considerably over prior year's first two quarters. So we are cautiously to more than cautiously optimistic about Q3 and Q4, and we're ready. So I don't know if that answers your question. - Q2 FY 2026 Earnings Call

Now the really nice part is that RELL openly discloses their customers in the semifab business. They are the primary and sole supplier to LAM research a steady relationship they have had since 2006 when Novellus was sold to LAM. They sell about 100+ devices to LAM including microwave devices (imagine a 36-inch stainless steel ring) that run for around $30k a piece. They also sell to Tokyo Electron, MKS, and Applied Research but prefer LAM’s business over the latter as they directly compete. Here’s a nice quote to give you some idea of the scale of the business:

What we are seeing is a pickup in the semi-fab equipment manufacturing business. You know, we follow LAM’s quarterly vendor meetings and listen to them, and they’re talking about a very positive increase in their business going forward. In the best year, we did about $40 million with LAM and people in that business. I think right now we’re running in the low $20 million, Wendy, somewhere. We see an opportunity to grow substantially in that business going forward. - Q1 2026 Earnings Call

LAM research reported Q4 2025 financials recently beating and raising guidance. Most importantly management forecasted a substantial increase in WFE spending, projecting it to reach approximately $135 billion in CY 2026, up from an estimated $110 billion in CY 2025. This growth is actually “constrained” due to a shortage in clean room storage which is pushing the bulk of this into 2H of 2026 as customers cant build their tools enough. For context, the previous peak for WFE spend was 2022 ($95-100B) which as we discussed RELL greatly benefitted from and now we are looking at a conservative 30%+ increase to that figure in 2026.


Now I wont hold your hands here too much as I think you can put two and two together but take a look at how has traded comparatively to in the chart above. Quite frankly I don’t think the market has digested this story at all and I fully believe the semifab business should easily return to its previous peak and exceed it. The capacity is already in place and the business has tremendous operating leverage at scale which should flow down to the bottom line and create a huge spike in earnings when realized.


2. Healthcare losing money

In June 2015, Richardson Electronics bought IMES (International Medical Equipment and Service) for $8.5M which birthed their healthcare division.

From the words of Wendy Diddell their COO it was a “challenging business that did not materialize the way they wanted it too.”

They wanted to service tubes as well as make them creating a proprietary X-RAY CT tube called the ALTA750. Even proudly claiming this in a 2018 Investor Presentation:

“Our Future is Healthcare: we’ve invested more than $35 million since 2015”

They targeted 40%+ gross margins on this tube business but struggled to hit the scale necessary to break even on this division pushing the goalposts every year until finally volumes collapsed in 2024. For most of its inception, the healthcare segment contributed <10% of sales and skirted around the mid 20%s in gross margin essentially diluting overall margins while contributing very little sales.


Why is this changing?

RELL finally gave up on this business in 2025, selling majority of their healthcare assets to DirectMed imaging for $8.2M. Retaining a small profitable piece of the Siemens Tube Repair business in PMT. However, they still have a supply agreement they entered where they have to supply certain CT X-ray tubes until its completion in Q4 of 2026/Q1 of 2027.

Okay. So this is Wendy. Year-to-date, the overall hit to the gross margin in PMT has been almost negligible. It’s about a 0% gross margin, so we’re not experiencing a huge hit there. It’s the addition of the SG&A. And on a year-to-date basis, while we’re doing better than we anticipated with that, we still are losing money. As we mentioned in the call, we anticipate finishing up the ALTA tube production in the third quarter. And when we conclude that, and we’re focusing then strictly on the repair of the Siemens tubes. We expect that to turn to a profitable bottom line contribution. So I’m estimating, we’re estimating at this point that, that will begin in Q1 of FY ‘27, but we’re going to do everything we can to pull that into Q4. - Q2 FY2026 Earnings Call

Despite have no effect on their gross margins, there is still a drag on the bottom line due to remaining overhead in SG&A on this supply agreement. The nice part is this margin boost could align nicely with the inflecting semi business to further increase earnings going into 2H of 2026 and into 2027. So it presents a nice opportunity for the “badco” to fully roll off the books and improve numbers.

Just to give some additional context here are the op losses for the healthcare business from 2022-2024:

FY2022: -5.5m
FY2023: -3m
FY2024: -3m (Just under 3m according to Q4 2024 call, lets just say 3m)

From 2027 onwards, this will be completely gone which should add a ~$0.15+ boost to EPS.

3. Lumpiness of projects in GES

The main thing I will point out here is that the GES segment had a 51% drop off in sales from 2023 to 2024. Now at first glance this is probably alarming to investors but digging deeper it was the result of a combination of non-recurring “lumpy” large orders and project delays, rather than anything affecting the long-term prospects of the business.

“GES sales decreased $10.6 million from last year’s fourth quarter, which included a large sale of EV locomotive battery modules that did not recur in fiscal 2024.” — FY2024 Earnings Press Release (July 24, 2024)

“Replacement of lead acid batteries in existing wind turbines is often project-based and timing is difficult to predict... program delays across several of our emerging GES opportunities [impacted sales].” — Ed Richardson, CEO (FY2024 Earnings Call)

Management commentary on this in their FY2024 call aligns with this narrative.

Why is this changing?

Management was able to steer the GES segment back on track in FY2025, growing sales in the division 30% from their down year in 2024 and getting gross margins back to their long term target of 30-35%.

In a short amount of time, we have designed numerous products, received several patents, and developed a growing list of key customers. All of this will help develop a more predictable quarterly revenue stream. […] In FY 2024, we saw the market share grow with an agreement to outfit 1,000 diesel locomotives with our patent-pending starter module. In addition, our pitch energy modules were selected by four new wind turbine platforms, including Suzlon, Senvion, Nordex, and SSB.

We now have over 18 wind turbine owner-operators purchasing numerous products from us, and we are expanding globally with the rollout of the new wind turbine platforms in Europe, Latin America, and Southeast Asia. Our customers repeatedly tell us that we have maintained our market share for our core GES power management applications, suggesting the slowdown in shipments in FY 2024 was primarily a timing issue. In fact, our customer pipeline and the number of opportunities continue to increase as we take advantage of significant energy transformation projects globally.

Over the first 2 quarters, of FY2026 this momentum is continuing with 1st half sales up 11% including a tough comp to Q125 that had a large one time EV locomotive order. Q2 26 was up a whopping 39% from Q2 26 with a book-to-bill of 1.1x which seems quite impressive on that growth.

They have several catalysts over the medium-long term that support this sales growth:

1. Partnered with Wabtec (diesel locomotives) to launch the “StartSaver” module, moving from their EV pilots to the mass-market retrofit of thousands of diesel locomotives.

2. Wind Expansion into non-GE turbine platforms (Suzlon, Senvion, Nordex) unlocks a new $150M+ addressable market in Europe and Latin America.

3. Existing wind customers are beginning to upgrade to the new “UltraPEM” modules, creating a second wave of sales from the same installed base. Management anticipates “new significant orders” specifically for this product. In addition, they are anticipating orders from new customers and expansion into the EU.

4. The company is launching its “Phase 1” commercial battery storage systems in Illinois right now (H1 CY2026) to capture state incentives. This would provide them an entry into Energy Storage Solutions (ESS), a very hot sector and lots of potential here with the direction the world is heading.

Obviously, a lot of exciting stuff and I think they should be on track to hit growth in the 20-30% range for this year and next based on these initiatives.

I will conclude with one note though. Its funny I look at other writeups on RELL over the years and this segment is always in the focus. Naturally, it makes sense - its the fastest growing, exposed to secularly growing industries, solid customer base, and good margins. I think for the long term story 3-5+ year view I fully agree but frankly I’m taking a shorter term view here specifically over the next 8-12 months so I believe the above catalysts are more important and I don’t need anything heroic from GES - as long as there are no surprises and steady growth I think the overall thesis will work here.

Management execution over the years has clearly been inconsistent so as exciting as the prospects in this division look I want to underwrite low expectations here and focus on the proven aspects of the company. Clearly market agrees here as they are ascribing almost zero value to the prospects and growth of this segment, will RELL prove them wrong? I hope but its not a question I feel confident answering.

4. Management

Speaking of management - the governance is a notable concern here. The dual-class share structure grants CEO Edward Richardson over 60% of the voting rights, as he holds 98% of the Class B shares (which carry 10x the voting power of Class A). He has essentially spent his entire working life at the company and owns 16% of the equity. However, at age 83, there are valid questions regarding his ability to lead the company through its lofty growth ambitions and manage the eventual succession. That said, the broader board and management team are quite tenured and experienced within the industry.

Capital allocation has also been questionable. The company has a history of poor M&A (lord knows what they were doing with the healthcare division) which was allowed to burn shareholder money for a decade. Despite paying a dividend, the company is typically overly conservative with its cash. Furthermore, ~70% of their current cash is held outside the U.S. in various legal entities; because this capital is required to stay offshore, the actual cash available to return to shareholders is significantly lower. Management’s priority is to invest in growth initiatives, primarily in the alternative and green energy segments, so I wouldn’t hold my breath on share buybacks (even though they make a lot of sense here considering the valuation).

From an engineering perspective, however, there is clearly incredible talent within the ranks. Richardson Electronics makes great products and boasts deep-seated relationships with several billion-dollar “blue chip” companies, so they are clearly doing things right on the customer side.

Ultimately, it’s a mixed bag, as is often the case with these longstanding microcaps. However, in my opinion, nothing here is extreme enough to make it uninvestable at these levels.

Valuation:

I have built out two models to roughly project what the 2027 numbers could look like. I have baked in pretty conservative numbers for my revenue estimates. Determining the right OpEx was the challenge. I referenced how opex as % of sales looked from their best years but increased them by roughly 3–5% to account for inflation and R&D spend, while also factoring in the removal of the Healthcare drag and the operating leverage of their semi business.

Applying an appropriate multiple on earnings is difficult here, but the current market narrative provides strong clues. The current consensus is that semiconductor demand is secular and will take years to build out. One look at RELLs biggest PMT customer (LAM) paints the picture of a what can happen to stock when the market views it as a secular story. LAM is up 3x in under a year and the is stock trading at 45x TTM and 35x forward earnings both historically high valuations for the company.

Even a pure distributor like Arrow Electronics (ARW) has seen its multiple expand significantly (15x–20x TTM earnings) due to its semi exposure, despite having half the margin profile of RELL and a slower growth trajectory.

Based on this, I believe the semi business should trade at a higher multiple than it has historically. Additionally, four factors suggest the entire enterprise deserves a premium:

1. The GES segment looks on track to grow sales at 20%+ while capitalizing on very hot themes (alternative energy, solar, power grid, ESS).

2. There is no longer a healthcare business dragging on profitability, which will be immediately accretive to margins.

3. Peak EPS (excluding one-time items) was already $1.02 in 2022 and $1.39 in 2023, proving the model works at scale.

4. Stronger emphasis on Engineering Solutions creates stickier/higher margin business

Price Targets

I think there is a strong case that RELL should trade at 20x+ earnings, but I will apply a conservative range of 18x–20x.

• Base Case (2027): $13.86 – $15.40 (22% – 36% Upside)

• Bull Case (2027): $20.34 – $22.60 (79% – 99% Upside)

• 2028 “Normalized” Scenario: Returning to peak EPS of $1.39: $25.02 – $27.80 (120% – 145% Upside)

Just a reminder, the company has no debt and is trading with ~20% of its market cap in cash.

With the stock at 1x Tangible Book Value and an NCAV around $8.97, I see very little downside in buying shares today at $11.35 and a very realistic chance at shares doubling in under 2 years.

Thus, I could be wrong, maybe even very wrong and it would still be difficult to lose much money. But the beauty here is that being even moderately right here could see material upside.

Risks

1. Management capital allocation

2. Semi cycle sentiment

3. GES growth hiccups

In this article, I will cover the remaining thirteen stocks and why I am invested in each of them.

Remaining Positions

Dlocal Ltd– (3.2%):

Cross-border payments processor focused on emerging markets, helping global merchants accept local payment methods and settle in-country. Most of the negative sentiment I see around the name is their declining take rate (the % fee they charge on TPV). They have essentially done this in order to keep growing their Total Payment Volume. Seems like a decent strategy for building relationships with more merchants and increasing their moat. Would like to see this stabilize at some point but at around 18x forward earnings and 35% projected growth feels cheap for one of the leading platforms in its industry.

Franklin Street Properties – $FSP (3.1%):

Beaten-down office REIT that is under strategic review. Trades at 0.15x book value, low occupancy but decent buildings in attractive locations (sunbelt area). In May 2025, the company announced a strategic review which is still ongoing. Big debt wall due in 2026 but they are actively negotiating a refinancing. Hoping for a timely sale here as properties are currently being valued at incredibly low $/sqft and could see a transaction happening at >$1.50 representing 50%+ upside here.

ODDITY Tech Ltd – $ODD (2.9%):

An growing cosmetics company that uses AI to determine effective skin care treatments using thousands of biological models that essentially emulate “skin” and then test various molecules on them to determine how skin reacts to them. The next phase of AI related investments will probably fall into the bucket of companies that can leverage it to innovate and streamline their operations and I think has a shot of doing this. Trades at ~17x 2026E, while consistently growing 20%+ and management that consistently beats and raises, the valuation and forward prospects look phenomenal.

CorMedix Inc – $CRMD (2.9%):

Biopharmaceutical company with a main product called DefenCath, which is used to prevent catheter-related infections. The valuation originally looked great based on the massive TAM and solid product efficacy. However, the main risk was always the significant TDAPA tailwind - a payment adjustment that effectively props up sales and profits for the first two years of a launch. This has clearly put a lid on the stock price.

Update: I have fully exited the stock at a loss following their 2026 guidance. The numbers looked worse than I expected, and the market is acting accordingly. Outlook is just too uncertain currently but may be worth a look again in the future.

ImmuCell Corporation – $ICCC (2.8%):

I’ve written up this name twice before (theses can be found here and here). I recently trimmed a chunk on some of the share price spikes, as I felt the stock would be “dead money” for a while. My reasoning was that most of the gross margin recovery had already been realized and year-over-year comps were looking tough now that they’ve finally cleared their massive order backlog.

While the recent news regarding Re-Tain® approval was disappointing, I thankfully had zero expectations for it given the product’s long history of delays. However, we got some very welcome news recently: the company announced they are pausing all further investment into Re-Tain after receiving an “Incomplete Letter” from the FDA regarding the fifth technical section. Instead, they are redirecting that cash to increase First Defense® manufacturing capabilities and expand the sales force by 50%.

This is exactly the shift I outlined as a possibility with the new CEO and CFO (and activists) coming on board. They’ve stepped in with a fresh set of eyes and objectively recognized that the approval process for Re-Tain was becoming a sunk-cost trap. The situation has essentially evolved into a “GoodCo/BadCo” play that has finally shed the “BadCo,” allowing the market to clearly see the numbers and potential of the crown jewel: the First Defense business.

