The results surprised even us. If you had bought all these stocks, you would have over tripled your money in just 2 years. Only one stock had negative performance. And our best performer, Acceleware (AXE.V) was up 1,333% in a single trading session just 3 months after we profiled it. All while the Toronto Venture Exchange stayed flat over the last 2 years. These stocks did so well that many of you reached out to us in 2017 and said: “I missed the boat last year! But please do another list for us this year” And we tried. But failed. The microcap market was hot and we just couldn’t find 10 cheap stock that met our criteria. Now fast forward to this year. Everything has changed. The microcap sector has been left for dead and we have more stocks on our watchlist than we have time to research. Our biggest challenge this time was narrowing the list down... And so today, we’re presenting the Top 10 companies on our watchlist. Well just the first 5 – you’ll have to wait next week for the top 5 in Part II of our special. These are the “cheapies with a chance.” The companies that could deliver our next huge winner. We are cheating a bit this year and expanding the criteria to a <$50 million marketcap vs <$10 million last time. We love tiny stocks, but we admit a few of our names last time were a little too small to get a decent position. Now remember these are just ideas. These are not SCD picks. We’ve done early research on them but nowhere near our full due diligence. Invest at your own risk! For each company we’ll give you some key facts and a list of pros and cons. Then we’ll give you the bottom line on if we are buying or passing and what we’d need to see to invest. The stocks are ordered from cheap to even-cheaper. Enjoy! ** The data in the key facts was taken from our screening software (screener.co). We’ve done our best to fact check the data but can’t guarantee all the figures are accurate. 10) Titan Logix Corp (TLA) Key Facts: Ticker: TLA.V Price: $.53 Market cap: $15.1M Shares outstanding: 20.6M Revenue (Trailing Twelve Months - TTM): $4.5M Net Income (TTM): ($4,000) Revenue growth last quarter (year-over-year - y/y): 40.7% P/E (annualized): 20.4 What it does: Titan makes fluid measurement systems primarily for the oil & gas industry. Their systems measure fluids in the field (tank level gauge), on the road (mobile oil truckers), and in the office (real-time data for business users). These systems allow customers to track assets and manage their supply chain more effectively. Titan’s systems prevent oil overfills and accurately report valuable inventory much better than conventional methods – which are often crude, manual processes like reading a dipstick. Pros: - Improving market conditions. TLA’s business is highly cyclical and tied to crude oil prices. After enduring 4 brutal years, crude is up and TLA’s business is accelerating. The downturn forced TLA to run lean while weaker competitors left the market – putting them now in a unique position to capture share as the market improves.
- Niche dominance. TLA has been in this market for 40+ years and built a dominant position in their niche. They are now leveraging that strength to partner with industry leaders (Pedigree Technologies) and expand into new verticals like fracking water.
Cons: - Cyclical. Though the oil & gas industry has recovered, another downturn could easily send TLA’s business back in the red. The last downturn caused TLA’s revenues to fall 50% virtually overnight.
- Dependent on new orders. TLA’s business is not recurring in nature and depends on production of new equipment, especially oil tankers, to drive orders. This can cause lumpiness in the business – on top of cyclical trends in oil prices.
Bottom Line: With a new management team and oil & gas recovering, TLA looks well positioned for future growth. But at 20X earnings, it doesn’t look cheap enough yet to justify the macro risk.
9) California Nanotechnologies (CNO) Key Facts: Ticker: CNO.V Price: $0.08 Market cap: $2.5M Shares outstanding: 31.4M Revenue (Trailing Twelve Months - TTM): $786,000 Net Income (TTM): $42,500 Revenue growth last quarter (year-over-year - y/y): 67.4% P/E (annualized): 14.3 What it does: California Nanotechnologies develops and sells advanced nano materials. Their technology improves material performance by improving its engineering properties. Cal Nano’s materials have high-performance applications ranging from aircraft engine coatings for Boeing to next-generation track spikes for Adidas. Pros: - Marquee customer list. Cal Nano counts as customers Boeing, General Electric, and Adidas. This is an impressive list for a tiny Canadian firm – and major validation of their technology.
- High margin model. Cal Nano’s tech is specialized and unique – and with that comes huge gross margins (~70%). This will mean big profits if they are successful growing revenues.
Cons: - Early stage. Cal Nano has for years been a research outfit and just recently began their commercialization phase. They are dependent on a few early customers and will surely having growing pains.
- Difficult to understand. We love simple stories and Cal Nano is notone of those. Their technology is very specialized and beyond our understanding – parts of the MD&A read like a different language and fly over our heads…
Bottom Line: Cal Nano has built an impressive business model around an impressive customer list. But it’s early days and they just broke through profitability – we’re content to wait another quarter or two to prove they are past the R&D phase.
