📈 2 stocks I'm watching

Xeros Technology Group (XSG) is a UK-based company specialising in developing innovative, sustainable technologies aimed at reducing the environmental impact of the laundry and apparel industries.

What does that mean?

Here’s what its website says:

It has two products.

The first being the Microfibre Pollution Filter.

This technology captures over 99% of microplastics.

Don’t know what these are? Neither did I when I first came across this company.

Basically, 700,000 microfibres are shed from our clothes with every wash.

These are synthetic fibres, and as a result around 500,000 tonnes of microplastics flow into the world’s oceans every year.

In fact, microfibres account for around 85% of man-made debris on shores globally.

This is a real issue, as microfibres end up in our water, our food chain, and is made plenty worse by fast fashion.

Here’s where Xeros comes in.

It’s filtration technology captures over 99% of microplastics.

It also offers a Garment Finishing System. This is a closed system called the XDrum which releases reusable polymer spheres called XOrbs.

These XOrbs use up to half the normal amount of water and provide additional mechanical atrion which helps drive chemistry deeper into fabrics.

At the end of the cycle, the XDrum collects the XOrbs back into the storage system to be reused again and again.

Now, you’re probably reading this and thinking the Total Addressable Market (TAM) for this business is huge.

And you’d be right.

It is.

But this sort of thinking has allowed investors to be completely wiped out several times.

During the course of my career, I’ve seen this stock refinance and wipe out 99.9% of shareholder value twice.

I’ve even made money on it, because previous management teams were incredibly dumb.

The first time was 2018.

It was my ‘free money trade’.

I think I’ve shorted the stock before a placing at least three separate times in all but those are two examples.

Basically, management would tell the market that it would need to raise money before it went and did it.

This did two things.

First of all, nobody bought the stock.

Why would you?

If you know there’s a discounted placing coming, because management literally told you then unless you have a fetish for losing money you’d just wait until the refinancing was done.

Second of all, people sold the short. Why wait for the price to go down? Just buy back either in the placing or after it’s complete.

And then people like me short sold the stock. By selling the shares, I was able to buy these back at a discount.

If you don’t understand how shorting works or want to learn how I do this - this video will help.

However, a new management team has come in who appear to have some sense.

And on the recent trading update, I actually went long.

It was a tiny position, but one I’m now up over 100% in as the stock has rallied sharply.

Now, just to be clear…

I am not suggesting that anyone buys at these levels.

The stock is extended, and you’re paying way higher prices for the same piece of news that came out the other week.

It’s likely profits will be taken at some point, and I also feel it would be prudent for the company to raise cash if it needs to whilst the market is strong.

However, the company claims to be amply funded for now.

I’ve heard this one before, and a quick check of the cash flow statement tells me that the company burned through nearly £5 million in cash last financial year.

So whilst net cash on 31 December 2024 was £2.8 million, even with the £2.5 million of revenue projected (remember this is revenue and not cash converted) I would say the balance sheet looks precarious.

But if the company does convert one of these discussions into an actual contract or raises money, this company could be worth a further look.

At the moment, it’s nothing more than a speculative punt.

However, the next stock is a business that is established, winning business, and yet still lowly rated.

My belief is that this could be a quality compounder on a low earnings multiple.