This was what I referenced 
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Funny post, even more as when I was looking at the company I was immediately thinking of military and first responder applications.
I’m spending more time review the company - difficult as (undertandably) very little coverage of such a small cap. Am impressed with the management team and board credentials as well as some of the brands they are quoting as customers. So difficult to assess financials though - it’s really more a matter of “believing”. In any case, will dip my toe in (most likely) bit by bit. Much can go wrong, and as they expand manufacturing capacity there’ll also be possibly be dilution moments.
This is a more speculative play than Blackline which had scaled and reached profitability (more or less) with just more runway left.
More money to be made?
Game on!
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Someone reminded me that ARM is up 14x from since when it was acquired by Softbank!
Looking at the chart of ARM I don’t see any 14x, but more a 6x since their IPO from roughly 50 USD to 300 USD.
well you won’t see it on the chart since the IPO came some time after softbank acquired them!
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Got it, thanks for the precision. Based on GPT looks like softbank owns around 90% of the company.
ARM was originally listed in the London market. Softbank bought it and took the company private. A few years later, they re-listed it on the US stock market.
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Clever move, they must have made tons of $$$ and I believe it’s not over. We’ll see in 10 years time if ARM overtakes Intel/AMD CPUs.
They will certainly take a lot of market share.
Alright, here’s a new one: 908 Devices (ticker: MASS, on Nasdaq)
- in a somewhat similar space as Blackline Safety which was taken private a few months ago at a nice premium
- smart handheld measuring tools for chemical substances / drugs
- also small cap
- 380M market cap of which 100M is cash (they sold a non-core business a while ago; this ensures as well that they are fully funded to become profitable while also having dry powder for small bolt-on acquisitions without having to issue new shares)
- 70M revenues, growing at 20-25% YoY
- 57% gross margins (likely to go up as the company scales)
- 30-35% recurring revenue (expect this to go up as well as they introduce new offerings and leverage the growing installed base)
- Roughly 10M EBITDA negative
- At roughly 4x enterprise value one can have two perspectives
- Cheaper than say the price Blackline was taken private for
- But still significant
- My guess:
- Revenues are very likely to double in the near term resulting in nice leverage on the bottom line - this could easily become a valuation at 10x EBITDA in 2-3 years (low for this kind of business)
- It’s also a business which is inevitably going to acquired - either by a financial party who’s going to invest heavily into scaling faster (incl. buy and build) or by a strategic (Thermo Fisher Scientific, Bruker, Danaher, Teledyne, etc.
It’s had a very good run up in price already so one should not be afraid of heights, but this could be ramping up to something much bigger.
Somebody asked how I find these opportunities? Each case is different. In this case, I am connected to a corporate development person at a company I follow on Linkedin. I checked his Linkedin profile for companies he follows. This one popped up and it became clear that a lot of his colleagues are following this company. I took that to imply: the business may be on their target list. That led to me starting to do some homework myself.
Not yet taken a position, but expect to take one and build it out gradually.
Wish I had spotted this opportunity earlier.
Go ahead and shoot holes at it, learning is what this forum is all about.
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908 acquired this Swiss (!) start-up recently: Identify anything anywhere in seconds - NIRLAB
908 has a robust M&A guy on their management team so I anticipate more of these deals and then plug and play into 908’s distribution => growth fly wheel. Having 25% of your market cap in cash on your balance sheet helps!
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Looks really interesting, and I like the story. But do they have any earnings at all?
I must first admit that I don’t know much about how to value a business, or how to pick stock, but I would be interested in looking deeper once you put your money where your mouth is. Any position yet?
Correct, they are not yet profitable. So you look at multiple of sales and/or make a projection of what earnings could be assuming they grow e.g. 2x the revenues.
As stated elsewhere, I recently made some first angel investments incl. one where there were zero revenues, just the first edition of a product and some trials.
It requires a leap of faith for sure. And comes with more risk (and hopefully with more reward!).
In the case of 908 though, their growth trajectory is good, they have solid net cash on balance sheet and they have a very impressive management team and board. Clearly, not as easy though as a DCF analysis for future sale of cans of coca cola:)
Cool, thank you for providing additional financial tidbits!
Did you initiate a position in 908? If so, at what time/level?
As for The Coca Cola Company: they do sell more than cans of Coke, but I’m certain you knew that already. Admittedly, doing a DCF (Discounted Cash Flow?) analysis is probably still easier for The Coca Cola Company than for 908.
I sadly know neither the board nor management team of either company, but it is inspiring to hear that 908 has an impressive one.
Would you buy 908 now or would you wait for a different entry level? It looks like they have been sharply going up since the end of 2024.
Yes, I have. A couple of days ago (not long after I posted here). Off the top of my head: 7k CHF.
I agree, it’s gone up quite a bit. For me, this is one of those ones where I’d rather DCA in as a build a bigger position. I’m targeting 50k and if I like how the business is developing may bump that to 100k. I believe there is an organic value creation trajectory they are on but eventually they will also be acquired.
While it’s quite possible that the stock at some point drops 10-20% again to offer a better entry point, quite a significant chunk of the company is held by what I would estimate are longer term holders who won’t buy/sell just based on what’s in the news. Not just referring to individuals here, but also investment funds who clearly recognized the potential.
Anyway, caveat emptor of course. With large caps you can follow the crowd with some degree of safety, with small caps, there is no crowd.
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Here’s some of my multi-bagger candidates. These are mostly litigation cases with 2 of them having already run 3 - 5x (GCM, GRZ) and a third one has been 100% derisked (sold 50% at 2x). It’s a multi-year play for a patient person. Some of them might become 50-100 baggers while others will become worthless.
| Company | CCY | Ticker |
|---|---|---|
| ALMADEN MINERALS LTD | CAD | CVE:AMM |
| BLUE GOLD LTD | USD | NASDAQ:BGL |
| EMMERSON PLC | GBX | LON:EML |
| ENERGY TRANSITION MINERALS | AUD | ASX:ETM |
| EQUATORIAL RESOURCES PLC | AUD | ASX:EQX |
| GCM RESOURCES PLC | GBX | LON:GCM |
| GOLD RESERVE LTD | CAD | CVE:GRZ |
| IMMERSION CORP | USD | NASDAQ:IMMR |
| PANTHERA RESOURCES PLC | GBX | LON:PAT |
| SARAMA RESOURCES LTD | CAD | CVE:SWA |
| ZENITH ENERGY LTD | GBX | LON:ZEN |
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Software Circle is one of the more interesting small companies I have come across recently. It is essentially trying to build a UK version of Constellation Software, but from a very small starting market cap. The company acquires niche, mission-critical software businesses, leaves them largely autonomous and reinvests their cash flows into further acquisitions.
What makes the story particularly interesting is the shareholder base. Software Circle is backed by several experienced value investors and serial acquirers, including Chapters Group. Chapters’ COO Marc Maurer, who previously worked at Constellation Software, also sits on Software Circle’s board and investment committee. The model is still at an early stage and execution remains the key risk, but if the company allocates capital well, the small starting size gives it a potentially long runway for compounding.
The market sold of the stock heavily because of the SaaSpocalypse thesis which is wrong as far as I think from my perspective as a software engineer and architect working for about 20 years in that field, partly also with AI.
I’m having a position in the company for the long term, assuming an above market average CAGR resulting potentially in a 10x over the next decade.
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Is this P123?