The Intelligent Investing Podcast

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Episodes

Eric Schleien discusses value investing, rational investment analysis, and vital mental models.

Episodes

Thursday Aug 06, 2020

#114: Vince Annable; The Household Endowment Model

Thursday Aug 06, 2020

Summary

Most investment portfolios look the same, comprised of 60 percent stocks and 40 percent bonds, and each portfolio moves with the rollercoaster of the stock market.

Vince Annable, best-selling author of The Household Endowment Model is here to show an alternative investment method that doesn't leave you whiplashed.

Modeled after the Yale Endowment Model, The Household Endowment Model is a similarly diversified, non-correlated investment strategy for individuals and families, enabling them to make private, institutional-style investments with minimums in the $50-$100k range, rather than in the millions.

By putting your money into alternative investments such as private equity, venture capital, real estate, natural resources, and more, The Household Endowment Model provides an illiquidity premium that prevents emotionally driven bad investment decisions and may contribute to greater overall yields in the future.

About Vince Annable

Vince Annable, CRPC®, is the creator of The Household Endowment Model® and founder and CEO of Wealth Strategies Advisory Group. Vince has been involved in the financial services industry since 1981. Vince prides himself in bringing new investment methods to high net worth families. He’s had families approach him after learning his method to tell him that they didn’t understand why their own advisors hadn’t told them about it. He’s also taken his message to the public on The Michael Wall Show, ABC15 Sonoran Living, and as the host of the podcast, Your Money Manual. Vince lives in Scottsdale, Arizona, with his wife and enjoys fine food and wine, traveling, and reading.

Support The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!

You can subscribe to the podcast on the following platforms:

Contact Vince

Wealth Strategies Advisory Group

Contact Eric Schleien

Email: IntelligentInvesting@gmail.com

Monday Aug 03, 2020

#113: Trey Henninger; Northfield Precision Instruments Corporation (NFPC); A Cheap Dark Stock

Monday Aug 03, 2020

Summary

Today's interview guest is Trey Henninger.

Trey Henninger runs the blog and podcast, DIY Investing. Trey is a private value investor focused on microcap and dark stocks in the United States. His focus is on high-quality companies with predictable durable earnings where management has skin-in-the-game. Trey runs a concentrated portfolio of 5 stocks with a 20% weighting each. By focusing on small companies, Trey hopes to find overlooked compounders at value prices. His favorite opportunities have a market cap below $50 million.

Focus Stock: Northfield Precision Instruments Corporation

Basic Company Information:

Name: Northfield Precision Instruments Corporation

Stock Ticker: $NFPC

Location: New York, United States

Industry: Industrial Manufacturing

Market Cap: $5.3 million

TTM Earnings: $668k

Shares Outstanding: 234,237 (constant, no change in the last 5 years)

Stock Price: $23.00

TTM EPS: $2.85 (based on 2019 FY results)

P/B: 1.09

P/E: 8.07

Earnings Yield: 12%

Dividend Yield: 2.6% (based on 2019 dividends)

3-year Earnings CAGR from 2015 to 2018: 100.4% (EPS was $0.53 per share in 2015) - dropped a bit in 2019.

Investment Thesis

Northfield Precision Instruments Corporation is a niche manufacturer of precision air chucks. Precision is a keyword because very careful machining is required in the manufacturing process to meet the required specifications. Northfield is a leading manufacturer in the air chuck industry although the market is quite small. Northfield manufacturers for a worldwide customer base out of a single manufacturing location in New York State, United States. This single manufacturing facility has room for production expansion without adding additional space. The combination of being a small manufacturing concern with room to grow is that Northfield is a huge current and future beneficiary of expanding operating leverage. They have a fixed cost base and are able to sell their goods at a consistent and sustainably competitive gross margin. Gross profit margins are consistently in the 45-50% range over the last 6 years.

Northfield is undervalued significantly as they trade for a single-digit P/E while in the process of rapidly growing their earnings. They have been able to sustain a high growth rate because incremental returns on capital clearly exceed 50%. It is my view that Northfield has remained undervalued for two key reasons: They are a small nano-cap company with a market cap below $5 million and they are dark. Northfield doesn't report to the SEC and the only way to receive financial statements is to email their accountant and request physical copies sent by mail.

