Welcome to this week’s edition of Microcap Moonshot Weekly.
I spend a lot of time looking at recommendations in the microcap and small-cap world.
I am always struck by the number of recommendations I have to read to find stocks I would rate as buys.
There are just a whole lot of crappy stocks in the entire asset class.
These are driven by stories far more than by substance.
The biotech sector, in particular, is rife with profitless story stocks.
Looking at these companies through the green eyeshades of a Chartered Financial Analyst (CFA), I marvel at how serious analysts can recommend 95% of these stocks in good conscience.
Put another way, about 1/20 of stocks make it through the most basic of screens that test for financial viability.
That’s why I now view – and value- these story stock recommendations more like call options.
As such, these companies' greatest asset is their volatility. They are driven by news flow. They can soar—or tumble—20 % overnight, offering the prospect of quick gains.
Microcap Moonshot Weekly
I take a very different approach to those who recommend highly volatile microcap or biotech “story stocks.”
Microcap Moonshot Weekly researches and ranks microcap and small-cap stock investment recommendations made by various paid financial newsletters, mainstream media outlets, and other Substack publications.
I rank each of these recommendations using Microcap Moonshot’s proprietary ranking system, which focuses on three factors: Quality, Value, and Momentum.
I then assign an overall rating on a scale of 1 to 100.
Looking beyond the numerical rankings below, Microcap Moonshot applies additional fundamental, technical, and market sentiment indicators to each stock. This process helps winnow down the list of over 10,000 candidate stocks to a handful.
Now, onto this week’s look around the web for microcap stocks.
Microcap Moonshot Verdict
1. Sterling Infrastructure (STRL)
Sterling Infrastructure, Inc. (STRL) specializes in three segments: E-Infrastructure, Transportation, and Building Solutions in the United States.
E-infrastructure Solutions provides advanced, large-scale site development services for data centers, manufacturing, e-commerce distribution centers, warehousing, energy, and more.
Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail, and storm drainage systems.
Building Solutions projects include residential and commercial concrete foundations for single-family and multi-family homes, parking structures, elevated slabs, and other concrete work.
The Company is the number 1 holding among the 20 microcap ETFs I track.
Source: Morningstar
Microcap Moonshot Rating: 98/100
Quality: 89
Value: 59
Momentum: 99
Microcap Moonshot View:
Nothing suggests any issues with company health, bankruptcy risk, or earnings manipulation.
2. ReposiTrak Inc. (TRAK)
ReposiTrak is a food traceability and regulatory compliance network. Its software-as-a-service platform solutions for inventory and risk management help retailers, wholesalers, and suppliers operate more efficiently. The company has been gaining market share.
Revenue increased by 8% year over year, and net income grew by 17% year over year in the second quarter of ReposiTrak's fiscal 2024
A 50% three-month gain is just the tail end of the company's larger 12-month increase of 118%.
ReposiTrak is one of the few micro-cap stocks that distributes dividends to its investors. The company recently issued a quarterly dividend of 1.65 cents per share, or 6.6 cents per year.
Source: US News and World Report
Microcap Moonshot Rating: 76/100
Quality:99
Value: 6
Momentum:91
Microcap Moonshot View:
The Company appears to be stable. There are no red flags regarding company health, bankruptcy risk, or earnings manipulation.
Although the stock does not represent great value, its high quality and momentum scores suggest a near-term upside for the stock.
3. Blue Bird Corp. (BLBD)
Based in Macon, Georgia, Blue Bird designs, builds, sells, and services school buses.
The company has sold over half a million school buses since its founding in 1927, and more than 180,000 of them are in operation today.
Blue Bird has a dedicated dealer network with over 50 dealers and over 250 service centers.
Annual revenue tops $1 billion. Sales are up 43% year over year. And Alex Green estimates that earnings per share will soar to nearly $1.50 in 2024.
Source: Oxford Microcap Trader
Microcap Moonshot Rating: 98/100
Quality: 98
Value: 58
Momentum: 98
Microcap Moonshot View:
Nothing suggests any issues with company health, bankruptcy risk, or earnings manipulation.
Again, a high-quality stock that has terrific momentum.
4. AXT Inc (AXTI) -SHORT
AXT, Inc., is a material science company that develops and manufactures high-performance compound and single-element semiconductor wafer substrates.
Its semi-conducting GaAs substrates are used to create opto-electronic products that are often used to backlight wireless handsets and LCD televisions and for automotive, signage, and lighting applications.
Its Ge substrates are used in applications such as solar cells for space and terrestrial photovoltaic applications
J Capital Research published on AXT Inc. last week, claiming the company “may be on the brink of collapse” because regulators have apparently blocked the IPO of its subsidiary operations in China.
In addition, sales have been declining “despite the claims [management makes] about AI demand.”
Throw in the fact that investors are abandoning China in droves, and it’s hard to make a case for owning this stock.
Source: The Bearcave (Substack)
Microcap Moonshot Rating: 43/100
Quality: 22
Value: 64
Momentum: 89
Microcap Moonshot View:
This stock’s problems are highlighted by its low Piotrovski F- score and low Altman Z-Score
MICROCAP MOONSHOT PREMIUM PORTFOLIO UPDATE
We’ve now made five Microcap Moonshot recommendations since March 5th.
How have these bets performed?
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