- One of the most important factors that we consider when choosing to invest in micro-cap companies is the number of shares owned by CIMD; company insiders, management and directors.
- As a general rule, we believe that it is extremely important that these key individuals have substantial “skin in the game”.
- Significant equity ownership by CIMD provides incentive and motivation to increase shareholder value, since, through their equity they participate in the growth of the company and their own net worth.
- While many investors may look only for token equity ownership, our threshold and standards are much higher; at least 25% or greater.
- With having already experienced two 100-baggers in the past 6 years, CELH and GLUC, we continue to scour the micro-cap universe for other potentially rewarding investment ideas.
If you have been following us, for any meaningful period of time, on Seeking Alpha and our Google blog page, you know that we view insider ownership as an important factor in our decision to invest in a micro-cap company.
Nothing is more important than a management team with considerable skin in the game.
We aren’t talking a mere 5 or 10 percent, our even 15 or 20 percent. We are talking about significant inside ownership on the order of 25% or greater.
If you look at Celsius Holdings, Inc. (CELH), Glucose Health, Inc. (OTCPK:GLUC), Blue Biofuels, Inc. (OTCPK:BIOF) and Conservative Broadcast Media & Journalism (OTCPK:CBMJ) you will find one common thread among all of them: high levels of insider ownership.
There can be many reasons why insiders sell their stock holdings, including diversification, estate planning considerations, large real estate purchases, paying their federal, state and local taxes, or just a simple change in their opinion on the future prospects for a company.
However, there is only one reason why an insider buys shares in a publicly-traded company, and one reason only: they believe that the shares that they are buying will be worth significantly more in the future than they are today.
It signals a high level of confidence in the prospects of the company going forward, and they want to participate in the bight future and higher stock price that they envision.
Now, some of you may look at the image above and think to yourself a 100-bagger; that’s ridiculous. How can anyone expect a return of 100x on their investment?
Well, we are here to tell you that it has happened to us twice in the past six years, and we think that there may be a few more coming within the next 3-5 years, provided that an investor has patience.
For the ROI calculations on the two stocks mentioned, please see the end of the article.
When we first decided to invest in micro-cap Celsius Holdings (CELH) over 10 years ago, it was because we saw an investor with a very strong conviction in the company, who also had a track-record of success in building publicly-traded companies.
That investor was South-Florida businessman, entrepreneur and philanthropist Carl DeSantis.
Source: Edgar Online CELH 10-K
By February of 2015, we had accumulated 568,250 shares of CELH at an average cost of $0.22 cents a share in our Fidelity Roth IRA. The rest, as they say, is history.
Source: Fidelity Account Screenshot
In early 2017, we discovered a little unknown micro-cap company by the name of Glucose Health, Inc. We, subsequently, wrote our first article about GLUC on April 5, 2017, which appeared on our Google blog page.
Between our first purchase in 2017 through the end of 2019, we built a 1.85 million share position in the shares of Glucose Health, Inc, at a average cost basis of just under $0.0825 a share.
We should note that, we were not required to disclose our holdings in GLUC, since the company was a non-reporting company, as defined under SEC regulations.
Today, as a result of participating in numerous financing activities, with Glucose Health, Inc,. we have been asked by the company to voluntarily have our share positions disclosed in the quarterly and annual reports. We have chosen to comply with those requests.
Source: Charles Schwab Account Screenshots
Shortly thereafter, the shares of GLUC began their ascent higher, reaching a price of $8.98 on January 5, 2021.
One of the main reasons we decided to invest in GLUC was the capital structure of the company, and the fact that CEO Murray Fleming controlled the majority of the common shares by virtue of his ownership of Glucose Health, Inc. Series A preferred shares.
The other factor, which still remains the same today, is that Mr. Fleming takes no salary in his role as Chief Executive Officer of Glucose Health, Inc.. In fact, he doesn’t even accrue a salary for future disbursement.
In essence, his net worth is tied directly to the value of the company’s shares. If that doesn’t give him incentive to build shareholder value over time, we don’t know what would.
Blue Biofuels, Inc. (OTCPK:BIOF), formerly known as Alliance Bioenergy Plus (ALLM), is another example of a company in which we hold a substantial equity stake, following in the footsteps of company management and insiders.
In the latest 10-K, as of March 31, 2021, management and insiders of Blue Biofuels own a whopping 37.487% of the BIOF common shares outstanding.
Source: Blue Biofuels 10-K 12/31/2020
Unfortunately, we don’t have the time to detail our research thesis here.
That brings us to the discussion of insider ownership for Conservative Broadcast Media & Journalism (OTCPK:CBMJ).
CBMJ is another example of a special situation that we are heavily invested in.
