Adding Three Names to my Model Portfolio
Geodrill, Kraken Robotics and Locafy
As much as I love writing research reports, they take up a substantial amount of time, and sadly, I’m crunched for time right now. I’m about to move to the US and start business school, so any time I have goes towards research rather than writing reports. That said, I wanted to add 3 names to my model portfolio, and I am using this brief article to introduce them. I’ll quickly cover the theses at a high level.
Geodrill ($GEO.V / $GEODF)
Price: CAD$2.40
Geodrill has completed a mini-turnaround of sorts. It has moved all its mining rigs out of higher-risk geographies and set them up in safer environments. Trading at a mere 3.7x forward EBITDA and 0.7x book, it’s hard to see this stock getting much cheaper. Especially if they get back up to high utilisation rates, which I believe is inevitable. Additionally, if gold prices spike, demand for their rigs will increase, so I think it’s a nice hedge against recession. I think a double is feasible in the next 18 months, and the downside seems minimal.
Kraken Robotics ($PNG.V / $KRKNF)
Price: CAD$1.27
Kraken produces batteries and sonar for UUV submarines, and demand for these is only set to increase given geopolitical tensions. They have strong growth and good margins. Despite not being as optically cheap in typical metrics, I feel the quality of the business, and the powerful industry dynamics provide the safety net for this investment. As for the upside, Anduril recently announced the construction of a new UUV manufacturing facility in Rhode Island that will produce ~200 UUVs per year for the USN and other NATO allies. These vehicles generate around $3-8m in revenue for Kraken each, which would be enormous for Kraken once it gets moving. It would also be reasonable for Anduril to acquire Kraken to secure the supply chain, though this is not essential to the thesis.
Locafy ($LCFY)
Price: $4.33
Locafy has the unique capability of enabling companies to appear at the top of search results organically (without paid ads) in an automated manner. Their technology is highly relevant in an environment where search engines (particularly Google) are changing their algorithms and rules frequently. The company’s financials have bottomed and are beginning to trend higher. They will likely turn profitable this quarter and experience decent sequential growth. They recently secured enough cash to make it to breakeven. The company has momentum in fundamentals and price, which seem to cover the downside. That said, the company is seeing traction in some enormous opportunities (such as diDNA publishers), which could dwarf the current business in a short time span. The upside on this one could be explosive, but if not, they should still do well over a reasonable timeline.
I am a new Elite subscriber, which I decided to pay up for because of wanting to support (and get early access to) the high quality and collaborative research coming out of BI. As I read through recent posts on the BI site, your compelling reports have really stood out for me, and your stellar results reinforce my sentiments. I was certainly surprised to find out how young you are, as your articulate analyses resonate with circumspect insights and wisdom that is usually only developed through years of trial and error in the brutal investing game. I am cheering you on as you dive into business school, but I certainly hope that you won't become too busy to keep engaged in BI and squeeze additional articles into your new routines on a not too infrequent basis. I'd love to learn more about how you come across your picks as well as your vetting process so that I can begin to contribute the way you have been to this investing community. Best of luck to you, and don't forget about us at BI as you get wrapped up in the many alluring side paths of your university life in the Bay Area!
Love your deep dives and your investing style. Your piece on NXGL was a total revelation to me - kudos. Will check out these 3 as well. Very grateful for such high quality content.