Presented by Douglas Gerlach President, ICLUBcentral Inc. - - PowerPoint PPT Presentation

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 1

Presented by Douglas Gerlach President, ICLUBcentral Inc. Editor-in-Chief, IAS & SCI June 2017

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 2

¡ Makers of software & web tools for

individual investors & investment clubs.

§ Toolkit 6 – Most popular software for fundamental stock analysis. ¡ Publishers of 2 investing newsletters: § Investor Advisory Service § SmallCap Informer

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 3

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 4

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IAS named to Hulbert Financial

Digest Honor Roll in 2016 for 7th Consecutive Year.

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 5

¡ Newsletter must outperform each bull &

bear market cycle over long term.

¡ Honor Roll recipients are more consistent

performers:

§ Go up more than market in bull markets. § Go down less than market in bear markets.

¡ On average, newsletters on Honor Roll

• utperform those that are not.

§ Pattern that’s repeated almost every year since mid 1990s.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 6

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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 10-year 20-year

IAS Performance vs. Market As of April 30, 2017

IAS Wilshire 5000 S&P 500

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 7

¡ Started in 2012 to address need of

investors to find smaller companies that fit long-term style.

¡ Published monthly with 2 small/midsized

stock picks w/Stock Studies.

¡ Tracks previous picks until sale is

recommended.

¡ For more:

www.SmallCapInformer.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 8

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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

YTD a/o 6/10/2017 1/1/2015 - 6/10/2017

SCI CAR vs. Market

As of 6/10/2017

SCI S&P 500 Russell 2000

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 9

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 10

• 1. Buying high-quality, solidly-growing,

individual stocks with long-term horizon provides superior returns.

• 2. Long-term investing reduces drag caused by

capital gains taxes & trading costs.

• 3. Buy-and-hold investing requires lower time

commitment than active strategies.

• 4. Longer horizon helps reduce risk of stock

investing.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 11

¡ Goal for each stock is doubling in value

in 5 years, from:

§ Capital Appreciation. § Dividends(though not all companies pay). § Price/Earnings Ratio Expansion (from

contrarian practice of buying stocks undervalued compared with historical trends).

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 12

¡ Do not advocate “trading strategy.” ¡ We believe that holding carefully

selected stocks over long term produces best results.

§ No stock follows schedule, always ups & downs in prices. § If original assumptions deteriorate, sale recommended & follow-up discontinued.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 13

¡ For each 10 stocks bought: § 2 will do much better than expected. § 2 will be disappointments. § 6 will follow expected course.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 14

Invest in a business, not a stock:

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 15

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 16

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CTSH Revs PTP EPS High/ Low Price ACE

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 17

¡ In short-term, price of stock affected by:

§ Investor market sentiment. § Analyst upgrades/downgrades. § Industry factors. § Politics. § Weather. § Rumor mill. § EPS estimate “hits” & “misses.” § Economic reports.

¡ None are predictable.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 18

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 19

• 1. Growth

§ Of revenues and earnings.

• 2. Quality

§ Of management, primarily profit margins.

• 3. Value

§ Of stock at current price.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 20

¡ Company must be profitable. ¡ Earnings & revenues must have history

• f acceptable growth.

§ Annual growth. § Recent quarterly growth. § Growth is appropriate for size of company.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 21

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FDS

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 22

¡ Earnings & revenues must be expected

to grow at acceptable rate in foreseeable future.

¡ Incorporate near-term & long-term

analyst estimates with historical trend to determine reasonable 5-year EPS figure.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 23

¡ Lots of ways to measure “quality.” ¡ Our experience shows that, for

consistent growing companies, pre- tax profit margin encapsulates depth & breadth of management skill.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 24

¡ Company’s pre-tax profit margins

must be stable (or growing!).

¡ Review 5-10 years (to see impact of

economic cycle).

¡ Margins should compare well to

competitors.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 25

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PCLN

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 26

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SWKS

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 27

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LKQ

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 28

¡ Current P/E Ratio below/near 5-year

Average P/E.

¡ Current P/E Ratio appropriate for

projected growth rate.

¡ PEG Ratio should be favorable.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 29 29

Curr P/E ----------------------------------------------------------------- 18.8 5-Yr Avg P/E ----------------------------------------------------------------- 18.6

SBNY Projected EPS Growth 15.0%

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 30 30

Curr P/E ----------------------------------------------------------------- 25.6 5-Yr Avg P/E ----------------------------------------------------------------- 28.2

FAST Projected EPS Growth 12.0%

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 31

¡ What are likely high & low P/E Ratios

• f next five years?

§ Upside Price = High P/E x Projected High EPS § Downside Price = Low P/E x Potential Low EPS

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 32

¡ Current price should provide projected

15% annual total return in next 5 years.

¡ Downside no more than 1/3 of upside.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 33

¡ Many customer evaluate

fundamentals, then layer technicals

• n top to determine best entry price.

§ Moving averages, relative strength, point & figure.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 34

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 35

¡ Never sell to “take a profit.” § Let winners ride to capture long-term profits. ¡ Occasionally sell on overvaluation. ¡ More often sell due to deteriorating

fundamentals.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 36

¡ “Buy & hold” does not mean “buy &

forget.”

¡ When mistake is made, acknowledge

error & sell.

¡ Waiting to get even is self-defeating

strategy.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 37

¡ Most sales come from: § Deteriorating fundamentals/declining

growth.

