Press On Research is the premium version of the Value Investing Journey blog. Where Jason Rivera will release his company recommendation articles exclusive to subscribing members. And where he will detail excellent obscure, small, special situation, and value investments. That will help make you rich over time.
A subscription to the newsletter includes:
- One company recommendation article each month for one year. For 12 total issues.
- A free PDF copy of my acclaimed book How To Value Invest.
- A free 20-page guide of terms that will help you evaluate companies faster.
- Priority access to the: How To Value Invest Course when it launches. Where space will be limited.
- My preliminary valuation checklist that will help you evaluate companies faster.
- Priority access to One on One Value Investment Coaching where space is limited.
Below are answers to some frequently asked questions you might have about Press On Research.
Press On Research FAQ
What is Press On Research?
Press On Research is the premium versions of the Value Investing Journey blog. It gets its name from the above quote which talks about the importance of persistence to success in life.
I focus on small, micro, and nano caps. ADR's and OTC's. And special situations types of investments. Because this is where I've found the most opportunity in the past. And it's where I've made the most money.
My number one goal is to preserve capital. And I'm an ultra conservative investor. I focus on the following criteria and situations when considering an investment.
What Are Those Criteria?
- Deep undervaluation based on years of training as a strict value investor.
- Strong management
- High profitability
- Healthy balance sheets
- Companies with competitive advantages
- Companies that pay dividends
- Companies that buy back shares
A company must have at least some of the above traits to pass my rigid tests. And even if it does, I will still only invest in three specific kinds of situations.
What Are Those Strict Situations?
1) Warren Buffett types of investments.
These companies are undervalued or fairly valued. They will have strong management. Healthy balance sheets with little debt and a lot of cash. They will produce a lot of cash with their operations. And in most cases they will pay dividends and buy back shares.
2) Benjamin Graham Net Current Asset Value (NCAV) types of investments.
Net current asset value is the net value of a company’s current assets after subtracting its total liabilities. In most cases finding a company's net current asset value is what the company should be valued at minimum. Also called a company’s "going out of business price."
Companies that sell below this number can be undervalued by a wide margin. They don't produce a lot of cash. In most cases are not good to great businesses. They don't pay dividends or buy back shares. And they also may not have strong management. But because these companies are priced as if they're going out of business. I will sometimes buy into them if the opportunity is great enough.
The one thing these kinds of companies must have are healthy balance sheets though. Even in this extreme case I will not invest in a company that has a lot of debt when compared to cash and assets. Because I will not make an unsafe investment.
3) Special Situation types of investments.
Special situations involving a company means that the company is about to change how it operates. How it's structured. Or change the industries it's involved in.
This may involve spinning off a smaller subsidiary the company owns that it doesn't want. Or cannot get full value of...
A company may have a lot of land or assets they can sell to generate value. Or a company may change its corporate structure to unlock value for shareholders.
Even if a company meets all my strict criteria above. And meets the three types of investments I invest in. Most of the companies I will recommend will be smaller companies.
Why small caps?
Because by focusing on small caps we can gain a legal informational advantage over others. Including professional investors.
Smaller companies aren’t covered by many analysts. And in some cases they aren’t covered by any.
For example, the company I recommended in October when working wasn't covered by any Wall St. analysts. The below chart shows the percentage of companies analysts cover.
Chart above is from Factset.
As you can see from the above chart smaller companies are covered less by analysts than bigger ones. And this is how we can generate higher returns.
Because when analysts don't cover a company, fewer people know about it. And less information is known about the company. But by doing a bit more work we can gain a legal informational advantage over the general investing public.
But this isn't the only reason I focus on smaller companies...
The chart below - from the Center of Research in Stock Prices - shows how a dollar invested into each class of stocks would have grown from 1926 to 2012. Microcap value stocks beat the S&P 500 Total Return index by 5.4% on a compounded annual basis. Over time this ended up being a difference of $223,806 between the S&P 500.
These are the kinds of advantages Mr. Buffett had when he started his fund. And are some of the reasons he said he would invest in smaller companies if he were starting out today.
But Why Won’t Most People Research These Kinds of Companies?
There are several reasons:
1) It's hard to do.
There are more than 20,000 companies listed JUST on the OTC markets. Vetting these is a massive amount of work. And this doesn't even count ADR's. Special situations. Or all "normal" small companies listed on the regular stock exchanges.
2) It's time-consuming.
I downloaded the entire OTC Markets company list more than six months ago. So far I've gotten rid of all the companies I don't understand. And the list still has more than 7,000 companies that I need to research on an individual basis.