Ingevity Corp – $NGVT (2.7%):

Specialty chemicals leader undergoing a radical portfolio simplification to exit low-margin legacy assets and emerge as a high-margin pure play. With the $110M sale of its CTO refinery now complete, the “New Ingevity” centers on two growing crown jewels: Performance Materials (activated carbon with 50%+ EBITDA margins) and Pavement Technologies (record North American sales).

The remaining segments are seeing mid-single-digit growth driven by stricter global emission standards and “warm-mix” infrastructure tech. Despite a recent rally, the stock trades at ~12x 2026E earnings, which significantly undervalues a business with pro-forma EBITDA margins of 37%. Management is using the resulting ~$1B in cash flow through 2027 to aggressively pay down debt and buy back shares. Expecting the removal of the “bad-co” assets should allow the valuation to re-rate toward specialty chemical peers.

Amazon.com Inc – $AMZN (2.6%):

This has been the clear laggard of the Magnificent Seven for the last five years, which I think makes it one of the more interesting catch-up trades in big tech. The stock has basically been dead money compared to its peers, and the earnings still aren’t “clean” because management is plowing over $125B into capex. All that reinvestment and depreciation really masks the fact that the underlying business has become a high-margin services and advertising machine.

The big story lately is AWS finally re-accelerating back toward 20% growth. I also like that they seem to be the most disciplined of the Mag7 when it comes to AI spend. Margins should also see a nice tailwind from all the robotics initiatives going on. There are just too many levers they can pull here to keep boosting earnings, and I expect the share price to eventually reflect that reality.

Galaxy Gaming – $GLXZ (2.6%):

The acquisition agreement was recently extended into Q1 2026, with a final outside date of July 17, 2026. Assuming the deal actually closes sometime before April, I can still pull a double-digit IRR out of this, but it’s definitely been a disappointing hold so far—especially considering it was initially expected to wrap up at the start of 2025. It's just more proof that merger arbs are hard and probably better left to the pros.

TechPrecision Corporation – $TPCS (2.0%):

Turnaround story with a new board and CFO. The company makes specialized components for U.S. Navy submarines, and demand looks strong: backlog is now $40M+ and gross margins are trending upward. Management is also working through legacy loss-making contracts in one division and gradually renegotiating terms, which should keep lifting margins as those projects roll off. Overall, it looks like a relatively straightforward turnaround with more accountable leadership and a supportive macro backdrop from increased focus on revitalizing the U.S. defense ship fleet.

Power Solutions International, Inc. – $PSIX (2.1%):

Has a segment that builds gensets for data centers, has been a huge winner over the last two years going from as low as $2 to >$100 at one point. Soft guide for Q4 in last quarter with no explanation or public conference call dinged up the stock quite a bit. It now trades at ~15x 2026E after growing 45% in 2025, and as explained in a limited CC with investors that the soft guide was an intentional slowdown to prioritize quality growth and temporary inefficiencies related to accelerated production ramp up. Definitely one of the cheaper names exposed to the data center theme and I would recommend everyone to listen to the investor call they did to understand the setup.

Jerash Holdings – $JRSH (2.1%):

A Jordanian-based garment manufacturer for global brands (VF Corp, New Balance). The company is currently a “revenue-growth, margin-recovery” story. While they’ve hit record sales ($146M+), margins have been squeezed by a deliberate shift toward high-volume, lower-margin products to secure new customers. The stock remains a deep-value asset play, trading at a ~$39M market cap against ~$35M in net current assets (NCAV) and $62M in tangible book value.

Management is hoping to return to 20% gross margins over the next 5 years, which if materializes at the current revenue base + potential growth would make the stock extremely cheap and rerate aggressively. Again feels asymmetric here with the downside protection from assets and upside from margin improvement and sales growth. To top it off we get a 6%+ dividend yield while we wait for this recovery.

NN Inc – $NNBR (1.7%):

This is mainly a January effect play for me. New management came in a few years ago and has been attempting to execute a turnaround to cut low-margin business and grow the sales pipeline. Margins have been ticking up, but sales comps have looked bad due to cutting that bad business; 2026 should finally be an inflection year for those comps. They have a bunch of US manufacturing capacity that should, in theory, see tailwinds from tariffs. The main issue is the $100m+ in preferred stock. The dividend rate on those shares starts to step up by 2.5% beginning in March 2026, and the payments eventually become mandatory in cash by September 2027. It is quite an albatross, and I am not sure how they can navigate it without dilution.

Health In Tech Inc - $HIT (1.4%):

Pretty speculative position for me that has turned out to be a big loser so far. Found the business model of using AI to provide self-funded health insurance interesting in the current backdrop of big insurance distaste. Early stage, massive TAM, huge growth numbers, and lots of operating leverage intrigued me but didn’t feel it was necessarily cheap when I bought. Stock took a big hit due to soft guidance for Q4 (blamed on timing) and margins unexplainedly dropped in Q3. Was not a fan of the Q3 call at all as management spent majority of it talking about some blockchain initiative which I found weird. Trimmed some at a loss and will monitor the small position.

Reflecting on a fantastic year for me, up 59% while the S&P comparatively has returned 18% in 2025.

Lots of names to cover, so I’m splitting this into two separate posts. The first will focus on the reflections and lessons I’m taking away from 2025 (plus a few positions), and the second will dive into the rest of the portfolio in detail.

Reflection time:

Main Contributors:

$CNRD, $ACCD (acquired) , $JOB, $USIO, $NSYC, $LFMD, $CCLD, $PPSI, $CCLDO, $WSTL, $FEIM, $IMPUY, $SBSW, $IZEA, $SNCR(acquired), $HROW

Main Detractors:

$FTRE, $SUP, $VAL , $PRAA, $MAGN, $THRY, $PLCE , $HIT

Lessons I learned:

1. Respecting what the market tells you.

I have found that 9/10 times if a position goes against you its best to take the loss and reevaluate the situation down the line with a fresh set of eyes. Peter Lynch’s quote “Water the flowers, cut the weeds.” is a fantastic analogy to how people should invest. Of course there are always exceptions, naturally the smaller and illiquid pockets of the market can create inefficiencies but for the most part, I have found cutting losers early can help avoid a lot of big blowups and sunk cost fallacy down the line.

2. Diversification/Correlation

I’ve been increasing the number of positions I own and making a deliberate effort to diversify across factors, sectors, geographies, and market caps. The goal is to smooth volatility and reduce risk. Outside of $CNRD, I’ve capped positions at ~5% and bucket them like this:

• 3–5%: higher conviction with low downside

• 2–3%: ideas I like, but either need more work or lack downside protection

• <2%: speculative bets (often more binary)

This ties back to the first point: I respect the market and its participants. Outside of the occasional “fat pitch,” I’m less interested in taking the risk that comes with oversized positions.

3. KISS Rule

Keep it Simple. I constantly read pitches and look at stocks other people share as part of my research and I have found more and more that if I have to read 20 pages of research and do mental gymnastics to justify investing in something I am better off passing. All I want to know is why is stock trading the way it is, what is going to change, and why the market is missing it. Bonus points if the business model is straightforward and leverage is low to moderate.

4. Valuation

This is probably the most controversial one. I feel like the way I view valuation has evolved every year. My view on valuation evolves every year, but one thing I’ve learned is that selling purely because a stock “hit your multiple” is often a mistake—in the sense that, barring egregious examples like a Palantir ($PLTR) stock, which anyone can look at and determine to be grossly overvalued even under the most optimistic scenarios, I’d rather reassess the business based on management execution, runway, and forward outlook/news flow. Valuation still matters—especially for opportunity cost and risk—but I don’t want to sell a company firing on all cylinders just because it crossed a pre-set earnings or multiple threshold.

Positions

Conrad Industries – $CNRD (12.1%):

What more is there to say on this one? Its been an incredible run-up for my first ever public pitch on X and Substack and boy did it deliver. I have pared back a good chunk as a lot of my core thesis has played out with shares nearly tripling from my average purchase price but still remains my biggest holding. Despite the run-up the barge replacement cycle still has no end in sight, earnings keep ticking up, they are benefiting from political tailwinds and are branching into some cool initiatives in modern shipbuilding. As the cherry on top, they recently partnered with Japanese super ship builder Samsung, which paired with sudden COC language in their recent Q - seems like coincidental timing around a potential buyout. In case you missed it, I go into more detail about the recent Q down below.

CareCloud Pref Shs Series B - $CCLDO (5.8%):

I laid out the investment case for these preferreds in my last portfolio update. Since then, CareCloud announced that the accumulated dividends they previously deferred during a cash-flow squeeze will double starting in 2026. The preferreds are up 34% over the past six months.

Integrated BioPharma – $INBP (5.8%):

Not a lot has changed since my write-up. The company reported Q1 results that were fairly weak, with a sales decline and some regression in margins and customer concentration. That said, the balance sheet remains solid: cash increased to $4.7M versus a current market cap of $9.63M, and trailing twelve-month EBITDA is roughly $3M, so the stock still trades at under 2x EBITDA. I’ll be watching closely to see whether the sales decline was a one-off, potentially tied to revenue being pulled forward into the prior quarter, which was the strongest quarter they’ve posted in the last couple of years. On the customer concentration front, a subscriber shared that management indicated (in a direct conversation) that the Herbalife contract has been extended to 2027, which reduces near-term uncertainty around renewal risk.

Bridgford Foods – $BRID (4.6%):

Most of the thesis surrounding the turnaround surrounds beef pricing and there has been some recent developments that might shift things around:

1. Trump removed the 10% reciprocal tariff on Argentinian beef and quadrupled the low tariff quota from 20000 to 80000 metric tons

2. Tyson Foods beef processing facility closure that accounts for 5% of US beef slaughter.

3. Removed 40% tariffs imposed on Brazilian food products

The first and third points should in theory help bring in more beef and create lower prices. However, US beef consumption is massive and imports can only help so much. The second point has historically caused beef prices to go higher in the short term as less can get processed but plants are already running at such low capacities, the lost capacity in the closed plants can easily be switched over to other facilities. At the end of the day, the only way to really bring down prices is through herd expansion, which is a slow and arduous process. Thus, while these are interesting developments I am not sure how much they move the needle on beef pricing but will monitor to see how it plays out.

Snap Inc – $SNAP (4.5%):

I know this might come as a shocker but I quite like the risk/reward of Snap right now. Even looking back two years I would never have expected to own this company but here we are.

I was inspired by this great breakdown by on X. Essentially the gist of the thesis is that sentiment is horrible, stock is near all time lows and has essentially traded in a channel for the last 3 years which puts a floor on downside. On the upside, you have 1B MAUs and multiple fast growing revenue opportunities introduced such as snap+ and storage payment options that are essentially 100% margin. Almost every argument I see centers around the following:

1) Egregious SBC
2) Who even uses Snap anymore?
3) Poor management

I don’t care much for the rearview mirror, is SBC still a problem yes but it continues to come down as a % of revenue every Q. Anecdotally, as someone in my early-mid twenties almost everyone I know still uses snap in some capacity with a lot of my younger cousins and their friends buying snap+ and pretty much using it as their main form of communication. Don’t just take my word for it look at yearly/quarterly trends for DAUS/MAUS somehow Snap continues to capture new users globally. As for the last point, I wouldn’t say I’m a big fan of Evan Spiegel or the management but the 14th year letter does read like he’s focused on steering the ship around and to me the hardest part is getting the eyeballs. From there it feels like straightforward execution and discipline - this model on what 10% adoption of their DAUS for $3/month on storage plans spells out how simple it is for them to boost bottom line by $600m with miniscule impact on the consumer. The levers that can be pulled here are limitless.

Pro-Dex Inc – $PDEX (3.6%):

Pro-Dex generates revenue by manufacturing and repairing surgical devices. I estimate the stock is trading around ~10.8x EBITDA, and Q1’26 posted 24% YoY growth. The most recent 10-Q also had some very bullish commentary that, in my view, supports a long runway for both growth and margin expansion.

After the quarter, they secured a contract extension with their largest customer (currently ~75% of sales) through 2028, with minimum purchase volumes committed for 2026 and 2027. Put together, I think this can support 15%+ growth over the next couple of years, and the current valuation still looks too cheap given the visibility from the extension and the potential for further margin upside.

PDEX 10Q - 10/30/2025 - Page 18

Richardson Electronics – $RELL (3.6%):

Richardson Electronics provides engineered solutions in the U.S. and now operates across three segments after divesting healthcare: Power and Microwave Technologies (PMT), Green Energy Solutions (GES), and Canvys. After a sluggish 2023 tied to portfolio reshuffling, growth is re-accelerating in 2024/2025, with net sales up ~7% in Q125 excluding the divested healthcare business. The most interesting piece is PMT’s semiconductor wafer fab exposure, which is up 52% YoY and already running at roughly a $20M pace; management thinks this can recover back toward the prior ~$40M level and potentially exceed it. On valuation, the stock sits around ~1x tangible book and is backed by roughly ~$130M of NCAV versus a ~$156M market cap, so the downside looks reasonably protected by hard assets. Unsure how I feel about management considering historical missteps but for an AI-adjacent industrial with a dividend and solid balance sheet, it looks like a solid risk/reward setup.

Thryv Holdings Inc – $THRY (3.4%):

A classic “goodco/badco” setup and a fintwit favourite that’s been absolutely decimated after Q3 earnings. Pretty shocking to see a ~60% drop on what looked like a decent report. The stock now trades at <5x EBITDA for a growing SaaS business: organic SaaS revenue was +14% YoY, and they continued paying down debt.

But the elephant in the room was NRR, which came in at 94% vs 103% in Q2 2025. Sounds the alarm bells? The market seems to think the company’s growth is mostly coming from squeezing the existing base, while “SaaS” as a category is hated right now and viewed as an “AI victim.” Management tried to explain it on the call, saying they’re intentionally letting lower-quality customers churn but clearly market is not convinced.

I’ll admit that after watching it for a while, I started building a position - valuation is attractive enough to dip my toes and to me management just needs to prove they are at least a mediocre SAAS platform. That said, they need to accelerate the wind-down of the legacy Marketing Services business and get NRR back on track for the market to appreciate the story. If management is unable to attract new high quality customers things can get even uglier here quick as they can only increase ARPU so much before more churn happens and you start seeing flat/declining revenues.