Source: Charles Schwab Account Screenshots
The company in its current stage is focused on the restructuring and refocus of a micro-cap company that was formerly called Canna Consumer Goods, which focused on the cannabis sector.
We first came across in September of 2020, when CEO Mark Schaftlein announced that the company was acquiring DeDenato Enterprises and changing its name to more accurately reflect the new direction that he envisioned taking the company.
Of special interest to us was a recent announcement by CBMJ that CEO Mark Schaftlein had retired a block of convertible debt on the CBMJ balance sheet, while investing his personal funds into the company’s common equity, by purchasing an additional 31 million common shares
“With the addition of the 31M shares, Capital Consulting Inc. now owns a total of 60,913,500 restricted Common Shares, which represents 17% of the total Issued and Outstanding Common shares. This more than doubles the shares controlled by the Company’s CEO.”
Source: Yahoo Finance
Obviously, Mr. Schaftlein appears to be extremely confident in CBMJ’s future, for him to double-down on his investment in the company.
We’re certainly not going to argue with a put-your-money-where-your-mouth-is move by the CEO of a publicly-traded company, and will simply view it as a validation of our prior assessment of the attractiveness of CBMJ shares.
The number of restricted shares of CBMJ now stands at 266,002,069, or roughly 73% of the entire number of shares outstanding, which total 364,842,720 as of October 15, 2021, according to the OTC markets website.
There are approximately 92,723,586 verified shares in the public float, according to Transfer Agent records.
Source: OTC Markets
By-the-way, today’s news of an 82% increase in CBMJ’s third-quarter revenues continues a streak of year-over-year revenue increases of 97%,118%,642% and 96% in the prior four quarters, since the corporate restructuring and refocus began in earnest..
In summary, we like to invest right alongside officers, directors and big money investors when it comes to micro-caps. They know better than anyone else what is going on behind the scenes and what the future may hold for the business.
Source: CBMJ Annual Report 3-29-2021
The figures above do not include the 40 million shares of restricted common stock issued to former CEO of Patriot Depot, Floyd Brown, who is currently a Director of CBMJ.
We certainly are not advocating that you blindly follow us into deploying an investment strategy based solely on insider buying and ownership.
Instead, do your own due diligence before committing any investment dollars to micro-cap securities, and, most of all, please do not invest any funds that you are not willing to lose; up to 100% of your investment.
(For illustrative purposes only)
Return on an investment in CELH stock, assuming that an investor bought at the low of $0.22 on 2/28/2015, and sold it at the high of $101.50 reached on 9/24/2021***
(For illustrative purposes only)
Return on an investment in GLUC stock, assuming that an investor bought at the low of $0.14 on 4/05/2017, and sold it at the high of $8.98 reached on 1/05/2021***
***Past performance does not guarantee future results, and an investor should not expect to achieve similar results based on what has already happened over different time periods, as well as under different market and economic conditions.
Please invest based on your own unique financial situation, risk tolerance, and liquidity needs. Micro-cap stocks are very risky and can experience extreme movements, up and down, in price during volatile market conditions. You should take this into account when considering that you may need to sell your position at a unfavorable price during a disadvantageous or inopportune time for the shares.
Disclosure: I/we have a beneficial long position in the shares of CBMJ, GLUC, BIOF either through stock ownership, options, or other derivatives.
Additional disclosure: Additional Disclosure: Disclaimer: We are not responsible for updating this article, or our opinion on any of the stock(s) that are mentioned in our articles. We are not in the business of giving investment advice and ask that readers refrain from asking us for it. Please do your own due diligence before investing. We are not responsible for any actions that you take based on the opinions that we express on Seeking Alpha.
Please remember that this article is a reflection of our current opinion on BIOF, GLUC and CBMJ. It is based on information that is publicly available at the time we wrote the article. Additional public information may be available but was not brought to our attention at the time we authored the article. We provide sources and links to factual information that we include in our articles but take no responsibility for the accuracy of their content. An investor should consider that new information may become available regarding the company’s business activities, financial condition or corporate governance. It is the responsibility of each investor to make sure that they stay abreast of any new developments which may arise, that could have an impact (negative or positive) on their investment.
CBMJ may need to raise additional capital in the future, to continue with its strategic business plan and history of acquiring other companies. There can be no assurance that they will be successful in obtaining additional financing, on favorable terms, in the future. The company’s financials currently contain a going concern acknowledgement. Investors should take this into consideration when deciding to invest in the equity securities of CBMJ. There always remains the possibility that an investor in CBMJ or any micro-cap company could lose 100% of their investment.
