Ranpak Holdings: The company owns or has license over 610 U.S. and foreign patents.
Luna Innovations: The company owns or licenses approximately 400 U.S. and international patents, and about 50 U.S. and foreign patent applications.

Andy Preikschat, the CIO, meets 100 CEOs every year and invests in public and private companies. The fund’s mid-year letter is very interesting – a must read for micro-cap investors.

For over twenty years, Mr. Rendino worked on one fund, Basic Value Fund, with a consistent Graham and Dodd focus, at, BlackRock/Merrill Lynch. He was the Value team leader, overseeing 11 funds and $13B in assets and a member of Blackrock’s Leadership Committee.

(a) No related party transaction in FY 2019 (b) Compensation is not out of line. There are no outsized perks. Moreover, the bonus is tied to the company’s performance. In FY 2019, the company did not award any cash bonus to Mr. Edenfield, since the company failed to meet the performance goal. The metrics used are revenue, adjusted EBITDA, and annual contract value.

In April 2017, the company launched AgilePlans, an all-inclusive connectivity-as-a-service, the usage-based pricing model for its mini-VSAT broadband service. For a subscription cost, subscribers get satellite communication hardware, shipping and installation, maintenance and support, airtime .

As per the Q2 2020 IR presentation, the company enjoys a 50% market share of wireless 911 calls. The company believes that it is the leading provider of Single Channel per Carrier (“SCPC”) satellite earth station modems, solid-state amplifiers, and traveling wave tube amplifiers. The company claims that it is the market leader for satellite ground station equipment.

The company was granted an exclusive franchise for each of its existing water and wastewater systems in Delaware. Artesian Water, the company’s principal subsidiary, is the oldest and largest public water utility in the State of Delaware, and has been providing a water service within the state since 1905.

(a) Subscription revenue: The company charges subscription fees which are recurring in nature. (b) First mover + proprietary product + recurring revenue with a high retention rate provides the company with a huge competitive advantage which could make it difficult for a new entrant to penetrate the market.

It is the first and only FDA-approved obstructive sleep apnea treatment that works inside the body with just the click of a button. (a) First mover advantage. (b) Track record: The company received approval in 2014 and since then has treated over 7,800 patients at over 350 medical centers across the U.S. and Europe. This proven track record would be hard for any newcomers to overcome.

During the current COVID-19 pandemic, some businesses and services are considered essential. Even though the companies are NOT 100% insulated, they benefit from some level of insulation to the fallout the economy is experiencing. Here is the list of few small and micro-cap companies that have obtained essential service status.

It is hard to ignore the efforts of Driver management in its proxy campaign against First United Corporation (M.Cap: $94 million). Driver Management garnered extensive media coverage for its campaign – American Banker, Reuters, S&P Global Market Intelligence, Bloomberg (press release), Institutional Investor, Baltimore Business Journal, Dominion Post, and Activist Monitor.

The Dolan family controls 70% of total voting rights through the ownership of Class B shares.
Concerns: (a) Family relationship: 7 out of 12 board members belong to the Dolan family (b) Executives of the company also serve in executive positions at Madison Square Garden Company (c) Related party transactions (d) Huge compensations; perks include aircraft, car, car driver and executive security

Randall K. Fields founded the company in 1990 and has been its CEO and chairman since its inception. He owns roughly 33% of the company’s outstanding shares. Overall, it is puzzling that Mr. Fields has an employment agreement as a sales department manager, in addition to working as CEO. Also, given the employment terms which allow him to work from his residence, it is not clear how many hours he works from the office.

Richard L. Soloway (age: 72) owns 33.5% of the company’s outstanding shares. He has served as the CEO since 1998, and secretary since 1975.
+ The compensation paid to Mr. Soloway is not out of the line.
+ No related party transactions.

