2 Microcaps Stacking the C-suite

Microcap companies, due to their diminutive size, sometimes suffer from a stigma that they lack the business sophistication of their large cap brethren, kind of like a small market baseball team. 

But sometimes an executive groomed in the front office of a major market team like the Yankees gets a shot at being a GM at a small market team, an opportunity to spread their wings and demonstrate more fully what they know.

A similar type phenomenon occurs when seasoned executives from large CPG companies leave to enter the C-suite of microcap companies. They finally get to call the shots and be free of large corporate bureaucracies. Mama’s Creations, Inc (MAMA) is one recent microcap example that comes to my mind fitting this narrative, with mutliple others from years past.

Often provided with stock incentives, the fruits of their labor can be more lucratively aligned with their production. In general, because starting from a small base and the more volatile nature of microcaps, it is possible for a microcap company’s stock price to double or triple over the next 12-24 months.

The value-add of these executives is typically relationships with major retailers, marketing spend ROI expertise, logistics knowledge, manufacturing improvement experience, and packaging design savviness that stands out on the shelves.
 
Perhaps most importantly, they typically have a more astute eye and appreciation for consumer trends, and can spot growing industries and pick winning product lines.

Why did they join the particular microcap company? Most likely because they studied and contemplated the consumer products offered and liked the “story” and felt their skills could take the products to the next level of mass appeal and distribution. They perceived a solid foundation was in place with good assets.

Changes at the C-suite finance level also can be telling. Oftentimes this is a positive signal that the company is bringing in a more seasoned executive with capital markets access to help facilitate the next stage of growth or for regulatory experience for a possible up listing. Or for experience in marketing the stock more aggressively to prospective investors because of the belief that the stock is undervalued.

Here we highlight 2 microcaps that fit this bill of stacking the C-suite with industry veterans from CPG titans like Pepsi Co, Frito-Lay, Kellogg's, Beyond Meat, Wrigley, and Kohler. Oftentimes these executives have successfully grown individual brands and products lines for large CPG’s.

These stocks might appeal to investors who prefer to bet on the “jockey” vs. the “horse” as they say in the investment business.

Armanino Foods of Distinction, Inc. (AMNF) is engaged in the production and marketing of upscale and innovative frozen and refrigerated food products and has an Outperform rating.
 

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Armanino Foods’ (AMNF) offerings include a wide variety of pesto sauces, frozen stuffed pasta, pasta sheets, cooked meat products and cheese shakers.

The other microcap, Jones Soda Co. (JSDA), develops, produces, markets, and distributes premium craft beverages, primarily in the United States and Canada. The Jones Soda Co. (JSDA) portfolio includes carbonated soft drinks under the “Jones Soda” brand, modern soda offerings (Pop Jones and Fiesta Jones), and cannabis-infused beverages under the “Mary Jones” label.

Jones Soda Co. (JSDA) has a Zacks Neutral rating. While the cost structure appears primed for leverage, we are waiting for more topline execution, specifically in terms of growing brand awareness outside of their typical geographical corridors. 

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This article originally published on Zacks Investment Research (zacks.com).

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