The principals of Altitrade Partners hold a beneficial interest of greater than 10% of the outstanding common shares of GLUC. In addition, we own shares of preferred stock Series B, C, D, & E issued by the company as a part of the normal course of financing activities by the company. We are not considered to be an affiliate or control person of Glucose Health, Inc. and exercise no influence over decisions made by the company, its CEO, or the Board of Directors.
Glucose Health, Inc. (GLUC) is not currently an SEC reporting company, and as such its shareholders are under no legal obligation to file standard SEC ownership documents, as would be the case with a fully-reporting SEC company. We, however, have chosen to voluntarily disclose our ownership position in the securities of GLUC, in the interest of full and fair disclosure.
Blue Biofuels is a developmental-stage company, and currently has no finished products and no revenues. As a result, the company will need to raise additional capital to continue operations. There can be no assurance that they will be successful in obtaining additional financing in the future The company’s auditors have questioned whether the company can remain a going concern. Investors should take this into consideration when deciding to invest in the equity securities of BIOF. There always remains the possibility that an investor in BIOF could lose 100% of their investment.
We currently own an investment stake of greater than 5% of the outstanding common stock of Blue Biofuels, formerly known as Alliance Bioenergy Plus, Inc. (former ticker symbol: ALLM). An investor should carefully take this information into consideration when assessing the value of our opinions. We make every attempt to be objective in our articles, but there is always the potential for a conflict of interest to exist by virtue of our substantial equity ownership in the company.
Altitrade Partners is not an investment advisory service, and is not a registered investment advisor or broker/dealer. Investors should base any buy and sell decisions on their own due diligence and preferably with the advice of their own financial, tax and investment advisors.
The views and opinions expressed in this report are purely those of Altitrade Partners. No views or opinions should be misconstrued as advice as to whether or not to buy or sell any securities. Altitrade Partners does not offer investment advice, or investment services, and is not compensated to provide opinions, write research reports, or to comment on news related to any publicly traded company.
Each investor is responsible for making his or her own investment decisions, with the assistance of a licensed financial advisor, investment advisor or tax professional to determine whether or not an investment is suitable based on their personal financial goals, circumstances and risk-profile. Readers must understand and acknowledge that there is a very high degree of risk involved in buying and selling securities, especially micro-cap stocks, and any investment decision should be based on a thorough analysis of a company, its business, its financial condition and the securities in its capital structure. No investment decision should not be based solely on what is read in a research report, viewed on a web site, or seen on the Internet. The Principals of Altitrade Partners may hold positions in the equity securities of companies or industries discussed here; including, but not limited to common stock, preferred stock, convertible debt, as well as listed put and call options. Any such positions are disclosed to readers, so that they may be aware of any potential conflicts of interest as a result of the author‚Äôs position (long or short) in a security which they are writing about. Understand that such disclosure is made at the time that the opinion is posted, and is subject to change. Such changes may include increasing or decreasing the number of shares held, increasing or decreasing the number of options which may be exercised into common stock, along with hedging strategies designed around taking an offsetting position in the same security, or convertible securities, to manage risk.
The information contained in this article may include or incorporate by reference ‚”forward looking statements‚” including certain information with respect to business results, plans and strategies of publicly-traded companies. For this purpose, any statements incorporated by reference that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting or forgoing the words ‚”should‚” ‚”could‚” ‚”may‚” ‚”believe‚” ‚”anticipate‚” ‚”plan‚” ‚”expect‚” ‚”project‚” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties, and assumptions about each company, economic and market factors in industries in which the companies do business, among other factors. These statements are in no way guarantees of future performance, and actual events, along with results, may differ materially from those expressed or forecasted by the companies due to many factors.
The information contained herein contains forward-looking information within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934 including statements regarding expected continual growth of the company and the value of its securities. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 it is hereby noted that statements contained herein that look forward in time which include everything other than historical information, involve risk and uncertainties that may affect the company‚Äôs actual results of operation. Factors that could cause actual results to differ include the size and growth of the market for the company‚Äôs products, the company‚Äôs ability to fund its capital requirements in the near term and in the long term, pricing pressures, unforeseen and/or unexpected circumstances in happenings, pricing pressures, etc. Investing in securities is speculative and carries risk.
Micro-cap stocks carry additional risks beyond those of higher classes of securities including, but not limited to trading outside of a listed exchange, potential liquidity issues, dealing with penny-stock rules, lack of margin eligibility, a possible absence of transparency regarding BBBO quotes, a limited number of Market Makers willing to provide depth to the order book, potential issues regarding financing activities, inadequate capital to execute on the company‚Äôs business plan, going concern caveats, and the potential inability to compete with larger companies due to limited financial and personnel resources. Please invest responsibly. We encourage individuals to only invest what they can afford to lose, up to a maximum of 100% of their investment.