Best Small Companies

Covid Cancellation Conference (5/14-16)

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SCHEDULE PRESENTERS ABOUT

… and with a Nod To Places Like St. Louis, Philadelphia and Dallas …

As the accompanying image suggests (and “delivers”) we’re in the middle of storm clouds over places like St. Louis. Stock markets have been turbulent in the wake of a pandemic and the path ahead is foggy, at best. That said, we envision a break in the clouds, future rainbows and better days ahead. The pandemic includes an outbreak of event cancellations and there’s no more succinct way to express what we think about that. “We miss all of you.”

In that spirit, we’re building Successful Investing I — a compendium of investing discussions intended to characterize the current challenges and demonstrate the discovery of opportunity. We’ve been through similar challenges in the past and the key is remembering that no matter how deep and wide the chasm shall prove to be, there’s always opportunities for long term investors

FULL SCHEDULE

Thursday — May 14 — 8:30 PM ET Panel Discussion — Always Invest Better (Butcher, Donnelly, Kavula, Lynch, McManus, Robertson)

Friday — May 15 — 2 PM ET Small Company Discovery (Kavula, Robertson)

Friday — May 15 — 4 PM ET Bear Market Lessons (McManus, Robertson)

Saturday — May 16 — 1 PM ET Selling Guidelines (Kavula, Lynch, Robertson)

Saturday — May 16 — 3 PM ET These Are A Few Of Our Favorite Screens (2 Guys & “All”)

SESSION DESCRIPTIONS

Stock Selection Panel Discussion

We’ll kickoff the event with a traditional panel, spending a few moments honoring the past and providing a fully transparent review of historical performance … and we’ll share the analysis of a favorite idea … with a lightning round chaser. REGISTER

Small Company Discovery

Finding smaller companies to add to portfolios is always a challenge. What is the role of small companies in your portfolio? What’s the difference between small-cap and small company? Join Ken Kavula and Mark Robertson as they present a progress report on their Best Small Companies for 2020. They will show how the list was put together and look at some interesting ways to identify small companies for study and possible purchase. When’s the last time you added a great small company to your portfolio? REGISTER

Bear Market Lessons

In this session, Mark and Hugh will take a look at the challenges presented during bear markets and the reliable approach inspired by some of the Legends of Investing. Trust your studies. What can be done when earnings are a mess on your visual analysis? What opportunities should be emphasized during deeper recessions and bear markets? What stocks were favored ten years ago and how have they done? REGISTER

Selling Guidelines

For the last two or three years Mark Robertson and Ken Kavula have been looking at ways to refine the selling process. Cy Lynch brings the perspective of portolio-centered decisions and its impact on necessary management decisions. Starting with the traditional selling cues, Ken, Mark and Cy have been searching for triggers which might add a percentage or two to total portfolio returns. As the data mounts, the findings are worthy of further exploration. Listen to new ideas. Respect time-honored guidelines and traditions. Can we sell better? REGISTER

These Are A Few Of Our Favorite Screens

Join Mark Robertson and Ken Kavula in this no-holds barred discussion about investing. The Two Guys are known throughout our long term investing community for this lively discussion class and they are sure to not disappoint! You’ll never know exactly what the topics will be but you can be sure to walk away with thought-provoking stock ideas and useful ideas to put to work as you build your nest egg. This session will focus on our favorite sources of ideas and we’ll be joined by a suitable compliment of damsels and knights as we explore Ivory Soap, Irish Spring and a number of stock study idea generators. REGISTER

PRESENTERS & CONTRIBUTORS

Kim Butcher is a Lifetime member of BetterInvesting and a BetterInvesting National Convention Presenter as well as a Round Table Presenter for Manifest Investing . She is currently a member of 2 investment clubs and one being “Bionic”, an online club that has members from the East to the West coast. Her love of teaching began during her career as a nurse over 30 years ago. She is also a past member of the BetterInvesting Volunteer Advisory Board (BIVAB).

