2 Small-Caps For Your Watchlist

It’s been a choppy start to the year for the major market averages and while many large-caps have begun new uptrends, several small-cap names remain stuck in the mud, unable to gain much upside traction.

In some examples, this underperformance is justified with many businesses not being worth owning and or having weak balance sheets.

However, there are a few small-cap names with solid business models and decent balance sheets generating free cash flow, and contrarian investors are being presented with an opportunity to invest in these stocks at a very reasonable price, especially given that they have robust growth plans.

In this update, we’ll look at two stocks worthy of adding to one’s watchlist:

MarineMax (HZO)

MarineMax (HZO) is a small-cap name ($600 million market cap) in the Retail-Leisure Products industry group, and is the world’s largest lifestyle recreational retailer of boats and yachts plus yacht concierge and superyacht services.

The company was founded in 1998 in Clearwater, Florida, and has grown through strategic acquisitions to now control a footprint of 125 locations globally, including 57 owned and operated marinas and 78 dealerships.

Some of the company’s recent acquisitions include BoatYard.com and Boatzon, Fraser Superyacht Services, MidCoast Marine Group LLC, and IGY Marinas.

Understandably, many investors might not be that interested in owning a business that derives its revenue from recreational boat and yacht sales during a period where consumers are pulling on their spending and in what appears to be a recessionary environment with increasing layoffs. Continue reading "2 Small-Caps For Your Watchlist"

2 Gold Miners With Long-Term Potential

While the major market averages have taken a beating over the last week, gold (GLD) has been one of the few asset classes to stage a sharp rally, with the metal up 2.5% for the week and over 5% since Thursday’s close.

The outperformance can be partially attributed to the belief that the Federal Reserve may have to rethink its rate-hike plans because of the fragility of the Financial Sector (XLF) with two banks already failing and several other regional banks down over 50% from their highs in a one-week span.

The sharp move higher in gold has fueled a major rally in the Gold Miners Index (GDX) which has soared 11% off its lows with the gold producers providing leverage to the metal, especially costs for the group rose materially last year.

In fact, the $110/oz move in gold has led to a temporary ~20% increase in margins for the producers, partially explaining the powerful performance of the group.

However, a couple of names were left in the dust during this rally, providing the opportunity to add exposure to miners without paying up for names that have already headed into overbought territory.

In this update, we’ll look at two names that have lagged their peers, and why they look like long-term outperformers vs. the index.

I-80 Gold (IAUX)

I-80 Gold (IAUX) was one of the best-performing gold developers in 2022, putting together a 15% return vs. 20-30% declines for many of its gold developer peers.

Unfortunately, the stock has since given up considerable ground to start 2023, down 26% for the year which has placed it near the bottom of the pack among its peers.

The disappointing performance for this junior producer with a ~$700 million market cap (assumes 350 million fully diluted shares) is partially attributed to a ~$65 million financing earlier in the year that led to an increase in its fully diluted share count and the announcement of a bought deal secondary offering by its largest shareholder because of a funding gap as it builds a massive mine in Canada, Greenstone. Continue reading "2 Gold Miners With Long-Term Potential"

Silver Lining For These Two Stocks

While the price of gold (GLD) has been pummeled over the past month, it’s the silver price (SLV) that has taken the real beating.

This is evidenced by the industrial metal finding itself more than 18% off its recent highs, more than double the ~7% correction of gold in the same period.

The violent decline has pushed the price of silver back near $20.00/oz, which is only marginally above the average all-in cost to produce silver for primary producers, with this cost being all-in-sustaining costs plus growth capital and corporate G&A.

This is not ideal for the silver miners group, and especially not high-cost miners with $25.00/oz plus all-in costs that are now seeing negative margins for every ounce pulled out of the ground and processed on site.

The silver lining, though, is that if the silver price has declined to a point where growth is no longer incentivized, suggesting a steady decline in silver production if prices remain at or near these levels.

This obviously isn’t great for high-cost producers, but it is positive for those producers that will survive the short-term margin compression and are being thrown out with the bathwater.

In this update, we’ll look at two names that are trading at deep discounts to their historical multiples, and dig into their respective low-risk buy zones.

Avino Silver & Gold Mines (ASM)

Avino Silver & Gold Mines (ASM) is a ~$90 million silver producer that operates the Avino Mine in Durango, Mexico, which has more than a dozen named veins on the property and sits on the edge of a caldera.

The mine is unique given that it has silver, gold, and copper instead of just silver and gold like many primary silver mines, and it’s also unique in the sense that it is profitable despite a very small footprint, operating at a rate of barely 700,000 tonnes per annum, translating to production of 3.0 million ounces of silver per year dependent on grades. Continue reading "Silver Lining For These Two Stocks"

Best Growth Stock? One To Watch Now

Twilio Inc. (TWLO) enables developers to build, scale, and operate real-time communications within software applications through a cloud communication platform and a customer engagement platform. The company operates both in the United States and internationally.

Over the past three years, TWLO’s revenues have increased at a 50% CAGR. Its total assets increased at a 34.6% CAGR during the same time horizon.

TWLO has adopted sweeping changes to improve the efficiency of its execution and accelerate its path to profitability. On February 13, the company announced its decision to reduce its workforce by approximately 17% to drive meaningful cost savings. To rationalize expenses further, on December 9, 2022, it announced its voluntary delisting from the Long-Term Stock Exchange (LTSE) to remain solely listed on the NYSE.

TWLO has also announced that, moving forward, it will operate two separate business units: Twilio Communications and Twilio Data & Applications. This strategic realignment enables Twilio to execute each business's key priorities better.

TWLO’s management has expressed its confidence regarding the effectiveness of the abovementioned changes by announcing the authorization of a share repurchase program of up to $1.0 billion of its outstanding Class A common stock.

TWLO’s stock has gained 17.1% over the past month to close the last trading session at $73.88.

TWLO is trading above its 50-day and 200-day moving averages of $57.86 and $70.99, respectively, indicating an uptrend.

Here is what may help the stock maintain its performance in the near term.

Improving Financials

During the fourth quarter of the fiscal that ended December 31, 2022, TWLO’s revenue increased 21.6% year-over-year to $1.03 billion, while its non-GAAP gross profit increased 19.9% year-over-year to $517.78 million. Continue reading "Best Growth Stock? One To Watch Now"

1 No-Brainer Gaming Stock For 2023

After witnessing unprecedented growth during the pandemic, videogame publishers are witnessing a reversion to the mean with a reversal to pre-pandemic lifestyles amid macroeconomic uncertainties driven by inflation and increased borrowing costs due to interest-rate hikes.

However, despite the softened demand in the broader industry, incumbents, like Activision Blizzard, Inc (ATVI), have cornered pockets of growth with proven blockbusters such as Call of Duty, World of Warcraft, and Candy Crush commanding a greater share of gamers’ pinched pockets.

The gaming giant looks to merge with Microsoft Corporation (MSFT) this year. It reported record net bookings for the holiday quarter and 2022, exceeding analysts’ expectations.

With continued investment in growing its development teams, robust product pipeline, live game opportunity, and ongoing focus on operational discipline, ATVI seems on course for another year of outperformance.

Could Generative AI rekindle the market’s ebbed interest in the metaverse?

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ATVI has dipped marginally over the past month to close the last trading session at $76.25. The stock is trading above its 50-day moving average of $76.10 and almost at par with its 200-day moving average of $76.40, indicating an uptrend.

Here is what may help the stock maintain its performance in the near term. Continue reading "1 No-Brainer Gaming Stock For 2023"