This brings my overall return, since Jan 1 2023, to 147%, which equals a CAGR of 32.1%. Compared to the S&P 500 of 70% (17.7% CAGR), and MSCI World of 57.80% (15.1% CAGR).

Mental flexibility

This outperformance was only possible by not putting myself into a box, but rather by following my hunches and — most importantly — my curiosity.

I think no one, myself included, would have expected that in Q1 2026 I would buy mainly Latin American oil companies. However, that is exactly what I did, and what led to the outperformance in Q1.

I believe putting yourself into any kind of box is a fool’s game. The only box I would put myself into is the one I think will beat the market. That can be Tech, Quality, or as it was in Q1, Oil. I don’t care if it’s in the US, Europe, Asia or Latin America. As long as the set-up is attractive and I think I have an edge, I’d be willing to go there.

Equally, I couldn’t care less about absolutes, only relatives. I don’t care if a company, country or sector is good in absolute terms. What I care about is whether it will be better than its current perception. You rarely make money on the best company if everyone knows it’s the best company — and it is priced accordingly. On the flip side, you can buy the worst company if it’s priced for bankruptcy but will actually survive. Obviously the best set-ups are somewhere in the middle, and have the greatest discrepancy between the current state and the potential future. Importantly, this change in perception can happen on multiple levels.

American stocks as a whole could experience a downgrade in investor‘s perception, while Latin American stocks could experience an upgrade. It does not matter that the US is still the richest nation and cares most about the stock market. What matters is the trajectory, compared to the current status quo. The same can happen for an industry as well as for a specific company.

Most bottom-up investors may not credit much of their returns to the first two levels, only to the last one. I believe that is only partly right. The years from 2020 to 2026 have pretty clearly showed the difference, in my opinion. Right after Covid, you had a stock market of two stocks: Covid winners and Covid losers. In 2022 — a year that 2026 is seemingly echoing — everything that benefited from inflation rose, while everything sensitive to higher rates plummeted. The years of 2023–24 were driven by American exceptionalism, fueled by the Mag 7 and a strong dollar, making everything ex-USA look weak. While 2025 looked good on paper for US stocks, it lagged most other country returns, especially measured in EUR. For European investors trading their stronger Euro into a weaker dollar to buy shares, the S&P barely did better than flat.

Anyway, it’s not about trying to predict the macro. But I think everyone who sees themselves as a bottom-up guy should acknowledge that their companies do not exist in a vacuum, but in a market driven by the perception of its participants. And that perception is what drives share prices in the short-to-medium term.

For me personally, a thesis rarely has a time frame longer than 12–24 months. I am happy to hold longer if the company continues to execute and the share price still remains attractive from a valuation perspective. However, to be frank, the IRR for most stocks decreases materially after the first 18 months of ownership, if you did time it right.

A perfect example is Cipher Pharmaceuticals (CPH.TO). I still own shares of Cipher, now for almost three years. After an unexciting 2025, also fueled by some fears around measures taken by the Trump administration around lower drug prices, shares are now positioned again for a strong 2026. Something I had already shared with my paid subscribers at the end of last year.

Operationally, Cipher has done a tremendous job all along, and yes it is more tax efficient to hold shares the whole time, but it is equally true that shares did not move for almost two years. Additionally, this is actually already the best case scenario: a micro-cap that holds its level after a run-up. Way more likely is that either the multiple gets so far ahead of the business that a bigger pullback becomes probable, or the company runs into operational problems. After all, growing a company is hard. Very hard.

All that is to say that in my opinion the stock market is about a change in perception, and that selling is equally — if not more — important than buying.

I believe a common “lazy man’s” excuse is that it is only a short-term issue and you should wait one more quarter. I think that is a very thin line, and it is actually very difficult to tell whether a problem or a trend reversal is really short-term, or how long it will last. In my experience, I have barely made money being contrarian. The easy money is buying Cipher at CA$3, when there are no expectations and you spot a new trend early. No contrarianism, no trying to catch a falling knife, just being early in an emerging uptrend.

Portfolio Update

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Given what is going on in Iran, I think there is a not insignificant chance this will lead to sustained higher prices in oil, fertilizers, and chemicals. I am of the opinion the market has still not really priced in the ongoing war. I may be wrong. This is not a macro call, but I think ignoring it completely is riskier than acknowledging the potential that “something might actually happen” and sizing the portfolio accordingly. What is even more interesting is that most of the effects are just fuelling what the market has been telling us from the start of the year. The sectors that would benefit most from ongoing disruptions are Energy and Chemicals. Both had been the best performing sectors already in January and February, before the war broke out.

Chemicals are a bit more nuanced than Energy, but to give you a sense of how real this already is: roughly 84% of Middle East polyethylene capacity depends on the Strait of Hormuz for export access. Asian petrochemical producers from Japan to Taiwan to South Korea have declared force majeure across the board because they simply can’t get naphtha feedstock.

It all comes down to what your feedstock is. If you’re a producer relying on crude-derived naphtha, your input costs are likely rising more than your output prices. That’s most of Asia and a good chunk of Europe. On the other side, producers using cheap natural gas as feedstock, primarily in North America, become cost-advantaged.

As for oil, futures markets are now pricing in a longer war. While oil prices are still set to decline on the curve, futures are no longer trading below $70 even three years out, and are holding above $75 through May 2027.

And this isn’t just a transit disruption. The IEA’s March report called this the largest supply disruption in the history of the global oil market. Gulf countries have cut production by at least 10 million barrels per day. Physical infrastructure has been hit by drone strikes on terminals in the UAE, Bahrain and Qatar’s Ras Laffan LNG complex. Even Saudi Aramco’s Ras Tanura took damage. You can’t just flip a switch on that. The IEA responded with an emergency release of 400 million barrels, the largest ever, and it barely moves the needle against a ~15 million barrel per day net supply loss.

The important context is that neither $75 nor $100 is actually that expensive, adjusted for inflation. Sure, at the start of the year, some some analysts argued “fair price” might be around $60. But even pre-war, you had very low investment into new fields in the US. Just look up the commentary from McCoy, or any other oilfield service provider, and you’ll get a good understanding of the underinvestment in the onshore Permian.

Quite the opposite is happening south of the border. With higher oil prices, capex spending in Vaca Muerta will only accelerate. “Chevron Eyes Tripling Vaca Muerta Production by 2035”, and VISTA’s CEO has said higher oil prices will likely further increase capex spend there. As a matter of fact, I view Latin America as the potential biggest beneficiary of all of this. I already wrote about cheap Colombian E&Ps here:

And now, one week after the parliamentary elections, we have the first polls, which are looking good.

The way I see the election: Cepeda (left) has his ~35% base of voters. They will always vote for him. The other 65% are undecided, and a good chunk of them will divide between far-right candidate Abelardo de la Espriella and center-right Paloma Valencia. Hence, as the polls are also expecting, the race will likely go into a second round, where I see the likelihood of Valencia winning as not too small. The likelihood, at least, is greater than it was in January. If that happens, Ecopetrol and Parex will be the biggest beneficiaries. Add to that oil prices above $70, and it’s easy to see the potential upside in these names.

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Ready for stagflation?

A term that has scared most investors since 2022, and is likely coming back, is stagflation. The comparisons with the 70s were drawn already in 2022, and are naturally returning now. As I already said, my approach is neither to obsess, nor to ignore it, but to attribute a certain likelihood to it actually happening.

As you can see, logically, the best-performing asset classes have been commodities, and interestingly small caps as well. Another potential similarity, albeit a complete long-shot: what was the richest country in South America in the 70s? Venezuela, by a mile. It was one of the 20 richest countries in the world. The ramp-up in Venezuela is taking place right now. Even though it’s still small in absolute terms, it’s happening. Not to an extent that it could offset the 10-20% of lost supply from the Iran war, but enough that it could transform the business of smaller companies.

Maurel et Prom (Disc. I am long) is looking to 3x their production in Venezuela in the coming years.

”Venezuela, -- of course, it’s the big item. We’re looking at more than 400 million barrels in existing reserves at 100%. So of course, we would like to have a strong ramp-up. (…) The ambition is to bring production back up. You may remember this to that 13,000 when we resumed operations, now this then at upwards of 20,000 and we’re looking at 30,000 by year’s end. And our ambition is to reach 60,000 barrels per day by, say, well, within 4 or 5 years.”
— Earnings Call 2025 results

American exceptionalism?

One remaining question mark for me is American exceptionalism. Before the war broke out, it was pretty clear that markets were of the opinion the US is getting weaker while other countries are catching up. The US was lagging all other countries year-to-date, and the dollar had lost roughly 15% of its value compared to the Euro in 2025. However, since the war in Iran broke out, investors have been selling everything to park their cash in USD, and even US stocks. Brazil, for example, lost ≈7% peak-to-trough on the first day after the war. Being up ≈15%+ year-to-date before that doesn’t make this a weak overall performance, but still, since the war, the USD has been strengthening and the S&P has been the best-performing index.

I can totally see why Europe, as a whole, would once again be the big loser of a potential continuation of the war and increasing energy costs. The spread between natural gas prices in Europe and the US has never been higher. Nevertheless, especially in the perception from the outside world, it is fair to say that the US has not gotten stronger with this war. And frankly, the only way out right now seems to be to leave the region without “winning” the war. As a thought exercise, this could potentially be the continuation of the “sell America” trade. Maybe. But then the question remains: what to buy? If energy costs stay elevated, Europe as a whole is not the answer.

I have already described Latin America as a potential destination for capital, especially in an environment of high energy costs. Most of the countries in South America are net energy exporters.

It certainly might be the right time to start hunting outside of the USA.

On this topic, I'd recommend: https://www.biremecapital.com/blog

How to position / trade the current market

As I already outlined, I believe the markets have not really priced in the potential long-term effects of this war. Coming from rich valuations anyway, it would not surprise me to see lower stock prices. I also believe the chances of having higher oil prices for longer are high, because even if the Strait of Hormuz opens, it will take time to recover the production shut-ins. Currently, I have 15% of my book in upstream producers, another 17% in a special situation that recently sold its upstream business and is now a midstream and infrastructure play. Add to that 8% in cash, and I am basically 40% “hedged”, if you will. As of right now, that was a very good decision, and looking at the current market, the only charts that are looking good are the ones from energy-related companies. Importantly, I don’t own them because of the war. I was long most of them before, because of their fundamental progress, but naturally they have become much more attractive relative to other names in the current environment. That, however, may change fast, and I am not married to the thesis. So far, it becomes stronger weekly. If that changes, I will change my mind. But, like it or not, I don’t think you come away in the current market ignoring macro.

