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The DIY Investing Podcast

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  1. All Episodes
  2. 127 - Scuttlebutt on Overlooked Companies

127 - Scuttlebutt on Overlooked Companies

Feb 6, 2022

Mental Models discussed in this podcast:

  • Scuttlebutt
  • Quality Investing
  • Capital Stack
  • Dark Stocks

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Show Outline

The full show notes for this episode are available at https://www.diyinvesting.org/Episode127

Scuttlebutt on Overlooked Companies - Areas of Focus

  • Capital Stack:
    • Clean is better. Ideally only common stock.
    • No lending to insiders or other self dealing.
    • Has management issued themselves options in the past? Were the prices reasonable? How much of the company does this represent?
    • "Overdue or delayed payment to insiders."
      • Red flag. This basically menas the company is in default putting your equity at risk. Can't even really mount a proxy fight because the management could force the company into bankruptcy.
  • Filings:
    • Current or pink limited on filings with the SEC
    • I want to see financials. (They don't have to be audited)
    • Some sort of management commentary is nice. (Shows shareholder friendliness)
  • Business Model:
    • Change
      • New products
      • New management
      • Growth of some kind
  • Asset Base:
    • Ideally assts to cover the market cap (providing a margin of safety)
  • Earnings Power:
    • Profitable (every year for 10 years, no more than one loss in 10 years)

 

Summary:

Overlooked companies are often cheap. Therefore, scuttlebutt on overlooked companies needs to focus on filtering for the quality of the business. High-quality and cheap makes for a great stock. Look for abnormal signs of positive potential.