Harrow Health Inc – $HROW (3.4%):

Harrow ($HROW) is an eye-care focused pharma compounder that buys/partners on de-risked ophthalmic assets and monetizes them through a built U.S. sales + distribution platform, with Vevye, Iheezo, and Triesence as the current foundation. Management has executed for a long time here, compounding revenue at 40%+ since 2014 and guiding to >$280M in 2025 revenue (vs. ~$200M in 2024). Gross margins have expanded from <40% historically to roughly ~75% in 2024, and they’re targeting low–mid 80s gross margins as branded pharma becomes a larger portion of the pie. With the commercial infrastructure largely built, they expect SG&A to grow slower than revenue, which is how you get to their long-term 30–40% EBIT margin model. If they execute on the path to a $250M+ quarterly revenue run-rate by Q4 2027 (>$1B annualized), today’s ~$1.8B market cap starts to look like early innings - roughly ~1.8x that revenue run-rate and about ~4.5–6x market-cap-to-EBIT on their margin targets.

CareCloud - $CCLD (3.4%):

Not much has changed here for me since I pitched it in my 2025 portfolio review. I think management continues to execute well. Stock still looks cheap and growth is starting to pickup again with acquisitions. I am content with holding.

Natural Alternatives International – $NAII (3.2%):

Another interesting turnaround, similar to $INBP does contract manufacturing for MLMs but still haven’t made a GAAP profit coming out of the post covid glut. Been tracking this one for a few years but got interested again now with 3 consecutive quarters of revenue growth and positive op income in the last Q (first time in years). Lots of hiring going on from their LinkedIn and a huge discount to tangible book value providing downside protection. Could easily multi-bag if they can return to historic profitability. Management is guiding a return to profitability in the 2nd half of FY2026, this was also the case for FY2025 so should take that with a grain of salt.

A supplement manufacturer with inflecting earnings, trading at <2× TTM EBITDA, growing revenues, and a net cash balance sheet. It trades under NCAV and less than half of tangible book value - which includes significant real estate conservatively worth 2–3× its stated value on the balance sheet.

Disclaimer: I own shares of Integrated Biopharma ($INBP) at an average cost basis of $0.30. This write-up is for informational purposes only and does not constitute investment advice.

Company Overview

Integrated BioPharma, Inc. ($INBP) manufactures, distributes, markets, and sells vitamins, nutritional supplements, and herbal products, serving customers mainly in the U.S. and Luxembourg. Its main operations include contract manufacturing through its subsidiary Manhattan Drug Company (MDC), which produces supplements for distributors, multilevel marketers, and healthcare providers, and other business lines such as warehousing and fulfillment services, raw material distribution, and legacy operations under its original Chem International name.

Snapshot

Price: $0.2921
Market Cap: 9.07M
Shares outstanding: 31.06M
Enterprise Value: 6.47M
Tangible Book Value: $0.65
P/TBV: 0.45x
EV/EBITDA (ttm): 1.97x

I will be honest here, I don’t have some crazy thesis here other than I think the company is dirt cheap and that I believe financials are messy due to several factors:

1. Multi-year industry-wide destocking after COVID oversupply created demand drop-off and losses in 2023/2024
2. Debt load eliminated in 2021/2022, saving roughly $1M in annual interest expense - transforming an over levered company into a debt free one
3. Discontinued business segments that make pre-2010 financials obsolete

From 2010 to 2021, revenues grew from ~$20M to $64M, an ~11% CAGR. Even discounting the demand surge in ‘21, you are looking at a 10% cagr. Growth slowed post-2021 due to an industry-wide recession and destocking cycle. The company over-earned during COVID, then experienced normalization, and is now returning to growth and profitability with six straight quarters of positive earnings after losses in FY23–24.

Now there are some reasons why stock is trading where it is:

1. Significant customer concentration - as of June 30th 2025 and June 30th 2024, 84% and 90% of net sales are derived from two customers: Life Extension and Herbalife.

INBP - 10K - 2025

However, recent disclosures show meaningful diversification progress. From the company’s PR:

“We are happy to report that while focusing on our core business we were able to expand our customer base over the past year and increase our revenue,” the Co-CEOs further stated.”

Supporting this, new customer sales increased $2.6M, offsetting a small $0.26M decline from others, driving an 8% increase in total sales while reducing customer concentration by 6%.

Now as to whether this is a blip or management can meaningfully diversify revenues is to be seen, but its good to see management acknowledge and show progress on this.

One thing to note is that the company’s development and supply agreement with Herbalife terminates on December, 31, 2025. They have supplied Herbalife since 1998 and have entered into several agreements over that span. Unless, something unprecedented happens, I expect a new deal to be signed extending the relationship.

2. Limited history of shareholder returns

Digging through old financials, I could only find one instance of the company buying back shares. A whopping 21 years ago.

[B] Treasury Stock Purchases - On June 25, 2004 Integrated BioPharma, Inc. adopted a stock repurchase plan giving management authority to purchase up to $3 million worth of the Company’s stock in open market transactions or privately negotiated transactions at the Company’s discretion. The Company purchased an aggregate of 9,100 shares of its common stock for a purchase price of $70,508 during July 2004.

INBP - 10K - 2005

Outside of this, I have not seen any record of shareholder returns. Given the stock trades below NCAV and <0.5× TBV, even a small buyback could materially increase value per share.

However, as stated before the company’s financial position is vastly superior to the past, and all the incentives exist for them to conduct some kind of buyback or dividend.

3. Ownership structure/illiquidity

Integrated BioPharma’s shareholder base is concentrated among two family groups - the DeSantis family (through the Carl DeSantis Revocable Trust and CD Financial LLC) and the Kay family (founders of INBP). Together, these insiders control roughly 60–65% of the outstanding shares, with another ~5% held by executives and directors. That leaves less than one-third of the float available for public trading.

INBP - DEF-14A - 2024

Just to give you some context on who some of these people are - Carl DeSantis was the billionaire founder of the Celsius energy drink. He passed away in 2023 at 84 his son Damon DeSantis remains as a director on both the INBP and CELH boards.

Valuation

So what we have left is a fairly stable contract manufacturing business, that grows mid to high single digits, has compounded tangible book value, net cash, and hidden real estate that is conservatively worth the enterprise value of the company currently. Trading for <2x EBITDA, <0.5x tangible book value and under NCAV.

Tangible Book Value per share - 2016 to 2025

Downside

There is a lot of downside protection here in the form of net cash, significant tangible assets, and positive operating cash flow. Outside of losing a major customer - I find it really hard to see someone losing money at these levels.

The company is a net-net, 9M market cap versus 14m in net current asset value, trades significantly below TBV and has 1/3 of its market cap in cash. At these valuations you would think the company is rapidly burning through its asset value, not compounding it.

I am not a real estate guy, so won’t try to do anything heroic here

INBP owns a 40,000 sq. ft. manufacturing facility in Hillside, NJ. Market comps suggest it’s worth $4–5M, versus a book value of $1.2M, providing incremental hidden asset coverage roughly equal to the enterprise value.

The same manufacturing facility was acquired in 2000 and has been carried at the $1.2M cost since then.

On August 30, 2000 the Company acquired the manufacturing facility by issuing 1,050,420 shares of its common stock in exchange for the property based upon an appraisal by an independent party. The space is utilized for Manhattan Drug’s tablet manufacturing operations.

Upside

I built a rough model of upside scenarios for the next 3 years based on the following assumptions:

• 6% revenue growth

• gross margin goes up to 11% in 2026/2027 from 10% in 2025

• Company rerates to 3-4x EBITDA in a stabilizing demand environment

Conclusion

I am not much of a value as catalyst guy to be frank - I think that’s likely the biggest driver here but there is definitely more nuance to the story here:

1. Company is significantly different today than pre-covid (saddled with debt/divested divisions), covid (over-earned), immediately post-covid (industry wide de-stocking) - I don’t think market has fully appreciated/digested the new co which is debt free, growing, and profitable

2. I believe despite the earnings having already inflected, there is further upside with growth, customer diversification, and some gross margin optionality to 11-12%+ which was normal for the company pre-covid

3. Left tail outcomes are very low due to net cash, trading under NCAV, and hidden real estate while a fat right tail event like a share buybacks/dividends or even a go-private deal seems plausible given the undervaluation, share structure, tiny scale of company, and costs of keeping company public.

The customer concentration and lack of clarity around a new agreement with Herbalife prevents me from sizing up this position, but I think the setup here is worth owning shares.

Risks

1. Loss of a major customer
2. Persistent inflation/tariffs on raw materials
3. Recession

I have had cows on my mind lately. Maybe its the delicious steak I had last night or a side effect of the research that went into my Immucell writeup (shameless plug here).

For the last 25 years, cattle and calf inventories have been steadily declining the US. To no surprise, beef prices have steadily climbed over the same time, experiencing almost exponential growth over the last 5 years coming out of COVID.

United States Department of Agriculture

Frankly, the long term trends here are not great. Cattle inventories have declined for decades due to a myriad of reasons:

1. Better beef production per cow
2. Rising land prices
3. Urbanization
4. Persistent droughts
5. Rising input costs
6. Unsexy business for new entrants
7. Shifting consumer preferences (increase in veganism, chicken/pork consumption).

The list goes on and on. I am not going to try and convince you these secular trends will reverse anytime soon, but rather how you can exploit the natural cyclicality that occurs over certain periods.

We are currently sitting at a multi-decade low for cattle inventories and all-time high in beef prices. Strong beef prices coupled with demand, provides financial incentive for ranchers to pursue herd expansion similar to what we saw from 2014-2019 following the steep beef price increase from 2010-2015. I think there is a high likelihood that we see a similar expansion occur soon which in turn would drive down beef prices for at least a couple years.

Naturally, when I see patterns like this, I immediately want to know how I can make money off them. Here I will introduce two ideas (short and long term respectively) that could see a short to mid term boost to earnings: Bridford Foods ($BRID) and an idea I have written up previously Immucell Corporation ($ICCC).


Bridford Foods ($BRID):

Quick Overview:

Bridgford food corporation is a family run meat wholesaling, frozen food distributor, and frozen food manufacturer that has roots dating 93 years ago when it was founded in 1932.

Bridgford Foods operates two main segments: Frozen Food Products and Snack Food Products. The Frozen segment makes items like biscuits, dough, and sandwiches, distributing them via third-party carriers to food service and retail distributors across the U.S. The Snack segment focuses on meat snacks like jerky and salami, delivered through a mix of warehouse shipments and a direct-store-delivery (DSD) network. Its snack products reach about 21,000 retail locations nationwide. Both segments rely on regional sales managers and broker networks to drive growth and service.

Snapshot:

Price: $7.85
Market Cap: 71.25M
Shares outstanding: 9,076,832
Enterprise Value: 74.1M
Tangible Book Value per share: $13.57

Ah everyone’s favourite value trap. There’s a lot about this stock that would make most traditional value investors froth at the mouth. Tales of mean reversion, significant discount to tangible book value, and a pretty crazy hidden real estate portfolio (sold a meat processing plant in 2022 for $60m after purchasing it for $500k in 1975).

Unfortunately, the family has shown almost zero intention to actively monetize these assets/return value to shareholders and a controlling interest means there’s not much we can do about it. Now if any of those things make you want to invest, I suggest searching around as there are tons of articles that cover these themes. My goal here is to focus operationally - how a likely reversion in cattle herd sizes could materially improve earnings here and is what I am looking for in my investment case.

Bridgford foods depends on several raw commodities in order to manufacture their products. This includes large quantities of commodity pork, beef and flour. Since we are focusing specifically on beef prices, we are primarily concerned about their snack food segment which made up ~75% of sales in 2024.

From their recent Q under Risk factors they outline the following - Fluctuations in commodity prices and the availability of raw materials could negatively impact our financial results.

Our operating results are heavily dependent upon the prices paid for raw materials, as well as the available supply of commodities.

The marketing of our value-added products does not lend itself to instantaneous changes in selling prices. In addition, if we increase prices to offset higher costs, we could experience lower demand for our products and sales volumes. Conversely, decreases in our commodity and other input costs may create pressure on us to decrease our prices. Changes in selling prices are relatively infrequent and do not compare with the volatility of commodity markets. If there is a lag between when costs increase and when we are able to increase selling prices, our profits margins may suffer.

While fluctuations in significant cost structure components, such as ingredient commodities and fuel prices, have had a significant impact on profitability over the last three years, the impact of general price inflation on our financial position and results of operations has also been significant.

I think that these three excerpts pretty much layout the potential turnaround case as a company like Bridford that relies so heavily on commodities making it essentially cyclical by nature.

So is being attacked on multiple fronts here: pretty much all their input costs have skyrocketed, they are unable to increase prices at the same pace hurting profit margins, and when they do their product prices reach a point where sales volumes start plummeting due to value-sensitive customer preferences.

Now comparing trends, its hard to pin all the gross margin deterioration on beef prices, as from 2015-2020, they stayed roughly flat yet there was a decent amount of fluctuation. Reading through the older reports, its evident that they faced multiple cost pressures in the form of labor, utilities, insurance and storage. But then again its clear from the excerpts above and the long term trend in margins, beef pricing is a major headwind.

Since the company states that changes in selling prices are infrequent, margins face intense pressure from skyrocketing beef prices. When they do increase them, cost sensitive customers will purchase less causing sales to drop. So in theory, lower beef prices should be immediately accretive to margins, and longer term even if they lower pricing of their products the uptick in sales should more than offput the difference.

Immucell Corporation ($ICCC):

In case you have made it this far without checking out my writeup on Immucell, I will provide a quick primer on what they do.

ImmuCell makes animal health products for dairy and beef cattle. Their main product, First Defense, protects newborn calves from scours (diarrhea), and their upcoming product, Re-Tain, is a non-antibiotic treatment for mastitis in lactating cows.

Now I hadn’t came across the alarming cattle herd size trends until recently so never mentioned it my original writeup. Thinking it through, its shocking to me that Immucell has someone managed to grow sales at a 12% cagr since 2016, despite cattle inventories plummeting. If anything its shows the effectiveness and stickiness of Immucell’s product line to have taken share despite this headwind. A declining herd size, means less calves, which means a reversal would mean a significant tailwind for unit sales.


The cattle cycle and why this is a significant tailwind going forward:

So I think we have established that cattle inventories are highly cyclical.

When prices reach a certain level it incentivizes farmers to breed more heifers to capitalize on this. This results in inventories climbing back and eventually prices easing. Now this doesn’t happen overnight.

USDA's Economic Research Service projects that U.S. cattle inventories will reach a multidecade low in 2025 following a 2019 peak, and that the typical cattle cycle spans about 10 years (ranging from 8 to 12 years), influenced by factors like drought and feed costs.

So based on historical precedent, if the average cycle lasts 10 years, its been 6 years of herd size compression which is a strong indicator that expansion could start soon.

This is further backed up from another excerpt from USDA’s Economic Research Service.