This amount of work isn't worth it to bigger institutional investors. Think bigger firms like Warren Buffett’s Berkshire Hathaway. These giant companies won’t invest in smaller companies. Because the small companies results will have no affect on big companies.
Pensions and educational funds also can't invest in smaller companies. This is because of restrictions on investing in companies below a certain size.
3) Most people assume all smaller companies are terrible.
While it's true there are a lot of terrible small companies. You can find many great ones if you take time to search for them.
This is just an excuse that people use. So that they won’t have to take the time to find the great companies.
4) Smaller companies are more volatile than bigger companies.
This can take a toll on investor emotions. But because we are savvy and more intelligent investors here I will use this to our advantage.
For example when a company’s share price drops for no reason in a short amount of time. It will give us a chance to buy into the company at a better price. And doing this will allow us to get higher returns in the long-term.
5) For all the reasons above, investing in smaller companies need more patience than bigger ones. And most investors aren’t patient.
Even most “professionals” stay away from smaller companies because of the reasons above.
How Have Some of My Picks Done In The Past?
I outline some of my past recommendations below. The percentage gain I expect or have gotten so far. And some of the reasons I recommended each company.
Brazil Fast Foods (BOBS) - I bought and recommended this company in 2013 because it had great margins. Competitive advantages. And it was becoming more and more profitable every year. It's a Warren Buffett type of investment.
I still own this company in the portfolios I manage. But will likely lose ownership of them soon due to a potential merger/buyout of the company.
If the offer gets completed at the offered price of $18.30 per share. I will make 129% on my total investment in less than two full years owning the company.
Dole Foods (DOLE) - I recommended Dole in 2012 after finding it undervalued. That it had $500 million in unused land it could sell. And the company was undergoing a "strategic review" to unlock the value of its shares. When a company is undergoing a strategic review it means its management is trying to find ways to pay down debt. Become a better company. And will possibly sell assets they own to do the earlier things. Special situation/Ben Graham type of investment.
After owning it for only 104 days I sold a part of my Dole stake with a gain of 66%. The stock rose so fast because the company entered an agreement to sell its worldwide businesses to Itochu in Japan.
Vivendi (VIVHY) - I recommended Vivendi in 2012 because it produced a lot of cash. It did have a lot of debt which I don't like in most cases. But its management was doing a "strategic review" to help unlock the value of the company’s shares. And to also get rid of a big part of its debt. Special situation type of investment.
My investment thesis played out on this one as well. It sold several of its subsidiaries. Paid down debt. The stock went up a lot. And I sold Vivendi in the portfolios I manage up 50% in less than two years.
Company I recommended while working and cannot release name of. It has the potential to rise 225% within three months if it does a special situation type transaction its proposed. But… It is a safe company that's undervalued even if this doesn't happen. And safety comes from the value of its properties.
The CEO estimates its properties are worth $90 - $100 million. And the company was only worth about $110 million total in the stock market when I recommended it. Meaning that the stock market valued this company’s profitable operations and cash at nothing.
It also has excellent management. High profitability. Great margins. Is buying back stock. And it was selling at a 40% discount to what I thought it was worth after subtracting all debt. Warren Buffett/Special situation type of investment.
Since recommending this company in October 2014 the company has continued to improve its business. Operations. Sales. And the company has "been buying back shares aggressively below $12 a share." Right now it's selling at $10.54 per share.
Its stock price has not risen since I recommended it because the special situation event did not take place as fast as it was supposed to. But it is still on track to happen. And this company could skyrocket once that happens. But like I said above, even if it doesn't happen the company is excellent and undervalued now.
Another company I recommended while working and cannot release name of. My pick in January 2015 was a $250 million market cap company. And it has some of the best margins I've ever seen at a company.
Its FCF/Sales margin in the TTM period is 22.3%. This means for every dollar of sales it has it produces 22 cents of free cash. Anything over 5% is great. When companies produce a lot of cash it means that the company can pay dividends. Buy back shares. And support its business without taking on debt.
It is selling at only 6.2 times owners earnings. And its unlevered return on net tangible equity is 100%. Anything over 20% is excellent and its percentage is five times higher.
It is conservatively undervalued by 30% now. It has $72 million in cash against no debt. 29% of its market cap is in cash. It is paying a 1.2% dividend. Has plans to buy back $15 million worth of stock. And it will benefit from the coming $140+ billion fiber optic network build out. Warren Buffett type of investment.