Pat Donnelly is president of the Pittsburgh Chapter having worked in several positions within the Chapter and previously served on the Better Investing Volunteer Advisory Board. Pat is proudly married to Sue Donnelly and together they have two great kids. Pat and Sue have recently added a grandchild. (Welcome to the Club!) During the day, Pat is a cloud infrastructure technology consultant. Besides finding great stocks, learning from the great volunteers, he likes to learn and share about the many no-cost computer based resources available to the individual investor. Tools that are available to everyone, some of them built right into your computer. When time permits after that Pat is revisiting his interest in sailing.

Ken Kavula (kkavula1@comcast.net) has served the modern investment club movement in a wide variety of leadership volunteer positions. He is a Nicholson award winner, a retired educator and is regarded as a small company champion and respected speaker nationwide. You might have heard him teaching on the TickerTalk program for BetterInvesting. Before retirement, Ken served as Principal of Genesee HS for 21 years. He lives with his wife Natalie near their two children and five grandchildren and he also belongs to four investment clubs, including two Model clubs and a family club. Ken and Natalie are avid theater goers and travel as much as they can.

Cy Lynch (celynch@att.net) is a respected and experienced long-term investor and educator. He has served in a number of regional and national volunteer capacities and currently serves on the Better Investing Board of Directors. Among his many vocational roles include investment advisory and service as a lawyer. He recently was ordained as a Baptist Minister. He is a Lifetime member of Better Investing. Cy is a frequent contributor at MANIFEST, providing regular educational topics and a knight of the Round Table series. Cy and his wife, Barb, are enthusiastic advocates for animal rights.

Hugh McManus (hughmcmanus@gmail.com) is a pharmaceutical scientist, successful long-term investor and renowned advocate at investment education conferences. A frequent contributor to MANIFEST, Hugh is also a knight, participating in our Round Table series. Hugh is renowned for his “less traditional” stock selections at conferences and for the Round Table but we know that he also maintains a steadfast core of vetted, excellent companies — accumulated at great prices over a few decades, too. Hugh is known for his extensive travels and has only recently spent a record number of days at home with his Irish Wolfhounds.

Mark Robertson (markr@manifestinvesting.com) is founder and Managing Partner of Manifest Investing, served as senior contributing editor for Better Investing and has worked with successful investment clubs and individual investors since 1993. He has appeared on National Public Radio, CNBC and ABC to discuss long-term investing. He has also worked with Smart Money, Barron’s, Money magazine and the Motley Fool and been covered by the Chicago Tribune, Wall Street Journal and MarketWatch as well as a number of local publications.

Sponsors

The Mid-Michigan Chapter of Better Investing is an outstanding example of community investing. Known as a “chapter” that operates on behalf of the National Association of Investors, the goal is to share the potential of long-term investing with as many individuals as possible. A network of investment clubs and individual investors has been admirably served by a talented team of educators and counselors for decades. The excellence runs deep — centered on the time-honored lessons of the modern investment club movement for the past 80 years. The chapter runs a steady series of educational programs and supports the development of regional and nationwide opportunities for sharing. We’re better together.

Manifest Investing is a web-based investing system including research and features/tools for stock and fund screening as well as resources for portfolio design and management. The resources are completely based on our interpretation of the lessons learned, methodologies, techniques and disciplines promulgated by the modern investment club movement. The intent is to serve do-it-yourself investors, small groups of portfolio managers known as investment clubs and to support the efforts of those who want to work in a more informed manner with their professional investing advisors. The community and content stream generates a continuous flow of actionable ideas. We seek and deliver “elegant simplicity” by focusing on a small number of factors and characteristics that really matter. Features and regular webcasts (e.g. Investing Round Table) feature demonstrations of analysis and methods. Our focus is on demystifying investing — particularly when it comes to the design and management of a portfolio — enabling anyone to experience successful investing with their personal investing or retirement plans. We endorse and encourage investment clubs as vehicles for support and group learning.

If you’d like a FREE test drive of http://www.manifestinvesting.com to explore and experience the origins of community-driven actionable ideas, send your request to markr@manifestinvesting.com  The annual subscription is $40/year — a special offer that will expire at the end of the month.  The annual subscription will be $59 after that.