We have compiled the list of all CEOs who agreed to reduce their base salary from March 1st 2020. As per our research, BlueLinx Holdings Inc. is the first company with a market cap of less than $2 billion* to announce the voluntary reduction of base salary of its CEO amidst Covid-19 crisis. On March 23, 2019, BlueLinx Holdings’ CEO announced that he would be voluntarily reducing his annual base salary of $850,000 to a monthly salary of $1 for a period of six months, beginning April 1, 2020.

Recurring revenue: In early 2017, the company launched a subscription-based product, StarLink Connect, which allows homeowners to use an app to control their security systems, lights and other devices. This system replaces the need for traditional phone lines with alarm installations. The company charges a monthly recurring fee for this service and the annualized run rate for recurring revenue is now $24 million based on the month of December 2019.

+ Recurring revenue with a long renewal period: The company’s subscription contracts are generally 1 to 3 years in length. The subscription revenue grew 180% from $48.6m in F.Y. 2014 to $136.6 million in F.Y. 2018. This could protect the company from a short-term shock.
+ Retention rate: In the F.Y. 2018, the company’s retention rate was 98%.

+ Recurring revenue: Recurring revenue accounted for 22.7% of total revenue for the F.Y. 2019. This includes the sale of disposable products, service and skincare.
+ Patents: The company had 32 issued US patents and five pending US patent applications.

+Market share: Accel enjoys a 31% share in the video gaming terminals in Illinois.
+ Long-term contracts with a high renewal rates: Accel’s exclusive contracts with its licensed establishment partners have remaining terms averaging approximately 7.4 years out of the maximum permissible contract term of 8 years. Also, Accel’s voluntary contract renewal rate for the three-year period ended December 31, 2018, was over 99%.

Class A license prevents competition to some extent: The company holds a Class “A” license, issued by the MRC, which allows the company to own and operate the racetrack. The Class A licence prevents competitors in the seven-county metropolitan area where thoroughbred and quarter horses are raced.

(1) Since the service provided by the CDMO is closely linked with the operations and process of pharma companies, it is not easy to switch to a competing CDMO. (2) Building facilities, and developing the expertise to comply with stringent regulatory audits and validation requirements can take years to construct and properly validate, and are barriers to entry.

In fiscal year 2017, the company completed its transition from a hybrid model where it sold both SaaS and perpetual license solutions, to a SaaS only business model. Today, the company only sells SaaS to new clients and is actively migrating its remaining perpetual license clients to SaaS.

Patents enable products to enjoy a long life cycle. AOL sold its patent assets to Microsoft for $1.05 billion and Google acquired Motorola, predominantly for its patent assets. Some investors have the ability to value patents and unlock the asset. We will improve the scope of the research after suggestions from investors.

The company is transitioning from selling perpetual licenses to providing access to its software on a subscription basis as part of its cloud offering. Subscription fees increased from $3.5 million in FY 2009 to $91.9 million in FY 2018.

Marchex (MCHX, M.Cap: $164 million) is a call analytics company that helps businesses connect, drive, measure and convert callers into customers. Edenbrook has been a stockholder since the first quarter of 2015. Here are few notable points from the letter: (a) The Company’s management team successfully transformed Marchex from a primarily transactional business to a recurring revenue business focused on enterprise clients. (b) The company’s crown jewel analytics business is high-margin and recurring in nature.

The Ultera ultra-low emissions technology gives Tecogen products a strong competitive advantage in markets where severe emissions limits are imposed or where very clean power is favored, such as New Jersey, California and Massachusetts. According to the company, its Ultera® CHP and fuel cell technologies are the only technologies that comply with California’s air quality standards for CO and NOx, which are regarded as the world’s strictest air quality standards.

AltraVue Capital, LLC is a women and minority-owned investment firm. AltraVue means a “different view.” The fund started filing 13F forms in February 2019. Market value of the most recently-filed 13F: $182 million.

As per the company’s 10-K, it is the only company with an integrated RAIN platform, and has a leading market share in endpoint ICs, reader ICs and stationary readers. The company’s intellectual property portfolio includes 247 issued and granted U.S. patents, two issued and granted international patents, 27 pending U.S. patent applications and one pending international patent application.

