Why Northern Technologies International (NTIC) Stock is a Compelling Investment Case

Artko Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 22.0% for the quarter, outperforming its benchmark, the S&P 500 Index which returned 8.9% in the same quarter. You should check out Artko Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Artko Capital highlighted a few stocks and Northern Technologies International Corp (NASDAQ:NTIC) is one of them. Northern Technologies International Corp (NASDAQ:NTIC) manufactures clean and environmental beneficial products. Year-to-date, Northern Technologies International Corp (NASDAQ:NTIC) stock lost 40.6% and on November 5th it had a closing price of $8.35. Here is what Artko Capital said:

“Northern Technologies International (NTIC) – We added a 6% position to a $75mm market cap chemicals maker at an average price of $8.50 throughout 2019 and 2020. NTIC’s chemical technologies deliver leading corrosion inhibiting products and services, as well as advanced bioplastic packaging solutions. What attracted us to this story, and why we have been patient in adding to our position is the company’s somewhat hidden balance sheet with approximately $55mm in cash and net working capital and a Joint Venture (JV) oriented, globally diversified and capital light business model. The company controls 19 JVs and 9 subsidiaries where the company receives 7% of the revenues and 50% of the dividend distributions from the sales of its Zerust corrosion protection product that is widely used in global logistics industry. The company has almost 30% global market share in the ~$500mm product and is widely respected in the industry with 50 years of serving its industrial customers. The Zerust product is fairly cyclical with 40% of its revenues tied to the automotive market and a small Oil & Gas segment and one we expect to grow significantly in most non recessionary economic scenarios within our multi year holding period.

What impressed us more, however, was the management team, with close to 15% ownership, having launched the compostable bioplastics compounds NatureTec product line, used in sustainable packaging applications. This is a product line that did not exist less than 5 years ago and that now accounts for over 30% of the company’s revenues, participating in a $1 billion market that is growing at high double digits. While this is not a smooth line earnings and cash flow growth story we are strong believer that the company has substantial tailwinds to make over $1.00 per share in earnings and cash flow in the next few years and to trade at 100%+ from today’s price. We believe the market currently underappreciates both the balance sheet and the operating leverage inherent in the company’s “franchise like” JV business model that will become apparent as the global economy eventually rebounds over the next 18 to 24 months. Ideally, we would like to make this a bigger position, though we have been patient over the last year or so, adding only at prices where we felt we had a balance sheet based margin of safety and will continue to do so.”

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In Q1 2020, the number of bullish hedge fund positions on Northern Technologies International Corp (NASDAQ:NTIC) stock remained unchanged from the previous quarter (see the chart here). Our calculations showed that Northern Technologies International Corp (NASDAQ:NTIC) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.