 

Of Tortoises & Rabbits

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Four years ago, we lamented the decision by Forbes to discontinue their annual Best Small Companies list. 36 years in the running, the list provided a number of actionable opportunities over the last couple of decades for many of us. That said, while sticking to their core criteria, we may have actually improved the discovery and screening process.

The Best Small Company tracking portfolio has now beaten the Wilshire 5000 in 10-of-13 years. The last four years have delivered 19.0%, 21.6%, 31.7 and 32.0% respectively. The 32.0% was achieved versus a Wilshire 5000 at 8.6% for 10/31/2017-10/15/2018. For 2006-2018, the average annualized return is 16.5% versus 10.2% for the total stock market.

Note: The year-over-year results increased to 36% with the surge in the stock market on Tuesday.

When thinking about our experience over the last four years since adopting the orphaned Forbes mission — essentially seeking excellent faster-growing companies through the eyes of George Nicholson — we might want to switch the name of this campaign to Better Small Companies going forward.

As of 10/15/2018, the following (20) companies are on the “leader board” for the 2019 roster of Better Small Companies. Keep in mind that some of the fundamentals will be updated and price changes will cause some “drift”. We expect that 5-6 of these companies will be dislodged from the list as we complete the search for actionable ideas among the best-performing small company funds, Red Chip Review and American Association of Investors Shadow Stocks.

Bsc short list 20181016

The session recording is available here: https://www.youtube.com/watch?v=S_QZ97qlPPk
Go ahead.  Hug some red rabbits!

 

Best Small Companies (2016)

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Best Small Companies (2016)

We lamented the decision by Forbes to discontinue their annual Best Small Companies list last year. 36 years in the running, the list provided a number of actionable opportunities over the last couple of decades for many of us. That said, while sticking to their core criteria, we may have actually improved the discovery and screening process. The returns posted by the lists, orphaned for two years now, have been 19.0% and 21.6%, respectively. For context, the Wilshire 5000 checked in at approximately 4% for both periods. With this experience under our belts, we head for the haystack in search of promising smaller companies to bolster our all-of-the-above investing discipline and hoping for a solid January Effect.

The Russell 2000 (RUT) gained 2.5% from 10/31/2015 through Halloween 2016.

The Wilshire 5000 (VTSMX) did a little better, checking in at 4.1% during that same period.

Every Halloween, we remind our fellow investors to be extra vigilant for opportunities among smaller, faster-growing companies, during the 4th quarter of the year. History suggests that some opportunities are created by tax-related selling. The smaller companies are impacted the most and those with solid expectations often get a stock price boost during January when investors return after wash sale periods expire.

Small Cap Does Not Mean Small Company

It’s also a time when we are reminded that small cap does not mean small company. As a case in point, the average sales growth forecast for the Russell 2000 (EQWS) is approximately 6.0% — the type of growth more closely associated with stalwarts and larger blue chip contributors. If you’re really looking for small companies, we suggest an emphasis on higher growth rates. This month’s fund feature is Conestoga Small Cap (CCASX) featuring an average sales growth rate of 13%. Go ahead. Check out the companies held by Conestoga. (See page 4.) In a word, they obviously shop for leadership small companies in much the same way that we do and can/should be considered a qualified source of ideas. Conestoga features a +2.4% (annualized) excess return versus the S&P 500 over the last ten years.

The criteria used to build the list is largely faithful to the Forbes traditions. Specifically, annual revenues were limited to less than $1 billion, but required to be greater than $50 million. We also required a minimum stock price of $5. Because we feel the sales growth forecast is the strongest characteristic to define “small” — we required a minimum growth forecast of 10%. No asset-based companies from the financial sector were included. And finally, when we think about “Best” we think the combination of quality and return forecast is a great place to start.

This Year’s Haystack

The companies that qualify for our 2016 Best Small Company Manifest are shown in the accompanying table.