Terry E. Trexler founded Nobility Homes, Inc. in 1967. He is currently serving as the CEO of the company and holds 53.8%. His son works as CFO and owns 10.3%. Together, the father-son duo owns 64.1%. The CEO’s base salary has remained fixed (at his request) for over twenty fiscal years and the CFO’s base salary has remained fixed since 2005. In order to reduce expenses, the company avoids retaining an outside compensation consultant. The compensation committee performs this role. Kudos!

Owner-operators: Bridgford Industries owns roughly 79% of the o/s common shares. The principal owners of Bridgford Industries hold several key positions in the company. The Company has not granted any stock or option awards to NEOs for more than 12 years. (We manually checked the past DEF14s). At the same time, plenty of family members on the company’s board, management, and operation.

In December, 2019, the company appointed John W. Gibson, Jr. as chairman of the board of directors, CEO and president of the company. The performance-based stock option award (PBSOA) is the one which caught our attention. The company awarded Mr. Gibson a PBSOA of 2,000,000 shares of common stock.

The company is a pure-play product company focused on tuberculosis (TB) screening. The company’s SPOT.TB test is one of the two recommended alternatives to TST. In FDA pivotal studies in the United States, T-SPOT.TB was shown to have sensitivity advantages over QFN Plus, a competitor’s testing methodology.

Tucows is a publicly-traded Internet services and telecommunications company. (1) Domain Services: The segment accounted for roughly 72% of total revenue. This segment’s business model consists primarily of non-refundable, up-front payments, which generates recurring revenue and a positive operating cash flow. Generally speaking, domain name renewals are “sticky” in nature. (2) Ting Fibernet: Possible first-mover advantage in smaller cities: In addition to mobile telephony services, the company is offering a gigabit fiber network direct to the premises (FTTP) whether a home, a business or a multiple occupancy dwelling. The total number of subscribers under management nearly doubled in the past year – 5 million in Q1 2018 to 9.5 million in Q3 2019.

Mr. Roger Fan founded RF Capital Management LLC in 2017. In the latest investor letter, Roger Fan explained his rationale behind adding Garrett Motion (GTX, M. Cap: $760 million) to the portfolio. GTX is not your typical auto supplier. GTX essentially operates as a duopoly in the turbocharger market with BorgWarner. GTX is also at the top of the auto supplier chain, with an 80% variable cost structure. In the event of a downturn, we believe GTX will perform better than other suppliers.

(a) Migration towards SaaS (recurring revenue business model): The company has steadily grown its base of SaaS subscribers and continues to move towards becoming a pure-play provider of software and subscription services. (b) Patents: As at February 28, 2019, the company has 73 US patents and 200 foreign patents.

A high-quality transcription software is useful for buy-side professionals. Here are the options- (a) Automatic / computer-generated transcription (b) Human-generated transcription.

Cove Street Capital was founded by Jeffrey Bronchick. Roughly 30% of the companies in the portfolio have a market cap of less than $1 billion, while 60% are between $1 billion to $10 billion. The fund’s blog covers various areas – investment strategy, investment management industry, competitive advantage, activism, governance, compensation, etc.

Many view 13D filings as similar to an oral liquid antibiotic, i.e. to generate alpha, one should invest within a few hours or days. This is bad logic – period. Are there reasons for this delusional approach? One of the reasons could be due to the way an activist’s performance is computed. It is common practice to compare the stock price on the “first filed 13D date” with the stock price on the “date of exit”. Since this data is widely reported in the media, many think they should invest with the same horizon to replicate the return.

(1) Unique business model: No insurance, no prior booking, and cheaper than industry average. (2) Franchise model(3) For spinal manipulation, the company charges approximately $27, which is roughly 65% lower than the industry average.

In October 2019, the company agreed to sell its Workspace Management business for $120 million. After the sale of this segment, Asure Software will be a pure-play human capital management (HCM) focused company, and the recurring revenue mix will be more than 90% of total revenue.