After reaching a low point in the cattle cycle in 2025, U.S. cattle inventories are expected to rise to 91.6 million head in 2034. Low supplies in 2026 are projected to drive prices to a record high before falling back through 2031 and then starting a new climb through 2034.

An early indication of herd size expansion can be tracked through heifer retention (if you have no idea what that means basically holding back young female cattle from slaughter/feedlot for the purpose of breeding). In April 2025, USDA reported that heifers in feedlots experienced the largest percentage decrease in the last 5 years and feedlot placements in the 6 months were down 4.4% YOY. Its clear - the early signs of an expansion are here.

What does this mean for $BRID:

Higher cattle inventories would apply downward pressure on beef prices, resulting in commodity input prices finally easing. In this scenario, I think margins in the snack segment could definitely go back to the 30%+ range then and I easily see a conservative case where the stock trades back to the $10-14+ it traded at in 2023. Implying a 30%-80% return from where shares currently trade.

How I am playing this:

The cattle cycle is one of those rare setups where you can play both sides: Bridgford ($BRID) as a short-to-mid term beneficiary of falling beef costs, and Immucell ($ICCC) as a longer-duration beneficiary of herd expansion.

1. I think the setup will look quite compelling in 2026/2027 as herd expansion begins and prices begin to abate. Trading at almost half of tangible book (likely quite understated) I think there is enough downside protection where getting in a couple quarters early can provide an attractive IRR when margins likely revert.

2. $ICCC, meanwhile, has already proven it can grow through herd declines; a decade-long inventory rebuild should accelerate that trajectory. I believe the eventual growth in herd size will materially increase the TAM, and help the stock rerate. I continue to like this as a long term hold and I am excited to see how the sales team can capitalize on this tailwind.

It’s been an absolute roller coaster of a year so far. The first half has seen tariffs, then no tariffs, and now some sort of hodgepodge Frankensteinian monster of selective tariffs. We’ve had an epic meltdown between Musk and Trump, World War 3 potentially brewing, and all kinds of political and economic drama.

And yet, despite all this, the S&P is sitting on an 8.56% YTD return, pretty crazy, right?

What’s even crazier is that I’ve somehow managed a TWR of 33% YTD in my primary investment account through the first half of the year.

I’ve found myself doing a ton of trading this year, mostly in smaller, non-core positions. I’ve also been experimenting with buying “tracker positions” in stocks or situations I find intriguing but am still tentative to size up. The hesitation usually stems from one or more of the following:

a. Lack of real conviction / haven’t done enough work
b. Minimal downside protection (not enough margin of safety)
c. No clear catalyst / uncertainty around timing

That said, the way I like to invest is by staying as fluid as possible, focusing purely on risk/reward and using position sizing to capture returns. So while I’ll own a lot of stocks, the core positions still make up the bulk of my portfolio allocation.

Without further ado, here’s how the portfolio is currently shaping up.

Conrad Industries – $CNRD (22.5%):

To no ones surprises, my top stock pick for 2025 remains my largest position despite a >40% return ytd. When I found $CNRD at ~$7 a share early last year it was easily the best setup I had ever seen in my few years of investing. After an absolute killer first quarter as predicted, I still feel the thesis is tracking very well even en lieu of the 50% steel tariffs that were announced recently. Again I have written extensively about the name on substack and X, so take a look if you want to catch up with the details. I have trimmed a bit due to the sheer size of its allocation in my portfolio but still very cheap and should keep growing earnings.

CareCloud Pref Shs Series B – $CCLDO(7.8%):

After a wild saga where CareCloud forcibly converted most of its Series A preferred stock (excluding a few major holders), the common share count ballooned but free cash flow significantly improved as preferred dividends dropped. Meanwhile, the Series B preferreds ($CCLDO) emerged largely untouched.

Annualizing Q1 2025 free cash flow (~$3.6M) implies ~$14M in annual FCF, while Series B dividends total just ~$3.3M per year. That means the current ~12% yield is very well covered, and with shares still trading ~25% below par, the risk/reward looks favorable. The remaining series A still costs the company 2.7m a year due to the 100k+ share holders not being converted but still, comfortable excess of FCF left for their rollup strategy. Overall, I think its a decent spot to park some excess cash.

Immucell Corp – $ICCC(5.1%):

Another stock that has run up for me and a name I have an extensive writeup on as well. Feels like a pretty straightforward case of the three return engines of revenue growth, margin expansion, and multiple expansion setting up outsized returns over the next couple of years for a market leader that has seen secular growth over the last decade and has a significant right tail (Retain approval) event that could transform the company.

Canadian weed basket:
Cronos Group – $CRON.TO:
Organigram – $OGI.TO:
High Tide – $HITI.V:

If you checked out my last writeup, I cover my smallish bet on the Canadian cannabis sector. Growing companies with strong balance sheets trading at dirt cheap valuations in a rapidly consolidating space with international growth vectors and fat right tail events being given zero credit. I like the story and am content with just holding exposure to the theme.

Pioneer Power Solutions – $PPSI(4.4%):

This has been a frustrating one to hold this year, I had initially bought a position on the extended drop after the special dividend early this year and averaged down aggressively way too early. Based on the Q1 financials, the company has a NCAV of 26m (26m in cash) against a 30m market cap with a revenue guide implying 20% revenue growth. Business momentum continues to look good with a recent $10m win:

https://www.gurufocus.com/news/2942517/pioneer-power-ppsi-secures-10m-deal-with-us-chargingasaservice-firm-ppsi-stock-news

Margins should keep improving here and I don’t see much downside at these levels. Think market is skeptical until they show a clear path to profitability.

[Undisclosed nanocap](4.4%):

A very thinly traded nanocap, that I am still researching and building a position in. Likely will reveal the ticker down the road. Net cash and has real estate that is conservatively worth more than the current market cap. Industry it operates in has been in a recession for years coming out of COVID due to persistent destocking. Has finally had a couple quarters of profits and are growing revenues again with new customers due to extremely high customer concentration (two customers make up >90% of sales). Insiders own a bunch of shares and I see a solid upside scenario with improving business operations and potential take private at these valuations.

Ziff Davis – $ZD(4%):

Owns a mish-mash of notable internet websites like CNET, PCMag, and IGN. Strong balance sheet and revenue basically flat the last couple of years albeit doing alot of acquisitions. Buying back tons of stock and reaffirmed guidance that implies 4x earnings at current price level. I am not a huge fan of the business model or brands they own but just feels like minimal downside here with valuation/buybacks and I think the market is unfairly punishing them and expect some kind of mean reversal here.

Fuel Tech – $FTEK(3.2%):

Fuel Tech provides emission controls solutions that could be used by data centers. In 2018, they secured a contract for 20 units of SCR systems for natural gas turbine backup generators that were used in data center applications. In Q1 2025, they mentioned submitting multiple bids and proposals for SCR and ULTRA systems for new data center projects. Even one win would be transformational for the company and I think despite the massive runnup this year, it feels like you could easily see a TGEN/TSSI type move if things start clicking together. Again very speculative but felt intriguing enough to take a small position.

Hawaiian Electric – $HE(3.3%):

With litigation risk effectively off the table, dividend reinstated and the company being in a good spot to pay back their share of the settlement over the next 4 years. I see the company slowly re-rating once the market gets comfortable with settlement overhang. Still feels like a good bet at a double with 2-3 years.

GEE Group – $JOB(3.0%):

Temp staffing sector has shown some signs of life but this one continues to look like a value trap as company continues to cut down costs but has not bought back any shares and made only one tuck in acquisition. Legitimate questions around if the sector has seen permanent impairment from AI and if not how long one must wait for the industry to finally turn.

CareCloud – $CCLD(2.9%):

Shedding most of the preferred overhang has significantly freed up cash flow, giving the company room to pursue its roll-up strategy and return to growth. At ~3.5x the midpoint of adjusted EBITDA guidance, it’s trading extremely cheap for a growing healthcare RCM business, especially one that’s received buyout offers, while larger peers like R1 RCM have been taken out at ~14x EBITDA.

Frequency Electronics – $FEIM(2.6%):

Honestly haven’t done a lot of work on the name but got interested after reading great article on the name. Cheap valuation, great thematics, inflecting backlog and great backdrop with increased US defense spending gave me enough reasons to initiate a position here.

Galaxy Gaming – $GLXZ(2.8%):

Another stock I wrote about in my recent article. Appears the close time for the deal has been extended to the end of the year, I have trimmed a bit as IRR isn’t as attractive. Would love to own if deal breaks up as business has materially improved and will get a breakup fee, still would expect a decently big drop in the stock price if deal doesn’t close and will look to add there.

Platinum basket:

• Anglo American Platinum – $ANGPY(2.8%)

• Impala Platinum – $IMPUY(2.3%)

• Sibanye Stillwater – (1.8%)

This is a pretty speculative bet, but platinum interests me for the following reasons:

1. Platinum prices have exceeded 10 year highs, yet miner stock prices have not reacted as aggressively
2. Historically platinum has always traded at a premium to gold due to its inherent rarity and industrial uses, yet with gold moving vertical platinum trades for a >50% discount
3. Platinum has faced 3 consecutive years of deficits, no new mines coming online, EV adoption slowing - supply/demand fundamentals continue to look favourable

Magnera Corp – $MAGN(2.4%):

Bit quite a laggard for me this year and I ended up trimming a decent amount due to timeline/leverage concerns here. Management cut EBITDA guidance and reaffirmed free cash flow due to tariffs, and that paired with the leverage and no clear sign of a turnaround makes me cautious here.

Westell Technologies – $WSTL(2.2%):

Company provides communication infrastructure solutions across three segments. This ones had a crazy run-up this year, up ~150% YTD yet still looks absurdly cheap as of the last Q:

$3.60 share price
$1.54 in net cash per share
Tangible book of $4.22
Revenues are growing and buying back a crap ton of shares
0.2 eps last Q pretax or 4.5x annualized earnings

Significant backlog still in their highest margin segment (ISM), leads me to believe earnings should continue to look good over the next couple Qs at a minimum:

As a matter of policy, we do not provide forward guidance on operations or prospects. However, as of the filing date as of this report, the Company had a significant backlog in excess of $25 million, primarily in the ISM segment, that is expected to ship over the next two to three quarters. While this backlog provides visibility into near-term revenue potential, it is important to note that certain customers retain cancellation or modification rights. As such, there can be no assurance that all backlog will convert to revenue as anticipated.

Small bets/Need more research:

Power Solutions Intl – $PSIX(1.7%):

A picks and shovels play for AI infrastructure buildout through their power systems division. I have messed up multiple times here overthinking on this name, I think multiple here is quite undemanding compared to most AI names and happy to just hold it out and see if it can close the gap with peers.

Altigen – $ATGN(1.6%):

Thinly traded nanocap, develops software for AI call centers. Pretty cool stuff and can see lots of potential, management has big revenue growth projections. Have a small position, still need to do more work on this name.

Bridgford Foods – $BRID(1%):

Quite beaten up this year, I have taken a smallish position to track the name as well as play any potential mean reversion (>50% discount to tangible book and near 52 week lows). Need to see significant improvement in input costs (beef/flour) before I can size this up on any turnaround potential. Wanted to make a quick article outlining what it would take to see meaningful turnaround operationally here.


Exited Positions:

$LFMD:

Traded in and out of the stock twice for 80%+ gains each time, despite the thesis not really coming to fruition. My initial entry price was $3.70 and stock peaked at $15, safe to say I left a lot of money on the table.

$THRY:

Been trying to find simpler situations, still find the setup intriguing and will monitor upcoming quarters to find a better entry point.

$NSYC:

Sold out on the big run-up that happened after people started catching on to the stealth liquidation that was occurring.


$BOSC:

Bought due to low multiple for projected growth in a secular industry but sold when I was simplifying my portfolio. Ended up being a mistake and has ran 50% after some good results.


$ROMJ.V:

Bought and flipped this for a nice profit. Small Canadian cannabis producer with solid balance sheet and growing ebitda and revenues. Still like the numbers here, management is aligned well, and rank high in regional sales.

$SUP

A very skewed binary bet that unfortunately didn’t work out with Superior industries losing two major customers in their last Q, pretty much putting the nail in the coffin for the overly levered company. Was quite a small position for me due to the balance sheet but nevertheless closed the position at a significant loss.

$USIO:

Stock went vertical over a couple days on no fundamental news so took my 80% profits there. Haven’t followed the name since then.

$ACCD:

Bought out for a huge premium.

$SBBC.V:

Bought and sold my position for a good profit way earlier in the year before the name change. Following the story on X, I seemed to have made a good decision but will keep monitoring.

$QRTEP:

Call it dumb luck or some random foresight but I closed this position at breakeven way earlier in the year, as after reassessing the risk/reward just didn’t look good for the entire capital stack. Down >80% ytd, seems like I ended up dodging a massive bullet.

I’m a sucker for turnarounds.

I like them even better when the stock price is largely disconnected from material operational improvements and substantial near-term catalysts.

Enter Immucell corporation - today you can own the market leader in Scours treatment growing sales at a 13% CAGR over the last 10 years and 52% year over year, including back to back quarters of record revenues and net income, with a pending FDA approval decision on their revolutionary Re-Tain product in 2025 at some of the lowest valuations in the history of the company.

A quick note - I first came across this idea from a pitch from SRK Capital. I give them credit for putting this on my radar and urge you to take a look at their slide deck on the name.

Company Overview

Immucell Corporation develops animal health products for newborn dairy and beef livestock through two business segments: Scours and Mastitis.

Scours

If you never heard of the word scours before - just think diarrhea for calves. Might not seem like a big deal but its the #1 cause of illness and death in pre-weaned calves. The scours segment currently accounts for 99% of product sales from their First Defense product line.

First Defense is derived from colostrum (first form of breast milk from a cow), and is an alternative to unnecessary and often ineffective vaccines given to the mother cow. It is the only USDA-licensed orally delivered preventive solution for the three leading causes of scours. Immucell is the market leader in unit volume and dollar sales within the scours preventative market. They have grown market share at the calf and US level every year since 2019. The total US market share for scours preventative products given to newborn calves is roughly $31.1m per year, however their new product Tri-shield First Defense protects against rotavirus as well which has allowed them to more than double their TAM to $81.8m per year. By all means the scours segment is a powerhouse, as the market leader with a sales CAGR of 12% since 2016, this segment alone would likely trade for multiples of the current market cap as a standalone company.

What really distinguishes Immucell’s First Defense product line is that it directly administers the antibodies needed to fight these illnesses. Vaccines expose the body to a weakened version of the scours pathogens, making it the body's responsibility to produce the antibodies itself. This makes it uncertain whether a protective immune response was actually generated as vaccine response variability can leave up to 20–30% of calves untreated.

