For the past week, I've been combing through various 13F regulatory filings and sifting through hundreds of securities, looking for ideas or new positions taken on by other investors. The thing about 13Fs is that they are only required for investors working with at least $100 million in assets. Sure, $100 million is peanuts in today's financial markets; nonetheless, there are thousands of people working with less than $100 million who also may have great ideas. After all, most of the names we revere today start managing portfolios with only several million dollars.
In trying to source out these ideas, one has go one layer lower and search for 13G and 13D filings. These are the required filings when an investor takes a 5% or greater position in a company. So, whether you manage $1 million or $1 billion, if you accumulate a 5% position in a company, you have to file.
In poring over these filings, I've come across some intriguing names. Keep in mind that, by default, many of these names are microcap stocks. After all, many small investors who take big stakes in companies are usually focused on the smaller issues. But that can often lead to unknown or mispriced ideas.
MFC Industrial (MIL) is a name I saw a couple of times. It's a $450 million company supplying and transporting commodities and materials worldwide. Shares trade for around $7 and yield 3.4%.
Cosi (COSI) is a small restaurant chain that has struggled for years to get things together. Years of losses and equity issuance have kept the company going. The concept is interesting: Cosi is like a mix of a Panera Bread (PNRA) and European bistro. Recently, the company appointed a new CEO who happened to be one of the most successful Cosi franchise owners. A private investor supplied the company with a $5 million line. Trading for about $1.25, the company is valued at $24 million and it has a healthy balance sheet. It is still experiencing losses, but perhaps this new management team has what it takes.
STR Holdings (STRI) is a $34 million supplier of encapsulants for solar panels, which essentially protect the circuits running through solar panels. Greater demand for solar panels means more business for STR as the company claims that 20% of installed solar panels are protected by STR. Shares have fallen hard and trade for about $1.30, off from $3.43 during the past 52 weeks. In March, the company tendered and bought back nearly 37% of its outstanding shares for $1.54 per share. The company did this thanks to a debt free balance sheet that was flush with nearly $30 million in cash. Solar power is clearly moving forward. If STR benefits, then this tender offer is going to pay off for shareholders in a big way.
Wall Street cannot afford to pay attention to sub-$100 million companies, but you the individual investor should because the possibility of finding inefficient stock prices is greatly magnified.