This was a year of the ball bouncing the wrong way. I am up 1.4%, giving me a 43.8% CAGR since I bought my first stock 9 years ago.
You can read my past annual performance posts here.
A reminder on this performance: this is my real portfolio consisting of most of my net worth. I invest all my family's savings and retirement in these little stocks and below you can see my portfolio. I've talked about my journey into stocks on a few podcasts and here's the very short version. I started reading finance books around Christmas 2012 and got into stocks a few months later. I end my fiscal year on April 17 every year because that's when I bought my first stock. This performance is since the very beginning.
Nine years ago I had just wanted to learn more about finance and prepare my family for the unknown. My goal was to make 12% per year and beat the market. Since then my portfolio has grown larger than I imagined possible, giving us a healthy cushion. These little stocks have bought us a house and given peace of mind for the future.
I'm 41 now, with an engineering career of almost 20 years. This year's lower performance has been a reminder of why I still work my day job but I can't help but dream of the future. I always figured I'd work engineering until my 60s but now we are within striking distance of being able to live off stocks only. If I were single I would've pulled the trigger already but with my family we're not quite there.
All that being said, my goals have changed. If I can get a couple more years of good performance in line with my CAGR then I think I can move to stock investing full time. We will see what happens.
My overall strategy works when the winners get big enough to drown out the losers and that just didn't happen this year. My buyouts and movers weren't sized large enough. Diversification saved me from the losers.
Here you can see my portfolio allocation.
On to the charts!
Dollar-wise this is my biggest loser ever. I first wrote up this stock almost 6 years ago when it was ZMTP. I first heard of ZMTP/MINM in 2015 around $0.75 with change in the air. The little modem maker ZMTP had earned a coveted contract with Motorola. Since then I've bought a few times. As Jeremy Hitchcock took control of the company in 2020 my excitement grew. He had sold his prior software company, Dyn, to Oracle for $600M and now he owned half of ZMTP. He brought in his team and remade the board. His plan was transform the hardware focused ZMTP into a combined software/hardware MINM focused on the growing internet connectivity and security market. Artificial intelligence and software margins and Saas, oh my. Change, motivation, and potential colliding which you know I like. I bought more. They announced ZMTP's purchase of Hitchcock's private company Minim to bring in their "leading AI-driven WiFi management and IoT security platform". The stock symbol changed and they uplisted to NASDAQ. All change and lots of potential with hopeful movement into a bright future.
Well my mistake was getting too excited before results were available. I bought a lot at 3 and above in 2021. The company sold shares. Profit has eluded and those high software margins have not overpowered costs. Now the stock has fallen all the way down to support. Share count is too high but the potential is there. I still hold my shares and look forward to the future.
Let me wash the taste of that loss out my mouth with a winner. I've written up DYSL a couple times and owned the stock for a few years. As with many of my stocks I've bought more as time went on. I bought in 2019 around a dollar. They reduced share count by 16% with a reverse split to de-register from the SEC. The stock dropped below a buck and I bought more. They reported good numbers early in 2021 and I bought more.
Unfortunately DYSL does not file publicly. After de-registering from the SEC they stopped posting reports online . They still report annual numbers to shareholders and quickly reply to emails. After the SEC announced plans to stop trading in dark stocks I reached out to DYSL with my concerns but they don't care. DYSL says they'll keep on doing what they are doing, in the darkness.
It's really too bad because the stock would be higher. In Dec 2021 the company announced record results. $53M revenue, $6.3M operating income. The company sold two divisions and has $30M in cash. They expect revenue in the range of $35M next year. With a share count of 14.9M that sounds like a $4 stock to me.
This exciting bit was in the Dec 2021 report as well:
"it seems likely that Dynasil will seek to reward stockholders by returning some capital to stockholders, though the portion of the cash proceeds which we may return has not been decided nor has the manner or timing, if in fact we proceed in this course of action. Our current thinking is that Dynasil may initiate some sort of tender offer in the first or second calendar quarter 2022 whereby it gives stockholders the opportunity to sell shares back to the company for a fixed offer price to be determined by Dynasil."
The stock doubled and now we are back to waiting. I wish it weren't on the expert market but what can you do.
TCOR is another stock punished by the SEC's rule change. Just look at the one year chart below. SEC change went into effect in Sept 2021, pushing TCOR to the expert market where most brokerages will only allow sales. I can't buy more. I've talked with others who would love to buy in but the liquidity is just not there.
A year ago the stock pushed up to a dollar along the back of strong numbers and the lumber rise. Investors sold as they came to terms with the reality of the SEC rule. Look at the volume vanish! Recently the company reports annual EPS of $0.18 with book value of $1.84 and revenue of $3.75. Yet the stock sits at $0.46 because so few people can buy it. I hold my shares and now I wait for the next set of annual numbers in a year.
