Paul Andreola and I sat down to discuss his under-the-radar investment holdings company. Andreola is the President and CEO of Brisio Innovations Inc, which trades on the CSE under the ticker BZI. By all accounts, this investment holding entity could certainly be considered a sleeper stock in the microcap space. Don’t expect flashy promo, churning news releases, or a slick investor deck. Brisio is quietly brewing four core positions in great companies with more to come. I say great, because that’s exactly how Andreola put it; he and Colin Bowkett are searching for the great, not just the good.
Brisio’s advantage is partly their backend braintrust and hard work under the hood of their investments. Brisio negotiates a position, identifies areas where a company could use their assistance, and then gets to work helping out in particular on the public markets side.
Often times these companies are operationally focused, running very lean to keep the costs down, things might get missed along the way. The BZI team slots in where they are most needed to take well-managed companies to the next level. On the investor’s side, Brisio (by proxy) offers access to private placements, blocks of shares that you would not under normal circumstances have access to at such early junctures. US investors who are not permitted into Canadian financings, can back door through Brisio’s OTC listing NTCEF. And those of us who don’t have the network+time+due diligence machine, can relax after this money goes into the pot. Reminder also that this is not meant to be a stock recommendation, please do your own due diligence and talk to your investment advisor.
Andreola, a former broker, has concentrated over the years on building a tight network of quality shareholders who hitch on for the ride. Smallcap Discoveries is Andreola’s newsletter along with partner and mad-hatter researcher, Brandon Mackie. Certain criteria and standards in the letter’s filtering process transfer over to BZI as well. For instance, companies that his letter recommends, and companies that BZI invests in, must be profitable. BZI however must invest >$150,000 in any given deal (unless that deal has less than 50 shareholders). His subscribers don’t have that limitation, so more picks might make the letter than the portfolio holdings of Brisio.
However each aspect of his business, whether it be running the letter, quarterbacking BZI or dealing with venture capital raises, has a strict rule book, and this disciplined approach is part and parcel with some serious successes for the Smallcap letter and BZI. A track record is everything when running a subscription-based newsletter whose objective is to grow money. Imagine the weighty responsibility of investing friends and family money? Brisio is friends, family, insiders and very little else in terms of shareholders. 70% of his investors are Canadian, and he guesses that about 20 people control 80% of the stock. He knows those people well, and they trust him implicitly. “Sometimes high volumes are a sign of bad shareholders,” he warns. He prefers high quality shareholders over impressive fluctuations in volumes.
Let’s briefly touch on the current core holdings.
Lite Access (CSE: LTE), who Brayden interviewed on the Syndicate here when it was trading near $1.10, now at $1.65, Andreola added to the Brisio portfolio at $0.15. Lite Access is known for their proprietary microduct and low-cost fibre optic solutions for cities, municipalities and other high profile clients. For more on Lite Access click here: http://liteaccess.com/
Pioneering Technology (TSXV: PTE), which we wrote about here when it was trading at $0.27, now at $0.59, BZI brought into the portfolio at $0.125 (including 1/2 warrant @ $0.25). Pioneering created an entirely new category in cooking fire prevention technology with their innovative products. Check them out here in more detail: http://www.pioneeringtech.com/
Spark, new to the BZI portfolio as of August 24th 2016, is a well-run tech company for real estate CRM, specifically tailored for new homes and condos. They are simplifying new home sales with smarter software and advancing the way new real estate development is sold, marketed and managed. You can read more on Spark at their website: https://spark.re/
ImmunoPrecise Antibodies, an investment announced on September 12th 2016, is a contract manufacturer for custom antibodies- they boast contracts for a number of major companies including Acumen Pharmaceuticals. Andreola sees them as grossly under-monetized (annual sales are a decent $2.5 mill) and hopes they find their way to 3-5 times the current recurring revenue. For more on ImmunoPrecise click here: http://www.immunoprecise.com/
Current Holdings for BZI
With these two most recent investments, Brisio is beefing up into its own living, breathing undervalued microcap investment.
How many times do you think they can hit it out of the park? They know more about the Canadian microcap space than anyone in Canada. And we have not yet touched on the share structure (only 29 million shares outstanding). The structure and the share price are almost static noise to Andreola. The intention is not to build Rome in a day.
Andreola and his team spend hours on Sedar, every filing day, filtering through what I can only imagine is mind numbing stuff, for the sake of tracking the farm team of opportunity out there in the microcap space.
They sift through thousands of filings, shunting aside anything resource industry, anything financial markets and basically anything else not turning a profit. It goes deeper than that, but therein lies the beginning of the filtering process.
Rather than thinking of Brisio as an Investment Holding Co, I prefer to think of it as a due diligence oven. You can rest assured all the ingredients are there for these companies. And the pubco mentorship is really valuable for a private company without the capital market’s experience under the belt.
Experience, conviction and a deep understanding of the market’s nuances. These give Brisio the leg up to find those mispriced opportunities of arbitrage. Is Company X’s success repeatable, scaleable? Is there not only upside potential, but how does the downside risk compare? Is the company not only good, but great. There is an opportunity cost to every decision. And Brisio is no exception!
Brisio has around $100,000 and it burns around $8k a month. There is plenty of money in the wings for this one as well. Insiders own over 25%. And here comes the plot twist! After all that dd to find multiple diamonds in the rough and investing with conviction— the exit plan is…
“You haven’t asked me the end goal.” (To which I replied, “Make investors loads of money?”). “To create the ultimate shell on steroids. At some point we want to divest our holdings and re-invest it all into for example, the next Lite Access. Own the next great company 100%. When Lite Access 2.0 comes around we will have what most public companies dream of, a great business, cash, great long term shareholders and a great capital markets team.… ”
My broker always says, “Another deal always comes along”. If and when Lite Access 2.0 comes along, or a similar opportunity that Andreola and his team identify, BZI divests and becomes the best cashed-up shell on the block. Guaranteed, great shareholders, great dd, and strong conviction get it there, not promo. (I do own shares of BZI. We reached out to Andreola for the sake of this article, he did not reach out to us. Please do your own due diligence).