Due diligence that goes above and beyond can often give you an edge that can yield large returns in the microcap space. Most astute investors read quarterly and annual financial statements, but I find very few go beneath this first layer of due diligence. In a four part series Sean, Neil, Jason, and I will give you a few recent examples of in-depth due diligence, and how it ultimately helped in making an investment decision. The company examples in each part are meant to help illustrate the DD and not meant to be stock recommendations.
By Sean Marconi
I was introduced to Xpel from a MCC member Paul Andreola around $0.35 about 3-4 months ago. It brought back several memories of ZAGG Inc (ZAGG) back in 2007-2008 when ZAGG was under a buck. If you were to compare Xpel today vs. ZAGG in early 2008 they have many similarities including: selling a protective film, branding, share structure, profitable, high growth rate, cash in the bank to execute, and international upside.
My extensive DD seems to come into play with consumer based product companies. Digging into Xpel has been a great time. It has been a combination of travel, phone calls to dealers, purchasing the company’s product to put on my own car, phone calls to account managers at the company, and a phone call with the CEO.
Independent Dealer DD: The first bit of on the ground DD was when I was in Michigan over the 4th of July weekend. I visited an independent dealer called Sun Shade window tint in Troy, MI. He is one of the premier window tint shops in metro Detroit. At the time he carried 2 brands of film. Suntek and Xpel. Definitely recommended Xpel, the higher priced option but said it was well worth it. His eyes would light up talking about the Ultimate film. I recently followed up with him last week and they mentioned that they ONLY work with Xpel films. The installer literally told me that he refuses to work with anything else.
Product DD: My 1st purchase from them was on August 12 ,2013 for $284 dollars. I purchased the bikini bra, headlight protection kit, and a few other accessories. Purchasing the product online you could get a feel for the sophistication of their shopping cart and was able to learn how they communicate with their customers. Literally a day after I received an email and a phone call from Xpel. The email was from a customer service rep. (See Below)
“Good Morning Sean,
Thank you for your recent order. We will need a physical address to ship the order because the cleaner can’t be shipped by USPS. Your prompt reply is greatly appreciated so we can process your order in a timely manner.”
The phone call was from a territory account manager that wanted to let me know that unfortunately there weren’t any installation facilities in North Dakota yet. He then proceeded to tell me that he wanted to make sure I knew how to install the product. On top of that he upgraded my Xtreme film for my car to the Ultimate at no charge. He said that he wanted to make sure that I received a great experience. That was one of the best customer service experiences that I’ve received over the past years. I received the product a few days later. I installed the product and very impressed with it thus far.
Website DD: Consumer based product websites it’s very important that they have a website that is easy to navigate through and purchase product. The website functions well, but you can tell it needs a little work. When you go through the selection process with your vehicle it auto selects the Xtreme film for your car. There is no option to select between the different kinds of film offerings. This is why I believe their sales reps are calling all of their customers to make sure they are pleased. You can check out the Dealer Locator http://locator.xpel.com/ to see the different dealers across the world. If you look closely it seems as though it’s built on a newer looking website. The header is a different style than the current website www.xpel.com. I’m hoping for a newer version website in the near future.
Social Media DD: I would highly recommend watching this video of Ryan Pape (CEO) of a dealer conference last year. He talks about strategy and how well his company is doing with the ULTIMATE film. He seems like a good guy. http://vimeo.com/channels/xpel/49604671
Self Healing Video (38,227 views)
Xpel Ultimate Paint Protection Film Stain Resistant test (10,602 views)
This is only a brief overview of the DD I’ve done into XPEL Technologies. Further due diligence on XPEL Technologies and more than 170 other microcaps can be found in our MicroCapClub members forum. Stay tuned for the next three parts in The Power of Due Diligence Series.
Disclosure: Sean Marconi is LONG shares of XPLT
MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap). MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. Our goal at MicroCapClub.com is quality membership, quality stocks, and quality content. If you are an experienced microcap investor, feel free to Apply today.