On Friday 01/11/13 I made an effort to find investable possibly overlooked opportunities on the OTC. Each OTC venue was superficially reviewed, OTCQB, OTCQX International, OTCQX International Premier, OTCX U.S., OTCX U.S. Premier, OTC Pink current, OTC Pink Limited, OTC Pink no information. There were over 18,000 stocks in total so I wanted to narrow the list for this post. Some countries were excluded and my financial criteria and started with YOY revenue growth, positive EBITDA for the TTM, enterprise value to market capitalization less than 1.30 (margin of safety), and market capitalization greater than 10 million. There may have been one exception to my filter for this post. I also did some qualitative review before listing the stocks. For example I made sure the financials were annually audited. My work was somewhat superficial and needs more effort if you’re considering investing. Not for this post but what is interesting as most of you already know you can buy many premium foreign companies that will dual list on the pink sheets. So purchasing these foreign stocks is now possible through online accounts like Ameritrade using the OTC (pink sheet) symbol. You may want to take a closer look at listed companies on these venues; not all are fraud, bankrupt or garbage as in years past. The cost of compliance (i.e. Sarbanes–Oxley) to list on the NASDAQ and the other large exchanges may be one motivating factor to list on the OTC.
For now I’m only going to look at a two smaller subsets of the +18,000 by focusing on two venues, OTCQX and OTCQB.
OTCQX U.S. Premier: “The OTCQX marketplace is the premier tier of the U.S. Over-the-Counter (OTC) market, providing investors with an objective measure to distinguish the best OTC-traded companies.”
No particular order for any of the symbols listed.
CPTP (real estate, high earnings yield, near 52 week low)
Capital Properties Inc. (CPTP): Price = $6.69, This stock is off its 52 week high of 12.17 partially due to the extra ordinary dividend at year end. Market Cap = 44.15M, Enterprise Value = 44.30M, EV/EBITDA = 9.61
CPTP engages in leasing and petroleum storage businesses in Rhode Island.
They may be holding real estate assets on the books at costs significantly below market value.
“The Company owns approximately 18 acres in the Capital Center consisting of 11 individual parcels. As of December 31, 2011, it leased 6 developed parcels that consist of a 13-story office building; an 8-story 225-unit residential building; a 4-story office building; a 10-story office building; a 17-story and a 19-story residential building containing 193 units, and a 10-story office building; and 330-car public parking garage. This segment also owns and leases an undeveloped parcel of land adjacent to the Capital Center for public parking purposes on a short-term basis; and leases certain outdoor advertising locations along interstate and primary highways in Rhode Island and Massachusetts. Its Petroleum Storage segment owns leases a petroleum storage terminal with a capacity of approximately 1,000,000 barrels and the Wilkesbarre Pier located in East Providence, Rhode Island to Global Companies, LLC for the storage and sale of petroleum distillates.”
OTCM (High profit margins, moat, modest growth, statistically cheap)
OTC Markets Group Inc (OTCM): Price = $7.71, Market Cap = 81.27M,Enterprise Value = 67.60M,EV/EBITDA = 6.95, YOY revenue growth = 6.20%, ROA = 22.92%, Profit margin = 14.89%
OTCM : “OTC Markets Group operates the OTC marketplace for equity securities. direct interaction between broker-dealers that provide liquidity and execution services. It offers OTC Dealer, a software-as-a-service application,which enables broker-dealers.”
Now on to the OTCQB venue where there were over 3,500 ideas that I filtered compared to the tiny group listed on OTCQX U.S. Premier venue. It’s important to realize the importance of waiting for your price as most of the OTCQB stocks although current in their filings are very illiquid. Many may be current but the financial have not been audited. I only included companies with current audited financial statements. Not an easy task on the OTCQB venue.
OTCQB is the “venture marketplace for companies that are current in their reporting with a U.S. regulator. There are no financial or qualitative standards to be in this tier”. Remember my list have audited financial statements but many of the stocks don’t report audited statements.
NSSI: (Patent troll, significant cash, earnings, strong BS )
Network-1 Security Solutions Inc. (NSSI): Price = $1.19, Cash Per Share 0.88 , Current Ratio =36.41, Book Value Per Share =1.15, EBITDA (ttm) = 5.23M, Total Cash = 22.76M, % held by insider = 54.34%, % held by institutions = 1.00%
Network-1 Security Solutions, Inc. “engages in the acquisition, development, licensing, and protection of intellectual property rights related to various telecommunications and data networking technologies in the United States”. The pejorative term for some of their work is patent troll.
TNRK : (Cheap, historically solid management, below book, close to negative EV), at 52 week low, reduced margins from Chinese competition)
TNR Technical Inc. (TNRK): Price = 9.00, Market Cap = 2.76M, Enterprise Value = 579K, Price/Book = .31, EV /Sales = .07, EV/EBITDA = 1.13, 52 week return = -16.59%, Qtrly Revenue Growth (yoy) – 7.90% (exception to my filter),
TNR Technical, Inc. founded in 1979 designs, assembles, and markets batteries to industrial, commercial, and retail markets in the United States. “Its batteries are used in various applications, utilities, personal watercraft, photography, power tools, watches, instrumentation, laptops, CNC, airsoft, surveying equipment, radio control, mobile radios, alarms, U.P.S., door locks, and emergency lighting, as well as various other consumer products. TNR Technical, Inc. sells its batteries and/or battery packs to electrical distributors, electronic wholesalers, battery assemblers, resorts, municipalities, police and fire departments, hospitals, churches, hotels, surveying companies, contract houses, and original equipment manufacturers.”
IBAL: Darn I wish I never sold, back in 2010 the stock was below .50, real estate, exceptional recent growth from Mexico, when I owned it went days with no trades
International Baler Corporation IBAL: Price $1.95 Friday’s close, Market Cap:11.66M ,Enterprise Value: 7.35M, Enterprise Value/Revenue:0.43, Qtrly Revenue Growth (yoy): 64.00%
IBAL is a tiny company that has recently reported excellent profitable growth with a growing back order. IBAL owns building and property located in Jacksonville, Florida with 8 acres of land. The property has no mortgage.
IBAL was founded in 1975 and designs, manufactures, and sells baling equipment used to compress various materials into bales for handling, shipping, disposal, storage, and recycling.
ELST (Deep value , tiny, below net cash with growing revenues)
Electronic Systems Technology Inc. (ELST): Price = .37, Market Cap:1.92M, Enterprise Value: -226.74K,Price/Sales (ttm): 1.00,Price/Book : 0.67, cash per share .41, Qtrly Revenue Growth (yoy): 13.10%, Total Cash: 2.14M, Revenue (ttm): 1.92M
ELST is a tiny deep value idea selling below net cash with growing revenues.
Electronic Systems Technology Inc “engages in the research and development, manufacture, and marketing of wireless modem products and accessories primarily in the United States, Mexico, Brazil, Peru, and Canada. It also provides repair and upgrade, professional, site survey testing, system start-up, and custom engineering services. Products are used in various applications and industries comprising agriculture, airport lighting, automotive, enterprise networking, entertainment, factory floor networking, federal, marine, material handling, metals, power, public safety, oil/gas, solar energy, water/wastewater, and wind power. “
There are many other ideas that are worth a closer look. So I thought it would be useful to list symbols that have a reasonable capital structure, growing sales, financially sound balance sheet, and recent audited financial statements and still listed on the illiquid wild west of the OTCQB.