No. of Recommendations: 4
I think about how people like to quote Buffett saying
"If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."and then try to coattail him, even though they have many orders of magnitude less to invest.
I'll also coattail Buffett sometimes, but I like to pursue various strategies. And I have gotten more constructive on small caps since I started posting on this board. I'm allocating some funds from maturing CDs into equities and the S&P 500 feels like an increasingly crowded trade. Many or most microcaps are not good investments, but there are a few worthwhile opportunities.
So in addition to RISKA, MCRAA, FF, and BELFA I have added very small positions in Kewaunee Scientific Corporation (KEQU) and AMCON Distributing Company (DIT). They function as toeholds. I don't have enough conviction for full size positions but psychologically having a small position makes me pay more attention, and I'm more comfortable distributing the risk more widely.
AMCON Distributing Company https://finance.yahoo.com/quote/DIT/I've written about this recently, so I'll just focus on why I decided to buy now. My reluctance was because of the recent share performance, they are about 50% off their high in July of 2023. If someone(s) with more knowledge and shares than myself is selling, I might take note of it and try to get out of the way. They have a very low P/S and as you'd expect from that, low margins. They are a distributor to convenience stores and other small retailers and transportation costs and inflation impact them negatively, which might explain the share performance. That said, they are acquisitive and consolidating in a tough market. The CEO has been there for 18 years, and owns a very substantial portion of the company (shares outstanding 630.36k, he owns 406,313).
They seem well run and in a position to lead in a fragmented market. The long term CEO seems well regarded and well aligned with shareholders.
Kewaunee Scientific Corporation https://finance.yahoo.com/quote/KEQU/"Kewaunee Scientific Corporation designs, manufactures, and installs laboratory, healthcare, and technical furniture and infrastructure products"
Essentially a highly specialized furniture company, they have been in business since 1906, have a TTM P/E of 5.19, a market cap of $93M, an enterprise value of $107.47M, TTM FCF of $7.60M, TTM P/S of 0.46, and 5 year share performance of +107.81%. I did not catch them in earlier screens because they pay no dividend.
Kewaunee had a relatively large amount of executive turnover around 2019. The current CEO was previously the CFO, and had been CFO since 2015; the CEO who resigned sadly appears to have passed away a year later. The current CEO's holdings are significant.