Calf-level market share from 2019-2024 (2024 10k pg.5)

US-level market share from 2019-2024 (2024 10k pg.5)

Mastitis

I view this segment as the “lottery ticket” of the company. Not in the sense that it is unlikely to materialize but that the thesis does not depend on its success. Subclinical mastitis is the bacterial infection of the mammary gland in dairy cows that causes poor quality milk and production which eventually leads to significant economic losses. It results in $2 billion of losses in the US every year and affects 20-40% of the US dairy herd at any time. Immucell has developed a purified Nisin treatment for subclinical mastitis called Re-Tain which they believe will revolutionize the way farmers treat the condition. Full commercial sales of Re-Tain cannot be done until they obtain FDA approval. However, as of April 2nd 2025, Immucell has announced the initiation of investigational product use of Re-Tain. They have currently achieved approval on 4/5 technical sections and are waiting on approval for the 4th submission of the 5th section which management are confident will be completed during 2025. I will dive deeper on this below, as it presents a substantial near-term catalyst for the company.

Backlog

Just a quick note on the backlog numbers. From the preliminary numbers released for Q1 2025 backlog was recorded at $4m as of March 31 2025, down from $4.4m at Dec 31 2024. Having any backlog is atypical for the company prior to 2023 and the CEO explicitly states “any amount of backlog is too much” because it means they are not able to fully meet customer demand. So while, its nice they have some backlog work, don’t read into it too much.

Snapshot (As of Q1 2025):

Price: $6.52
Market Cap: 58.5M
Shares outstanding: 8,980,602
Enterprise Value: 64M
Tangible Book Value per share: $3.22

Now what has caused the stock chart to look like this?

1. Massive product development expenses due to Re-Tain FDA pursuit

To illustrate just how burdensome the Re-Tain FDA pursuit has been for ImmuCell, consider this single line from the 10-K:

After an investment of about 25 years and approximately $50 million in the development of this technology, we are committed to seeing this product through to regulatory approval and our previously disclosed limited distribution, controlled launch strategy (Controlled Launch)

This isn’t hyperbole - the company has literally spent 25 years developing this drug to the tune of $50 million dollars. Essentially, the company has poured the equivalent of the current market cap into developing this drug, with literally zero to show for it.

Here are the mastitis product development costs over the past five years (in millions):

• 2024: $3.49

• 2023: $4.24

• 2022: $4.32

• 2021: $3.89

• 2020: $4.35

That’s nearly $20 million burned on Re-Tain in just the last half-decade alone.

The 10-K (page 31) provides more color for 2024:

Product development expenses included non-cash depreciation and stock-based compensation expenses of approximately $1.5 million during both of the years ended December 31, 2024 and 2023. Approximately $1.4 million of these non-cash expenses consisted of depreciation expenses pertaining largely to our DS facility and equipment for Re-Tain® during both of the years ended December 31, 2024 and 2023. We began depreciating this asset when the Certificate of Occupancy for the new construction was issued during the fourth quarter of 2017, but sales of our new product cannot be realized until we achieve FDA approval.

Approximately 40% of these 2024 expenses were non-cash, stemming from aggressive depreciation of the DS facility and equipment built for Re-Tain. While this significantly impacted reported earnings, it had a much smaller effect on cash flow.

Despite contributing no sales, the mastitis segment has resulted in millions of losses every year underscoring the strong performance of the scours segment. Now imagine for a second if all these costs for Re-Tain were instead allocated into funding higher growth in the Scours segment and the associated capacity increases. Lets just say I doubt we would be discussing Immucell as an obscure micro-cap if it had played out that way.

2. One-time contamination events

In order to accommodate first defense demand growth, the company pursued multiple investments starting in 2019 to expand production capacity. This fast expansion resulted in multiple contamination events that required them to scrap the entire inventory resulting in charges to COGs of $407,000 and $527,000 in 2024 and 2023 respectively. As of their last update for Q1 preliminary results on April, 8th 2025 they have reported zero contamination events since April of 2024.

To make matters worse, not only did the contamination events destroy gross margins, it also largely explains the significant drop in revenues between 2022 and 2024. The contamination events coupled with untimely equipment failures forced Immucell to slow down production to contain the damage and resulted in lower output and sales.

The root cause? Scaling too fast. The company’ strategy to increase capacity at such a high rate to accommodate demand was the primary reason behind the contamination events, as they had largely kept capacity the same for the last 30 years. They state the following as lessons learned on page 3 of the 10k.

We believe that we now have significantly improved processes and controls in place to better support large-scale production from our raw material source farms through liquid processing.

This remains a key operational risk. While the current run-rate is around $30 million in annual sales, future contamination risks could resurface if they attempt another aggressive capacity expansion without adequate safeguards. It’s something investors should watch closely.

3. Illiquidity/microcap/Investor fatigue

The usual illiquid stock disclaimers apply here. ImmuCell is a nano-cap stock, trading at a market cap under $50 million, with no analyst coverage and an average daily volume of just ~9,000 shares, on a float of 5.8 million shares. It’s extremely illiquid, with a shareholder base that appears fragmented and disgruntled after years of underperformance and the long, drawn-out wait for Re-Tain’s FDA approval.

To put the level of obscurity in perspective:

• There have been zero Seeking Alpha articles about ImmuCell since 2018.

• The stock receives no ongoing coverage on X (formerly Twitter), Substack, or Value Investors Club.

Catalysts

1. Imminent decision on Re-Tain

Re-Tain has arrived. After 25 years, there are several indicators that suggest FDA approval is very likely to happen before the conclusion of 2025.

There are five significant technical sections that require FDA approval for Re-Tain to be cleared. Immucell has achieved approval on four of these sections and are currently awaiting FDA action on the fourth submission of the 5th section.

Immucell uses a 3rd party subcontractor Norbrook for formulation, aseptic filing, and packaging of Re-Tain DP. Clearing inspectional observations at this facility is stated as the “critical path constraint to NADA approval”

On April 2nd, they announced the initiation of investigational product use of Re-Tain. This allows them to collect product data and test market acceptance through a controlled launch, while finalizing their NADA submission.

Why is Re-Tain special?

Re-Tain has the potential to disrupt the $200M+ mastitis treatment market by introducing a first-in-class bacteriocin-based therapy. Its active ingredient, Nisin A, selectively targets Gram-positive bacteria responsible for subclinical mastitis—without the human antibiotic resistance risks of conventional therapies.

Crucially, it would become the first FDA-approved intramammary treatment for subclinical mastitis without a milk discard or meat withdrawal requirement. That’s a game-changer: cows can continue producing peak milk volumes without disruption, offering significant productivity gains for dairy farmers.

The company’s dedicated DS facility already has enough capacity to support $10 million in annual Re-Tain sales at current yields. Assuming approval in 2025 and a standard commercial ramp, Re-Tain could become a major revenue and margin contributor, opening up a new and largely untapped market for Immucell.

For full transparency, I am just going to play devil’s advocate for a second:

When I started digging around for any resources or older write-ups on the name, I came across articles and mentions on twitter from years ago touting the “FDA approval catalyst.” I was immediately skeptical - this catalyst seems to have existed in some shape or form for the last decade. Why are things different now? There are two main reasons, I became comfortable with the investment thesis.

1. Re-Tain is no longer the entire story. The First Defense product line has developed into a strong standalone business and growth engine. This de-risks the Re-Tain outcome, effectively turning it into a “free call option” for the investment case.

2. We are objectively at the finish line. With four out of five technical sections approved and investigational use now active, Re-Tain’s path to approval appears clearer and shorter than ever before.

Note the CEO has this to say in the Q1 2025 PR:

“As our contract manufacturer continues to work to resolve inspectional observations at their facilities, we are moving ahead with Investigational Product use of Re-Tain® to collect market feedback about product performance in the field over the second half of 2025,” concluded Mr. Brigham. “At the same time, we are reducing product development expenses and exploring potential strategic options for our technology.”

The last sentence is interesting, we know about the reduction in product development expenses but the “exploring potential strategic options for our technology” piqued my interest.

My interpretation is that any data they collect from the investigational product launch could be used to attract bigger players like a Zoetis/Elanco to partner with them/buy Re-Tain rights directly to offload commercialization risks. I will admit to tea leaf reading here, I am excited to hear more on this in the upcoming quarters.


2. Normalization of Gross margins

                      Macrotrends - Immucell

Despite revenue reaching all-time highs, gross margins have not kept pace. In isolation, this could appear concerning—as it often suggests a company prioritizing top-line growth at the expense of profitability. However, the trend in gross margins tells a more nuanced story. As shown in the chart, margins were historically high (above 60% pre-2016), then declined into the 40–50% range between 2017 and 2022, followed by a sharp drop and recent recovery.

There are two simple explanations for these patterns:

1. Management explicitly states their goal is for >40%+ gross margins after the initial launch of new products. This should be the expected level going forward. Most of the margin deterioration was due to contamination events as I explained above, which were a one-time issues due to rapid expansion of production capacity. They did not benefit from spreading fix costs over higher volumes or lay off any workers in 2023 You can clearly see the quarterly improvement in margins to management’s expected level:

Its pretty evident that management’s story matches the dramatic margin recovery we are observing. With the 42% gross margins they hit in Q1 2025 they also explicitly state this in the report:

We were able to increase our gross margin as a percentage of product sales to 42% and 37% during the most recent quarters ended March 31, 2025 and December 31, 2024, respectively. As we fully integrate and utilize our increased capacity and evaluate our product costs and selling price, we believe we could increase our gross margin to approximately 45% or more of sales.

Management has clearly been conservative on the margin improvement as they have been moving the goalposts up every time, now targeting 45%+ in gross margins.

2. Why were gross margins historically higher before 2016 and why can’t we get back to those levels?

   Pretty straight forward answer: simpler product line came at the cost of sales growth. This is explained by management as a result of Immucell’s newest product Tri-Shield being a more complex format to produce as it uses three antibodies versus two in their previous product Dual-Force. In addition, they are offering a bivalent and trivalent gel format which is more expensive to produce versus the bolus format they largely used before. These new products have rocketed sales growth for them as they are willing to grow total gross dollars while sacrificing gross margins as a % of sales. Management appears to be adapting by implementing price increases to reflect the higher cost of goods sold, balancing unit economics over time.

3. Rapidly declining product development expenses

Immucell has been actively decreasing their massive product development expenses every quarter. More than 90% of these expenses are attributed to the Mastitis division stemming from pursuing FDA approval with Re-Tain. With a 40% decrease in 2025 Q1 from 2024 Q1. About half of it in the recent Q is in the form of non-cash depreciation related to their DS facility and equipment for Re-Tain. This has been a huge loss driver for the company over the years. As they continue to aggressively cut these expenses and Re-Tain gets approved, I expect to see this number continue to decline over time.

4. First defense capacity expansion & growth drivers

With first defense sales exceeding their current production capacity when annualized, an important question is how can they meet this demand and what drives growth going forward.

After doubling first defense product capacity, management is now targeting expanding their $30m facility to be able to handle $40m in sales. They have estimated it would take another $4m to expand their capacity 33%.

From page 26 of Q1 2025, they state how much is left in investments and why they have chose to defer it for the time being.

The investments of approximately $3 million of these funds to increase First Defense^® production capacity from approximately $30 million to approximately $40 million per year and approximately $2 million to build an in-house aseptic filling facility for Re-Tain^® have been deferred for the time being, due to cash constraints caused by production slowdowns implemented during 2023 to remediate certain contamination events. These estimated costs to complete are based on historic quotations and have not been updated or adjusted to account for inflation, project scope change and other factors.

While the deferral is prudent given recent cash flow challenges, the company is now producing healthy operating cash flow. Assuming continued clean operations and full capacity utilization through 2025, it’s reasonable to expect the expansion will resume in 2026 as cash reserves are rebuilt.

Importantly, even without the added production volume, ImmuCell has multiple growth levers at its disposal:

• Price Increases: Management has already hinted at implementing price adjustments to better reflect increased production costs.

• New Product Formats: In the most recent conference call, management discussed introducing additional formats, such as bulk powder, which they anticipate could drive incremental sales in the near term.

• New Regions: Initiating process to achieve approval for First Defense in selected international territories

Together, these factors position First Defense to remain a key revenue and earnings driver, even before capacity is formally expanded.

5.New CFO and Activists

On April 7th, 2025, ImmuCell appointed Timothy Fiori as Chief Financial Officer, marking the first time since 1991 that the CFO role is being held by someone other than long-time CEO Michael Brigham. Fiori brings 24 years of financial and operational experience from IDEXX Laboratories, a $42 billion publicly traded company specializing in products and services for animal health, livestock, and water testing markets - making his background highly relevant to ImmuCell's core business.

CEO Micheal Brigham has the following to say in the PR:

“Adding Tim’s depth of experience and his great attitude to our team is a critical step in our ongoing growth plan,” added Michael F. Brigham, President and CEO. “He can help us leverage our personnel, improve our standard costing and financial reporting systems and find new efficiencies in all aspects of our business, to touch on just a few of the anticipated impacts that I believe Tim will have on our business.”

Separately, two activist investors filed 13D forms toward the end of 2024. While it’s unclear how much direct influence they’ve had on recent operational improvements, their presence provides additional reassurance. It’s encouraging to see aligned external pressure that could help keep management focused on disciplined capital allocation, especially with regard to Re-Tain spending.

Fintel.io

6. The Robert F. Kennedy Jr Effect

I will admit this is a speculative one but I will toss it in here anyway. I am sure you have seen the headlines everywhere of the new health & services secretary taking on big pharma and questioning traditional food/safety practices. If you are suffering from insomnia, I would recommend reading through the 73 page MAHA report (“Make America Healthy Again”) that came out recently.

Immucell should be a direct beneficiary of any regulatory restrictions around antibiotics in both their scours and mastitis segments. A common practice is to not prevent scours, but rather reactively treat it with antibiotics. Forcing more regulation around antibiotics, would force farmers to seek preventative methods where Immucell dominates. In addition, since the accepted practice for Mastitis treatment is through antibiotics, Re-Tain being a natural alternative could experience a massive tailwind given tightening around antibiotic use in cows.

Valuation

I will attempt to value ImmuCell Corporation over the next couple of years, based on a set of conservative assumptions. A disclaimer, there is a lot of moving parts here, I think there is a really compelling story here and the numbers could get completely flipped on their head depending on how various catalysts materialize. Either way, I like to think about valuations, so I will give it a shot anyway :)

FY 2025:

*As of December 31, 2024, ImmuCell has approximately $18 million in federal net operating loss carry forwards. Combined with significant depreciation from their newly constructed facilities, I think EBITDA is a more relevant metric for evaluating the business.

Assumptions:

• I will assume no new capacity comes online in 2025 for first defense and Re-Tain provides no material revenues.