Disclaimer: I own shares of Maurel et Prom. I do not own shares in any other company mentioned in this article. Nothing in this newsletter constitutes financial advice, and all content is for informational and entertainment purposes only. I am not a financial advisor. You should always do your own research and consult a qualified professional before making any investment decisions. My positions may change at any time without notice.

And there are reasons for that. Politically, the country has done the oil sector no favours — quite the opposite. With current policies the country will run out of oil in 7 years. However, most of these Colombian E&Ps are not pure-play Colombian businesses anymore, or at least are planning on not staying that way. Yet all of them trade much lower than their historical mean valuation (based on $60-65/bbl forecasts), and also much lower than state-owned Ecopetrol, which is already trading above its mean.

On top of that, each company has somewhat exciting developments going on that can unlock value for shareholders. A consolidation is underway, and soon we will have one clear big independent player behind Ecopetrol, producing 90,000+ boepd. Two of the players are expanding into other Latin American countries like Argentina, Ecuador, and Venezuela. All while trading below 3x EV/EBITDA. And with oil at $75/bbl or above, one of these companies would be trading at a free cash flow yield north of 50%.

That’s what I call layers of catalysts. I own two of these players.

Why now?

Investing in cyclicals is all about timing, and I believe there are potentially multiple catalysts hitting here. Some broader, others country-specific, others company-specific.

The “safe barrel” trade

With the current war in Iran, potentially 20% of global oil supply is at risk. Colombian barrels are untouched by this. The crude flows from the Llanos Basin to the Caribbean port of Coveñas via pipeline, then five days by tanker to the U.S. Gulf Coast. No Strait of Hormuz. No Suez Canal. No tanker war insurance premiums. Atlantic basin barrels, listed on Western exchanges in Toronto and London.

These companies don’t just benefit from higher oil prices. They benefit from a repricing of risk. When capital rotates out of Middle East-exposed energy assets and into “safe” producers, Latin American E&Ps are a natural destination.

Colombia obviously has its own risks. Pipeline attacks, political uncertainty, heavy crude discounts. But those risks are uncorrelated with the ones dominating headlines right now. A Hormuz crisis doesn't make Colombia worse.

The election catalyst

Colombia holds presidential elections on May 31, 2026. Petro cannot run again. Every major center and right-wing candidate is campaigning on reopening exploration and allowing fracking. Even Claudia López, the center-left former mayor of Bogotá, reversed her anti-fracking stance in 2025, calling cheap energy the best predictor of industrialization. Cepeda is the only major candidate who would maintain the moratorium. Colombia currently imports natural gas at steep premiums because domestic production cannot meet demand. Voters feel this on their utility bills. A center or right-leaning president would reprice these stocks almost overnight.

But here’s the key: the thesis does not depend on a right-wing victory. If the moratorium continues, existing operators are already positioning themselves to grow outside of Colombia. That shift would only accelerate if the current stance on fracking remains after elections.

Colombia, a brief overview

You are probably asking yourself why I am writing about Colombian oil producers. Honestly, I would not have guessed this half a year ago. But my curiosity led me there.

Despite being known for its violent past in the 80s and 90s, Colombia has improved and stabilized since then tremendously. They have one of the oldest democracies in all of Latin America. The country was usually known for its right/center-leaning politics, especially during the eight-year tenure of Alvaro Uribe, a right-wing politician, from 2002-2010. He was responsible for a pro-oil agenda. His 2003 reforms created the ANH, opened the sector to foreign investment, and triggered a production boom from ~530,000 bopd to over 800,000 bopd by the time he left office. Production continued climbing to an all-time high of ~1,008,000 bopd in 2013 under his successor Santos.

However, this changed when Gustavo Petro won the elections in 2022. The reaction from the market? The Peso crashed to COP5000/USD, and the 10-year yield climbed to a record high of 14%.

Consequently, the stock market crashed as well:

Importantly, Petro never had power over the parliament. He couldn’t do much “damage” — most of his proposals never passed congress. Recently seen by the suspension of his (ridiculous) 23% proposed hike in minimum wage. The court threw it out. A clear example that the parliamentary system in Colombia works, and that the country can actually be seen as politically stable.

The overall economic situation is not exciting. GDP grew 2.3% in Q4 2025, below forecasts, with inflation around 6%. But it’s also not horrible. Probably still good enough that common-sense policies could see a material improvement.

The upcoming elections

This weekend’s parliamentary elections gave us the first real signal. Paloma Valencia, the Centro Democrático candidate backed by former president Uribe, won the right-wing consulta with 3.2 million votes, roughly 59% of the primary vote. That’s a serious number for a primary. The right came out of March 8 looking united and energized.

The presidential field has now narrowed to roughly six candidates for the May 31 first round. Cepeda leads the polls and will carry the left. De la Espriella is the hard-right independent who has been rising fast. Valencia now enters as the official center-right coalition candidate. If she and De la Espriella consolidate, the path to a pro-oil presidency looks increasingly plausible.

In Congress, neither side won a majority. Petro’s Pacto Histórico gained 5 Senate seats, but Centro Democrático gained 4. The parliament remains fragmented, which, as we’ve seen over the past four years, actually works in investors’ favor: it means no president can do too much damage in either direction.

Importantly, they don’t need a Milei. The country, albeit with 6% inflation, is not in ruins. A lift in regulations would be bullish for regional perceptions.

That being said, let’s dig into each of the smaller companies. I will not cover Ecopetrol, it’s already well covered, state-owned, and much more expensive. There are only four independent players. Soon, only three. I own two of the three companies I'm covering here, plus Frontera Energy which I've written about before.

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The best performing sectors continue to be Energy (+25%) and Materials (+17.7%). As I’m writing this on Sunday morning, the full extent of the Iran strikes is still unclear. The initial reaction looked like markets down, oil up, but that’s already starting to reverse. The big caveat for oil will be the strait of Hormuz and by how much OPEC could increase production to offset Iran. We’ll find out more once futures open. My view is that the longer-term effects will be negligible and markets will have forgotten about this within a few weeks.

I came across this post showing the historical effect of similar strikes on the stock market:

Source: https://x.com/TheShortBear/status/2027476773785501838?s=20

Current positioning

My portfolio is up +2.7% YTD. Honestly, it feels like I left some stuff on the table. Two of my last three pitches here on the blog have worked very well and much faster than I expected (+46%, +79%), yet they only contributed 5% and 1% to my YTD performance. Hindsight is 20/20, of course, but it once again highlights the difference between being a good analyst and a good portfolio manager. Position sizing cuts both ways, but with small positions only, it's tough to generate meaningful outperformance.

Here’s an overview of the biggest contributors so far this year:

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Earnings in February

BluMetric (BLM.V) — February 26th (Disc. I am long)

BluMetric files on a separate calendar, so they will report their Q1 FY2026 results. I think it will be an interesting quarter given it will be the first in which we see the numbers of their recently acquired consulting business. The last three quarters were underwhelming on the bottom line: in Q2 and Q3 the Canadian service business was slower, and in Q4 they absorbed a one-time expense of CA$1.1M in their water-tech business. They’ve already hinted at how the business will look post-acquisition on a pro forma basis: CA$85–90M in revenue, with 10% EBITDA at CA$100M revenue as the goal, and high single digits pro forma.

Things to watch: Numbers from the acquired company, margin improvement in their water-tech business.

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Frontera Energy (FEC:TO) — From Spin-Off to Divestiture (Disclosure: I am long)

When I pitched Frontera in January, the thesis was straightforward: the market was pricing the stock as a struggling Colombian E&P company and assigning almost no value to its infrastructure assets, a 35% stake in the ODL pipeline and a majority-owned deep-water port, Puerto Bahía. A planned spin-off of those assets, I argued, would force the market to recognize that hidden value. Conservative sum-of-the-parts suggested 90–180% upside.

Although it didn’t play out quite the way I expected, it actually turned out even better.

On January 30, ten days after I published, Frontera announced it had agreed to sell its entire Colombian E&P business to GeoPark for a firm value of US$622 million. The proceeds will fund a special dividend of approximately CA$7.18 per share. When I pitched the stock, shares were trading at CA$6.36. The special dividend alone covers more than the share price.

What remains after closing is the infrastructure business. I increased my position the morning the news dropped, as the market was slow to react. I’m still holding.

The question now is exactly how much the remaining stub is worth. I'll walk through my valuation model and what the specific upside looks like from here below the paywall.

The Second Idea from January

In early January I also pitched a small-cap with direct exposure to a potential Venezuelan oil reopening. The thesis at the time was that this company was on the cusp of receiving a license in Venezuela, something the market wasn’t pricing in. You were essentially getting a well-run company at a fair valuation, with a free option on one of the most politically charged macro trades of the year.

The license saga was somewhat of a roller coaster. I'll cover what it means for the valuation below.

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While this trend initially started with a weakening dollar once Trump took office, the latest driver appears to be the potential disruption by AI. Naturally, the last great tech wave (the internet) is the most fragile to the next one (AI). However, it is not hard to see how almost every sector will be changed by AI, just like the internet eventually changed every industry.

But not only that, the Mag 7 are spending as much on CapEx as never before. What once were asset-light compounders now look more like oil producers. I have no stance on who is winning or not, but it seems logical to me that these companies, which are still attributable for a good chunk of the S&P 500, are less attractive now than they were four years ago.

This is obviously a drag on the index.

Moreover, the second and third tier of software companies look even worse. I came across this post from the founder of SaaStr, one of the go-to conferences for software companies.

So where is the money flowing? Energy is the sector with the strongest YTD performance, followed by materials, staples, and industrials.

Long live the old economy.