As of Sept 2021 I had about 20% of my portfolio in dark stocks that do no comply with the SEC's rule change. I did nothing in response to the SEC rule change. Perhaps I should've sold some of these but I have a hard time selling what I think could go up. I still think they'll come back somehow so here I sit.
The "expert market" barely functions as far as I can tell. A number of my stocks have gone down to almost nothing. People sit with bids near zero waiting for those who just want out. It's hard to think up a less efficient market.
Take a look at this table. It's incredible. Those market cap numbers are in dollars! Say what you want about the (lack of) quality of my stocks but this is ridiculous. FRXX I believe has millions in revenue yet a market cap of seventeen hundred dollars. PRAC and SOFT I think do not actually exist as a business so the question is what's a ticker worth. RBCL last filed in 2017 with a $6.5M book value (P/B = 0.017%)! SYEV has the bright website of a thriving company, and the last 10-k from two years ago showed $3M in sales with a $3M book value, yet the stock sits priced like a bathroom remodel. Take a look at HAUP's website here and let me know if you think the company is really worth 10 grand.
It's both funny and sad. The SEC has destroyed shareholder value in these dark stocks. I hold my shares and await brighter days.
IVRO is a story of potential and missed opportunity. I have owned IVRO for years now and it's always been one of my favorites. It's just so small and tight. Market cap of $3.6M, consistently profitable. I bought most of my shares around $0.05, near book value. I can recall not wanted to pay up to $0.07 and now the stock sits at $0.16... I never wrote it up because the stock moved and I wasn't able to buy as much as I wanted and it's hard to really call it cheap since it's priced at 3x revenue and over 2x book.
Still the potential is there. Just read these quotes from the latest 10k:
The Company is a pioneer in the field of non-animal testing and was first to develop and commercialize its flagship product Corrositex® in 1991. The global regulatory bodies that govern non-animal testing did not exist at the time. These regulatory bodies started to evolve in early 2000’s and then consolidated into a more robust global regulatory system in the last few years. Organization for Economic Co-operation and Development (OECD) is the foremost such regulatory body today, with 37 member countries, including the US, and covers more than 80% of the world of commerce.
In 2014, Corrositex® was adopted by OECD, with the publication of Test Guideline (TG) 435. Following this regulatory approval, Corrositex®, became Global Harmonization System (GHS) accepted as a full replacement for animal test results virtually everywhere in the world of commerce. The OECD/European Centre for the Validation of Alternative Methods (ECVAM), Transport Canada, U.S. DOT, EPA, OSHA, Consumer Product Safety Commission, FDA, and the International Air Transport Authority (IATA) all have accepted Corrositex® as an alternative as well.
In November 2019, the OECD published Test Guideline (TG) 496, the final step in the adoption of the Company’s now 30 year old core technology, Ocular Irritection® (OI). OI thus completes an eleven year effort to become the first 100% animal free ocular irritancy test method to be OECD accepted, validated and adopted for 37 countries, including the U.S.
This is one I follow with extra excitement because I feel like it's a matter of time before they take off. I know they've been around forever but don't you think their products are the future? It has to be and if they can stay profitable with $1M in revenue I just imagine what'll happen when that double or triples.
At the very end of 2021 the stock shot up to $0.50 and stayed near 0.30 for two months. When that happens I think of the possibilities. Why is it moving. Someone must know something. A partnership announcement is coming. What if it doubles again.
Sadly it has fallen back down and I captured nothing. Selling is hard and in this case there was a large movement but not huge volume. I watched it double and didn't sell because I feel like it can go higher. Looking back now it seems I should've sold some but oh well. Back to waiting.
Now on to a winner. I've owned CCOM for a few years, buying most of my shares around a dollar and only talking about the stock on Maj's podcast. CCOM is a small, consistently profitable HVAC company. Sitting around $10 per share in revenue and $0.10 earnings the past few years, with the stock near a buck.
I never wrote it up since it's a story I've told before: small, boring, and cheap.
Recently a buyout at $2.71 was announced. It was a good premium so hard to argue with but then only a few weeks later they put out an annual with $0.54 EPS after backing out the PPP loan. Maybe it could've gone higher but it's out of my hands so I now sit waiting for the payment.
Let's finish up with something I think has potential. Blonder Tongue is an information technology hardware company in the midst of a turnaround. I know I'm a broken record with these turnarounds. I've owned the stock for years, buying and selling a few times. Take a look at the chart and you'll see why it's interesting now. It sits at support. This is where you buy.
The company is trying to reverse many years of losses. They're moving into new markets and products. They've brought on new board members and executives. They've been cutting costs and following a plan to profitability. The question with BDR, and my other stocks DYNT, CVV, GIGA, HYDI, ..., is will they get there. They've got over a buck per share in sales. Take a look at their website and you'll see the potential is there.
disclosure: long all the stocks I talked about
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