Mohawk Group optimizes brands using AI

16 gru 2020

Here is an early entry in a micro-cap with an interesting business model and growth plans.

Mohawk was founded on the idea that if you created a new consumer products company today, you'd heavily using Artificial Intelligence to provide more relevant products to a targeted set of consumers and optimize the process from concept to production to delivery.

Mohawk has a proprietary software platform called AIMEE that consumes massive amounts of data to analyze trends, consumer sentiment and brand performance. Based on the knowledge, AIMEE helps Mohawk determine which products to produce, market and sell at the right times when consumers are most likely to buy. That keeps inventories from getting unnecessarily high and reduces unsold product.

Mohawk also offers AIMEE as a Software-as-a-Service platform in the cloud. That makes the tools available to other consumer product companies to also optimize their own business.

The growth strategy for Mohawk has been to acquire consumer product brands from companies, or the entire company and then use their proprietary software AIMEE to improve the efficiency and effectiveness of the brand.

Most recently, Mohawk acquired the Mueller, Pursteam, Pohl and Schmitt, and Spiralizer brands and will apply the same AI technology to further optimize these already popular brands.

Fundamentals

• YoY sales growth last three quarters +44%, +97%, +45%.
  
• As part of 12/1 acquisition announce, future revenue outlook raised.
  
• EPS for last three quarters -0.99, -0.19, -0.05
  
• Not much institutional sponsorship now
  

Technical

• Up 600% from March lows
  
• Up 43% since acquisition announcement
  
• IPO highs around $10 is current resistance
  
• Volume now shrinking as price consolidates under $10
  

Buy Point

• Buy Point: $10
  
• 10d ATR Stop (x2.7): $7.52 (24.83%)
  
• Position Size: R4.03
  

It's a very loose stop and therefore small position. Alternative is to wait until this clears the big gain from 12/1. That would provide a tighter ATR Stop, but possibly risk missing another big move. Anyway, I'd only put a small position in this microcap and then add to it as the company proved itself.