SRK Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of -9.41% was recorded by the fund for the second half of 2021. In contrast, the S&P 500 and the Russell 2000 returned +11.67% and -2.34%, respectively. For the year, the Fund appreciated 46.71%, compared to 28.71% for the S&P 500 and 14.78% for the Russell 2000. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
SRK Capital, in its Q4 2021 investor letter, mentioned Nocopi Technologies, Inc. (NYSE: NNUP) and discussed its stance on the firm. Nocopi Technologies, Inc. is a West Conshohocken, Pennsylvania-based marketing technology company with a $12.3 million market capitalization. NNUP delivered a 17.63% return since the beginning of the year, while its 12-month returns are up by 9.55%. The stock closed at $0.18 per share on February 15, 2022.
Here is what SRK Capital has to say about Nocopi Technologies, Inc. in its Q4 2021 investor letter:
“Nocopi’s licensees fell victim to supply chain issues due to the rapid increase in cost to ship products to and from China. This sent Nocopi’s product sales off a cliff in the third quarter. It is hard to predict when shipping issues will dissipate or what licensees are doing to confront it. I imagine that licensees will make larger but less frequent purchases in order to soften the blow of shipping costs. On the bright side, royalty revenue grew to its highest quarterly level. Growth in royalty revenue leads product sales higher. As disappointing as the quarter was, the company was still able to maintain positive cash flow and add to the cash on its balance sheet. The company’s largest licensee, Bendon Publishing, has recently introduced new products under its Imagine Ink line that includes six mini markers and 4 additional pages. I believe the company is selling this product at a 24% price increase versus the older format, which should increase royalties to Nocopi. Despite the issues that Nocopi is facing on the shipping front, there has not been long-term impairment to the attractive economics of the business. Those attractive economics have attracted a collective of quality investors taking interest in the company. For years I have asked the company to hold an annual meeting only to be met with another year go by without one. I have mentioned to the company that someday someone is going to come knocking and not be as patient as me. That day has come, and activists have demanded for an annual meeting to be held with a proper election of directors. Nocopi has pulled the same card they did against me previously by promising a meeting and changing the bylaws of the company in order to entrench management. The CEO doesn’t realize that he would not be in this situation if he would have put shareholders’ interests above his own. For a company that requires minimal capital in its business with multi-year contracts, return of capital to shareholders is a value enhancing no-brainer. In fact, the company should borrow as much money as possible and return that capital to shareholders as well. By my calculations, at current prices this would produce significant value for shareholders. Granted, borrowing large amounts of capital relative to their operating earnings could be quite difficult given the lack of assets in the business, but I doubt they have ever tried or considered it. Maybe I should send the company this calculator.”
Our calculations show that Nocopi Technologies, Inc. (NYSE: NNUP) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Nocopi Technologies, Inc. (NYSE: NNUP) delivered a -0.81% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on NNUP in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