8) C-Com Satellite Systems (CMI) Key Facts: Ticker: CMI.V Price: $1.21 Market cap: $45.0M Shares outstanding: 37.2M Revenue (Trailing Twelve Months - TTM): $12.0M Net Income (TTM): $1.7M Revenue growth last quarter (year-over-year - y/y): 50.5% P/E (annualized): 11.8 What it does: C-com makes mobile antennas that deliver broadband internet to any location via satellite. Their systems allow internet connectivity in remote and harsh environments – think military bases, oil rigs and emergency medical responders. Pros: - Industry tailwinds. Thanks to the rise of mobile devices (5g), demand for broadband – especially in emerging markets – is growing exponentially. C-Com has an R&D partnership with the University of Waterloo that if successful, would give them a mass-market device uniquely poised to capitalize on this trend.
- Geographic diversity. C-com has sold systems in over 100 countries across all kinds of markets. That’s a big plus for a microcaps, which often rely on a few customers in a single industry.
Cons: - Lumpy. C-com relies on sales of relatively-expensive hardware to drive sales. This can cause erratic swings like in Q1 this year, where revenues declined 47% sequentially from Q4 17.
- Obsolescence risk. C-com must constantly innovate to stay relevant in this fast-moving market. They highlight a delayed partnership with ViaSat that is late coming to market – and could be replaced by a superior technology (fortunately that superior technology is theirs!).
Bottom Line: C-Com is a classic example of strong management operating in a brutal industry – one that is notorious for boom and bust. We’re passing on the industry risk but no question – this small company is best-of-breed.
7) Titanium Transportation Group (TTR) Key Facts: Ticker: TTR.V Price: $1.31 Market cap: $48.0M Shares outstanding: 36.7M Revenue (Trailing Twelve Months - TTM): $175.4M Net Income (TTM): $4.5M Revenue growth last quarter (year-over-year - y/y): 42.3% P/E (annualized): 7.6 What it does: Titanium is as simple as it gets: they move materials from A to B with a fleet of large vehicles (i.e. 18-wheelers). They also offer logistic and freight-forwarding services, acting as a 3rd party to move goods for customers using assets owned by others. Pros: - Size. TTR has over 1,000 customers in various industry and did $175 million in revenues over the trailing 12-months. That gives them scale and stability you don’t often see in microcaps.
- Boring to sexy transformation. The logistics business is the sexier part of the business – it’s asset-light and leverages technologies like big data. As TTR continues to grow this business line, it should help boost the valuation.
Cons: - Commodity business. TTR’s core business is commoditized – no IP or specialized technology here. This means low margins and a competitive environment driven by price.
- Debt. It’s a four-letter word as Warren Buffet says. And TTR has plenty of it. With $170,00 in cash vs $46 million in debt, an economic downturn could spell trouble for Titanium.
Bottom Line: TTR’s numbers look great but we’re left wondering how a boring-ole commodity business can grow at these rates. Once we understand the sustainability of growth, we’ll be in a better position to invest.
6) Evergreen Gaming Corporation (TNA) Key Facts: Ticker: TNA.V Price: $0.39 Market cap: $48.6M Shares outstanding: 124.7M Revenue (Trailing Twelve Months - TTM): $40.0M Net Income (TTM): $5.3M Revenue growth last quarter (year-over-year - y/y): 30.0% P/E (annualized): 5.1 What it does: Evergreen gaming operates 4 casinos in Washington State. These casinos offer all the games you’d expect to see: poker, blackjack, and baccarat, among others. Pros: - Good business. A friend of mine used to say The Venetian in Las Vegas was not paid for by you winning. And so for better or worse, odds are always in the house’s favor – and casinos are a really good business.
- Buyout opportunity. TNA reported in January they are looking at selling the company to a 3rd party. This makes TNA an event-driven opportunity with potential for good returns in a short time period.
Cons: - Regulations. The casino business is heavily regulated. To protect consumers, these regulators can strike down on operators like TNA.
- Growth. To grow, TNA must bring in more visitors, get them to spend more, or build more casinos. This model is harder to grow than say a SaaS or eCommerce business.
Bottom Line: Casinos are far from our favorite business to invest in and with growth visibility low, we’re passing for now. But for event-driven investors, this one is worth a good hard look. Wrap-up So there you have it, 5 completely unknown companies that meet our criteria. We can’t promise all – or even some of these – will be winners. But our experience shows tiny, cash flowing smallcaps is the fastest route to big profits. Tune in next week for Part II of our list, where we’ll reveal the Top 5 – the cheapest, most undiscovered companies we know. To your wealth, Paul & Brandon | 
