What Do Berkshire Hathaway’s Buyback and Stock Purchases Mean for Small Cap Investors?
The Oracle of Omaha’s Berkshire Hathaway announced third quarter numbers on Saturday.
In its filings with the SEC on Monday, the Omaha, Nebraska, conglomerate disclosed it bought nearly $1 billion of its own shares in August and nearly doubled its year-to-date net purchases of equities in the third quarter, adding $12.5 billion in the period.
While some financial pundits viewed the stock buyback to mean there was a lack of opportunities to buy companies at good prices, its important to note that the $1 billion represents just 1% of Berkshire’s current cash position.
Quite the contrary, the fact that Berkshire’s net purchases of equities in the period accounts for more than half of its year-to-date total of $24.4 billion indicates Berkshire was increasing its appetite for equities.
This falls in line with our view last week that the current market turmoil at worst is likely to lead to an extended and broad trading range, a range where we are much closer to the bottom than the top.
Small-cap indices have fared the worst during the October correction, but were the leaders at their peak in the summer.
While indices may only bounce back to their recent highs in the coming months, as we’ve noted in the past, individual small-cap stocks often trade very independent of their benchmark indices.
With likely positive tailwinds ahead, which Berkshire’s activity seems to confirm, owning a basket of the right small-cap stocks could produce solid gains for you leading into year-end and through 2019.
Be sure to read this newsletter each week for the latest developments on some of the top names in the small-cap space.
Nutriband (OTCQB: NTRB) was issued a "Notice of Intention to Grant" for its European Patent Application entitled, "Abuse and Misuse Deterrent Transdermal System," submitted by its subsidiary, 4P Therapeutics. The patent relates to the company's proprietary opioid abuse deterrent transdermal technology, utilized in the Defent™ fentanyl transdermal system, which is being developed at 4P Therapeutics to combat fentanyl overdose.
Key Quote: "The notification of ‘Intent to Grant’ by the European Patent Office is another step forward in the worldwide prosecution of our abuse deterrent transdermal technology intellectual property portfolio." Alan Smith, Ph.D., Head of 4P Therapeutics
What’s Next: The abuse deterrent patch technology used in the Defent™ fentanyl transdermal system is an abuse deterrent platform that the Company believes can be applied to other types of pain patches and other transdermal products as well to lower the risk of abuse and accidental misuse through the use of aversive agents, creating a safer treatment option for patients.
Disclosure
Nutriband Inc. (OTCQB: NTRB) is a client of RedChip Companies, Inc. NTRB agreed to pay RedChip Companies, Inc. a monthly cash fee and 10,000 shares of Rule 144 stock for 6 months of RedChip investor awareness services and consulting services.
GSRX Industries (OTCQB: GSRX) reported revenue of $706K for the third quarter, up 100% from its second quarter results, primarily driven by significant growth in its Puerto Rico operations. The Company followed up these impressive results with news of its entrance in the multi-billion-dollar retail CBD market.
Why it Matters: GSRX plans to open a chain of branded retail stores offering premium quality all-natural health and wellness hemp CBD-based products. The Company is currently in the process of identifying potential locations for its first Pure and Natural CBDs retail store in the Austin, Texas area. In a study released earlier this month by MJBizDaily (MJBiz Daily Report), U.S. Hemp-driven CBD retail sales are projected to exceed $3 billion by 2022. In an article published in Rolling Stone last month, a new estimate from cannabis industry analysts The Brightfield Group indicates the overall hemp-CBD market could hit $22 billion by 2022 (Rolling Stone).
What’s Next: Through its branded Pure and Natural CBDs stores, GSRX plans to offer a broad selection of proprietary all-natural branded Pure and Natural CBDs Hemp CBD products in major product categories, including: oils; gummies; candies; edibles; sub-linguals; baked goods; topicals; pet care products; hair care; skin care; coffee and tea; vape products; bath and beauty products, and more. This is a great complement to its expanding medical and adult use cannabis operations and positions the Company for dominance in what is a significant market opportunity.
Disclosure
GSRX Industries (OTCQB: GSRX) is a client of RedChip Companies. RedChip Companies, Inc. received 1,000,000 registered shares of GSRX for consulting services and 50,000 shares for investor awareness services. Be advised RedChip intends to sell some or all of its shares at any time, including when you are buying.
Net income was $1.6 million or $0.04 per fully diluted common share; non-GAAP net income was $3.1M, or $0.08 per fully diluted common share
Key Quote: “We had a very successful third quarter, which included strong revenue growth, market share gains, new account growth and progress on our clinical and R&D programs.” Pat Mackin, Chairman, President, and Chief Executive Officer
The Backstory: Headquartered in suburban Atlanta, Georgia, CryoLife is a leader in the manufacturing, processing, and distribution of medical devices and implantable tissues used in cardiac and vascular surgical procedures focused on aortic repair. CryoLife markets and sells products in more than 100 countries worldwide. For additional information about CryoLife, visit our website, www.cryolife.com.
Etsy to Announce Third Quarter 2018 Financial Results on November 6, 2018
Etsy, Inc. (NASDAQ: ETSY) is the global marketplace for unique and creative goods. Our mission is to keep commerce human, and we're committed to using the power of business to strengthen communities and empower people. We connect millions of buyers and sellers from nearly every country in the world. Buyers come to Etsy to be inspired and delighted by items that are crafted and curated by creative entrepreneurs. For sellers, we offer a range of tools and services that address key business needs.
According to Goldman Sachs, a thriving labor market is part of a continuing economic boom that will have to slow down or it eventually will cause trouble.
Goldman thinks the Federal Reserve is taking the inflation threat seriously and will raise interest rates more than the market thinks and believes the central bank will have to be even more aggressive than the market thinks.
Goldman is forecasting five more quarter-point rate hikes through early 2020.
Generated $25M in revenue and $765K EBITDA in 2017
PHI Group (OTCQB: PHIL) is a fast-growing holding company implementing an acquisition model to acquire established and revenue-generating private companies that PHIL management believes will substantially increase shareholder value.
The Company recently announced an agreement to acquire a majority interest in Vinafilms JSC, a Vietnamese plastic manufacturing company (www.vinafilms.com.vn), in order to create a platform to consolidate other businesses in the same industry.
The Backstory: PHI Group focuses on mergers and acquisitions and invests in select industries and special situations that may substantially enhance shareholder value. PHI Group also provides merger-and-acquisition and consulting services through its wholly owned subsidiary, PHI Capital Holdings, Inc. (www.phicapitalholdings.com).
Disclosure
PHI Group Inc. (OTCQB: PHIL) is a client of RedChip Companies, Inc. PHIL agreed to pay RedChip Companies, Inc. a monthly cash fee for 4 months of investor awareness services.
Quote of the Week
"Small caps outperform not because of market capitalization alone but because the stocks in this category are least efficiently priced."
- James O'Shaughnessy, Author of What Works on Wall Street
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