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Q1 2021 Portfolio Update

Welcome to my Q1 2021 portfolio update.

Volatility from 2020 carried over into Q1 2021. My portfolio reached all-time highs only to sink lower with the overall TSX Venture.

As always I don’t feel the need to calculate my returns every 3 months but will do so at the end of the year. In 2020 my portfolio returned 35% and 25% since I started investing in early 2018.

In the quarter I bought a position in OneSoft Solutions (OSS.V) after watching it for a couple years.

My longer full year write up is found here.

Q1 2021 Portfolio

Q1 2020 Portfolio
Q1 2021 Portfolio Update

I have been having a difficult time committing the amount of time to investing as I’d like. I started a new position at work in October that has a pretty steep learning curve and is much more demanding, both time and brainpower, than my previous position. This is reflected in the quantity and timing of my posts.

I just completed my RIWI 2020 results posted a month and a half after financials were released. I plan to do better although I don’t think anyone really notices and that’s ok.

Investment Criteria

I have been thinking quite a bit about what I am looking for in an investment. I know this will change as I progress and mature as an investor but here is what I’ve come up with. Admittedly, most of what I own does not fit these criteria very well:

  • I need to understand the value proposition the company provides its customers, usually through time savings or increased profit;
  • Minimal dilution;
  • If the company using their shares as currency for compensation or acquisitions they must have an exceptional growth rate, but preferably I want to invest in companies that won’t be issuing shares;
  • Minimal to zero debt on the balance sheet;
  • As small of a market cap as possible. This is my biggest advantage. There is no market cap too small for me to invest in;
  • Consistent revenue growth. This doesn’t mean it has to be “smooth” revenue growth. I find investors focus too much on perfect SaaS-style revenue growth that climbs in a nice neat pattern. I focus more on the yearly results instead of the quarter to quarter so lumpy revenue isn’t such a turn-off for me.
  • Management integrity is huge. If you cannot trust what they are telling you why should you trust them with your money. This isn’t always so easy for me to determine yet but something I’m working on developing. I think I am more susceptible to a nicely presented CEO interview than I should be. It is important to remember they are shining the best light on the company and often exclude the risks.

There are lots of really interesting companies in Canada so I haven’t ventured outside of Canada for the most part. I want to be able to actively monitor the companies I own and this leaves me with little time to search for new ideas so I’m not running out of Canadian names to look at.

Options Issuance

I find one of the biggest stumbling blocks is finding a company that treats its shares like gold. It bothers me when companies issue options to the promotion company they have hired or to executives without any connection to performance. First, I don’t see the need to spend money on promotion if your company is executing, generating cash, and not in need of tapping the capital markets.

Second, if you are issuing options to a promotional company I have a hard time seeing them as a shareholder a company would want. Is it possible the promotion company will work harder for you so the share price increases, sure you can argue that, but if a company is executing and improving its business the market will eventually recognize it. I find it hard to believe that the promotion company is planning on being a long-term shareholder and the value the share price increase they create is sustainable.

Q1 2021 Portfolip Update: New Position

OneSoft Solutions CIM Video

OneSoft Solutions provides a software solution to oil and gas companies. Their Cognitive Integrity Management (CIM) software uses artificial intelligence and machine learning to combine and analyze years of pipeline inspection data to identify faults in a pipeline so they can be repaired. OneSoft has been successful in adding new customers to the CIM platform. In addition to new customers, OneSoft is continually working on improving user integration and CIM functionality.

I again focus on the value proposition with OneSoft and CIM. OneSoft is still working on determining how much CIM truly saves an oil and gas company. They believe CIM is significantly cheaper than the manual processes oil and gas companies are currently using. Here is a slide from OneSoft’s January presentation:

OneSoft Solutions Sidoti Virtual Investor Conference Presentation

Not only is CIM cheaper than existing pipeline integrity maintenance but CIM is much better at detecting faults before that become spills or catastrophic failure. The savings, accuracy, and increasing functionality make CIM a very valuable piece of software that oil and gas companies can adopt, not to mention protecting people.

Another exciting aspect of OneSoft is the platform potential of their technology. OneSoft believes they can utilize their artificial intelligence algorithms and experience on different classes of infrastructure. They are specifically targetting water and sewer infrastructure and rail infrastructure. OneSoft is making progress on water and sewer infrastructure products at their Innovation Lab they started in Q1 2020.

OneSoft is a small position for me and I think it is a company that could be a multi-billion company in the future. Below is the most recent OneSoft interview with President and COO Brandon Taylor.

SNN Network OneSoft Solutions Update

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I swear I proof read all of my posts multiple times but always seem to miss errors. Apologies in advance.