(a) National Research Corporation derives 89% of total revenue from renewable annual subscription-based service agreements with its customers. (b) Michael D. Hays has served as CEO and director since he founded the company in 1981. His base salary is $127K, which has remained the same since 2005 as per his request.

(a) Brand: With more than 90 years of operation, Bluebird is an iconic American brand. (b) Reputation and regulation act as barriers to entry: The school bus industry has few competitors due to the importance of brand and reputation for safety and durability, compliance with stringent safety and regulatory requirements, an understanding of the specialized product specifications in each region, and specialized technological and manufacturing know-how. (c) Leadership in Alternative Fuel: Blue Bird is the market leader in propane, gasoline and CNG fuel powered-buses, having sold approximately eight times more alternative fuel school buses than all of its competitors combined from fiscal 2010 through fiscal 2018.

Even though Caligan Partners has filed a 13D in only two stocks, Merksamer is no stranger to activism. He served as a managing director of Icahn Capital for eight years before launching Caligan Partners. Caligan Partners argued that the individual components of the company’s portfolio are worth more than $30 per share, and the company enjoys several competitive advantages.

In December 2018, Michael R. Zapata, founder of Sententia Capital, was appointed executive chairman and president. In July 2019, the company appointed Zapata as CEO. As per the employment agreement, Zapata will receive a retainer fee of $90,000 and the company granted 48,000 RSUs. The RSUs vested in the amounts set forth below on the first date the 15-trading-day average closing price of the company’s common stock equals or exceeds the corresponding target price (listed below).

East 72 is a publicly traded closed-end fund in Australia. Its latest quarterly update mentions two sub-$200 million companies –Vulcan International and PICO Holding.
Well, the crux of the story is this – Vulcan International announced its decision to liquidate the company, which it will do “at its own pace”. East 72 argues that the company’s assets are worth (gross asset value – pre-tax) ~US$205/share, and states that, “for the first time, there is a hint in the 18 September 2019 release that “the Company intends to commence stockholder distributions.”

Greenhaven Road Capital runs a concentrated portfolio that focuses predominantly on stocks that have a market cap under $500 million. In the latest investor letter, Scott Miller explained his rationale behind making “jockey” bets. He wrote, “Given my operating experience, I am a firm believer that people build businesses. Particularly in the context of a smaller enterprise, the contributions of a “jockey” can be profound. These are not super humans who can overcome all challenges, but the right jockey pursuing the right strategy with a little bit of good fortune can be very profitable.”

Every time a company (under $2 billion market capitalization) appoints a new CEO, we research the track record of the CEO. This is a core research conducted by our team. Every year, hundreds of new CEOs are appointed. CEOs who have an A+ track record get hidden among others. By uncovering an excellent CEO, you can uncover a great investment idea.

PGT has the #1 position in the market for impact-resistant windows and doors in Florida. According to published data, the company enjoys over 50% of the market share in Florida. More than 80% of total sales are generated in Florida. There are some areas in Florida where building codes require impact resistance. According to a 2014 report by Karen Clark & Company, four of the top eight US cities that are most vulnerable to major storms are located in Florida. Over three million WinGuard® units have been installed, with zero reported impact failures. It is difficult for a new entrant to create this track record.

On August 15, 2019, the company amended the employment agreement of Nathaniel A. Davis, the company’s CEO. The company awarded a one-time issue of performance-based restricted stock, valued at $10 million that will vest over three years, subject to the company attaining its free cash flow goals for 2020, 2021 and 2022.

Retrieval of information is a vital tool for an investment professional. Searching Google drive is like a doing a Google search of your research files. It will retrieve all the documents (Word, Excel, PDF) that contain your keyword in both the content and title. The system will list all the documents that contains the keyword.

Tarkio Fund’s 2nd quarter 2019 shareholder letter explains their rationale behind buying Manitowoc. The core argument revolves around the CEO (appointed in December 2015) who is transforming the company through lean strategies.

