I’ve been meaning to write more but work has been getting in the way of a long writeup, so I thought I’d throw out a quick idea, one I haven’t yet pulled the trigger on.
Currency Exchange International is a Canadian company headquartered in Florida that sells, well, currency. It has 698 store locations across the US and Canada, some in airports, where customers can purchase various foreign (and domestic) currency in various denominations. Some customers are just going on trips, but others are businesses that need to exchange or purchase currencies. This is something banks don’t want to do and don’t want to keep on hand, so there is a bit of a moat here.
The business got clobbered by COVID but has rebounded strongly, and looks like COVID was actually bit of a blessing since competitors have pulled back. On the fundamentals CURN looks fairly attractive. Its roughly doubled revenues since the last full year before COVID, 2019, which is roughly an 18% growth rate. The last two years it’s averaged $1.70 share in after tax profits while now trading at about $178 , so a very cheap trailing PE of just over 10. And for downward protection it has roughly a $13/share book value, and a lot of cash giving it about $11 in working capital per share.
The problem of course is that its a microcap, so being cheap even while showing great growth isn’t necessarily a formula for a rapidly increasing stock price. We all know the old saying, if a microcap doubles revenues in the forest, does it make a gain?
So this is where the catalyst comes in. Management announced last quarter that they’d start buying back stock. So far I can’t see that they are off to a fast start, but if they follow through it should help drive the stock price higher over time. Obviously I’ve skipped over a great deal of detail here, so do your own due diligence, this isn’t a recommendation and remember that as of yet I don’t even own CURN.
But on the surface it appears to be an example of the type of long term investment I’m interested in, good growth with some kind of moat at a very cheap price with a shareholder friendly management team following good capital allocation strategies. Most importantly if an investment doesn’t have the last two things, the first three can’t guarantee good results in micro-cap land.