But something else is rotating within the oil sector: Is Argentina the next power house for Oil?

The Permian in the US has been the home of US shale and recognized as probably the highest quality oil field in the world. However, it appears that this story is close to over. Some sources claim 60% of Tier 1 Permian acreage is depleted, the EIA forecasts that US crude production will decline in 2026-271, and large-cap producers only have 7.5 years of inventory left (smaller ones just 2.5 years)2. Harold Hamm recently shut down drilling in the Bakken, a warning sign for the whole industry3.

Viva la vaca muerta. Long live the dead cow.

With break-even prices lower than in the Permian ($36-45 vs. $58), Vaca Muerta (”Dead Cow”) in Argentina is becoming a more and more attractive destination for oil producers. And the gap is only widening, an Enverus report projects US shale breakevens could rise to $95 per barrel by the mid-2030s as core inventory depletes.4

I would argue that we have somewhat of a perfect storm that could make Vaca Muerta one of, if not the most attractive oil field in the Americas.

Why it is technically superior to the Permian

• Productivity: Vaca Muerta wells produce approximately 30 barrels per foot of lateral drilled, compared to the Permian average of just 15–23 barrels5.

• Vertical Thickness: The formation is 30 to 450 meters thick (averaging 150m), allowing for “stacked development” (multiple wells at different depths) that increases resource density per acre6.

While it might be more expensive to drill there compared to the US (e.g., higher sand prices), the field is just much more productive.

Two things have held the field back: First politics and second infrastructure. But both are inflecting.

Let’s touch on both:

Politics. Since Milei took over, he has already implemented new regulations that make Argentina more attractive, such as the RIGI Framework (Incentive Regime for Large Investments) and dismantling capital controls to allow cash flows to exit the country.

Just this week another reform passed, allowing 12-hour shifts in Argentina. Milei is serious about pursuing his goals to make Argentina business-friendly and an energy net-exporter.

Infrastructure. The other thing that held Vaca Muerta back was the infrastructure. But with ADNOC, the 4th largest oil company, backing a $17B infrastructure push, this is changing fast.7

There are major projects coming online in 2026, like the Oldelval Expansion, which will double the capacity of the existing trunk line to Puerto Rosales (from ~36,000 m³/d to over 80,000 m³/d)8. Then there is Vaca Muerta Sur (VMOS), a 437 km dedicated oil pipeline and a massive deepwater export terminal at Punta Colorada capable of handling VLCC (Very Large Crude Carrier) supertankers9.

The King of Vaca Muerta: VISTA Energy (VIST)

How has this story played out for investors? 73% CAGR since 2021.

To continue on the Vaca Muerta trend, look at the organic replacement ratio from Vista Energy.

Yes, VIST is a well-known story by now. But Vaca Muerta is still in its early days, country risk under Milei is lower than two years ago, and if anything, this oil field should trade at a premium, not a discount.

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Vaca Muerta aside, the rotation is also creating opportunities in the US. Here are three US names that fit the theme.

Three US Stocks that fit into the rotation

1) Ascent Industries - Specialty Chemicals

Ascent has transformed under the leadership of Bryan Kitchen into a specialty chemicals pure play. After divesting their steel business, they’re sitting on $58M in net cash against a roughly $160M market cap. The chemical market is still soft, but thanks to recent business wins, I expect revenue to grow from roughly $77M in 2025 to $88-95M in 2026.

While shares aren’t as cheap as they were last November, I think there’s still a lot of value ahead. Management repurchased roughly 7% of shares in 2025 and authorized a new buyback program for up to 2M shares — that’s 22% of shares outstanding. Another potential catalyst would be an acquisition.

2) Core Molding Technologies (CMT) — Trucking Recovery

This is a bet on the recovery of the trucking market. Core Molding is a supplier of molded parts for the trucking industry. They lost their Volvo business some years ago and recently won it back. Despite that loss, they stayed profitable the entire time. With the Volvo contract and other wins, the company is guiding towards annual product revenue exceeding $325 million within the next two years.

3) Ampco-Pittsburgh Corporation (AP)

Ampco has two divisions: Forged and Cast-Engineered Products and Air and Liquid Processing (ALP). After exiting their unprofitable UK segment, the company is positioned to benefit from the same industrial tailwinds driving the rotation we're seeing. My friend wrote a thorough (and free) deep-dive on the catalysts aheah, I recommend reading it here:

Trident Opportunities

Ampco-Pittsburgh Corporation ($AP): A good business bad business setup with catalysts ahead

First of all, the disclaimer: I am invested in Ampco-Pittsburgh ($AP). Nothing I write should be considered investment advice. I bought my first shares at USD 4.05…

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3 months ago · 40 likes · Christian Schmidt

Disclaimer: I own shares of Ascent Industries (ACNT). I do not own shares in any other company mentioned in this article. Nothing in this newsletter constitutes financial advice, and all content is for informational and entertainment purposes only. I am not a financial advisor. You should always do your own research and consult a qualified professional before making any investment decisions. My positions may change at any time without notice.

In fact, my current timeline offers a perfect case study. With the narrative that AI is disrupting software, investors who made a fortune in the sector over the last decade are now spending their days arguing why the market is wrong, insisting AI will actually be a tailwind.

They might be right. I’m not here to debate the future of software, but rather to highlight a behavioral trap: the thin line between being a contrarian and simply wanting your ego to be proven right. And from my personal experience, it’s a good heuristic to believe that in most cases, it comes from a place of wanting to be right.

The reason for that is: why do you choose this game in the first place? Why do you choose a theme where you have to do mental gymnastics and be the only one having a certain opinion, a contrarian opinion to all other people? Why don’t you just step over a one-foot-hurdle? A game where the competition is easier, the puzzle simpler, and you’re not the only one with the contrarian opinion?

Ultimately, the market doesn’t care about you.

It doesn’t even know you exist. The market is like the weather. Sometimes it rains, sometimes there’s thunder, sometimes the sun shines. All types of weather are needed and can be used to do different activities and serve different purposes.

However, you get into trouble if you insist that this Sunday it should be sunny. Sunday comes and it’s not sunny, your mood is ruined, and your Sunday as well. All the preparation for a sunny Sunday was wasted. Instead, on the other hand, approach Sunday with an open mind. If it rains, you stay inside and read your favorite book. If it’s sunny, you go hiking. If it’s cold, do a road trip. Commit to having a great Sunday, not to having a great Sunday in a certain way.

It sounds like a simple example, but how many people approach the market with rigid rules? “I only buy companies X.” Well, to me that’s like obsessing over a sunny Sunday. Sure, during summer, this works because most Sundays will be sunny, giving you the illusion that your approach is so good it will always work—until winter comes along.

The best stock pickers are not contrarian, neither high conviction—they are adaptable.

Too many times I had a clear set of stocks that I wanted to make money with. It had to be them. One bad quarter and you say, “Well, next quarter it will be better.” If you don’t average down, you have no conviction.

See, it’s not about the action itself. It’s more about why you’re doing it. Are you really averaging down from a place of rational behavior? Or are you averaging down because you want to make money with this stock because your ego is attached to it?

But that’s just my circle of competence.

Circle of competence is often just a polite way of saying: “I don’t want to learn this.”

“I underperformed because my style didn’t work,” or “My year was bad because I was concentrated in X.” Sure. But the style and the concentration were decisions. If you don’t revisit them, you’re not staying disciplined, you’re staying attached.

See, your circle of competence is not something you were born with. Neither is your strategy or approach something you were born with. At some point you learned about an industry, and at some point you learned about a certain investment style.

Then you likely made some money and stuck with it.

But guess what, you are actually capable of learning about new industries. It takes you probably a month or a quarter until you get a good overview. You won’t be the expert, but you’ll get the 20% that are most important.

It happened to me in 2025 as well. Mining stocks were a relatively obvious bet mid-2025. A friend of mine and tremendous investor pitched me a gold miner. I barely looked at it because “I don’t buy mining stocks” “I don’t know anything about miners.”

The stock is up 300% now. It would’ve cost me one month to learn the basics of the mining industry. If, after doing that work, I had decided not to invest in the sector, that’s fine. But not even looking at it in the first place can be ignorance.

Does this mean you should chase momentum and approach a different strategy every week? No, that’s the other side of the extreme.

But a lot of times, the ways to make money are not the trades where you are the contrarian betting against anyone. It can be. But from my experience, more often than not cases it’s not, instead, it’s the obvious trades you spotted early.

Ask yourself, if you’re really honest:

Do you want to be right, or do you want to make money?

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice, investment recommendations, or an endorsement of any specific strategy. The views expressed are my own. Please do your own research or consult with a qualified financial advisor before making any investment decisions.

This discount exists because the previous management team made questionable capital allocation decisions. However, I argue that with a new team and an activist now on board, the company should no longer be punished for past behavior.

Furthermore, a unique and strange set of macro-headwinds that plagued the company in recent years has finally turned into tailwinds.

The business itself has two segments: one is an actual monopoly, and the other is a high-quality “razor-and-blade” model with high recurring revenue.

The Math:

• Conservative case (~65% upside): No growth, no multiple expansion — returns come primarily from free-cash-flow-driven debt pay down (≈19% IRR over ~3 years).

• Base case (130%+ upside): If margins normalize even partway and valuation re-rates toward its historical mean (~12x EV/EBITDA), equity value can more than double within the next three years (≈33% IRR).

The kicker: We don’t need a sale to win. But the CEO is explicitly incentivized to pursue a segment sale. Notably, a pure-play industry comp was acquired in a strategic transaction at a premium multiple (~20x EBITDA) less than a year ago.

This is why I have made it my biggest position.

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What changed in January (high level):

• Performance: +1.1% in January

• Activity: 3 new positions, 1 re-entry and 1 add to an existing core position, exited one position, trimmed 3.

• Key theme: More focus on mispriced stocks with tangible near-term catalysts, less emphasis on “high-growth” narratives.

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So the overall outlook looks bearish, neutral at best. However, there is also some good news for oil bulls, like Kazakhstan, which had a supply disruption, and a rise in demand outlook for 2026 stated by The IEA’s January Oil Market Report.

What is interesting though, are a couple of other things.