Earnings History

2015 = $0.53 per share

2016 = $1.05 per share

2017 = $2.46 per share

2018 = $4.27 per share

2019 = $2.85 per share

3-yr avg = $3.19 per share

As Northfield grows earnings above $1m per year over the next few years and starts to earn multiple millions of dollars per year, they will be able to justify spending money to include their financial reports on OTC Markets. This will grow their potential investing audience and likely broaden their appeal.

Potential Risks

Northfield is an industrial manufacturer which means it is not immune to cyclicality in the economy. With the current recession, we should expect earnings in 2020 to be lower than in 2018 and 2019. They are likely considered an essential business, so I doubt they would be drastically affected. However, a dip in earnings is both foreseeable and expected. Yet, I expect that earnings will grow again after this recession ends to exceed the 2018 high in earnings.
They are highly illiquid. It is difficult to buy shares in the market. It took several months for me to acquire my full position. I think liquidity is largely constrained because current large shareholders are unwilling to sell at such a low price while the profitability of the company continues to improve.

In summary, Northfield Precision is a dark company with a low single-digit P/E and a high earnings growth rate. They are able to profitability reinvest their earnings into growth at a high ROIC. While a 2020 recession will slow their progress, Northfield is on the way to becoming a much larger and more profitable company. Simply trading from the current P/E of 8 to a market multiple of 16 would double the stock price. The earnings growth and ROIIC should justify an even higher multiple though. The biggest downside is simply that the company is small and overlooked. It is hard to predict which a company of this size will begin to get a bid in the market. Yet, the low liquidity in shares should ensure that once interest grows the stock price will jump quickly.

Connect With Trey Henninger

HELP OUT THE PODCAST

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GET IN TOUCH WITH ERIC SCHLEIEN

Email: IntelligentInvesting@gmail.com

Disclosure: Eric Schleien and some SMA clients of Eric Schleien through GSCM own shares of NFPC. Nothing here is investment advice. Do your own due diligence.

Thursday Jul 30, 2020

#112: Jim White; Opportunity Investing

Thursday Jul 30, 2020

SUMMARY

In this episode of The Intelligent Investing Podcast, I sit down with Jim White to discuss his book Opportunity Investing.

As the famed value investor, Joel Greenblatt, had to say about the book:

"Jim White's marvelous book Opportunity Investing is conclusive evidence of my belief that the secret to investing is to figure out the value of something - and then pay less. Dr. White offers magical advice on how to make big money while saving on capital gains. At the same time, he vividly illuminates the dire situations in Opportunity Zones and presents a wide range of innovative ideas for Opportunity Funds, including directing them toward education and non-profits."

QUALIFIED OPPORTUNITY ZONES

For those interested in learning more about qualified opportunity zones and opportunity funds, check out Jim's presentation on YouTube.

ABOUT JIM WHITE

Jim White, PhD is Chairman and CEO of Post Harvest Technologies, Inc. and Growers Ice Company, Inc., Founder and CEO of PHT Opportunity Fund, LLC, and Founder and President of JL White International, LLC. Jim is the best-selling author of What's My Purpose? A Journey of Personal and Professional Growth. The book, which has been lauded by such industry leaders as Steven M.R. Covey and Jack Canfield, seeks to change readers by helping them to identify key truths while breaking down the main barriers (the Five Masks) to fulfillment. Jim is also the founder of the customized yearlong leadership and management transformation process, The Circle of Success; Jim White's Classic Movie Series; and The Red Carpet Tour. These innovative events have attracted more than 100,000 participants worldwide, including Fortune 500 CEOs, management teams, entrepreneurs, governments, and trade associations. Dr. White first found his entrepreneurial spirit at age five when he created his first business-collecting and selling Coke bottles to help support his family. From these humble beginnings, Jim went on to serve his country in Vietnam before entering the corporate world upon his return. Along the way, he would go from high school dropout to academic triumph, eventually earning a B.S. in Civil Engineering, an MBA, and a Ph.D. in Psychology and Organizational Behavior. Dr. White achieved international recognition as CEO of Blount World Trade Corporation; owner and Managing Director of ACEC Centrifugal Pumps NV, Belgium; and as Vice-President and Division Manager of Ingersoll Rand Equipment Corporation. Throughout his career, he has bought, expanded, and sold 23 companies, operating in 44 countries. Jim acquires struggling businesses to revive and develop them into profitable enterprises using his business turnaround strategy. To date, Jim has generated more than $1.8 billion in revenue.