• I will use 30m in sales for first defense maxing out their current capacity (13% YOY growth). This is a very low bar to hit considering their last two quarters annualized >100% of capacity. I will also assume any revenues from Re-Tain are insignificant

• I will use a gross margins of 45%.

• Management is aiming for 2.1m in product development expenses in 2025 (excluding depreciation) and 2.7m in admin expenses per year

• I will assume sales and marketing expenses is flat at ~3m (they aim for <20% of sales).

• D&A of 1.3m, I arrived at this by taking 2024 D&A (2.7m) and subtracting out the 1.4m thats excluded from product development expenses

  

So in a pretty standard and conservative case based on management’s projections for the year, you are paying 9x EBITDA for just First defense - a secular grower that is the market leader of its space. Feels cheap but maybe doesn’t scream out at you yet.

FY 2026:

Now this is where things get interesting.

Management states their longer-term goal is to exceed $35 million in product sales by approximately 2027. We can use this as a starting point for 2026. Assuming everything else stays constant, that improves our multiple to 6.7x EBITDA.

Remember, of the 2.1m in product development expenses (excl. depreciation) management is targeting for FY2025, 1.7m of this is for Re-Tain. That is all money that can flow to the bottom line. Considering they are modelling an 18% reduction in this expense from 2024 to 2025, I will assume another 20% reduction going into 2026.

FY 2027:

Let’s say First defence can add the full extra $10m in capacity in sales by the year 2027 - (considering their current growth rate and annualizing the last 2 quarters this feels conservative) and Re-Tain is able to add $5m in sales by now on a similar margin to First defense. Re-Tain product expenses continue to decline to ~1m a year, we are looking at potentially $45m in revenues and 14.5m in EBITDA, suddenly we are looking at 4.4x EBITDA.

As you can see, the story barely depends on Re-Tain. As long as First Defense keeps doing its thing, any contributions from Re-Tain are purely upside at current valuations.

It’s difficult to find true comps with similar growth, size, niche products, and market positioning. Most direct competitors, such as Zoetis, Elanco, and Merck Animal Health operate at massive scale with diversified portfolios.

• Zoetis trades at a premium, around 18.5x NTM EV/EBITDA, supported by high margins and mid-to-high single-digit growth.

• Elanco, by contrast, trades at 11.6x NTM EV/EBITDA, but offers low single digit growth, smaller scale and has comparable margins to ImmuCell.

Given ImmuCell’s growth profile and improving fundamentals, I will use a 10x EBITDA multiple as a starting point. I arrive at the following per-share value estimates over the next 3 years:

Risks

1. Re-Tain approval is delayed further
2. Contamination events
3. Liquidity/Active ATM program

It’s been a wild start to the year for my portfolio, up 35% year to date compared to the S&P 500’s 1.5% return. The main drivers of my gains were successful trades in $JOB and $USIO, $PBI closing in on a 3x return, a special dividend from $PPSI, and $ACCD being bought out at a massive 110% premium. If you navigate to my last article, you can pick my brain on why I thought these were attractive bets, I’ll leave a link below:

All of this activity has grown my cash position to ~42%, and I’m now back to the drawing board, looking for new places to deploy capital. Everyone loves seeing their investments go up, but knowing when to sell and what to buy can be overwhelming. With market multiples historically elevated and major economic uncertainty under the new administration, I’ve been more cautious with capital allocation and have been holding my cards close until I find ideas that really resonate with me.

That said, I still love the art of flipping over rocks—nothing beats the thrill of discovering hidden gems in random corners of the market. I’ll often write short tidbits or repost informative pieces about stocks I find intriguing over on X, so follow me there if you want more real-time updates :)

Lately, I been grappling with what would add more value to my subscribers - quick informative pieces like this one covering lots of interesting names with a couple lines summarizing the investment thesis or long deep dive writeups into high conviction names.

My 23 vote poll on X, seems to overwhelmingly favor longer more in depth writeups:

I think both sides can argue their stance until their blue in the face - the best ideas feel like they can be explained well in a couple lines but on the flipside you can only build true conviction in a name and size it up if you do in-depth work on it.

Since I have >200 of you guys on here now, leave a comment or message what you would rather see. I’ll likely settle on some mixture of both styles but curious what the people think!

Housekeeping aside, lets get into discussing some cool ideas I have come across to start 2025. There was a delay between me writing this initially and material news coming out related to the company, so I also provided an “update” where applicable. So without further ado, lets dive into some names!

ImmuCell Corporation ($ICCC):

Found this idea through a pitch from SRK Capital, and interested me enough to dig deeper into the name. Why has a company growing revenues at 12% CAGR since 2016 and ~14% U.S market share in their Scours segment, has had “check notes” nearly 0 price appreciation in the last 10+ years?

One can immediately see the elephant(s) in the room: persistent large losses from their Mastitis segment and a slowdown in growth combined with a massive drop in profitability within their Scours segment. Now anytime I see issues in a company, my first thought is are these one-off or is there something systemically wrong with the company? The losses in the Mastitis segments arise primarily from product development costs associated with their pursuit of FDA approval for the last 25 years. Why is this changing? Expect to get approval for the final section in FY25Q1 - if they get it - great - you are looking at ~10m in revenues on 40% gross margins initially with a massive TAM. If not, the belief is that they will stop pursuing FDA approval, thus will cease the massive losses in the division.

Now what about the issues plaguing the Scours segment? It seems like they are capacity constrained on this side, and a combination of equipment failure & contamination events have caused the revenue decline and deterioration of gross margins. A record 26.5m in sales for FY2024 combined with annualized Q4 output of 30m or 103% of capacity, suggesting that the growth issues have been fixed. Management is also guiding for 40% gross margins, so Scours looks like its in great shape.

So basically, it seems like out of 4 plausible scenario only 1 of them makes an investor lose in the long term, if FDA does not approve Re-Tain and the company continues to pursue. Having invested in it over 25 years to the tune of $50m dollars, I worry about there being some degree of “sunk cost fallacy.” But I’m an investor at the end of the day and not a psychologist, so the odds of this 1 particular scenario playing out still seems quite low too me. I have tried my best to provide my interpretation of the situation - but do check out SRK capital’s pitch on it to get into the nitty gritty details.

Update:

Well they released an 8k with their unaudited financial results for FY 2024 - the thesis seems to be playing out quite nicely so far. Aside from sales growing a whopping 52% YOY, the major thing was they were able to book 37% gross margins in Q4 up from 25% the year before and very close to managements guidance of 40%, 1.3m in EBITDA, and even managed a GAAP profit of 0.06 in eps. Product development expenses also decreased 23%. No material update on Re-Tain approval was disappointing but their Scours business is absolutely killing it.

Here’s an exercise to see how cheap this could be, management is aiming for 2m in product development expenses in 2025 (excluding depreciation on their DS facility), lets toss in an extra 1m to account for this. They should be able to grow to max capacity of 30m next year, if they can hit 40% gross margin, let’s say sales and marketing are flat (they aim for <20% of sales) giving us 3.3m in operating income. They have nearly 18m in federal NOLs, so for simplicity, let’s assume no taxes. So at current market cap, you are paying 14x earnings for a market leader with steady double digit growth and a free call option on Re-Tain being approved this year. The more I explore this name, the more I am tempted to make an in-depth writeup. There is a looming question mark though and likely why this hasn’t traded much higher. With their current First defense production capabilities hitting capacity, management is estimating needing another 3.5m to upgrade capacity from 30m → 40m and 2m for Re-Tain related upgrades. They used an ATM, to raise 4.5m in 2024 (1.1m shares) and will likely need to tap into it for more liquidity considering they ended 2024 with ~4m in cash and ~11m in NWC.

LifeMD, Inc. ($LFMD):

I was immediately intrigued by this one when it popped on my radar around $4.70. A theme that I have heavily resonated with, is finding companies that have hidden assets or “diamond in the rough” business segments which are more valuable than the aggregate company. My thinking is in the day and age of powerful screening and algorithms, ideas that require actual human reading of filings or call transcripts presents an informational edge.

Composed of two segments - telehealth & worksimpli, one can immediately see the 90% gross margin telehealth business growing 65% YOY is being overshadowed by the declining Worksimpli segment. To sweeten the pot, earnings calls revealed they planned to divest WS in the 1st half of 2025. With WS doing, 1-1.3m in ebitda/month with growth stagnating, my thinking is a sale could return 60-120m in cash at 5-10x ebitda.

LifeMD trades at significant discounts to and despite similar growth in the telehealth division & higher gross margins. With a 6% EBITDA margin in telehealth and expectations for 25+ million EBITDA in 2025, they are turning the corner in profitability as well. All together, as a pureplay telehealth company after divesting WS, this is an easy candidate to rerate and close the gap with its peers.

Update:

Its been a weird start to the year for LFMD and the telehealth/GLP1 related names with LFMD running up 75% in a month on virtually no news? It then proceeded to dump 40% on the FDA determining the shortage of semiglutides (GLP-1) medications had been resolved. My mantra recently has been if a stock I own runs up a lot on no fundamental news or catalysts related to my thesis, I will sell and lock in the gains. As far as the impact of FDA closing the loophole, growth likely slows down without being able to offer these knockoffs but a 40% drop seems overdone considering the catalysts I listed above haven’t even played out yet.

National Stock Yards Co. ($NSYC):

The largest live auction cattle stockyard in the US that has seen its cattle head count in secular decline over the years probably isn’t on many peoples radars right? But what if at a 13m market cap with minimal debt, the company suddenly listed the 100+ acres of their Oklahoma stockyards for a 27m sale price only disclosed by a small footnote in their recent quarterly filings. Probably piques your attention now? Since finding it, the market cap has jumped to 19m - still interesting but of course r/r is not as attractive as before. If anything it outlines these quirky extremely asymmetric Buffett-like opportunities still exist out there and are waiting to be found.

Galaxy Gaming Inc ($GLXZ):

Don’t usually dabble in merger arbs but this one caught my eye especially because I find GLXZ quite attractive to own even in the event the deal doesn’t go through. At the current price of $2.85 GLXZ trades at a 12.3% discount to the $3.20 transaction price with a mid-2025 expected close. Despite acquirer, EVO.ST having enough cash it seems the gap exists due to some combination of illiquidity and regulation risks. What’s intriguing to me is that at the acquiring price of $3.20, GLXZ still looks quite attractive to own. In a peculiar 8k released after the acquisition was announced, a table was attached with projected numbers out until 2029.

So essentially, Evolution is paying 5x 2025 EBITDA for a growing 50% margin business, albeit fairly levered with 37m in net debt.

To sweeten the pot, GLXZ will receive a $5m breakup fee in the event the acquisition doesn’t go through. The deal likely goes through, but in the chance it fails it might be almost beneficial, as you can own a quality business at a cheap valuation + the cash windfall.

Pioneer Power Solutions, Inc. ($PPSI):

I have some recent history with this stock, as I bought it mid last year and sold it for a nice return after collecting the special dividend in January. After the sale of their custom electric products unit, they now only operate through their critical power segment which contains their fastest growing product e-boost. In preliminary results announced for Q4 2024, they reported:

$9.8m in revenue vs $2.7m in Q4 2023 (22.9m for FY 2024)
GMs went from 23% to 29%
$1.5m in op income (excl. R&D and non-recurring professional fees)

In addition, they are guiding for 27-29m in revenues for 2025 and have ~25m in cash after paying out the special dividend. They also expect to be profitable and cash flow positive.

So based on the midpoint of revenue guidance, PPSI is growing topline 22%, profitable, & exposed to the secularly growing electrification market (particularly portable EV charging) for an EV/S of ~0.5x. Once again, this feels way too cheap here if they hit guidance.


B.O.S. Better Online Solutions Ltd. ($BOSC):

An Israeli company that is a global integrator of supply chain technologies (basically automate supply chains with cool tech and robots) - I don’t have anything groundbreaking to say about this name other than it looks quite cheap based on guidance of $44 million in revenues and $2.4 million in net income. This implies YOY growth of 10% and places the stock at ~9.8x earnings.

Thryv Holdings, Inc. ($THRY):

Sticking with the theme of the diamond in the rough business segment. I present you Thryv holdings. A fast growing SAAS business trading at a significant discount to peers is being obscured by the secularly declining Yellow Pages segment. The SAAS business now accounts for >50% of total revenues. I’ll keep this one short as I got the idea from a great writeup by . So checkout that out to capture the full thesis.


Weed Basket (Canadian cannabis LPs):

- Rubicon Brands ($ROMJ.V/$ROMJF)
- Organigram Holdings Inc. ($OGI.TO)
- Avant Brands Inc. ($AVNT.TO)
- Cronos Group Inc. ($CRON.TO)

I must admit, I have a guilty pleasure: Canadian LPs. Most of you probably stopped reading by now and I can’t blame you. But with sentiment absolutely bombed out (MSOS - down 94% from its peak and 65% over the last year), I thought to myself that there must be names that are being thrown out with the bathwater. Looking for stocks trading at <5x forward EV/EBITDA (Yes it’s adjusted but more on that later), growing topline by double digits with strong differentiated brands, cash flow positive, in a nascent industry undergoing consolidation of the weakest players?

The Canadian cannabis market is absolutely unloved and left for dead, as looking through the financials I see stock prices that continue to crater despite continued growth and significant operational improvements at bombed out spot prices on cannabis and a punitive $1/gram excise tax destroying profitability. To further complicate matters, under IFRS accounting standards, cannabis must record fair value adjustments on the income statement that can severally impact the true cash costs of production.

To be clear, there are real structural issues in the industry, in addition to the ones mentioned above, current oversupply has destroyed pricing power and US rescheduling looks like a distant mirage (never mind legalization). But industry commentary has been looking more rosy recently, with massive export opportunities arising in Germany for medical cannabis, LPs with established relationships can ship out more product at higher spot prices and 0 excise taxes! But wait, what does this mean for the current oversupply in Canada? Organigram CEO, Beena Goldenberg discusses this in a recent podcast but this massive export opportunity is pushing up wholesale flower prices in Canada due to the hole left behind in domestic supply.

The dynamics within the cannabis industry are displaying the characteristics of what makes up a great contrarian trade in a ravished sector. I’ll likely post a more in depth article diving deeper into this speculative theme and the specific names mentioned - so stay tuned.

I’m sure most of you are aware of my position in CNRD by now, but yes, I do own other investments! Here, I’ll dive into the bets I believe will outperform the market over the next 8–12 months. With the S&P 500 (trading at 38x Shiller PE) and speculative assets like Bitcoin reaching all-time highs, it’s become increasingly challenging to filter out the noise and focus on fundamentals.

I’ve delayed releasing this for some time because every time I sat down to work on it, my portfolio had changed significantly since the last iteration. Over the past couple of months, during earnings season, I’ve closed seven positions on a net basis. Now, I’m left with 13 positions, which I’ve categorized below. Surprisingly, despite the broader market appearing devoid of ideas, I continue to find intriguing opportunities in the small-cap space.