#1: Oil has been going down for three years straight, making this the second longest period of declining oil prices since the 80s (1981-1986). Can it decline for another two years? Yes, for sure. But I'm a fan of simple heuristics, and regression to the mean is one of them. The best cure for low prices is low prices. If prices stay in the current range, investments will naturally decrease, which will solve the oversupply.

#2: Oil stocks had a strong start to the year and have been outperforming oil prices. However, I would take the XLE with a grain of salt because Chevron and Exxon combined are 40% of the index. Nonetheless, it’s noteworthy.

#3: Lagging behind other commodities. While basically all commodities have been going straight up since 2025, oil has actually declined. As this chart indicates, this is somewhat of a divergence from past behavior.

In my opinion, it’s impossible to predict oil prices, you can spin every narrative the way you like. That being said, I do think oil at $65/bbl is not expensive. Can it go lower? Yes, but the lower it goes, the higher the likelihood of higher prices in the future becomes.

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Three Ways to play it

The safe way to play oil is through the service providers. They depend on the capex of the oil companies instead of the oil price in general. On the flip side, the “torque” is also lower if oil prices really go higher. Further they usually lack behind. First prices rise and Oil producer make and then they increase their capex.

Here are two cheap names:

OMS Energy Technologie (OMSE)
It’s an oil service provider specializing in surface wellhead systems and oil country tubular goods for the oil and gas industry. The company came public as a spin-off. It trades very cheaply at 4.5x (FY’25) earnings. They also have more than half of their market cap in net cash, so on an EV/EBIT basis, shares are even cheaper. However, I'm not sure about their earnings power. Based on LTM numbers, shares are trading at 6.5x earnings, and their last quarter was not necessarily strong.

Reasons it’s so cheap: Saudi Aramco contributes 67% of their revenue, the company’s jurisdiction is the Cayman Islands, and there’s a majority shareholder. It gave me more than enough reasons to pass, despite it being cheap.

Ashtead Technology Holdings Plc (AT.L)
A service provider for the subsea space. They mainly make their revenues from rental equipment. The decline in offshore wind made the stock tumble to new lows. The other reason might be because it's a UK-listed company and they just go down (just kidding). However, they did uplist from the AIM to the LSE; ironically, this caused some AIM-focused funds to sell out. Shares have recovered from their lows in the summer of last year but remain at historically low(er) valuations:

Here is a good thread from Adam:

It’s added to my watchlist, but I just have a natural aversion to UK-listed companies.

Oil exposure with a politcal kicker

Speaking of the outperformance of Chevron and Exxon, this has been nothing compared to the YTD performance of Colombian state-owned, major oil producer Ecopetrol.

I wrote about the upcoming election in Colombia in the last Treasure Hunting weekly, so I won’t repeat myself here. But obviously, Colombian oil stocks trade not only on oil prices but on politics as well.

If you want to look one row behind Ecopetrol, Parex Resources (PXT.TO) is the largest 100% privately owned oil producer with 100% Colombian exposure. The market cap is roughly US$1 billion, and they trade at the typical Colombian discount of 2.5x EV/EBITDA for a debt-free oil producer that has returned money to shareholders through buybacks and dividends (current yield is 8%).

The issue with Colombian E&P firms is the relatively low reserve life and the low oil quality, meaning the oil is usually sold at a discount. So, the 2.5x EV/EBITDA multiple is not as cheap as it seems, and regardless of the country-specific risk, these companies deserve to trade at a discount. However, a lift of the current exploration ban—something that right-wing candidate de la Espriella is advocating for—would increase current reserve lives, albeit at the expense of some serious capex. Therefore, a player like Parex with a debt-free balance sheet can probably take advantage of that.

For me, I don’t see any meaningful catalyst for Parex, apart from the upcoming election and higher oil prices. That’s why I opted to buy this special situation instead, where the election and oil prices just serve as an additional kicker for the upside but are not thesis-dependent:

Summary

I’m watching the oil sector closely, and I’m also learning more about the sector as a whole. I think it makes more sense to learn about oil when it’s at $65/bbl than when it’s at $100. At the same time, I’m monitoring the situation in Colombia. The currency and the stock market are betting on a right-wing president, while the bond market seems still skeptical. If you have any interesting names, feel free to comment your favorites.

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As you may have seen, I just launched a new project with called “The Small Cap Earnings Monitor. Your fast track to micro-cap and small-cap earnings (under $2B Market Cap) insights. You can learn more about it here (click here).

Disclaimer: I don’t own any of the mentioned companies. This is not financial advice—for entertainment purposes only.

This is priced for disappointment (jurisdiction + commodity skepticism) — which is exactly why the setup is interesting.

The Set-Up: A conglomerate is simplifying. It’s preparing to spin off its infrastructure business.

Even under conservative assumptions, today’s valuation appears to assign little-to-no value to the upcoming spin.

Conservative sum-of-the-parts suggests ~90–180% upside.

Two potential kickers would increase the upside further: a strategic transaction and a sentiment/regulatory shift.

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In this week’s treasure hunt:

• Why I missed the 78% run in LatAm (and what I’m doing now).

• Notable insider buys… and a cheap stock trading at 5x EV/EBIT

• Assessing the damage in the Travelzoo chart.

• A market-leading distributor with a new CEO executing a turnaround.

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The 78% return I’ve missed

It’s really funny how much the world has changed in the past four years. Well, in your day-to-day life, the world has changed very little to nothing, but investment-wise, I feel the change is quite big. I was just listening to a podcast that did some predictions for 2026. The last time I listened to the podcast was at the beginning of 2022. The only theme that had stuck was inflation. Otherwise, what used to be “tech will outperform” is now “commodities will continue to outperform.”

The run in commodities is really impressive, and I think it's something that no one would have predicted 4 years ago. The other common theme seems to be that Latin America will continue to perform well. As a resource power hub, that is, country-by-country shifting to the right, it seems very well positioned. And obviously markets have caught up to that. With low starting valuations, it has already made good moves. I would have made way more money if I had just put my portfolio into a Colombian ETF one year ago.

As a stock-picker in microcaps, I must admit, it is really a tough pill to swallow. Sure, hindsight is 20/20, but boy, what a performance. I could have just chilled all year in Rio, learned to surf, AND made 78%.

Looking back 10 years, the picture obviously looks different:

If you wonder why I picked Colombia and Brazil, it is because these are the two countries with upcoming elections this year. Both countries have been governed by left-wing presidents, and both presidents have low approval ratings.

I, and apparently the market as well, think that a right-wing candidate in Colombia is more likely to be elected than in Brazil. Colombia has historically voted right-wing/center-ish. Current president Petro cannot be re-elected. Favorites right now are right-wing newcomer de la Espriella, and left-wing successor of Petro’s politics, Cepeda. There is also still a chance someone else makes the race, like Pinzón or Valencia.

Importantly for the market, as long as Cepeda does not win, every one of these other three candidates would be an improvement from the current anti-oil administration.

Anyway, as a stock picker, it is an interesting development, and while the overall landscape of Colombian companies is not really investable, there will surely be some beneficiaries. Most of them are likely in the oil sector.

Talking about the oil sector…

Interesting Insider Buys

A company I have been following for a while now, and even talked to in Vegas, is McCoy Global (MCB.TO). The company had some insider buying by multiple insiders, including directors James Rakievich and Alexandre Ryzhikov, as well as officers Bing Deng and Lindsay McGill. It could mean they are making progress regarding their orders in the Middle East. I wrote about the company here, back in May.

Another company with notable insider buying was Innovative Food Holdings (IVFH) (Disc. I own shares).

The buys have been in the $0.30 range, and shares have already recovered from their lows. Notably, Ian Cassel also increased his position.

Before I would consider increasing my currently small position, I would like to see operational progress—the warehouse sale and some cleaning up in Q4 from the horrible Q3 results. But eyes are on it.

A company I am also following since mid-2024: Q.E.P. (QEPC)

It is very cheap and has purchased 100k shares from its former CEO, Lewis Gould. (H/T John W. on X)

The company has a market cap of $125M, with $36M in net cash. They earned $19.8M in EBIT last year, and will likely earn at least $18M this year. Putting the stock at merely 5x EV/EBIT. I don’t know about their growth prospects, so re-rating would likely depend on smart capital allocation. If they start repurchasing a bunch of shares here, it could be a buy.

Worst-looking chart of the week

It doesn’t matter if markets are green or red; one push notification I always get is “new 52-week low for TZOO.”

This is the textbook of a falling knife.

The big question is, is it a train wreck or a contrarian buying opportunity?

Travelzoo (TZOO) is a global publisher of exclusive travel deals that shifted its business model from getting paid via advertising to a paid membership model at $40/year. However, they now have to spend money upfront to acquire these paid subscribers, and those acquisition costs get expensed immediately while the revenue is recognized over the course of the year—even though they receive the full $40 upfront. So the GAAP numbers look worse because the expense hits today, but the revenue gets spread out over twelve months. The market has been selling off on this constant decrease in operating profits each quarter this year.

Regardless, bulls argue that they can get back to previous profitability levels ($4-5M/quarter). In that case, shares would trade at less than 6x earnings. However, there are some red flags, like a majority shareholder with weak governance. Not sure if that’s worth the risk, but I’ll put it on the watchlist.

Speaking of watchlist:

Top Watchlist Pick for this week

A classic turnaround setup: This market-leading wholesaler and distributor has been crushed by mismanagement. Here is why the new CEO's cost-cutting plan makes it a top watchlist pick.

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Weekly Treasure Hunt #01

News

Acorn Energy, Inc. (ACFN) — Expands Infrastructure Asset Management Technology Offerings for Cell Towers, Data Centers and Utilities. Strategic partnership with Israel-based AIO Systems, Ltd. to market, distribute, integrate and sell AIO’s best-in-class solutions for cell tower, data center and utility infrastructure asset management to customers in North America.

DIRTT Environmental Solutions Ltd. (DRT.TO) — Early Termination of Lease Agreement for Former Rock Hill Facility. “This action represents an important step in rationalizing DIRTT’s real estate footprint and is expected to deliver recurring annual cost savings of $1.6 million beginning in January 2026.”