RESOURCES

HELP OUT THE PODCAST

You can subscribe to the podcast on the following platforms:

GET IN TOUCH WITH ERIC SCHLEIEN

Email: IntelligentInvesting@gmail.com

Monday Jul 27, 2020

#111: XLMedia PLC; Malcolm Ingalsbe and Ladislao Zichy

Monday Jul 27, 2020

In this episode, I sit down with Malcolm Ingalsbe and Ladislao Zichy Thyssen, co-author Quantrarian Research, a research blog covering microcap equities. We discuss a long position of theirs, XLMedia PLC

Summary

XLMedia PLC (LSE: XLM) is a leading digital publishing and affiliate marketing company that owns 2000+ informational websites across several high-growth verticals. The company generates sales primarily through revenue-sharing agreements; they publish editorials and other informational content (i.e. product reviews, rankings, ongoing deals, etc.) on their websites which drive visitors to their clients’ services.

History and Problems

XLMedia has experienced tremendous growth in the past decade, increasing revenues by over 750%. However, XLMedia’s top-line growth has retracted in recent years as it faces a combination of regulatory headwinds, search engine demotions, and the cancellation of sporting events. Worries over these complications have driven the share price down over 80% in the last two years, yet the company produced over 50% free cash flow TTM.

New strategy

The hindrances currently being faced have precipitated the company’s plan to employ a “quality over quantity” consolidation strategy. This entails a shift of focus towards selling non-core assets and establishing a meaningful presence in mature and regulated markets that are less prone to volatility. This includes infiltrating the U.S. sports-betting market, which should experience very high growth via regulatory tailwinds over the next several years. The company’s new management team is well incentivized and brings more experience to the table than the prior team.

Staying In Touch With Eric Schleien

Staying In Touch With Malcolm and Ladislao

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Thursday Jul 16, 2020

#110: IKONICS Corporation (IKNX); David Flood

Thursday Jul 16, 2020

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Background

David found this stock by screening for the smallest listed companies in the United States. He doesn't bother screening on any value metrics, just lowest market cap company he can find. No mining, financials, crypto or cannabis.

Summary

Founded back in 1952. HQ in Duluth, MN. Make emulsions and films in printing. Make different types of glass and etching equipment. Sound deadening equipment. Chemicals and materials.

7m market cap. 1m shares floated. Management owns 30%. 17m Revenue. Loss of 800k. A few bad years, then good thing happens. Sell off legacy business, start a new business. Ebbs and flows over time.

Insiders Buying

CEO, COO, and Directors have all been buying

Valuation

Trades at half of book value. At some point there could be good news and a stock pop. Part of David Flood's basket of these low market cap stocks that have been left for dead.

About David Flood

David runs the blog, Elementary Value, and is a private value investor based in the UK. His investing approach is grounded in the fundamental precepts of value investing based upon Ben Graham’s core concepts of ‘Intrinsic Value’ and ‘Margin of Safety’. His investment strategy involves looking at both ‘Deep Value and ‘Franchise Value’ situations and using the value investing framework to analyze the financial and corporate facets of a given prospective investment.

Staying In Touch With David Flood

Twitter
Blog

Staying In Touch With Eric Schleien

Tuesday Jul 14, 2020

#109: Video Display Corp (VIDE) | David Flood

Tuesday Jul 14, 2020

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Video Display (VIDE)

The company does video simulation products and video displays. Simulations for military and aerospace. They’ll also do huge video display units that can be installed in huge rooms like NASA.

5.9m Market Cap

Lots of hair on this company. Lots of liabilities. Made 67,000 last year. And loss-making previous 3 years.

Why does David like it?

2 reasons:

Price chart hit support and volume dropped off. Accumulation period. People picking up shares in the stock.
CEO owns 49% of the company. He doesn't want to see the company go under. VIDEO has been around since 1975 which indicates that it has managed to struggle along for all these years. They have divested a lot of their old legacy businesses in 2014. Had expanded over the decades and "diworsified."

