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Strategies & Market Trends : Fundamental Value Investing

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To: bruwin who wrote (4418)

5/23/2020 10:30:54 AM

From: Sergio H

Read Replies (1) of 4719

Amazon traded as a public company for 14 years without making a profit. For the most part, share price rose. Even today while it is profitable, it trades at ridiculous multiples. I am seeing some OTC stocks as opportunities that were present in the 90s in high growth Nasdaq stocks like AMZN, MSFT, CSCO, etc. They were considered high risk as OTC is considered now. OTC has done an excellent job in monitoring and compliance. I did a write up on the different markets and investor safety which can be found here: seekingalpha.com

Below is an illustration of how fast these companies are growing relative to the dilution created by issuing shares to fund acquisitions. It's simple to calculate that if they stop acquiring companies they would be profitable but they are scaling their business, similarly to Amazon's game plan.
The first step to review is if revenues are growing faster than share count. Then the next step is are growth margins and recurring revenue growing. I didn't do the latter because it's not always a straight stairway to heaven and I only looked at one year. These OTC stocks do not have a long history of being a commercial enterprise so it is also very important to look at the history of the management team and I like skin in the game as well.
As EKS noted, eventually these companies get acquired by bigger fish who operate in the same sector who want to beef up their earnings and margins.

	REV 2019	REV 2018	CHANGE	SHARES 2019	SHARES 2018	CHANGE
MCLDF	6.6	1.3	76%	10	7	30%
VQ	11.5	25.1	136%	10	9	10%
EM	17,963	18,372	2%	616	621	0

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