United-Guardian $UG is the smallest, most profitable company you've never heard of.
Founded in 1942, the company researches, produces, manufacturers, and markets a mix of products, including:

  • Cosmetic ingredients

  • Pharmaceuticals

  • Medical & health care products

  • Proprietary industrial products

United-Guardian (UG) has formed marketing and supply agreements with partners around the world, presenting unique opportunities for growth. This is further amplified by the company’s R&D efforts, which aim to not only formulate new products but identify new uses for their existing portfolio. Continued operations are extremely profitable while being very capital-light, allowing the company to generate substantial free cash flow it eagerly returns to shareholders.

The company’s corporate headquarters are in Hauppauge, New York, United States. Shares trade on the NASDAQ under the ticker UG. Presently, the company has a market cap of ~$57.3 million, has no debt, and as a microcap, seemingly has no current analyst coverage.

Disclaimer
This publication’s content is for entertainment and educational purposes only. I am not a licensed investment professional. Nothing produced under the Invariant brand should be thought of as investment advice. Do your own research. All content is subject to interpretation.

Investment Thesis

United-Guardian is a durable business run by extremely conservative management. The company has a fortress balance sheet and has reported positive net income every year since 1991. Furthermore, the company’s microcap status offers several contrasting dynamics:

  • The company is so small that it receives nearly zero coverage.

  • Its size, paired with its reliance on a small number of key customers, makes the company especially susceptible to fluctuations in macro conditions.

  • A key niche market the company operates in carries huge potential costs for new entrants, insulating UG from competition.

A series of events over the last decade may be masking the company’s long-term potential, and recently, the company’s equity has reached an extremely compressed multiple relative to history.

Management’s interests are heavily aligned with shareholders, with the CEO owning over 25% of outstanding shares, and while total growth prospects remain uncertain, continued operations are very capital-light, allowing nearly all generated cash to be returned to shareholders.

As an illiquid microcap, a mix of unique catalysts could present an exceptional opportunity to buy into this highly cash-generative business.

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Brett Schafer's avatar
Saved in my inbox. Looks like a fascinating business

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