Community Update
[New] Cliff Notes # 135, 136 and 137
We’ll be adding three new stocks to the Microcap Quality Index (MSMqi) over the next few days. For those who are new to our Substack, we typically add one to three stocks to the index per month.
Cliff Note #135: A small-cap medical diagnostics company that is growing revenue by more than 25%. The company will soon pivot into profitability as revenue continues growing, gross margins expand, and fixed costs are absorbed. The company is trading well below its larger peers, and we think that as the company continues to grow revenues at 25% and turns profitable, the valuation multiples will expand. In fact, we are projecting that earnings per share will inflect to profitability over the next 1-2 quarters. Shares are trading at a 2026 P/E of 15.5x based on our EPS estimates.
Cliff note #136: A manufacturer of components for the defense and commercial markets. Backlog continues to grow, and gross margins expanded substantially. The company just had a breakout quarter, even coming ahead of our already rosy expectations, and is trading at less than 10.0x run-rate earnings.
Cliff Note #137: A leader in its sector that pioneered one of the key technologies in its sector and is currently benefiting from defense tailwinds.
We believe #135 and #136 have the potential to double within the next 18 months.
While #137 seems reasonably valued in the near-term, we see it as having long-term multibagger potential. Please remember, even though our Index is producing a high hit-rate of multibaggers, its primary purpose is to provide you with a fertile hunting ground. This means that we also add qualifying stocks to the Index even if they are reasonably valued in the near-term, since we know some of you like buying stocks on pullbacks or have long-term time horizons.Stay tuned!