Pebbles Digest #2

"Looking for investment ideas is like searching for a quiet corner in a loud party: everyone's talking, but only a few whispers are worth leaning in for." - Gemini, trying a subtle investing pun.

I am back with a second edition of Pebbles Digest. If I slightly digressed in the inaugural edition, I will get straight to the point this time around.

For new readers (or as a refresh for returning ones), this format's two-fold objective remains:

• Be exposed to a wide variety of company profiles and filter out what you do and do not want to spend your time on.

• Walk away from borrowed conviction. Borrowing ideas is normal and origination have to start somewhere but refining your own due diligence is mandatory if one wants to make fast, decisive and - ultimately - lucrative calls whenever markets offer opportunities.

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Now, here is a quick summary of what I looked at recently:

Companies assessed since last time: 41

Hard passes (folded under 3min): 29

Companies further evaluated: 12

Companies added to watchlists: 7

Starter position initiated: 2


While 'TACO' is the buzzword of the moment, the Orange Man certainly sent shivers down spines on Liberation Day and offered investors a prime opportunity to snag some favorite watchlist items.

So, here are some standouts from yours truly:

1. McCoy Global $MCB.TO - Starter position initiated
   

   A 110+ yo O&G services company out of Canada that started monetizing a suite of automated products, including recurring revenues from a SaaS offer.
   It took McCoy about 6 years to finalize that product line but initial results indicate an industry-changing potential: their automated process allows to halve man hours needed for casing while bringing live data to well operators.
   Share of revenues coming from this new tech is rapidly gaining steam and should power both topline growth and margin expansion in the coming quarters/years.

   McCoy is profitable, debt-free, growing nicely and yours for 9x NTM earnings ex-cash.
   Initiation date: April 17th
   

2. Rapid Micro Biosystems $RPID - Starter position initiated
   

   A life sciences technology company providing devices for the detection of microbial contamination.
   Ways of working for QCing drugs and personal care products are fairly outdated, cumbersome and lengthy (7-12 days according to LLMs).
   Incentives to move to automated solutions such as RPID’s are big as their Growth Direct System increases execution speed, mitigates contamination risks and creates robust data flows.
   For about $200k/year (+ the same amount at installation), clients get to hedge themselves against multi-million $ risks while significantly reducing incurred labor costs.
   CEO is an ex-TMO so he knows the industry very well and I have little doubt that his end game for RPID includes an eventual takeout by one of the big dogs.

   RPID trades currently at ~3x NTM EV/Sales when comps hover between 6 and 12 times.
   H/t to

   Multibagger Monitor
   for delivering this idea.

   Initiation date: April 22nd
   

3. Ascent Industries $ACNT - Moved to primary watchlist
   

   A good ol’ turnaround play for a company with 2 historical activities: steel pipes/tubes and specialty chemicals.
   New management is currently selling the former part of the business to focus on the latter which is articulated around white label products (with some long-term relationships in place, unexposed to tariff risks) and “branded” ones.
   Branded products are their #1 focus as they are higher margins and efforts seem to pay off as the segment already moved from 10 to 25% of total revenues.
   If they manage to fully exit the steel business while maintaining solid momentum on the chems side, Ascent could be trading at ~6x 2025 EBITDA, with some dry powder for bolt-on acquisitions.
   H/t to

   Sebastian
   for pitching it at Planet MicroCap in Vegas.
   

4. Riskified $RSKD - Moved to primary watchlist
   

   A $800M fraud prevention platform introduced on the Nasdaq in summer 2021 that got subsequently nuked in less than 6 months.
   The stock has flatlined since then and sits at around 1x ARR when peers trade at multiples of that.
   Recent earnings call indicates a stronger than expected pipeline and a welcomed move into the payments vertical. Given industry consolidation and its very depressed valuation, I wouldn’t surprised if it gets taken out rapidly.

   My one hold-up (for now) is the significant SBC burden, though the cynic in me sees it as an unfortunate hallmark of this company profile in current times.

Another 5 names made it onto my secondary watchlist, missing the primary due to valuation or need for further DD:
Douglas Elliman $DOUG, Firan Technology $FTGFF, Acorn Energy $ACFN, Ferrovial $FER.MC and Italmobiliare SpA $ITM.MI.

If you own any of these names or just know them well, I’d happy to chat.

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Alright, that’s a wrap for PD #2!

I will be publishing pebbles digests every month as it simply forces me to transparently share what I recently looked at.
If just a couple of these ideas turns out to be a good investment for me (or for you) every year, it will be worth it.

Until next time,

Silence

P.S: One more name piqued my interest, but I'm saving it for a potential write-up soon. Here's a tiny clue: think of one of the two certainties in life...