Forget Wall Street’s “Magnificent 7”, the true hidden gems of the American economy lie in the backbone: the lower-middle market. These are the family-owned businesses, the regional powerhouses, and the niche players that often go unnoticed by traditional investors. Yet, they are the backbone of the economy, driving innovation, creating jobs, and fueling local communities. But how can you, as an investor, tap into this hidden potential? Enter 1847 Holdings LLC (NYSE American: EFSH).
Imagine a company that acts as a private equity firm within the public markets. Unlike the complexity of traditional private equity, 1847 Holdings offers transparency and accessibility. The company acts as a champion for these smaller businesses, providing them with the resources and expertise they need to thrive. This translates into win-win situations: the businesses receive a fair valuation and continued growth under experienced leadership, while investors gain exposure to proven, cash-flow-positive companies with significant growth potential.
About 1847 Holdings, Inc.
1847 Holdings is a diversified acquisition holding company led by seasoned investor Ellery W. Roberts. Seeking hidden gems in the lower-middle market, EFSH’s expertise lies in identifying "solid" businesses with $5 million+ in revenue and unlocking their potential through operational optimization and strategic growth initiatives.
This translates into value creation for shareholders through two main paths: selling businesses at higher valuations or holding them for consistent cash flow and regular distributions.
EFSH’s diverse portfolio, spanning consumer-facing and human-manufactoring industries showcases their commitment to both financial returns and supporting the backbone of the economy by empowering smaller businesses.
A Diverse Portfolio: Currently, 1847 Holdings boasts a diversified portfolio of businesses across various industries, including:
- ICU Eyewear: Leading provider of private label and branded eyewear products.
- Wolo Manufacturing: Manufacturer of specialty tools and industrial equipment.
- High Mountain Door & Trim: Specializes in carpentry for builders, crafts everything from doors and trim to bathroom vanities and built-in closets, partnering primarily with large single-family, commercial, and multi-family developers.
- Kyle’s Custom Wood Shop: Leading custom cabinetry maker designing, building, and installing cabinetry tailored for custom and semi-custom builders.
- Innovative Cabinets and Design: Delivers beautiful and functional custom cabinetry solutions with award-winning service for homes and businesses.
Recent News: A Strategic Move
In a strategic move, 1847 Holdings divested appliance service subsidiary 1847 Asien for $10.9 million in annual cost savings. This realignment streamlines operations, boosts margins, and frees up resources for accretive acquisitions in core businesses, furthering the company’s commitment to profitability and shareholder value. CEO Ellery W. Roberts sees this as "an important step" towards their long-term vision of growth and innovation.
The Highlights:
- This strategic move aims to optimize resources, enhance shareholder value, and reduce expenses by $10.9 million annually.
- CEO Ellery W. Roberts believes this will improve profitability and position the company for future growth opportunities.
- The divestiture frees up capital and bandwidth for accretive acquisitions that align with their core businesses.
- This decision reflects EFSH’s commitment to delivering value to shareholders and achieving long-term success.
ICU Eyewear: Growth Through Retail & Diversification
Joining 1847 Holdings in 2023, ICU Eyewear brought more than just a brand partnership with retail giant Target. Their $19 million revenue in 2021, with a positive EBITDA and healthy 40% gross margin, showcases a solid foundation for growth. But their vision expands beyond Target shelves. ICU is actively diversifying its product portfolio, exploring new consumer lines, and even ventured into personal protective equipment during the pandemic, a strategic move that proved to be fruitful.
This innovation and adaptability opens doors to a wider audience and broader market reach. ICU’s extensive network of over 7,500 retail locations, diverse product portfolio of 10 brands, and over 3,000 SKUs offer immediate cross-selling opportunities and expand 1847 Holdings' reach. With combined expertise, ICU and 1847 Holdings unlock exciting potential for synergies, innovation, and product development, creating a bright future for both companies and investors.
Potential Upside for Investors: Why EFSH Could Be a Unique Buy
- Focus on Fundamentals: Despite market turbulence, EFSH remains confident in exceeding $90 million in revenue for 2024 and boasts a small market cap with a high potential upside. This number was recently reaffirmed, demonstrating confidence in their growth trajectory.
- Financial Performance: Total Q3 revenue in 2023 reached $18.8 million, representing a 29.8% year-over-year increase compared to Q3 2022. Gross profit also soared in Q3 2023, jumping 64.9% year-over-year to $8.0 million.
- Exposure to Hidden Gems: Unlike traditional public companies, EFSH focuses on the lower-middle market, finding hidden potential in smaller businesses often overlooked by larger investors. This untapped potential translates to higher growth opportunities.
- Diversification and Risk Mitigation: Their diversified portfolio focused on consumer-facing and human-manufacturing industries spreads risk and offers exposure to different growth sectors.
- Operational Expertise & Value Creation: EFSH doesn't just buy businesses, they actively optimize operations, drive growth, and unlock hidden value through strategic initiatives, leading to higher potential returns.
- Access to Smaller Businesses: For investors seeking exposure to smaller companies, EFSH provides a unique avenue compared to traditional large-cap investments.
Final Thoughts
In conclusion, we at Small Caps Daily think that 1847 Holdings LL (NYSE American: EFSH) stands out as an attractive investment opportunity for investors looking beyond the traditional market giants. Operating within the often-overlooked lower-middle market, EFSH offers investors a unique avenue to tap into hidden gems with substantial growth potential. With a transparent and accessible approach to investment, coupled with a track record of operational optimization and value creation, the company demonstrates its commitment to delivering long-term shareholder value.
Backed up by a diverse portfolio, a strategic vision for growth, and a projected $90 million in revenue for 2024, 1847 Holdings is in the perfect position to continue its rise, making it a must-watch for investors seeking exposure to smaller, yet promising, companies driving innovation and growth in the economy.