Potential Catalysts

Started to move into a new sector - cybersecurity for defense industry. VIDE has a unit that can test computer systems with homeland security - this could potentially be a lucrative business in the future. just finally turned a profit. the future could be better than in the past.

History

VIDE has gone on and off doing well to poor again. The stock goes up a lot when things are good. nobody is paying attention to the company, left for dead. nobody talking about the company on stock boards. Those are the kinds of businesses David likes the most: No sign of life and nobody cares about the company.

Stock Buybacks

VIDE was buying back stock last year in mid-2019.

Other Catalysts

Potential for some kind of change due to a very old board of directors.

About David Flood

Staying In Touch With David Flood

Twitter
Blog

Staying In Touch With Eric Schleien

Friday Jul 10, 2020

#108: Micron Solutions (MICR); David Flood

Friday Jul 10, 2020

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Summary

https://www.otcmarkets.com/stock/MICR/overview

Micron (MICR) is a medical device company founded in 1978.

MICR has a heavy debt load and negative working capital. It is sat at an all-time low and has recently announced it is going to de-list. Upon the announcement, the share price got cut in half. >10% owner has been buying more.

http://www.openinsider.com/search?q=micr

Insiders own 26% of the common.

About David Flood

Staying In Touch With David Flood

Twitter
Blog

Staying In Touch With Eric Schleien

Thursday Jun 25, 2020

#107: Calloway's Nursery (CLWY) | Jan Svenda

Thursday Jun 25, 2020

OTC Stock Manual

If you’d like to purchase Jan Svenda’s Manual Of Stock (like an updated online Walker’s Manual)…click, here.

You can see samples to Jan’s manual, here.

If you like The Intelligent Investing Podcast, please consider subscribing on:

Summary

Calloway's Nursery was first discussed in Episode #22.

In this episode of The Intelligent Investing Podcast, Eric Schleien sits down with Jan Svenda to discuss Calloway's Nursery, Inc. (CLWY).

This may possibly be the least obscure stock that Jan has ever discussed on the show.

The company runs a small chain of garden centers in Texas. There is an activist investor in the management who has been a good steward of capital. The original pitch was that the company was trading below liquidation while business was solid. New management came in and realized value. There’s been about an extra 10% return with special dividends. The company currently spits out $3,000,000 a year in free cash flow which is backed up by real estate and a healthy balance sheet. The company is opening up new stores. There’s also the possibility of future improvements in free cash flow. The company is currently valued at about a 10% free cash flow yield. The coronavirus should not hurt them too badly.

About Jan Svenda

Jan is a “deep value” investor/analyst mainly focused on the US small-cap and micro-cap universe. He started out with a long-only bias (stocks trading close to NCAV etc.) which led to his interest in the OTC world.

Jan now covers this space through his exclusive newsletter service where he shares his latest long ideas and a watchlist of OTC stocks which should help subscribers generate material returns and allow them to “monitor” the OTC space more efficiently.

The service also acts as a community of engaged members who share the same focus. On top of this, he is interested in short-focused research especially in the thesis revolving around accountancy or earnings manipulation.

From time to time he also contributes to Safety in Value’s marketplace ‘Microcap Review’.

STAYING IN TOUCH WITH JAN SVENDA

To learn more about Jan and his manual of OTC stocks, you can visit his website.

He can also be reached via LinkedIn.

Staying In Touch With Eric Schleien

Monday Jun 22, 2020

#106: Jeremy Raper; Endor AG

Monday Jun 22, 2020

For the full video interview on YouTube, click here.

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Overview

Endor AG is a Munich-listed holding company whose sole asset is Fanatec, the premium provider of racing wheels and other accessories for sim racing games played on consoles and PCs

Despite being a German-listed small-cap, the company has ~80% market share in the premium wheel/accessories segment and has essentially locked up exclusive branding rights for all the major OEMs and racing organizations (F1/Nascar/WRC) to produce branded replica racing wheels.

