Balanced viewpoint and rigorous analysis in a brief format...
We are pleased to introduce Small Cap SEARCH, a monthly newsletter profiling small capitalization companies. Sign up for a Free Trial Subscription.
Take a look at this sample issues:
SEARCH January 2009
SEARCH Methodology
The companies profiled in Small Cap SEARCH have been screened across certain criteria including sales growth, profitability, and leverage, among others. We particularly favor operations with positive cash flow and ample financial resources. For early stage companies, which have yet to build revenue and profits, we look for effective strategic relationships or distribution arrangements to reach customers and solid execution by management.
Since our focus is on companies with market capitalization under $2.0 billion (our definition of small-cap), most of the companies will be in the middle or bottom third of their competitor group. Accordingly, we look past size for a strong brand name or franchise, proprietary technologies or innovative service platforms that add value for the customer.
Our commentary, while brief in length, covers the same topics in a typical comprehensive research report.
Size - What is the company’s size relative to its competitors, suppliers and customers? Is revenue growing? Is the growth rate accelerating or decelerating? Does the company have the critical mass or financial strength necessary to win new customers?
Earnings - Are profit margins comparable to competitors? What are sustainable profit levels? Is there danger of cost increases? Does the company has pricing power? Are unusual, non-operating items included in operating results, perhaps creating confusion over the companies real profitability? Is there potential for operating leverage?
Assets - What are the cash and debt balances? Are changes in working capital commensurate with sales and profit trends? Are intangibles a significant portion of total assets and, if material, is there any danger in a write-off? Is the company’s intellectual property protected with patents, trademarks, or employment agreements? To the extent that management and key employees are assets to any organization, is management well qualified and demonstrating good execution on the growth strategy?
Reliability - What is the competitive position? Is the company vulnerable to sudden new competitive threats that would be difficult to foresee? Is there visibility into the business pipeline, customer base or demand drivers that facilitate a forecast of performance over the next year?
Catalysts - Are there forthcoming developments that could lead to a fair valuation of the stock likely to unfold within the next twelve to eighteen months? Does the company have a cogent investor relations policy to communicate fundamental developments to shareholders and investors? Are governance policies up to current standards? Are public reports timely and transparent?
Horizon - What are the current equity market dynamics for the sector in which the company operates? Are valuation metrics trending up or down? How is the company valued relative to its peers? Finally, we point out issues that should be watched in the coming weeks and months as potential catalysts for revelation of the stock or as risks to the business.
Disclaimer: Any opinions expressed in the Small Cap SEARCH newsletter are statements of judgment at the publication date and are subject to change without notice. Information comes from independent sources believed reliable, but accuracy is not guaranteed. The newsletter is not an offer or solicitation to buy or sell any securities. The newsletter does not address specific investment objectives, financial situations or particular needs of any recipient. The information is provided for general information purposes only and should not be considered an individualized recommendation. The security or industry discussed in the reports may not be suitable for all investors.
All investments involve risk. All recipients are encouraged to use multiple sources of investment information and to actively monitor their holdings. Investors may review information concerning the profiled companies available at the web sites of the U.S. Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD). Additional information on investment newsletters and Internet stock fraud is also available from the SEC and NASD.
Disclosure: Neither Crystal Equity Research nor any of its employees or affiliates have a beneficial interest in the securities of the companies profiled in the Small Cap SEARCH newsletter unless otherwise specifically stated. Crystal Equity Research receives no compensation for any purpose from the companies profiled in Small Cap SEARCH.
