"How can they be out of favour? Maybe it looks so good that it...

"How can they be out of favour?
Maybe it looks so good that it is hard to believe."

I think you must be looking at a different company to what the market is perceiving, because it's not that good. Well, not as good as it should be, anyway.

The acquisitions that have been made over the past 12 months have masked the lack of organic growth in earnings and cash flows.

And if a company operating with the industry tailwinds that CLG enjoys can't demonstrate organic growth then the market will suspect something is not right with the business model and will value the stock at discount to fundamental value; it certainly won't price in any growth optionality.


Having watched the Coffee Microcaps presentation, it occurs to me that CLG management has taken on board criticism about:

1. the lack of organic growth,
2. the need to respect the share capital account, when it comes to new equity issuance, and 3. the market's requirement for the business to be observed at steady state operating conditions for at least one full 12-month period.

Also, I particularly liked the articulation around capital management discipline, i.e., using the surplus capital generation to pay down debt, with the implication that future acquisitions can be debt-, instead of equity-, funded (equity being a very expensive form of capital at present, given the undervaluation of the company's stock).

Accordingly, with some of my long-held concerns having been somewhat addressed, I have resumed building a position in CLG, the first time I have done so since Oct 2023.

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