WW International, Inc. (WW) — GLP-1 Platform with Access to Wegovy® Pill Advancing a New Standard for Long-Term Weight Health. $149 per month, providing a more accessible entry point for individuals seeking clinically supported, evidence-based weight health care. On Friday, Amazon announced it will distribute the Wegovy® Pill as well, including a collaboration with $WW. Nonetheless, shares were down 11%.

B.O.S. Better Online Solutions Ltd. (BOSC) — $2.2M order from existing Indian customer for electromechanical connectors, with deliveries expected over the first three quarters of 2026. Reflects strategic expansion in the growing Indian defense and aerospace supply chain market.

Earnings

EACO Corporation (EACO) — A distributor of electronics and fasteners had another set of strong earnings. Revenue grew by 18% and net income by 35%. Furthermore, the company believes “it continues to gain market share through its local presence business model.”

The Caldwell Partners International Inc. (CWL.TO) — A tech-enabled executive search company posted strong earnings. Revenue grew by 36%, and operating income came in at CA$0.8M compared to break-even last year.

SANUWAVE Health (SNWV) [Disclosure: I own shares] — Preliminary results for Q4 2025 came in at the low-to mid-point of their guidance ($13.3-13.4M vs. $13-14M). This represents their highest-quarterly revenue ever and a 29-30% increase compared to 2024 Q4.

Beaten Down Names, Near 52-Week Lows

LifeVantage Corporation (LFVN)—14% above 52-week low. MLM supplement company trading at less than 6x earnings. Dayton Judd (CEO of FitLife) is on the board and owns close to 6% of the company. Shares trade down due to stagnation in sellers and fear of GLP-1 drugs. The company presents in January at the 28th Annual ICR Conference.

Bragg Gaming Group Inc. (BRAG.TO) — iGaming operator, shares are up 24% the last five days and 16% on Friday alone. After a five-year decline from CA$28/share to CA$3ish/share, this could indicate the bottom has been found. The company trades at less than 4x EV/EBITDA. Stock has been punished for regulatory changes in the Netherlands, which used to be their cash cow.

Supremex Inc. (SXP.TO) — Former FinTwit darling. Stock is trading down due to United States Postal Service and labor issues at Canada Post; consequently, revenue and EBITDA decreased. The company did two acquisitions and announced a $53M sale-leaseback in 2025.

Forrester Research, Inc. (FORR) — Stock is down from $60 to $8 in the last three years. Declining revenue and margins caused by weakness in their consulting business are the main reasons for weak share performance in the past years. Currently, shares are trading at 6x earnings.

Epsilon Energy Ltd. (EPSN) — Natural gas and oil producer. Shares are down from $8 to $4. First, the Powder River acquisition made investors cautious; then news from Venezuela and fears over a longer-term cheaper oil price caused the stock to further decline at the start of 2026. The biggest investor, Solas, has been selling shares, while the CEO has been buying sub-$5.

Top Watchlist Pick for this week

A mining services player trading at 5x EV/EBIT after a 52% drawdown. The bad news is priced in, but I am waiting for the 1H 2026 report in February to confirm the turnaround.

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2025 was a year of extremes. My biggest winner from an IRR perspective was D-BOX Technologies (DBO.TO), up almost 300% since I bought and profiled it in June. At the same time, my largest position heading into the year is down 78% YTD.

This perfectly illustrates why microcaps are such a fertile yet volatile hunting ground. The chances that a Microcap is fairly valued at any given time are way lower than for a megacap. It’s almost more common that a Microcap is either over or undervalued.

This naturally leads to a strategy with higher turnover and a lower batting average than you'd see with large caps, but if executed correctly, a much higher slugging average. For a concentrated approach with Microcaps, that means results can and most certainly will be volatile, and a handful of big winners will account for most of your gains.

Since I started tracking my performance in 2023, my overall return has been 127% (31.4% CAGR) — but ~70% of that came from just three companies: Cipher Pharmaceuticals, D-BOX Technologies, and Koil Energy.

This year tells the other side of that story. My return has been -0.9%, lagging the S&P 500 which was up 16.3% in USD (or 4.77% in EUR, the currency I track my returns in).

Learnings

In soccer they say, the best matches to learn from are those where you played badly but still managed a draw. That pretty much sums up my year. There is no way I am satisfied with my own performance this year, but thankfully, I didn’t lose much money, just time. However, this year was a valuable learning lesson. It's easy to coast when everything's working, and impossible to think clearly when everything's falling apart. But you are forced to learn if you underperform.

While I have made several investments that did not work out, most of them have not hurt me much because they were either smaller positions and/or losses were cut shortly after the thesis broke. Finseta would be an example where my thesis was wrong and I moved on. I’ve barely spent any thought on that company after I sold my shares. It’s part of the game to be wrong.

The issue is if we don’t accept being wrong, if our ego takes over. I wrote about that at length here — and it is my biggest learning for this year. I hope it’s engraved into my skin now. It also shows that the biggest advantage of retail investors is not that they can buy illiquid companies, but that they can actually sell them once the thesis cracks, and let’s be honest, most will crack eventually.

The longer you invest in microcaps, the more of them you see round-tripping, and the less seriously you’ll take a “breakout” quarter. Recently, I read an older quarterly letter of mine where I explained my investing style in “inflection points” — while the overall theme is still true, I have seen too many of those “inflection points” just round trip shortly after.

My favorite story is the Parable of the Chinese Farmer. Whenever something ‘good’ or ‘bad’ happens to the farmer and everyone either starts to congratulates him or pities him, he simply responds with ‘Maybe.’ It’s a reminder not to judge events too quickly because you never know how things will actually turn out.

This applies perfectly to microcaps. As an example ETCC and ACFN both won big contracts. Is this good or bad? Certainly good, right? Well, it depends. It was in both cases good for the stock price in the short run, but in the medium term, it raised the expectations of investors that these new record earnings were sustainable. Once the revenue from the contract rolled off, shares plummeted. The “good news” became bad news. Maybe.

My own investment strategy has naturally evolved over the years. In 2023 I was very heavily focused on not losing money, mostly buying stocks that were backed by hard assets. My portfolio consisted of companies like LS Invest (large discount to book value), Centrotec (below net cash), and HRBR (below liquidation value). This has shifted completely over the following years to companies that are growing their earnings or where I think they can do that in the future. However, this approach can also make you take bigger risks than you actually realize.

The downside in most cases is bigger than we like to think. IVFH demonstrated that perfectly. And downside was something I was not as focused on as I should have been in the past two years. You can get downside protection either from the business quality itself, which increases the odds that the business can continue to grow (and deserve a higher multiple), or by buying it so cheap that even if you are wrong you won’t lose much. While both are nothing new to value investors, if you apply that to microcaps you’ll find how rare both are.

Most microcaps are not high quality businesses. They depend on the execution of management to a very high degree. They have no real competitive advantage. Therefore, naturally the downside is very rarely protected, and yes, your microcaps can also trade below net cash if the cash is not used properly. Even worse, having a large cash position only serves as downside protection if management does something smart with it. Best examples are Cipher Pharmaceuticals and Ascent Industries. Both bought back shares aggressively with their cash position and didn’t burn any with bad M&A. So even something like having half of your market cap in cash, is it good or bad? Maybe it‘s good, maybe bad.

2025 for the Blog and an outlook for 2026

In 2025 I profiled 7 companies in total. The good news first: the highest-performing write-up I’ve ever published came out this year in June. Overall, I am not satisfied with my own returns or with the published ideas in 2025. However, I do feel that the second half of the year was better than the first, both in my investing results and for the profiled ideas.

For 2026 I already have some good ideas on how to make the blog more valuable without adding noise. The easiest way to make more money on Substack is to just issue a write-up every week, but I will not do this and also don’t want to attract the people who want a new write-up every week. That being said, I will make sure to keep the quality high and still deliver frequent write-ups next year.

Additionally, I will introduce a new format so you can get a better understanding of the work that happens behind the scenes, what companies I look at, and my thoughts on current positions. Make sure to check your inbox in January for the first issue.

Portfolio update

At the end of every year, I go through my portfolio with a simple question: “Can this stock double from here within the next 12-18 months?” Some years I’ve had more success with this exercise than others. In 2025, for example, I obviously failed quite badly at it. Nonetheless, I think if done honestly, this exercise forces you to think about whether you’d actually buy these positions today at current prices.

After a particularly bad year like this one, I felt the urge to almost start with a blank sheet — keeping only the stocks I would buy again today. Unfortunately, actually executing that would be stupid for tax reasons, and some positions are illiquid enough that it would take time to exit anyway. But the mental exercise itself was valuable, and the end result was basically as follows:

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Act I: The potential

November 2023. While searching for new ideas, I stumbled upon Innovative Food Holdings in the MicroCapClub. What sparked my interest was the involvement of Pappas and Gramm, both of whom had bought stakes and taken board-seats ealier. They also replaced the old CEO with a new one. And while the numbers hadn’t shown much progress yet, the Q3 2023 earnings call was full of promise and common-sense capital allocation going forward. Ironically, that same Q3 quarter, just two years later, proved to be the (temporary) low point in the “Pappas-and-Gramm” era of the company.

“So we’re going to dramatically shift our capital allocation to better align to our business and profit objectives. This will require several chess piece moves. First, we are exploring strategic alternatives for the e-commerce business with a variety of different potential paths forward, but all of which eliminated the profit drag on the total business. You will see us continue to cut marketing spend, which will result in continued revenue declines in e-commerce. Second, we are exploring, making some big moves in our real estate portfolio, looking at unlocking the value in our Florida office building and our Pennsylvania warehouse. Lastly, we are simplifying other nonmaterial parts of the business so we can help the company focus on the core.

We have exited several partnerships, and we are selling our small consulting business called Grow Brand Management. With these strategic moves, we expect to unlock somewhere between $7 million and $13 million in capital based on their appraised values and net of the associated loans. This will eliminate ongoing losses associated with those businesses.

So what will we do with this capital we’ve unlocked? Our hope is to reinvest into our Professional Chef business.”