If I were to describe my style, I would call myself a value investor. While the definition of value investing varies depending on whom you ask, to me, it simply means buying something trading below its “intrinsic value” or obtaining a dollar for fifty cents. I primarily seek businesses undergoing some kind of improvement that isn’t immediately apparent through traditional screening—this could include business inflections, earnings growth, or capital returns. I focus on opportunities trading below tangible book value or net current asset value to ensure a margin of safety. Additionally, I feel more comfortable buying stocks near their 52-week lows, especially when sentiment has hit rock bottom. When I find an investment that meets all these criteria, I size it accordingly. Occasionally, I trade around theme-based positions, but I intend to hold the majority of my portfolio for at least 8–12 months.

To summarize, I believe there are two critical questions to ask before making an investment: Why does this opportunity exist? and What will change to attract future investors? Being able to answer these questions effectively can save you a lot of headaches and help avoid the infamous “value trap.”

1. Cyclicals trading cheap on normalized earnings

Conrad Industries - $CNRD (33.7%):

A U.S.-based shipbuilder emerging from a multi-year downcycle, characterized by historically low barge construction levels, with net cash, record backlogs, and clear visibility into growing demand. Trading at 3x my conservative estimate of 2025 earnings, I view this as one of the best risk/reward opportunities in the market today.

It's challenging to find opportunities right now that offer substantial asset-based downside protection along with multi-bagger potential. I began buying shares in the $7–8 range when it was trading as a net-net, but the situation continues to evolve. I won’t bore you with the details here — you can find my original thesis and updates below :)

PRA Group - $PRAA (10.7%):

One of the major players in global debt collection, with 62% of cash collections generated in the U.S. and Australia and the remaining 38% in Europe, has recently overhauled 80% of its management team in an effort to transform the business. I have increased my position in the company due to its counter-cyclical nature, which could act as a hedge for the rest of my portfolio in the event of a market downturn. Even without a downturn, this is a company undergoing a turnaround under new management in a strong environment, as credit card debt balances have risen 30% since 2019, and charge-off rates have climbed to 4.5% after bottoming out at 2% in 2021/2022 during the pandemic stimulus period.

Recent earnings have been poor, with the company posting a loss in 2023 after 19 years of profitability. However, with three consecutive quarters of accelerating earnings, the company exceeded the upper end of its 2024 ROATE guidance of 6–8% and is now guiding for a double-digit return in 2025. Conservatively assuming they achieve a 10–12% ROATE in 2025 based on $761 million of tangible equity in Q3, earnings could range between $76 million and $91 million, or $1.92–$2.30 per share (based on 39,492,000 shares outstanding). This places the stock at approximately 10x 2025 earnings.

With a 15–20% return on tangible equity from 2020–2022, there’s significant room for earnings growth (6x P/E at the midpoint). Historically, the stock has traded at ~15x earnings and >1x P/B. With a clear path to higher earnings, I’m confident this company will return to the $40 range it traded at prior to 2023.

Magnera Corp - $MAGN(9.6%):

Recently formed through the merger of Berry Global’s spun-off HH&S division and Glatfelter Corporation, the combined entity is guiding for $455 million in EBITDA while still recovering from cyclical lows caused by the pandemic-related surge in demand and subsequent destocking. Historically, utilization has ranged between 85–90% but is now gradually recovering to the mid-70% range after bottoming in the low 70% range.

If both entities return to their average pre-pandemic EBITDA, the company could achieve $490 million in EBITDA or $557 million after expected synergies. On a pro forma basis, the company has $2.085 billion in gross debt structured as follows:

• $500 million at 4.75%

• $800 million at 7.25% (due 2031)

• $785 million at 9.25%

This results in $154 million in annual interest expenses.

Accounting for EBITDA, interest, and capex:
$455M EBITDA - $154M interest - $130M capex = $171M free cash flow (FCF)

This implies a 26% levered FCF yield.

I believe the combination of debt reduction and EBITDA growth from normalization in utilization could act as a powerful catalyst for rerating the stock price.

Gee Group - $JOB (5.5%):

A dirt-cheap staffing company with $20 million in cash and no debt, currently trading at a $23 million market cap. Historically profitable, the company is now losing money as the industry experiences a cyclical downturn. It’s tough to determine if the temp staffing sector has hit bottom, with penetration rates continuing to decline to a seasonally adjusted low of 1.66%—a level similar to the dot-com crash and above the financial crisis lows of 1.34% and the COVID-19 lows of 1.51%.

Based on the last earnings call, management seems optimistic that the industry has reached a trough. They anticipate completing M&A in early 2025 and have hinted at the possibility of share buybacks.

While I’m no expert on the industry, with the company essentially trading at cash value, the downside appears minimal. Any positive developments could significantly boost the stock price.

Superior Industries International, Inc. - $SUP (2.3%):

A North American and European wheel manufacturer, essentially trading as an equity stub. The company recently refinanced its term loan, providing a runway to pay down debt, and relocated operations to a lower-cost region in Poland. Despite a significant improvement in its outlook, the stock has languished, with relentless selling driving it down 38% year-to-date.

In the short term, this selloff seems overdone, and I see this as a pretty good January effect beneficiary. If it can meet guidance or if SAAR volumes rebound to pre-COVID levels, the stock has multi-bagger potential. If not, it's likely headed to zero.

Natural Alternatives International, Inc. - $NAII (2.2%):

A supplement manufacturer that experienced a significant but unsustainable surge in demand following COVID, which led management to mistakenly open a new manufacturing facility under the assumption that the heightened order levels were permanent. Destocking from customer inventory buildup forced them to close the newly built plant and incur losses. I haven’t done a deep analysis on the industry or competition, but the company has been consistently profitable for most of its existence, and the issues seem temporary. Trading at about one-third of tangible book value and with management guiding to profitability in the second half of 2025, I believe there’s a good margin of safety to wait for the cycle to turn.

2. Attractively valued players in secular growth industries

High Tide Inc - $HITI.V(6.4%):

The second largest cannabis retailer globally by store count based in Canada. This pick is a bit more nuanced than the financials suggest and requires an understanding of the underlying story occurring. A growing, net cash and profitable cannabis retailer is already a unicorn in the industry. Throw in massive consolidation in the industry within Canada allowing HITI to continue growing market share to a record high 12%, a vicious CEO with a 9% stake artificially suppressing gross margins to weed out marginal players (no pun intended), and amazing store unit economics, you have a lot of levers that can be pulled here. They slowed down revenue growth the past year to prove they could be profitable and are now focusing back on growth. Trading at a massive discount to peers, even just rerating to a 1x multiple of sales with growth you have a multi-bagger in the making.

Usio, Inc. - $USIO(3.8%):

A fintech company providing integrated payment solutions with net cash and quality recurring revenues, growing revenues from 28 million in 2019 to 81 million TTM. In their recent quarterly press release, management informally guided to 100+ million in revenues in 2025 and expanding margins. The company is currently about break even on a operating income basis, growing, buying back shares and net cash but trades at ~0.4x EV/S. This feels overly punitive for a consistently growing company on the cusp of profitability. Why does this disconnect exist? The stock price has been flat the past 2 years coinciding with a flat year of revenue growth from FY 2023 to FY2024 entirely due to 12 million of onetime revenues lost from the conclusion of a covid NYC program. Not only were they able to fill the revenue lost from this, management is confident they will return to growth next year. With exposure to secularly growing markets in electronic payment processing and a return to growth, the valuation looks way too cheap here.

3. Special situations

Hawaiian Electric Industries Inc. - (3.9%):

Utilities company with a monopoly in Hawaii, providing electricity to ~95% of the state. Dropped 75% due to a $1.99 billion settlement HE must pay in 4 equal payments of $478.74m/year due to causing a devastating wildfire that resulted in the loss of human life. Company cut their annual dividend (160m/year) and raised $558 million through a stock offering at $9.25. That combined should get them close to paying off the first 2 years comfortably. But the real kicker here is the value of their American savings bank, which they are in talks of selling and could go from anywhere between 0.5-1 billion dollars. The bank did an average of 80 million in net income over the last 3 years, so a 6-12x multiple seems reasonable. Even getting the midpoint of that range, would give them leeway to pay the 3rd year and most of the 4th when you add back the dividend savings for those years. Basically this is a bet the company will survive with minimal dilution going forward and in that case a 75% drop is overdone. There is a substantial near term catalyst with the upcoming Hawaiian Supreme court hearing to uphold the settlement, there is a high probability it will be upheld due to legal precedent and to avoid a drawn out litigation.

Accolade, Inc. - $ACCD(3.7%):

Down 71% YTD, Accolade is a former COVID IPO darling that has been left for dead. You can now buy a 50% gross margin healthcare business growing revenue in double digits for 2/3 of book value and sales. Although the book value is a bit questionable, with most of it in goodwill and intangibles, it’s also exposed to the secularly growing telehealth market (think HIMS) through its fast-growing PlushCare segment. I am treating this as more of a reversion to the mean than a longer-term holding, as I think this deserves to trade at least at 1x sales and book value. A 44% drop in stock price is not justified for a revenue guidance drop from $490 million to $467.5 million. Despite seeing this as a trade, if they can keep growing revenues at a double-digit clip and cut back on R&D expenses, I can see a straightforward pathway to profitability in about two years.

Simply Better Brands Corp - $SBBC.V (2%):

Admittedly I have not done a lot of work on this name but have read writeups from some great investors. Previous management underinvested in their powerhouse protein bar Trubar. New experienced management has taken over and are projecting crazy growth numbers as they have launched it at several new stores. Good reviews online, high growth, decent valuation, and experienced team probably warrants a higher multiple and eventual takeout by a bigger player.

4. Boring cheap cash flow generators

Pitney Bowes Inc. - $PBI (3.8%):

A shipping and mailing company, that operated through three segments - Global Ecommerce, Presort Services, and Sendtech solutions. I bought this last year in the $3 dollar range as a Goodco/Badco setup, with Hestia involved as an activist looking to divest the Global ecommerce division along with its massive losses. Fast forward today, Hestia has taken control of the company, divested the Ecommerce unit and the stock has more than doubled. I think the company can pay down debt and cost cut its way to at least $1.25-1.50 in EPS in 2025, which gives you a stock price of $10 applying just a 8x multiple on the low end of that range. Thus, while the easy money has been made I still think the upside is favorable here and continue holding.

Qurate Retail, Inc. Preferred Shares - $QRTEP(2.4%):

I initially invested in the common stock because I believed the company had sufficient runway and free cash flow generation to service its debt and turn things around. However, with each quarter showing a continuous decline in customers and revenue, the situation increasingly resembles a melting ice cube. While most people view this as a binary situation—either a zero or a multi-bagger—in the event the company slowly declines and teeters on the edge of bankruptcy, earning a ~20% yield on the preferred shares looks attractive to recoup my investment, albeit with capped upside and downside.

5. Cash (10%)

In my original thesis, I discuss the company and its going forward prospects on a high level. In this update, I will break down Q3 and what the future could look like in more detail. You can read the original thesis here:

The numbers

Headline number of $1.49 EPS was primarily driven by the 5.8 million in lawsuit net income that hit the books this quarter. Parsing through the noise there were a couple numbers of note to point out:

• $4,966,000 of vessel construction gross profit (+8% Q/Q)

• -$1,414,000 of repair & conversions gross profit
  

The vessel construction segment continues to chug along posting record gross profit in recent years. This was with additional losses as noted:

During the third quarter of 2024, new construction gross profits were partially offset by forward losses relating to the U.S. Navy’s exercise of its option for the eighth of eight YRBM barges covered by the contract and higher costs on YRBM barges under construction


Going through their 2022/2023 filings, I estimated they were recording forward losses of ~3-5 million per barge. The 1st, 2nd, and 3rd quarters of 2024 give me an almost exact number of how much the YRBMs are concealing the true earnings power.

Q1 2024: Forward loss for the 6th YRBM vessel → $3.3M charge
Q2 2024: Forward loss for the 7th YRBM vessel → $3M charge
Q3 2024: Forward loss for the 8th YRBM vessel + higher costs on YRBMs under construction → $4.5M charge

Using the above numbers we can almost pinpoint the recent forward loss to be ~3m. Notably, with the last barge forward loss recorded, we will not see one in Q4!

Lets turn over to something I did not discuss in my original thesis - the repair and conversions segment. To my surprise they reported a fairly poor quarter attributed to “decreased volume, higher labor costs and higher overhead allocations.” To illustrate how unusual this is, here are the recent gross profits recorded in that segment. In the last 10 quarters, they have only been unprofitable once.

Q2 2024: 876
Q1 2024: 687
Q4 2023: 1,885
Q3 2023: 1,496
Q2 2023: 825
Q1 2023: 880
Q4 2022: 84
Q3 2022: -1664
Q2 2022: 58
Q1 2022: 952

Compiling everything together, I have come up with 3 scenarios for how Q4 with no more forward losses on the YRBM barges could look.

To demonstrate how conservative even my base case is, here are the following assumptions baked into it:

• I took the Q3 construction gross profit and added back a flat 3m to account for no forward loss on a YRBM barge (remember they took an extra 1.5m as well which wasn’t in Q1/Q2 that I am not adding back in)

• Ascribing 0 profit associated with increased revenue from management’s guidance of 29.7% of backlog done by EOY which would put Q4 construction at 84m in revenue (~15m higher than Q3)

• 0.5m in repair gross profit, below 7 of the last 10 quarters

• SG&A of 2m (Around 2.2% of revenues if they do ~90m in Q4) - inline with 2/3 of the last quarters without any legal costs

For my bull case, I took the 84m of construction revenue and applied a gross margin of 11.5% (what you get back if you add the 3m forward loss back). Assumed 1m of repair profits inline with recent quarters and SG&A as 2% of revenues. This implies the stock is trading at ~2x P/E!

Let me also paint a picture of how 2027 earnings could look given the 3 remaining YRBM barges would be delivered in 2026. If we run rate next quarter’s construction revenue, and apply their historical peak gross margin in 2012 (15.2%) on it:

84m * 4 * 0.15 = 50.4 gross profit from new construction + 4m in repair profits

54 million - (10m in SG&A) * 0.74 = 32.6 million NI/5,018,000 shares outstanding = $6.5 EPS

So a 1.78x P/E on current share price, and a $32.5 - $39 stock price on 5-6x earnings.

Revenues are lumpy and there is no guarantee they can hit their peak margins again but it’s still a good exercise to see the potential here and how cheap it is currently.

The backlog

A couple people have asked me questions regarding lumpiness in the total backlog numbers, so I will address it here.

• $218.4m in new construction signed the first 9 months (up 7% YOY).