Newcomer Meridian Bioscience (VIVO) checks in at #1. VIVO is covered in the Value Line Standard Edition and had a 16% low total return forecast (11/18/2016). Meridian Bioscience provides diagnostic test kits, purified reagents and related products, as well as biopharmaceutical enabling technologies. Products are marketed to hospitals, laboratories, veterinary centers, physician offices, diagnostic manufacturers and biotech companies worldwide. The company is headquartered in Cincinnati, Ohio and investors are encouraged to explore the investor relations materials at:
www.meridianbioscience.com

Diagnostics as a “theme” are fairly prevalent among the best small companies. Solomon Select feature Mesa Labs (MLAB) is one example and Mid-Michigan local favorite, Neogen (NEOG) is another. Both of these companies were “discovered” via the Forbes list and continue to qualify. Another company that qualifies as biopharma-enabling might well be Simulations Plus (SLP) but the company falls a little short of the annual revenues minimum.

We expected to lose last year’s #1, Forward Air (FWRD) to “graduation” but the recessionary conditions in transporting “stuff” kept FWRD below the $1 billion maximum. Forward Air had been a resident of the Forbes listing for seven years … so this makes it nine years for this logistics leader.

The top performer from last year’s best small companies was Ubiquiti Networks (UBNT) with a total return of 79.7%. Ubiquiti develops high performance networking technology for service providers and enterprises. UBNT is closing the digital divide by building network communication platforms and has 38 million devices worldwide. Ubiquiti just missed qualifying for this year’s list — ranking #41 as the UBNT return forecast is down to 7.9% following the robust performance over the last year.

 

Diagnosis: Ubiquitous

We think a ubiquitous haystack is a path to opportunity and success. We’re reminded that we can’t achieve proper balance unless we’re continuously searching for the next promising well-managed small company. We’re reassured by the presence of several long time favorites on this study list and look forward to discovering and diagnosing at will.

2 Guys Talk Stock (1/30/2016)

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Two Guys Talk Stock

Ken Kavula and Mark Robertson share stock ideas, favorite sources of ideas and screening techniques during this Chicago event. The program is among the most popular at recent national conventions and is on the agenda for the NAIC National Convention (Washington D.C.) in May.

Favorite Resources and Screens Covered

Stocks Discussed

  • Luxoft* (LXFT)
  • Illumina (ILMN)
  • FleetCor Technologies (FLT)
  • Polaris (PII)
  • Customers Bancorp* (CUBI)
  • Popeye’s Louisiana Kitchen (PLKI)
  • Mesa Labs (MLAB)

View the program via YouTube: https://www.youtube.com/watch?v=ysi7T_FTgx0

MANIFEST – Best Small Company Preview

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Screening Results (October 2015)

Best Small Company Preview

by Mark Robertson

One of the most powerful lessons we’ve learned from tracking the Forbes Best Small Company list every October is that QUALITY MATTERS. Over the long term, we want out-sized returns from our smaller, more speculative, and faster-growing companies and the best protection against the brutal downside of smaller companies is … quality.

Manifest Investing — Best Small Companies (2015)

Best Small Companies (10/8/2015). Screening results as we search for high-quality faster-growing small companies. The Forbes list will be out during October. Sorted by MANIFEST Rank (PAR & Quality) with minimum growth forecast of 12%. * – not covered in Value Line Investment Survey standard edition.

It will be interesting to see how many of the featured companies end up on the Forbes list. This is certainly a list of candidates that can bolster the overall average growth forecast of our portfolios with an average sales growth forecast of 16.3%. The average return forecast is 18.2%.

Value Line is quite a bit less exuberant with an average low total return forecast of 8.5%. Morningstar is a little more enthusiastic with an average price-to-fair value ratio (P/FV) of 85%. We take lower expectations for early stage companies with a grain of salt whenever Value Line or Morningstar are providing the analysis. S&P has an average P/FV of 82%.

The outlook for the year ahead from this group is optimistic with the ACE forecast at 24.2%, S&P at 25.3% and our Goldman Sachs benchmarking checking in at 17.6%. It’s all good.

Several of these companies have appeared on the Forbes and/or Fortune lists in the past — some actually discovered by us using those resources.

Which ones have you studied? Which ones do you own? Are any of the names new to you? Welcome to October and small company discovery. Oktoberfest is for good hunting.