-Q3 2023 earnings call

Reading this, I think any investor would be interested in the setup. The company was cheap, if you believed it would be able to sell its warehouse for $18M and return to the previously earned margins on the drop-ship side. I calculated that, assuming both would happen, shares would be as cheap as 5x EV/FCF.

Spoiler: neither of those things happened.

So the thesis was: They shut down the unprofitable e-commerce part, reallocate capital to the profitable B2B business, sell the warehouse, and scale to their publicly stated medium-term goal of $100M in revenue and $10M in EBITDA without dilution.

Act II: The rise

The pitch was well received. There’s a high chance that my IVFH pitch was the first thing you read from me. What followed in the 12 months after the pitch was nothing but an upward spiral. Everyone loved the company and especially the CEO. Shares rose from $0.70 to $2.35 at the peak in February 2025. But what had driven that development?

IVFH made progress toward its strategic goals. They confirmed the shutdown of their e-commerce arm and were about to sell parts of it for a small amount. They announced partnerships with new, big customers for their dropship business to offset the high customer concentration with US Foods and to scale the business further.

I felt confirmed in my pitch, and despite the fact that the warehouse wasn’t sold yet, I felt like I had struck gold with IVFH—at least that was what the share price demonstrated to me. However, with the Q2 2024 earnings results, the first warning signs started to appear. Back then, the company had earned $0.8M in adjusted EBITDA and specialty food service revenue continued to decline. They stated:

”While this quarter was in line with our revenue expectations, we’re not satisfied with the business’s performance, and we are making material progress on our turnaround efforts. In fact, we continue to be confident that we’ll return our foodservice business to year-over-year growth in the back half of the year (...).”

- Press release Q2 2024 earnings

One of the three areas they had mentioned as a future growth driver was the launch of their new retail cheese business. They started a ten-store launch that quarter.

Act III: Overvaluation

The continued weakness in their specialty foodservice business was quickly forgotten by the market as attention shifted to their newly started retail cheese operation. This was topped by the bullish news that: “Innovative Food Holdings, Inc. Announces Fulfillment of Largest Purchase Order in the Company’s History”

$676,000 worth of cheese. The market rewarded that with an $11.4 million increase in market cap, a testament to the bullish nature and positive echo chamber that surrounded IVFH at that time. Operationally, while the company also made some progress, shares started to run on anticipation—very bullish anticipation instead of reality.

While earnings in Q3 saw a small increase in foodservice revenue (+5%), the dropship side of the foodservice business continued to decline, albeit less:

”In fact, our focused growth channels contributed $809 thousand to our growth this quarter, with our legacy drop ship business experiencing lesser declines than in Q2.”

- Press release Q3 2024 earnings

A sign that the technology change at US Foods had a more permanent effect on them than previously anticipated. But again, even that played little importance as shareholders shifted their focus to the new retail business and the two acquisitions announced. This sentiment probably peaked with the news in December:
“Innovative Food Holdings, Inc. Announces Corporate Name Change to Harvest Group Holdings, Inc., A Reverse Stock Split, and Private Placement, in Preparation for Uplisting to Nasdaq”

You have to admit that was a very well-done raise, financed by existing shareholders and embedded in the bullish news of the uplisting.

The issue: only the raise took place. The other issue—and maybe I’m being a bit too harsh here—but going back to the original goal stated in 2023, this wasn’t part of the original plan:

”Now we aren’t going to jump to $1 billion overnight, so our first milestone in that journey is what we call our 100/10 plan. This entails getting to our first $100 million in revenue and driving $10 million in adjusted EBITDA. We want to achieve this first milestone with 0 incremental debt and no other capital raises over the next 2 to 3 years.”

-Q3 2023 earnings call

The year 2024 ended with $72.5M in revenue and $3.2M in adjusted EBITDA. Revenue grew by 11% organically, but mainly due to a $5.2M increase from their retail business. Meaning shares at that time traded at their peak valuation at 37x EV/EBITDA and 1.6x EV/Sales.

Act IV: The downfall

Q1 2025 earnings saw more of the same: a slight decline in their dropship business and no profits (yet) from their retail operation. The stock market started to lose its patience. Shares had already fallen from their peak of $2.35 to $1.70 but accelerated their decline after the earnings to $1.35.

But two more blows were about to drop. Despite stalling progress operationally, there was still some hope that a) the retail cheese business would become profitable and that b) the praised management team would be able to turn it around.

However, in August, IVFH announced its exit from the cheese business and also (finally) the sale of their Pennsylvania warehouse.

While at this time, these were probably the right decisions given its unprofitability, the news also showed that shareholders’ expectations had been too high for almost everything. The warehouse was planned to be sold for $9.7M instead of the $18M communicated previously. The money raised (among other things) for the working capital needs of the cheese business never resulted in any profits for shareholders—just remember the reaction to the first order.

Shares collapsed to $0.70. A roundtrip at this point for me.

But there was one more thing…

Act V: Complete collapse

Innovative Food Holdings Announces Leadership Transition

This was the last domino the market needed to scare the last remaining bull out of IVFH. Everything that had been fueling the narrative had not come true at this point—not even the warehouse had been sold. Gary Schubert, the previous CFO, took over as CEO, and apparently they had decided to dump all the negative news into the Q3 earnings call. And oh boy, things looked ugly. The most concerning for me was the previously well run local distribution business basically collapsed and the acquisitions also are going terrible:

”We received a few questions on the decline of the local distribution business, causes, leadership fixes and Golden Organics issues. After acquiring Golden Organics and LoCo Food Distributions, we incurred double-digit declines. Recently, the local distribution performance, excluding acquisitions, declined 21.5% in Q3. As stated, this was driven primarily by controllable factors, including inconsistent service levels, fulfillment accuracy and leadership gaps that affected customer trust and repeat ordering.”

- Q3 2025 earnings call

The warehouse hasn’t been sold, and the price of the warehouse will get cheaper:

”Second is the Pennsylvania facility sale. We remain under the sale agreement with the buyer signed on July 28. The due diligence period expired without resolution on October 6 due to a roof repair issue, which required additional inspection time. Last week, both parties executed a third amendment to the agreement. As part of that amendment, the purchase price was reduced by $500,000 to offset required roof repairs and the buyer was granted additional time to close, now scheduled for mid-January. We currently have nonrefundable deposits totaling $500,000 with an additional $250,000 in nonrefundable deposits if another extension is requested.”

- Q3 2025 earnings call

Oh, and all these quarters of burning cash had left their mark on the balance sheet as well:

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Rubbing my nose in my own mistakes

I don’t think it was a mistake to buy shares in late 2023/early 2024. The situation smelled like potential—and that’s when you ideally want to buy, when you see the potential just before it translates into the numbers. If I saw the situation right now, I would be interested in it. I would likely buy it, but I don’t think I would size it as big as I did. The reason isn’t that I think large positions are stupid; I just think I underestimated some risks back then.

The story mainly revolved around the previous earnings they had achieved (10% EBITDA margin) with US Foods. I underestimated the dependence on US Foods and also the impact of their technology shift (moving to a marketplace model). I also overstated the business quality. While the dropship side is asset-light, the only competitive advantage was the relationship with US Foods. Once that changed to a transactional relationship, the “moat” disappeared. In a company with a sub-$50M market cap, the chance of finding a moat is only slightly higher than winning the lottery. So contemplating the error of buying IVFH in the first place for a lack of sustainable moat is the wrong place to dig. The real error I made here was not tactical but psychological.

In February, I knew the stock was overvalued. I even had a small sell order in place, which I didn’t follow through on. Here is what I wrote in my journal on March 10th, 2025:

My first error (and learning): Your biggest position always needs to be the best risk/reward in your portfolio. In a concentrated portfolio, your performance will depend on your biggest positions. If your biggest position got there by running up a lot, you tend to like the stock because you made money with it, and yes, the stock “deserved” its place in the portfolio. But, like every financial disclaimer says, “past performance is not indicative of future performance.” Yes, it’s also a thin line between overoptimising and “letting winners run.” I wouldn’t have sold all of my shares at that point, but as I laid out, I should have trimmed.

From now on, once I think my biggest position is not my best idea, I know I have to adjust the portfolio. It doesn’t matter if my biggest position is up 100%, 1,000%, or down 50%. Position sizes have to represent your assessment of r/r attractiveness going forward. The biggest advantage of a private investor is that I am nimble—I can change my mind as r/r changes.

Furthermore, you tend to like stocks that have made you money more than they deserve. Vice versa, you probably hate stocks that have lost you money more than they deserve. Both shouldn’t cloud your judgment on a stock, but they do.

The real error, however, accrued after Q1 earnings. In March, I wrote:

“$IVFH -- this company is now difficult to value. Realistically. If I run my numbers are correct: (73-80m in revenue, SG&A 15-16m, they need at least 28% GM, better 30% to achieve 6-7m in EBITDA. The stock would still not be cheap then. Therefore, IF they are not showing greater than 25% GM in Q1, I would sell 1/4 of my position.”

Gross Margin came in at 22.9%. I sold 16% of my position instead of 25%. I should have sold 100% in hindsight and without hindsight probably still more than 30%.

I had plenty of time to continue selling shares, but I just couldn’t accept being wrong on the stock I was vocal about. I didn’t want to accept the truth. I even bought back a smaller chunk later at $1.15. My ego had taken over.

After the dreams of the cheese business disappeared and it was obvious that the company faced real issues, sunk cost fallacy prevented me from selling a significant portion of my shares at $0.89. I just sold what I had bought back at $1.15 plus a bit more.

Later, I did sell more shares at low prices, justifying it by realizing some tax losses.

The first post-mortem I wrote was about Parks!America, a mistake I made on an analytical level—misjudgment of capital allocation, overpaying on elevated earnings.

This IVFH post-mortem is of a different nature. The error was not as much analytical but purely psychological. I guess it was a lesson I needed to learn, not just in investing but in life in general. I am glad I did, in a weird way, and I really hope that this is now burned into my memory. I am hopeful it is, and if so, it would make me a better investor.