• The total backlog was $282.2m as of Sep,30,2024 (down 2.6%)

• Since the end of the 3rd quarter they signed another 27.7m in contracts (roughly 1.5 months).
  

I think the only number of relevance is the increase in new construction signed. The total backlog numbers have too much noise in them with the unprofitable large contracts still in them to have much value.

Our backlog as of September 30, 2024 consisted of 52 vessels: eleven 30,000 bbl tank barges, ten deck barges, nine spud barges, eight YRBM barges, five ferries, two sponson barges, two ice class tugs, two tow boats, one 6,500-cubic-yard capacity trailing suction hopper dredge, one drydock, and one crane barge

What matters to me more is what constitutes the backlog. 15 new vessels were added Q/Q, with 9 of them being tank barges. This trend of increased tank barge orders has been directly mirroring the comments I have been hearing from Arcosa (fully booked in 2025 capacity). Excluding the 8 YRBM barges the rest of the backlog is $216.4 million. This still includes the suction hopper dredge which they have recorded a forward loss on. I estimate this to be ~50m of the backlog. So, backlog is likely around $166 million excluding the large unprofitable work.

Just to give an idea of what historically makes up their backlog here is a snippet from their 2013 10k. Going through historical backlog details gives us an idea of what vessels they have worked on before and thus able to complete profitably.

Our backlog as of December 31, 2012 consisted of 42 vessels: 2 Liquefied Petroleum Gas (LPG) barges, 33 30,000 BBL tank barges, 2 lift boats, a deck barge, a crane barge, and 3 mid-body extensions. Our backlog (including remaining contract revenue for projects currently in progress) as of December 31, 2012 was approximately $120.7 million compared to $47.1 million as of December 31, 2011.

Here are historical backlog numbers from 09-13 I pulled from a 2013 VIC writeup of the name. You can clearly see the fluctuations Q/Q. The company was solidly profitable even with a much leaner backlog. Here are the net income numbers to get an idea of profitability compared to backlog/revenue.

2009: 13m
2010: 10.3m
2011:19.17m
2012: 21m
2013: 29m

So what I want to conclude from all this, is that the total backlog number Q/Q needs to be taken with a massive grain of salt. Rather, looking at the trends of new signings and the demand picture is much more relevant.

Final thoughts:

I hope I have addressed all the key points or concerns anyone has about the numbers. There continues to be minor things lingering obscuring the underlying earnings power of the company, but it also makes it even better for those who do the work to see past them. The stock has gone up about 14% since my article and 53% since I started buying shares. But it’s a drop in the bucket compared to the numbers I described above.

Looking forward, I have high expectations for Q4 as we can expect to see the first quarter without a substantial forward loss and hopefully normal repair segment profits. Either way I view this as a multi-year story and temporary weakness in a quarter or two shouldn’t impact the thesis. With incredibly robust demand for barge construction, strong liquidity, negligible debt, and large obscured profits, $CNRD remains one of the best risk/reward situations in the market right now and my top position.

I sold CNRD on September 3, 2026 at $30.01. It was $10.20 when I wrote this up in October 2024, so that’s about 2.9x in under two years, the top of the 2-3x range I laid out.

Here’s why I sold:

1. The next two quarters look soft. The last filing guided to finishing 39.2% of backlog by year end. That’s around $57m of shipbuilding revenue per quarter, or roughly $65m with $7-8m of repair added in, which should be soft against last year’s numbers. Over the last couple of years, this guidance has been a pretty good indicator of their Q3 and Q4 sales.

2. Steel plate prices are creeping toward multi-year highs, and steel is a big cost for a shipbuilder.

3. Thesis drift. Blue Autonomy, LNG and the Samsung partnership are all interesting, but none of them are why I bought. I bought a cheap, asset-backed shipbuilder with a growing backlog. At $30 stock is still cheap but less certainty around these newer initiatives.

I’m really grateful for this pitch. It’s basically what got this Substack and its investing community started. Thank you to everyone who read it, pushed back on it, or held it with me.

Conrad Industries Inc (CNRD) presents a compelling opportunity at its current price of $10.20. With approximately $6 per share in net current asset value, $8 million in lawsuit proceeds expected in Q3 (or $1.15 not accounted for in NCAV), consecutive quarters of positive earnings, and record backlogs growing year-over-year for the past four years. I think the forward prospects warrant a stock price that is 2-3x higher over the coming years.

Company Overview

Conrad Industries is a 76-year-old family-run business based in the U.S. The company specializes in the construction, conversion, and repair of marine vessels for both government and commercial customers. Their business is divided into two segments: new construction, which accounts for 85% of their revenues, and repair/conversion, which makes up the remaining 15%. I will primarily focus on the new construction division in this writeup, although some of the key points also benefit the repair division. They operate from 5 shipyards: one in Morgan City, Louisiana, three in Amelia, Louisiana and one in Orange, Texas. Over the years, they have diversified their product offering. However, their primary focus has always been building barges and is evident in their current backlog as of June, 30th, 2024 where 27/37 of the vessels are barges.

Snapshot:
Price: $10.20
Market Cap: 51.2M
Shares outstanding: 5,018,000
Enterprise Value: 39.4M
Tangible Book Value: $14.75
P/TBV: 0.69x

Backlog:

2020: 184m
2021: 149m
2022: 244m
2023: 254m
As of June 2024: 245m -> Expecting to complete 57% of this during 2024

Why does this opportunity exist?

1. One of the principal materials used for ship building is steel plates and steel shapes. Demand for steel skyrocketed after covid shutdowns causing steel plate prices to reach unsustainable all time highs in 2021/2022. Steel plate prices have now retraced significantly nearing pre-covid levels.
   

Most of the construction contracts we enter into, whether commercial or government, are fixed-price contracts under which we retain all cost savings on completed contracts but are liable for all cost overruns. Commercial contracts may have provisions that protect us to some extent from escalation in steel prices and currency exchange rate fluctuations, but typically do not protect us from escalation in other costs.

As noted above in their 10k, if steel prices go lower then what is negotiated in contracts, then Conrad retains all the cost savings. Thus, lower steel prices have a two pronged benefit by increasing demand from customers and creating cost savings.

2. Conrad signed fixed price contracts right before this massive boom in steel prices creating massive losses in 2022 and 2023 as they had to deal with material and labor costs significantly higher than contracted. The losses were primarily tied to a contract they signed with the US Navy to build up to 8 YRBM barges. Conrad recorded forward losses on the 6th and 7th YRBM barges in Q2 2024. Along with the poor timing of the contracts, the YRBM barges were a new and more complex type of barge that Conrad had no prior experience with. They expect to deliver the 1st one in the 2nd half of 2024, 4 during 2025 and the last 3 after that.
   
   

From time to time, we bid on fixed-price contracts to construct vessels that we have not constructed in the past. The risks of cost overruns or delays in delivery on those contracts are greater than for contracts for vessels that we have built in the past. When we enter into contracts for vessels we have not constructed in the past, we generally believe we have sufficient related experience to perform profitably; however, we are willing to risk losses in order to gain experience and entry into markets for new products.

From there 2020 10k, they discuss how they purposely do this in order to enter new markets.

Despite the many challenges we have confronted, we remain optimistic about the long-term prospects for our business. We believe that our ability to provide products and services to a variety of customers and to respond to demand for new types of vessels is a competitive strength. The infrastructure, government, pressurized barge, offshore wind and other markets are presenting us with exciting opportunities. We are intently focused on executing our backlog effectively, obtaining new profitable projects and returning our company to profitability, in order to benefit our stockholders, employees, customers, suppliers and our community."

The CEO’s message from the 2023 results, leads me to believe they will avoid this for the foreseeable future.

With losses of $5.39/share and $3.47/share in 2023 and 2022 respectively, CNRD screens horribly and will be overlooked by anyone not familiar with the company or sector. 

Most of these losses are now behind us, and in fact, they might have been overstated, as the company has been making positive adjustments over recent quarters. With each new vessel of this type, the company learns from past mistakes and improves efficiency. This, combined with lower-than-expected plate prices and higher contract values for subsequent builds, results in considerable cost savings.

To illustrate, they took forward losses over 2022 and 2023 on the first five barges. Plate prices were roughly $1500-2000/short ton in 2022 and $1400-1500/short ton in 2023. Assuming they made the provisions using the prices at the time as a proxy for the future, we could expect 50-60% savings on the steel costs as plate sits at $920/short ton currently.

3.  It's no secret, this company is extremely illiquid and trades through the OTC market. The average 30 day volume is 1,556, with 5,018,000 outstanding shares and a tiny 3.58 million float.
   
   The company’s ownership is heavily concentrated within the Conrad family and other insiders. John P. Conrad, Jr. holds 991,375 shares (19.8%), Katherine C. Court owns 521,634 shares (10.4%), and other family members and executive officers collectively control over 21% of the company.
   
   This high insider ownership and the lack of analyst coverage further contribute to the stock’s obscurity, as there are no conference calls or regular updates from management beyond occasional press releases.

Catalysts

1. Structural Shortage of barges in the USA

There are two types of barges: dry cargo and liquid cargo. Age of the fleets is around 17 years and the average lifespan of barges are 30-40 years, although liquid cargo usually lasts a shorter time due to the sensitivity of the material they carry (oil, petrochemicals). Open fleet dry barges have accelerated to 21 years in 2023. As fleets age, it signals a lack of supply as not enough newer barges are coming in to replace the older ones. Why is this happening? Over the last couple of years, the replacement cost has been too high due to factors such as steel prices, labor shortage, and supply chain disruptions. As a result, there is incredible pent up demand for barges over the next few years and there is only a limited number of shipbuilders in the USA who are specialized in making them.  

As the largest barge maker in the industry fills its capacity for 2024 and begins booking orders into 2025, any overflow demand from customers unable to place orders with the larger manufacturer will naturally trickle down to smaller barge makers like CNRD.

My takeaway, from the overall tone and commentary on their calls is that the supply side will remain constrained for several more years due to large discrepancy between retirements and shipyard capacity to build new barges.

That’s the beauty of the situation, the thesis is not dependent on speculative building but simply building enough to maintain fleet sizes as a disproportionate amount of barges retire.

2. Steel Price Normalization

As mentioned in the previous section, the subsequent shutdown and reopening of the world during covid created commodities like steel to skyrocket. Now that a lot of this has subsided, steel plate prices have come down significantly from previous year highs. With prices normalized, barge and ship operators will feel more comfortable putting in new orders.

3. Lawsuit settlement hitting the books next quarter

In February 2023, Conrad Industries won a $7.49 million judgment from a lawsuit related to a customer defaulting on contracts for two vessels. The ruling was upheld in February 2024, and by August 2024, Conrad received $8.04 million, including interest and costs. This will be reflected in the Q3 2024 financials. For context, that is 15% of the current market cap, being awarded in a single quarter. 

4. Reinstatement of dividends/special dividends/share buybacks

Management quality here is honestly super underrated. Despite the often accurate negative sentiment around family run companies, the Conrad family have been excellent with creating long term value and returning cash to shareholders. In previous cycles, they aggressively both bought back shares, had annual dividends, and issued special dividends. All while keeping a stellar balance sheet to weather downturns in the cycle. From 2009 - 2015, if bought at $6, investors could make $6.40 in dividends as well as a stock price that appreciated $24. Investors can expect similar capital returns in the next imminent cycle and with the added kicker of a much reduced share count.

5. Closing of Major Competitor - Jeffboat

Thanks to for pointing this out and sharing his notes. The 2nd major player in making dry hopper barges and liquid barges was closed down by its parent company (American Commercial Lines Inc) in 2018. The parent company then filed bankruptcy in 2020 as they were overwhelmed with debt during the downturn in the cycle.  They had roughly 30% market share, with more in liquid than dry hopper barges. This closure was a direct result of weak demand and oversupply following the strong liquid barge cycle in 2014.

Here is a graphic from Statista showing global shipyard capacity over the years and projections forward. As you can see capacity has been getting decimated over the years as a lot of ship makers couldn’t handle the competitive and capital intensive nature of the business during the down cycle.

Conrad not only survived the downturn but significantly expanded and improved upon their existing shipyard capacity. They now have the opportunity to collect additional market share in barges left behind from Jeffboat and other smaller players that exited the scene. 

Valuation

Here are the net income numbers Conrad produced from 2006-2015:

Earnings Power and Valuation of CNRD:

• Peak Net Income (2013): $28.63 million

  • With the current share count, this results in an EPS of $5.7.

  • At the current share price, CNRD is trading at 1.8x peak EPS.

• Mid-Cycle Earnings:

  • Pre-financial crisis earnings (2008): $23 million.

  • Post-crisis earnings: $13 million.

  • Taking an average of these, we get mid-cycle earnings of $18 million, resulting in a current multiple of 2.86x earnings.

• Normalized Current Year Earnings:

  • Based on the first two quarters of this year, we get an EPS of $0.74, simply normalizing this over the year gives me a current multiple of ~13.8x.

  • This is still a very undemanding multiple for the start of a new cycle.

All of these projections also completely disregard the cash and tangible assets on the balance sheet, which if backed out from the market cap make these multiples even cheaper.

Price Targets

Despite the earnings growth during previous cycles, the company has never commanded a high multiple. With the P/E hovering around 5-10x for most of the 2009-2015 runup.

Applying a 6x earnings multiple to the mid-cycle and peak earnings and assuming 5 years to reach peak earnings we obtain the following:

• 2-year price target: $21

• 5-year price target: $34.

This gives you a CAGR of 43% over 2 years and 27% over 5 years from the current share price of $10.25. With lots of downside protection when factoring in $7.15 in net current asset value and $15.9 in tangible book value on the balance sheet when including the $8 million from the lawsuit next quarter.

Again this is all from stock appreciation and completely ignores substantial return potential from dividends as cash builds up during the cycle.

Risks

1. Steel prices go back up significantly

An obvious risk - if steel prices suddenly revert to 2021/2022 levels, fixed-price contracts they have signed recently with no provisions will result in losses and demand for new construction will wither. Although the latter point might not be possible due to the barge shortage I discussed above.

2. Prolonged economic recession in the USA

Economic recession will cause oil prices to drop, exports/imports to decrease resulting in lesser usage of vessels. 

3. Signing of loss contracts that significantly hinder earnings power

Having discussed this above, I believe it's a non-issue due to management commentary in recent press releases regarding a focus on profitability.

4. Customer concentration

56% of revenues are derived from 3 customers currently. We can reasonably infer that at least one of these customers is Great Lakes Dredge & Dock Corporation (GLDD) for work on their dredges and likely another is related to the YRBM barge contracts for the US Navy. Both of these sources of revenue have not been profitable, so there is not much risk to profitability from this concentration. With the immense demand for barges looming on the horizon, the company should have ample opportunity to diversify.