Growth

Endor AG grew 70-80% last year and has compounded revenues at 40% over the last 10yrs, as iRacing/simulated racing has grown organically in popularity at very high rates

COVID-19 Impact

Current growth is exploding due to COVID-19 and the mainstream recognition sim racing has garnered with normal sports closed for the last three months.

The current business is growing 100-200% per annum, so much so that the company can barely keep up with demand.

The company has already leaked they are targeting 150-200mm in revenues at 25-30% EBIT margins in the next couple of years (versus 40mm revenues last year and 80mm this year).

Going Forward

The stock currently trades at ~11x 2021 earnings, and ~2x 2021E sales, despite a multi-year runway where the business could grow 30% for a very long time.

Fair value on a 'normal' exchange with English disclosures/investor relations would probably be 4-5x the current price. Jeremy believes that even on the minor German exchange, it's hard to see how the stock doesn't double or triple again.

Staying In Touch With Jeremy Raper

Blog
Twitter

Staying In Touch With Eric Schleien

Wednesday May 27, 2020

#105: Pinelawn Cemetery (PLWN); An OTC Dark Stock; Jan Svenda

Wednesday May 27, 2020

OTC Stock Manual

If you’d like to purchase Jan Svenda’s Manual Of Stock (like an updated online Walker’s Manual)…click, here.

You can see samples to Jan’s manual, here.

Other Episodes Featuring Jan Svenda

If you like The Intelligent Investing Podcast, please consider subscribing on:

IF YOU’D LIKE TO WATCH THE INTELLIGENT INVESTING PODCAST ON YOUTUBE, CLICK HERE.

Summary

In this episode of The Intelligent Investing Podcast, Eric Schleien sits down with Jan Svenda to discuss Pinelawn Cemetery (PLWN), a dark OTC stock.

Articles

A Dark OTC Stock with a 9% Dividend Yield (Elementary Value)

About Jan Svenda

From time to time he also contributes to Safety in Value’s marketplace ‘Microcap Review’.

STAYING IN TOUCH WITH JAN SVENDA

To learn more about Jan and his manual of OTC stocks, you can visit his website.

He can also be reached via LinkedIn.

Staying In Touch With Eric Schleien

Disclosure

Eric Schleien and clients of his company Granite State Capital Management have no position in Pinelawn Cemetery. I, Eric Schleien, recorded this podcast myself, and it expresses my own opinions. This episode should not be considered investment advice. Please do your own due diligence.

Episodes

Summary

About Vince Annable

Support The Podcast

Contact Vince

Contact Eric Schleien

Summary

Investment Thesis

Earnings History

Potential Risks

Connect With Trey Henninger

HELP OUT THE PODCAST

GET IN TOUCH WITH ERIC SCHLEIEN

SUMMARY

QUALIFIED OPPORTUNITY ZONES

ABOUT JIM WHITE

RESOURCES

HELP OUT THE PODCAST

GET IN TOUCH WITH ERIC SCHLEIEN

Summary

History and Problems

New strategy

Staying In Touch With Eric Schleien

Subscribe

Subscribe

Background

Summary

Insiders Buying

Valuation

About David Flood

Staying In Touch With David Flood

Staying In Touch With Eric Schleien

Subscribe

Video Display (VIDE)

Why does David like it?

Potential Catalysts

History

Stock Buybacks

Other Catalysts

About David Flood

Staying In Touch With David Flood

Staying In Touch With Eric Schleien

Subscribe

Summary

About David Flood

Staying In Touch With David Flood

Staying In Touch With Eric Schleien

OTC Stock Manual

Subscribe

Summary

About Jan Svenda

STAYING IN TOUCH WITH JAN SVENDA

Staying In Touch With Eric Schleien

For the full video interview on YouTube, click here.

Subscribe

Overview

Growth

COVID-19 Impact

Going Forward

Staying In Touch With Jeremy Raper

Staying In Touch With Eric Schleien

OTC Stock Manual

Other Episodes Featuring Jan Svenda

Subscribe

IF YOU’D LIKE TO WATCH THE INTELLIGENT INVESTING PODCAST ON YOUTUBE, CLICK HERE.

Summary

Articles

About Jan Svenda

STAYING IN TOUCH WITH JAN SVENDA

Staying In Touch With Eric Schleien

Disclosure