Two New Multi-Baggers

Last week, we saw two stocks from our microcap Quality Index reach 100% (Multi-bagger) returns. We now have 35 multi-baggers under our belt, an impressive 35% of the index.

We are adding two new stocks to our Hall of Fame list, a place where we put all of the stocks from the index that returned at least 100% at some point after being added to the MSMqi. This brings the total to 35 stocks added to the MSMqi multi-bagger Hall of Fame, or in other words, approximately every third stock we add to the index has doubled at some point.

That being said, our goal is to reach at least a 50% multi-bagger hit rate and it’s only been 2 1/2 years since we launched the MSMqi.

The average time it has taken for a double to occur has been about 300 days or around ten months. Some of these stocks have achieved 100% return in just three or four months, as is the case with one of the newest additions and our top performer whic his up over 1000%.

What does all this mean? That creating an index that merges quality and multi-bagger factors in the small-cap, microcap and nano-cap space works.

So, let’s move on to the next two stocks that reached multi-bagger status. One of them might continue to make large moves, as we found some information hidden in a shareholder letter that showed the company has doubled its manufacturing capacity.

• Koil Energy (KLNG)

This subsea stock reached its double just 98 days after being added to the index. Cliff Note #92 was added to the MSMqi due to the favorable earnings and contract award trends we noticed. This only strengthened when KLNG released its August financial results.

Now, favorable industry trends and the company’s restructuring to generate more revenue from current customers and create more visibility into future sales, is translating into new large contracts.

Last week, the company released news about a new maintenance project for an international oil & gas (O&G) business. This likely supports the idea that offshore oil might be back in play, given the current geopolitical environment, even if the oil prices are relatively stagnant.

Mind you, KLNG is also trying to branch out of the O&G sector, which could bring further revenue opportunities and stabilize the earnings going forward.

The key to KLNG becoming a strong long-term multi-bagger will be in its ability to reduce lumpiness in its revenue stream, as it tries to increase the amount of long-term recurring revenue type contracts in its pipeline.

• Pro-Dex (PDEX)

This medical device company took some time to get to a double. We added the stock to the index about two years ago. The share price stagnated somewhat for the first year and a half, but was woken up by strong earnings in the past few months. According to a quick message from a CEO letter to shareholders below, 100% might not be the end for PDEX.

Source: Proxy for 2024

The doubling of the company’s manufacturing facility possibly indicates that management might finally be able to commit to long-term growth as opposed to lumpy growth, which has been a staple of its past. I met the CEO of PDEX around 2018. It might be time to rekindle a conversation.