To sum it up: I know that when I make 5 big bets, I will be wrong in 2 or 3 of them. I don’t know which ones I will be wrong about. The point is not to predict this—you can’t change reality. That’s like being mad (and not accepting) that it rains because you wished for sun that particular day. That’s the recipe for being miserable in life and losing money in the markets. The secret is to accept the truth regardless of what your preference was and to dance in the rain. That’s how you make money in the market and how you stay happy in life. Or as Ryan Holiday put it: Ego is the enemy.

Disclaimer

This post is not financial advice. It’s a personal reflection on my own investment experience and the psychological mistakes I made along the way. I’m sharing this for educational purposes and to document my own learning process.

You should always do your own research and make your own investment decisions. Past performance is not indicative of future results—as this entire post demonstrates. Investing in microcap stocks like IVFH carries significant risks, including the potential for total loss of capital.

As of writing this, I still hold a small position in IVFH. This post reflects my personal views and experiences, which may be biased by my involvement. Your situation, risk tolerance, and assessment may differ from mine.

Nothing in this post should be construed as a recommendation to buy or sell any security. If you’re unsure about any investment decision, consult with a qualified financial advisor.

Short thesis

Currently, Sanara MedTech (SMTI) trades at less than 2x EV/Sales, its lowest valuation since going public, while its mean historical valuation (and those of peers) offers 100% upside from re-rating alone. The market discounts SMTI so heavily for two reasons: Years of disappointing shareholder returns from investing their profitable surgical business into their “moonshot” project THP have eroded trust and capital. Now that these ventures are discontinued, Sanara issued weak Q4 guidance, making SMTI the ideal tax-loss selling candidate for an already frustrated shareholder base.

I argue that: SMTI should no longer be punished for past capital allocation mistakes, and the growth story isn’t broken. They’re just facing tougher comps for Q4. Even if growth decelerates to 15%, you’re still buying shares in a high-quality category leader in hydrolyzed collagen, with two potential category leaders in their pipeline, inflecting EBITDA margins and 90%+ gross margins. All of this at its lowest valuation in history and much lower than any private transaction of its peers in the past.

Overview

Name: Sanara MedTech 
Ticker: SMTI 
Price: $21.76
Market Cap: $193 million
Enterprise value: $223 million

Sanara MedTech markets soft tissue repair and bone fusion products. While they sell multiple products, the bulk of its revenue (~80%) comes from its star product CellerateRX, a hydrolyzed collagen. Apart from CellerateRX (soft tissue repair), they offer five more products on the soft tissue front. BIASURGE, which launched in 2023, is the only one of those that could eventually become a significant part of revenue as well. Bone fusion contributes roughly 12% of revenue but has been flat in recent years. They have one more potential star product in the pipeline with OsStic.

The business model of Sanara is extremely asset-light. They acquire the rights to certain products that have been developed by other companies and distribute them into hospitals. In some cases, they pay the manufacturer a royalty as part of the licensing agreement (BIASURGE and OsStic). For CellerateRX, they acquired the assets directly from the original owner in August 2023, allowing them to eventually stop paying royalties. Most deals are structured as “related party transactions” because their Chairman and majority owner Ron Nixon has a stake in some of these companies. I view this as one of the competitive advantages of SMTI.

Their distribution model is also unique. They currently have 40 regional sales managers (RSMs) who manage relationships with the underlying distributors. A distributor is an external company that employs 1099 reps. They can vary in size from one-man operations to hundreds of 1099 reps within one distributor. The distributor earns a commission.

Their product portfolio

Sanara’s product portfolio includes CellerateRX (hydrolyzed collagen powder), BIASURGE (no-rinse irrigation solution), FORTIFY TRG (tissue repair graft), FORTIFY FLOWABLE (flowable extracellular matrix), TEXAGEN (amniotic membrane allograft), and a bone fusion segment consisting of ALLOCYTE (cellular bone matrix), BiFORM (synthetic scaffold), and ACTIGEN (demineralized bone matrix).

CellerateRX is the most important product of the company and is mainly responsible for the growth from less than $9 million revenue in 2018 to $100 million in 2026. BIASURGE, which launched in 2023, has the potential to become a significant revenue contributor, while OsStic (expected to launch in Q1 2027) could become another star product. The rest are largely irrelevant for this thesis: Fortify and Texagen are commoditized “bag fillers” for sales reps. The bone fusion portfolio contributes roughly 12% of revenue but has been flat. Those products are standard “me-too” offerings in a market dominated by giants like Medtronic and Stryker, lacking the competitive moat of CellerateRX, BIASURGE and OsStic.

Therfore I will focus on three products: CellerateRX as it‘s the majoriry of the business, BIASURGE and OsStic as these two have compelling value propositions and can become significant driver of future revenue.

Understanding the success of CellerateRx

CellerateRX is the only activated hydrolyzed collagen type 1 on the market. It is applied mainly in orthopedic and spinal surgeries for high-risk patients to prevent wound infections. A study claimed that CellerateRX can decrease surgical site infections (SSI) by 59% compared to native collagen1. The value proposition is simple and compelling: A surgery costs $50,000-$100,000. The risk of SSI is higher for high-risk patients, and applying CellerateRX decreases thar risk materially. If a patient gets an infection in the wound, it means reopening it. The cost is another operation worth ~$50,000 or more. So the value proposition is similar to that of insurance: Pay ~$700 (price of CellerateRX) to prevent the potential cost of ~$50,000.

CellerateRX does not have a separate reimbursement code. It’s bundled into the overall surgical payment, meaning it’s a direct cost for the hospital. But given the potential savings from avoiding complications, hospitals usually see the value. The value proposition is strongest in high-risk, high-cost procedures like spine fusion and joint arthroplasty. The company is also expanding into vascular and plastic/reconstructive surgery.

Competition
CellerateRX created this category and still owns it. The alternatives are native collagen products. The main advantage of hydrolyzed collagen compared to native collagen is higher bioavailability, which increases the speed at which the wound closes. The body can work much faster with hydrolyzed collagen than with native collagen. This is extremely valuable for patients that have a high chance of wound complications.

The average selling price (ASP) for CellerateRX is roughly $700-800. Native collagen is way cheaper with an estimated cost of $50-$200. Apart from a bunch of commoditized native collagen products, one of their competitors is MicroMatrix, a porcine urinary bladder matrix originally from ACell that got acquired by Integra for roughly 4x EV/Sales. MicroMatrix comes as a powder or sheet and represents an intact extracellular matrix rather than hydrolyzed collagen. Same issue here as with native collagen: the bioavailability is much lower than hydrolyzed collagen.

Now you probably ask yourself, why doesn’t someone come up with hydrolyzed collagen themselves? The answer is it wouldn’t be that easy. Sanara’s particular formulation is protected by patents and proprietary know-how. Best case is someone would spend $50 million+ and a decade to develop something that doesn’t violate Sanara’s IP and has the same effect. Add on top of that the work to get approvals by hopsitals and built your distribution network and you are looking at an pointless task for competitors to try to beat CellerateRX at its own game.

The rising star: BIASURGE

Sanara MedTech never had the ambition to be a one-product company, although they have been exactly that for the majority of their time on the stock market. This, however, could look a little bit different in the future. While CellerateRX will stay the dominant force thanks to its strong market position and headstart against their other products, the next one in line is BIASURGE. Launched in November 2023, Sanara pays a 2-4% royalty on net sales to Rochal Industries under the BIAKŌS license.

BIASURGE is a no-rinse irrigation solution used by surgeons to clean wounds during an operation. It is a powerful surgical wash that has two competitive advantages: it kills biofilm-producing microbes and prevents their attachment to implant materials, and it doesn’t need a rinse afterward. The key difference to CellerateRX’s unique value proposition is that BIASURGE is an improvement offer (a potential best player in an existing category) whereas CellerateRX was a greenfield opportunity when it came out. So, while CellerateRX arguably has a stronger value proposition, BIASURGE, once it starts to grab market share from its competitors, could in theory scale faster than CellerateRX did in its early days because hospitals already allocate a budget to irrigation solutions.

Another difference to CellerateRX is that the use case for BIASURGE is bigger. While CellerateRX only makes sense for certain surgeries with high-risk patients, BIASURGE could, in theory, be applied to every surgery because every wound needs to be washed.

Competition

The main competition to BIASURGE is Irrisept, which was acquired by private-equity firm ARCHIMED in 2024. Irrisept is the market leader in this segment, but has two disadvantages compared to BIASURGE: it kills less bacteria2 and needs a rinse after applying it, whereas BIASURGE is a no-rinse solution.

I believe Irrisept got a headstart compared to BIASURGE. BIASURGE is currently available in 1L bags, whereas Irrisept is offered in smaller bottles (150 mL and 450 mL) as well. Could this have hindered adoption for BIASURGE? Maybe. However, Sanara is working on other doses as well. Irrisept claims <$80 per use. Older transcripts of Sanara have communicated that one 1L bag costs $200. I don’t know how much you would need for one surgery, but it’s fair to assume that BIASURGE is a bit more expensive than Irrisept.

The star in the pipeline

One product that has a similar greenfield opportunity is OsStic. OsStic is basically a “bone glue” that surgeons can use to glue shattered bone pieces back together, especially in tricky areas where metal screws and plates are too big or clumsy to work. It’s a synthetic injectable bone void filler designed to help reduce periarticular fractures and provide provisional fixation of fracture fragments. OsStic has received FDA Breakthrough Device Designation for periarticular fractures and is set to launch in Q1 2027.

The market opportunity in periarticular fractures is roughly 100,000 surgeries a year in the US. From there, they could expand into other surgeries as well. The product will have a much higher price point than CellerateRX or BIASURGE, likley in the $2500 range, making it less of a volume and a more specialised product.

There is one upcoming competitor: TETRANITE from RevBio. While they started mainly in dental, the product has received FDA approval for a 20-patient pilot trial in complex wrist fractures (extremity fractures)3. By my understanding, this will be the closest competitor that (for the beginning) focuses on a different subset of surgeries (extremity vs. periarticular). Overall, for a new category like this, one can argue that having one competitor focused on adjacent surgeries could increase awareness for the new category in general.

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The opportunity

First, a look back. In 2020, Sanara MedTech started its division TissueHealthPlus (THP), back then under the name WoundDerm. The goal was to build a “Value-Based Care” platform for chronic wounds. The result after 5 years was this: No revenue and $7 million+ cash burn a year.