The blog is run by Richard Lewis, who, with painstaking effort, has published transcripts of The Daily Journey Annual Meeting and other meetings. I came to know about this blog through Cove Street Capital’s blog.

Huge recurring revenue: The maintenance and support segment of Globalscape accounted for 63% of the 2018 revenue. Maintenance and support (M&S) are recurring in nature. Almost all customers who purchase a perpetual license to use the EFT platform also purchase an M&S contract, for which they pay a recurring fee that is typically 20% to 30% of the perpetual license fee per year.

As per the company’s 10-K, GastroPlus has one significant competitor and has a high barrier to entry, as it would be difficult to validate new software to levels required to support regulatory submissions. In the past three years, that company generated roughly 69%-80% of revenue from renewals. The company’s renewal rates were 85% based on accounts and 93% based on fees.

Pay close attention to the CEO’s language. Also, check the number of times the CEO uses the word “acquisition”, and how bad news is delivered – it is a red flag if the CEO tries to obscure the details of bad news.

Transcat’s calibration service is critical to ensure that test equipment is operating according to specifications. This segment is supported by a recurring revenue stream. This segment maintains high margins and an inherent operating leverage. Out of the $1.4 billion calibration service market, 41% is controlled by 3rd party service providers. Transact enjoys a 17% market share of the 3rd party service segment.

On November 23, 2015, Rodney A. Bienvenu, managing partner of Spear Point Capital Management, sent a letter to the board of GSE Systems, and expressed his belief that the company enjoys several competitive advantages.

GVP has great barriers to entry, extremely high levels of industry and institutional knowledge, a very large base of current customers, and mission critical software solutions that once installed become extremely difficult to dislodge or replace.

(a) The company’s technology is the only mask-free, clinically validated alternative to the current standard of care for the treatment of respiratory distress.
(b) De nova: The FDA recently granted the company’s de novo request for an expanded indication for the Precision Flow Hi-VNI system. De nova means the device is “novel” with no existing classification or predicate device on the market.
(c) Recurring revenue: Vapotherm generated roughly 67% of its total revenue for FY 2018 from the sale of single-use disposables, nasal interfaces, cannulas, and adaptors used in conjunction with the Precision Flow capital units.
(d) Huge installed base + treated patients: As of December 31, 2018, more than 1.7 million patients have been treated with the Precision Flow systems, and the company has a global installed base of over 14,000 capital units.

The company creates liquid marketplaces for surplus and scrap assets. The company’s warehouse can be replicated – in fact, a competitor can easily double or triple the company’s warehouse capacity (which is less than 0.6 million square feet), but it is difficult to attract a large buyer and seller base. Think of Facebook, LinkedIn, eBay – the network effect itself acts as a barrier to entry.

http://thepatientinvestors.blogspot.com/. This blog is run by Avram Fisher, Portfolio Manager at Long Cast Advisers. The blog is updated regularly – most recently he discussed Cynergistek, Quest Resources etc.

Occasionally, I write about a few technical hacks. This article is about the usage of “Pin” in windows.

There are two pin options: (a) Pin to taskbar and (b) Pin to this list

Roumell Capital’s top five stocks account for 57% of the total portfolio. ZAGG accounts for 17% of the total portfolio – Rank #1
Signs of Moat – The company’s screen protection products enjoy a 51% market share in the US market. Moreover, the company enjoys 67% market share of US battery cases; 35% market share of US external power; 23% market share of US wireless charging pods.

KEMET is a market leader in polymer tantalum, with an estimated market share of greater than 50.0%. The company claims that over the years it has transformed its product portfolio from a commodity-based approach to a customized, design-in approach.

MAK Capital runs an ultra-concentrated portfolio with just five stocks. Agilysis is the second largest position, and accounts for roughly 25% of its portfolio. Agilysys has been a leader in hospitality software for more than 40 years. The company has shifted from the legacy business model (license and maintenance) to the SaaS model. Generally speaking, SaaS customers face huge switching costs – (a) risk of data loss from migration from one platform to another platform; and (b) the learning curve involved with learning a new platform.