5 Interesting Minnesota-Based Companies

This post is the end of my series "Looking at every Minnesota-based company A-Z."

It turns out this was a poor time to start this series. Times are hard for Minnesota. Over the course of 5 years, we have experienced George Floyd, Renee Good, the assassination of a state representative, and a church mass shooting.

But Minnesota is a good state, with good people. A state with a midwestern sensibility and work ethic, a general open mindedness; and terrible winters that force communities to work together, dig each other out, offer support, etc. We have the highest civic engagement in the nation, and as a result we have some of the highest quality of life in the country. On an average day, it is a great place to live.

Economically, we were once the “silicon prairie.” Now we have the second most Fortune 500 companies per capita. Perhaps, equality of opportunity spurs economic innovation. Perhaps, as Harvard researchers suggest, it’s that bad weather makes people more productive, like how the Scots invented the modern world. In any case, I am proud to be born and raised in Minnesota, and I know that we have the grit and resourcefulness to overcome.

Now let’s wrap up this series. I have looked through all public companies headquartered in Minnesota A-Z. 93 companies were reviewed. In that group the most investable name was Ameriprise Financial.

Here are 5 more Minnesotan companies of note that I found interesting, but that I am not investing in personally.

Autoscope Technologies Corporation (OTCQX:AATC)

AATC is a company that markets traffic detection cameras (the white cameras you might see on the top of stoplights). These detect the presence of vehicles to change the signals at the intersection and improve traffic flow. There are a number of devices that do this, some radar, some video, some weight.

The company got a big boost from federal funding under the Biden administration under their “target zero” policy for zero traffic deaths. However, revenue has slowed with government budget cuts, which will likely worsen in the coming years. Now, the company is betting on its latest product generation or as they call it, an “AI-powered platform in Autoscope IntelliSight, Wrong Way, and Autoscope Analytics.”

There has been some insider buying here, but the economics don’t look very attractive to me. Also, there are many traffic management systems on the market (many of which traffic engineers I have spoken with like more), and it’s hard for me to see how this company will be able to compete successfully going forward. Notably, their salesforce is outsourced to a distribution company, which makes the company capital light and royalty-based, but their distributor/reps sell other traffic management devices as well.

Interestingly, Andrew Berger, former Editor-in-chief of Walker’s Manual of Penny Stocks is chairman of the board.

All in all, not that cheap and there are a few red flags here.

Regis Corporation (NASDAQGM:RGS)

RGS trades at a price to levered free cash flow of 5x, so appears cheap. The history is interesting as well. Regis is the remnant of a rollup acquisition model. From 1994-2007 they acquired rapidly using debt to fuel the acquisitions. When opportunities dried up in 2004, they started buying franchisees out. By 2007 they had 11,881 salons, 8139 which were company-owned. But then the cycle turned, the debt became too much and the company entered a decline. After some financial engineering and selling off owned locations, they shifted focus to being a fully franchised asset light company with 4000 locations - in 2021.

This post provides a good history of the company until 2021: https://www.weightedcapital.com/p/it-may-be-at-the-wrong-price-if-its-06e

In 2024, something interesting happened. The management team renegotiated their debt effectively eliminating $80M in long term debt from their balance sheet and termed out the debt to 2029. As fears over anticipated massive dilution to fund operations were alleviated, the stock price rocketed 5x..

Today it owns a variety of mid-luxury salon franchises, and seems to have stemmed the tide of location closures, but it seems to have pivoted into buying out its franchisees. The CEO who oversaw the creditor negotiations and brought the company back from the brink is now leaving. Both of these actions are a red flag.

SANUWAVE Health, Inc. (NASDAQGM:SNWV)

SNWV is a medical device company that was bought by a value investor and seems to be investing in the salesforce to better commercialize the product. Reimbursements for the alternative intervention “grafting” have been cut recently. Woundcare historically has been a very tough business, all the incentives have been geared towards more expensive recurring interventions, is that changing? I can’t tell. It is a type of razorblade business, but management doesn’t break down the split between initial device sales and recurring sales. I don’t like that lack of transparency. Backing into it, it seems that the recurring use is very low, which makes the economics of the business unattractive to me. Competition may also prove a major problem in the coming years. More than anything this industry is firmly outside my circle of competence.

This was best written up on VIC previously. I recommend you start there.

SPS Commerce, Inc. (NASDAQGS:SPSC)

SPS is a supply chain management platform. It has had recent earnings growth of 20% a year, and trades at a PE of 20, giving it a PEG ratio of 1. It would also be a very attractive acquisition target for PE firms. This company in my mind is equivalent to ameriprise, or that it is a high quality compounder. But it seems fairly prices to me and not cheap enough. But it is boring and you will probably do well owning it.

Trung Nguyen has covered this company well.

Table Trac, Inc. (OTCQX:TBTC)

Makes devices for casinos. It trades at a 12x P/FCF (levered), and due to a significant cash position 6x EV/FCF. There could be 50% upside here. But for me, the value proposition isn’t completely clear, and the gambling industry has far too much competition and regulatory risk for me.

Competition for slots and in person gambling is geting worse. This business relies on casino traffic which worries me. Over the past decade the number of ways you can gamble away your money has exploded, now they can get you to do it as you lay in bed. No need to drive to a casino. Even if I didn’t consider the industry, I still wouldn’t invest. It is not cheap enough.

Interestingly, Andrew Berger, former Editor-in-chief of Walker’s Manual of Penny Stocks is on the board.

Just a Value Investor and Worldlyinvest have covered this name well.

Well that’s all folks. While I didn’t find anything I would personally invest in, I did enjoy this experience. I think going through a list of companies A-Z is a rewarding activity. It shows you just how few great companies there are out there, and once you do find one it puts it in perspective. I recommend everyone do it at least once. Next I plan to do something similar and go through a list of illiquid companies A-Z, to see what I can find. Stay tuned.