§ Appearance of headwinds/uncertain

• utlook for future.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 38

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¡ 26 sells in ~2.5 years (as of 4/2011). ¡ Key reasons cited:

§ 10 due to “Declining/Flat Growth” § 8 due to “Uncertain Outlook for Future” § 4 due to “Acquisitions or Spin-offs” § 3 due to “Accounting Irregularities” § 2 due to “Overvaluation” § 2 due to “Pressures on Margins” § 1 due to “Adverse Management Changes”

(Occasionally, multiple key reasons for selling are identified.)

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 39

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 40

¡ Since 1929: 25 Bull Markets. ¡ Average Bull lasted 31 months. ¡ Average Bull gain was +104%. § Smallest: gain +21% in 2001. § Largest gain: +582% in 1987-2000. ¡ Average frequency of Bull Markets is

every 3.4 years.

¡ Present Bull is 7+ years old.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 41

¡ Since 1929: 25 Bear Markets. ¡ Average Bear lasted 10 months. ¡ Average Bear loss was -35%. § Smallest: -21% in 1949. § Largest: -62% in 1932. ¡ Average frequency of Bear Markets

since 1929: every 3.4 years

¡ Last Bear ended March 2009.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 42

¡ We don’t predict bear or bull markets. § Our strategy is independent of market cycle. ¡ In every market, quality companies

can be found which are suitable for investing.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 43

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S&P 500 12-month real earnings per share — inflation adjusted, constant April 2017dollars. Source: www.multpl.com.

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 44

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Price to earnings ratio, based on trailing twelve month “as reported” earnings. Source: www.multpl.com.

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 45

¡ Over long-term, market is always

bullish.

¡ With right timeframe, can use bear

market to our advantage.

¡ Bear markets are opportunity to build

wealth.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 46

¡ Well-managed companies always

grow.

¡ Capital appreciation will follow in

time.

¡ Growth companies often stand out in

recessions & bear markets.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 47

¡ Overall low valuations provide

• pportunities.

¡ Volatility may be uncomfortable, BUT

also provides 2nd look at companies that might have seemed expensive.

¡ Deploy additional cash (if possible) to

be buyer of underpriced stocks.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 48

¡ Use bear to upgrade current holdings

with higher quality and/or higher total return candidates.

¡ Weed out fundamental

underperformers and laggards.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 49

¡ Develop personal wish list of stocks to

buy if price was right.

¡ Use screening tools to find candidates

that are good, well-managed companies but are too pricey.

¡ In bear, use wish list to quickly find

• pportunities.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 50

¡ Bear markets often last longer than

you might prefer.

¡ However, they do alwaysend.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 51

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 52

¡ Not all stocks will be suitable for all

investors.

¡ Conduct your own due diligence

before making any investment.

¡ Diversify your holdings by industry &

company size.

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 53

53 Tractor Supply Co (TSCO)

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 54

¡ Industry: Specialty Retail/Home Improvement

Stores

¡ Current Price: $56 ¡ Buy Up to: $76 ¡ Current P/E: 17 ¡ Current

Yield: 1.9%

¡ 5-yr Proj. Annual EPS Growth: 12% ¡ 5-yr Proj. Annual Return: 23% ¡ Headwinds: Weak farming & energy trends. ¡ Tailwinds: Expanding margins, acquisitions,

sector recovery.

¡ Website: www.tractorsupply.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 55

55 Extra Space Storage (EXR)

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 56

¡ Industry: REITs ¡ Current Price: $74 ¡ Buy Up to: $92 ¡ Current P/FFOS: 18 ¡ Current

Yield: 4.2%

¡ 5-yr Proj. Annual FFO Growth: 13% ¡ 5-yr Proj. Annual Return: 21% ¡ Headwinds: Competitive threats. ¡ Tailwinds: Increase demand, room for

industry consolidation.

¡ Website: www.extraspace.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 57

57 Air Lease (AL)

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 58

¡ Industry: Rentals & Leasing (Transportation) ¡ Current Price: $38 ¡ Buy Up to: $50 ¡ Current P/E: 11 ¡ Current

Yield: 0.8%

¡ 5-yr Proj. Annual EPS Growth: 16% ¡ 5-yr Proj. Annual Return: 24% ¡ Headwinds: Rising costs of capital. ¡ Tailwinds: Global footprint, economic

expansion.

¡ Website: www.airlease.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 59

59 As of 5/19/2017 Sym Company Name Curr Price Proj % Tot Ret Proj % EPS Gr Curr P/E Buy Below PEG AL Air Lease 36.23 28.8 18% 9.7 45 54% ENSG Ensign Group 18.68 26.5 11% 12.5 24 114% UTHR United Therapeutics 120.90 26.3 5% 7.7 157 154% OZRK Bank of the Ozarks 45.24 22.3 14% 14.8 54 106% TSCO Tractor Supply 57.73 21.8 12% 16.5 72 138% UBNT Ubiquiti Networks 49.19 21.3 15% 15.3 52 102% BIIB Biogen 251.34 20.8 5% 12.1 280 242% TROW

• T. Rowe Price

69.23 20.0 11% 14.1 77 128% GNTX Gentex 18.65 20.0 12% 14.1 22 118% SBNY Signature Bank 137.85 19.9 15% 15.2 168 101%

Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 60

E-mail: gerlach@iclub.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 61

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 62

Use Promo Code AAII2015 to subscribe at www.SmallCapInformer.com

• r

www.InvestorAdvisoryService.com

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Profiting from Fundamental Stock Analysis by Doug Gerlach, Editor-in-Chief, Investor Advisory Service http://www.ICLUB.com 63

¡ ICLUBcentral Inc.:

www.iclub.com

¡ Toolkit 6:

www.iclub.com/tk6/

¡ Investor Advisory Service:

www.InvestorAdvisoryService.com

¡ SmallCap Informer: www.SmallCapInformer.com ¡ Email me at:

gerlach@iclub.com

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