This meant for shareholders they saw no share price appreciation in the last 5 years, despite the fact that the surgical business went from $24 to $102 million in revenue and EBITDA turned from negative to $16 million (TTM).

After they appointed Elizabeth Taylor as CFO and Seth Yon as CEO, a couple of months later followed the announcement of the shutdown of THP. However, the stock dipped that day by more than 30% from $30 to $20. The reason for that, I believe, was largely caused by their guidance for Q4. Investors fear that the growth story is over:

“With respect to our net revenue over the balance of the year, as a reminder, our net revenue in the fourth quarter of 2024 grew 49% year-over-year. This exceptional performance benefited in part from increased demand for BIASURGE following the disruption caused by Hurricane Helene last fall, which caused industry shortages of IV fluids and saline solutions.

As we have shared previously, of the $26.3 million of net revenue generated in the fourth quarter of 2024, we believe approximately $1.8 million was attributable to this unique dynamic. Excluding this $1.8 million headwind, we expect our revenue in the fourth quarter of 2025 will increase in the high single digits to low teens on a year-over-year basis compared to strong year-over-year growth in the fourth quarter of 2024.”

- Q3 2025 earnings call

First, I think even if growth would decrease materially, the market’s reaction was probably fueled by potential tax-loss selling and general frustration with the company’s capital allocation decisions in the past. After assessing the opportunity, I do think they can continue to grow by 15%+ for a couple of years. Here are the potential growth drivers:

The Model Their model is as follows: Get approval from a hospital (currently 4,000 hospitals approved) and sell into these hospitals with their distributors (1,400+ active hospitals they’ve sold into).

There are many layers they can grow with just CellerateRX. First, they can sell into more hospitals (closing the gap between approved and active). They can increase the number of distributors. And as I said, distributor is not equal to distributor in terms of size, so there’s still a lot of room within the current distributors as well.

#1 Growth Within One Hospital (within Ortho & Spine + adjacent surgeries)
Say in hospital A they currently have five 1099 reps selling their product to the spine surgeons. The rep is therefore “the spine guy.” Within the same hospital, they may have already covered all spine surgeons, so they could expand into plastics. They already have the relationship with the distributor (and in most cases already had the conversation that they ultimately want to expand into other reps as well), so they could go to the “plastics rep” as well, within the same hospital. Further, there are a lot of hospitals where their penetration within the key segment ortho & spine is still low. So even within the current active hospitals, there’s still plenty of room to grow, either within the key areas or by expanding.

#2 Increasing the Number of Hospitals Sold Into
The next simple way is increasing the number of hospitals they sell into (i.e., closing the gap between approved and actively selling into). This would likely also correlate with the distributor agreements signed, and both numbers have been growing nicely over the past years. In Q2 2024, the number of agreements with distributors was 300+, now it’s 400+. Number of active hospitals sold into in the last twelve months was 1,100+, now it’s 1,400+. Both trends trends are encouraging and point towards growth.

Penetration Upside If you take an ASP of $700 for CellerateRX and assume $80 million in revenue from the product, that would lead to 114,000 cases sold. By my research, there are 1.6 million spine surgeries a year, 3 million attributable ortho (joint replacement, trauma), and roughly 1 million plastics (ex. beauty related). Meaning 5.6 million surgeries in total. Probably 40% of those would fall into the high-risk bucket (obese, diabetic, smoker, old age, etc.), meaning roughly 2 million surgeries per year where CellerateRX usage would make sense. This would imply roughly 5% penetration rate. While some numbers here will be off, it’s safe to assume that the penetration within CellerateRX is still low. Whether it’s 3%, 5%, or 7% doesn’t matter much to make the point. What penetration rate is achievable? I don’t know, maybe 15%, maybe 20%. Point being is that the growth runway for CellerateRX is still there, just from a market perspective.

#3 New Products This will likely take the longest time but offers great, and totally underappreciated, upside by the market. They don’t disclose BIASURGE revenue, but based on royalties paid in 2024, I assume it was between $4.4-8.8M—with $1.8M attributable to the spike in Q4 2024. Either way, it’s still small, likely around 5% of total revenue. The opportunity lies in the cross-selling with existing CellerateRX customers. The company describes it as a one-two punch where the customer is buying CellerateRX and you add BIASURGE to that bag as well. While the product also needs new approval in the hospitals, they already have the relationships in place and can slot this product into their existing distribution structure. The same goes for OsStic. In theory, BIASURGE and OsStic both have the potential to become $50+ million in revenue products.

Hence, I think the runway for growth is still long. The only two arguments against it (that the market is focusing on right now) are: the guidance for Q4 and the law of large numbers.

“I would give some perspective on the guidance, as even without the hurricane bump the growth rate was still 38%.

As far as Q4 performance and looking at that, as Elizabeth had mentioned, we grew 49% in Q4 of 2024. If you take out that adjusted $1.8 million, it’s still about 38%, which obviously was just a very, very significant growth quarter for us.

And even inside that 38%, when you think about the $1.8 million that we grew as a result of the saline shortage, that was solely on just new accounts. So we had other growth as well coming from BIASURGE in existing accounts as well. That’s not captured in that $1.8 million.

So we know we had a really significant number. We still believe in a very strong quarter this coming quarter as well. And again, I don’t think that the expectation going into the fourth quarter should be concerning to anybody.”
- Q3 2025 earnings call

Sanara MedTech had similar patches when they faced stronger comps. Sure, 123% is different than 48%—and overall revenue (including the bump) will be flat compared to the 15.80% at the end of 2023. So yes, the company will obviously grow slower than in 2022-2024. But I think for the next few years they can grow by 15%+.

And, at the end it all comes down to..

Valuation

When the company was growing 50%+, it also had a different valaution than now:

For next year, I model three scenarios between 15-25% growth. The more time I’ve spent on this name, the more confident I am that the base or bull case is more likely than the bear case, and I think the company will also start communicating their growth aspirations by the start of next year. Their SG&A line consists of their RSMs, which should increase only slightly, general and administrative costs that should stay pretty flat, and the commission paid to the 1099 reps, which scales with revenue. Hence, I expect only some operating leverage.

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The other variable is their interest payment. Currently they have $45 million in debt and pay a staggering 13.5% interest rate. They have publicly stated to be able to refinance that debt. I assume lower interest expenses by Q1 2026. Any way you slice it, the company appears to be cheap, too cheap in my opinion:

We can use a couple of private transactions to estimate a fair value of Sanara MedTech. ACell was acquired for 4x EV/Sales and was growing 13% at that time. Acera Surgical did roughly $90 million in revenue and was recently acquired for $725 million + $125 million in milestone payments, meaning 8-9.25x EV/Sales.

Conclusion

While Ron Nixon is the genius behind Sanara and basically created the company, ultimately he failed to create shareholder value. The changes this year are evident, in my opinion, that Sanara has entered a new era. The era of being a disciplined, simple growth story. Seth Yon has been with the company for a long time, when there were just 8 employees. He worked his way up from Director of Sales to CEO in his 7 years at Sanara. Elizabeth, the new CFO, has worked in the hedge fund industry before. After talking to them, I came away thinking that Sanara is now being run way more for shareholders than before, and I believe this will become apparent through more disclosures, better capital allocation, and rewarded with an appropriate multiple of 3-5x EV/Sales. You can think of this like when Apple went from Steve Jobs to Tim Cook.

Risks:

• Growth stalls due to “law of large numbers”

• BIASURGE never takes off

• OsStic launch costs money but takes too long to become material

Catalysts:

• From Q1 onwards "clean" quarters without THP spend, and therefore profitable

• Stronger growth rates from Q1 onwards coompared to Q4 guidance

• Launch of OsStic

• Refinance of debt

• The Joint-Venture with ChemoMouthpiece could inflect once a dedicated reimbursement code is obtained for the product.

• Discovered by institutions

This SMTI write-up is a one-off free deep dive that’s usually reserved for paid subscribers only. If you want full access to future write-ups like this, real-time updates on SMTI and other names, and my actual portfolio, upgrade to a paid subscription here.

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Disclosure: I am long Sanara MedTech (SMTI) and may buy or sell shares at any time without notice. This write-up is for informational purposes only and is not investment advice.

Special Thanks to Christopher Plahm from Tall Pines Capital who helped me get up to speed on my research.

Mentioned Stocks

• Reo Plastics (REOP) – Presented by Maj (03:00)

• D-BOX Technologies (DBO:TO) – Presented by me (11:00)

• Ituran Location and Control (ITRN) – Presented by Maj (20:00)

• Sanara MedTech (SMTI) – Presented by me (28:00)

• Burnham Holdings (BURCA) – Presented by Maj (37:00)

• Grey Wolf Animal Health (WOLF:V) – Presented by me (46:00)

• Acorn Energy (ACFN) – Presented by Maj (49:00)

• Cleantek Industries (CTEK:V) – Presented by me (1:00:00)

• Mistras Group (MG) – Presented by Maj (1:06:00)

• Precipio (PRPO) – Presented by me (1:12:00)

Special Feature

• B.O.S. Better Online Solutions (BOSC) – by

• Koil Energy (KLNG)

Disclaimer: This is not investment advice and is meant for entertainment purposes only. Maj and I hold positions in some of the discussed companies and therefore may be biased in our opinions.

I own shares in: KLNG, SMTI, and DBO:TO.

It’s earnings season again. Previously, I provided the preview via the chat, but since it got too long, I decided to publish it as an article instead. Here are my thoughts on the ten profiled companies and their upcoming earnings in November.

Ascent Industries (ACNT)
Date: First week of November

No heroics are expected from ACNT. QoQ revenue growth should be the primary target. Gross margin improvements are likely not possible to the extent they were before. Commentary regarding the sale of their facility, M&A, and their pipeline are the most important factors to watch.

Reminder: for the thesis to work (meaning they’re earning money), they need to grow the topline from here. Anything related to potential revenue growth in 2026 is the most important.

The company I am probably the most bullish on for Q3 2025 is the one I have just recently profiled here.

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