Since recommending this company in January its margins and operations have continued to improve. And due to this it's stock has already risen 20% since mid January.
What Are The Target Returns For Press On Research?
My goal is for the Press On Research Portfolio to outperform the market every year by as wide of a margin as possible.
What Is My Typical Holding Period?
I will continue to hold a company until either my thesis of the company changes for the worse. Or I made a mistake in my original analysis after further information comes available.
What Is The Risk Management Strategy For Press On Research?
The risk management strategy for Press On Research is three fold:
1) Safety – I will abide by the strict value investing principles and criteria outlined above. And only bring you the best ideas I find.
2) Position Sizing - I will recommend strict position sizing rules to lower the amount of money you can lose in any one investment.
3) Circle of Competence - I will stay within my circle of competence and only invest in companies that I understand. If I can understand the company and its business. I can spot potential risks easier to avoid them. And I can spot upside potential easier as well.
What Will Happen To The Portfolio When The Market Crashes?
Micro caps will take a hit like the rest of the market when this happens. I hope by less. But no companies are immune from a market crash.
The chart below – from Morningstar – shows that microcaps outperformed larger companies in the decade from 2003 to 2012. This is important because small cap companies outperformed all other investments. Except gold. Even when considering the Great Recession.
When the market crashes we will have more opportunity because of the lack of coverage by professionals in this area. I expect huge returns during a recovery. Because this is what has happened with these kinds of companies in the past.
What Do I Think About Liquidity?
Low liquidity does not bother me. And it shouldn't bother you because it will allow us to get higher returns over time.
Press On Research is a long-term oriented portfolio. As long as I can get you into a company’s stock in a reasonable amount of time I will have no problem recommending it to you.
If a company does have low liquidity I will outline this in the issue. And will state about how long you should expect to wait to buy shares in said company.
What Companies Won’t I Invest In?
I will not invest in companies that I don't understand. If I can't understand how a company, its industry, and its business work, I won't recommend it no matter what.
If I can’t understand how a company operates there's a greater chance of making mistakes. I abide by Warren Buffett’s principle of staying within my circle of competence. And knowing my recommendations intimately.
Why Should You Trust Me to Pick Stocks?
Here is a testimonial from a former coworker who used to help manage billions of dollars about my analysis abilities.
"If I were to go to anyone else in the entire company to get a second opinion valuing and analyzing an investment... I would go to you first."
What a former colleague told me upon leaving my job. The company had around 50 employees. And every other analyst had an MBA. Decades of experience investing. And ran or helped run billions of dollars at various hedge funds and firms before joining the company.
In the last two years when searching for investments full-time the cumulative two-year gain for the portfolios I manage was 61.87% (not compounded). And the cumulative two-year gain for the stock picks that I've bought is 98.13% (not compounded). Any year over 15% is great.
But great stock recommendations to make you rich over the long-term aren't the only benefits you will get subscribing to Press On Research. You will also get the free gifts outlined above when you subscribe.
Are Sample Issues Available?
No Press On Research recommendation issues are available. If you’d like to see a sample of my work go to Value Investing Journey.
What Does Press On Research Cost?
A full year subscription to Press On Research costs $97 unless a discount is offered at the time of purchase.
When Will You Publish Each Monthly Issue?
Each monthly issue will release on the third Tuesday of each month.
Are Past Issues Available?
Once you subscribe to Press On Research you will be emailed each past monthly issue, if any.
How Long Will Each Issue Be?
In the past my company recommendation articles have ranged from 10 to 20 pages. And this is the length I will aim for each Press On Research issue.
Does Each Issue Recommend A New Company To Buy Into?
The aim is to find a new company to recommend each month. This may not happen if the market continues to rise. But I will continue to search for new recommendations all the time.
Will You Own The Companies You Recommend?
I will only recommend the types of companies I would invest in. I will not buy new recommendations before I release each monthly issue. And will only buy into a company 72 hours after I release each issue. This way we will all be in the same boat when I recommend something. And I can't front run the recommendations before you get to buy them.
I will tell you if and when I sell something too.
What Happens To My Subscription If You Get Hired?
At this point I'm not looking to be hired full-time by anyone. And if someone wanted to hire me on anything more than a freelance basis they would have to blow me away with an offer. At this point I'm not worried about this happening.
But if someone does come along with a great offer and I accept. I will refund your subscription for the remaining time you have left on your one year subscription.
How Can I Subscribe To Press On Research?
You can subscribe to Press On Research for one year below. Once you subscribe you'll also gain access to your free gifts too.