Key Takeaways Microcaps have been rallying and outperforming large caps of lateMicrocaps have a unique set of risk factorsMSGM and DJCO are 2 new OutperformsMicrocaps seem to be catching a bid of late, as they say, as the asset class has rallied nearly 20% over the last 2 months vs. flattish performance by the S&P 500. So I feel now is a good time to revisit the nuances of the asset class. Image Source: Zacks Investment ResearchAs we’ve highlighted in previous discussions,https://www.zacks.com/commentary/22 ...

Highlights the Board has Overseen Record Revenue at Journal Technologies, Sound Capital Allocation and a Sustained Focus on Long-Term Value Creation Reminds Shareholders That Buxton Helmsley, Which Previously Tried to Extract Consulting Payments as Part of a Self-Serving Scheme, Continues Waging a Reckless Campaign That Could Undermine the Company’s Positive Momentum Urges Shareholders to Vote “FOR” All of the Company’s Highly Qualified Directors on the Company’s White Proxy Card LOS ANGELES, Jan. 21, 2026 ...

Core Viewpoint - Daily Journal Corporation (DJCO) has been upgraded from a "Neutral" to an "Outperform" rating, indicating growing investor optimism regarding its transformation from a legacy publishing business to a tech-forward enterprise [1] Group 1: Journal Technologies Performance - Journal Technologies now accounts for nearly 80% of DJCO's total revenues, with a 32% increase in revenue to $69.9 million for the fiscal year ended Sept. 30, 2025 [2] - Pretax income for Journal Technologies rose from $2.5 million to $12.7 million year over year, an increase of over 400%, driven by stronger consulting revenues and growth in software license and maintenance contracts [2] Group 2: Financial Strength and Capital Management - DJCO's balance sheet is strong, holding approximately $493 million in marketable securities with unrealized gains of $134 million and interest and dividend income of $7.4 million in fiscal 2025 [3] - The company reduced its outstanding margin loan by $5.5 million, demonstrating a conservative capital management strategy [3] Group 3: Global Expansion and AI Integration - DJCO's technology products are deployed in around 37 U.S. states and several international markets, including Australia and Canada [4] - The company is enhancing its platforms with AI features to improve user experience and automate workflows, responding to the demand for digital modernization in court systems [4] Group 4: Challenges and Risks - The legacy publishing business saw a 4% decline in circulation revenue in FY2025, primarily due to falling print subscriptions and pricing adjustments [5] - Journal Technologies faces risks related to its client base, which consists mainly of government agencies that favor larger vendors for statewide deployments [6] Group 5: Outlook - The upgrade to "Outperform" reflects a positive sentiment as DJCO successfully repositions itself as a software and services company while maintaining a strong financial structure [7] - Despite challenges in the traditional publishing business and competitive pressures, DJCO is well-positioned for continued growth if it can sustain momentum in software and manage its capital effectively [8]

Company Overview - Daily Journal (DJCO) is valued at $802 million and publishes newspapers in California, Washington, Arizona, Colorado, and Nevada, including the California Lawyer magazine and specialized information services [1] - The company also publishes The Code of Colorado Regulations and specializes in public notice advertising [1] Stock Performance - DJCO has recently achieved a new 52-week high of $594.82 on January 9 [4] - The stock has gained 25.11% since the Trend Seeker issued a new "Buy" signal on November 25 [2] - Over the past month, shares are up nearly 25% and have made 16 new highs, with a total gain of 23.9% [6][7] - The stock recently traded at $591.80, with a 50-day moving average of $467.11 [7] Technical Indicators - DJCO maintains a 100% "Buy" technical opinion from Barchart [6][7] - The stock has a Weighted Alpha of +36.09 and a Relative Strength Index (RSI) of 72.97 [7] - There is a technical support level around $566.83 [7] Financial Performance - DJCO has experienced increases in both revenue and earnings for the past three years, although specific projections are not available as the stock is not covered by Wall Street [8]

Core Insights - Daily Journal Corporation's shares have declined 5.7% since the earnings report for the fiscal year ended September 30, 2025, underperforming the S&P 500 index, which declined by 1.1% during the same period [1] Financial Performance - The company reported a net income of $81.41 per share for the fiscal year, up from $56.73 per share in the previous year [2] - Total revenue reached $87.7 million, marking a 25% increase from $69.9 million in the prior year [2] - Net income rose to $112.1 million compared to $78.1 million in the prior year, driven by operational growth and strong investment returns [3] Segment Performance - Journal Technologies accounted for approximately 80% of total revenue, with a 32% year-over-year revenue increase to $69.9 million, up from $53.1 million [4] - Consulting fees surged by 51% to $22.7 million, while licensing and maintenance fees rose 12% to $31.7 million [4] - The Traditional Business segment saw a slight revenue increase of 6% to $17.8 million, but recorded a pretax loss of $0.2 million, reversing a $2 million profit from the prior year [5] Management Insights - Management emphasized the importance of Journal Technologies in driving growth, with nearly all customers being government agencies [6] - The company plans to continue investing in product development and modernizing its platform while facing challenges in the Traditional Business segment [6] - Following the death of Charles T. Munger, the company will not initiate new equity investments in unrelated public securities, focusing instead on supporting operations within Journal Technologies [7] Investment Portfolio - The investment portfolio contributed significantly to net income, with $134.3 million in unrealized gains on marketable securities, up from $96.1 million in the prior year [8] - The fair market value of the investment portfolio was $493 million as of September 30, 2025, including $353.9 million in cumulative unrealized gains [8] Operating Expenses - Operating expenses increased by 19% to $78.2 million, driven by higher personnel costs and increased legal and accounting fees [9] - The company undertook initiatives to strengthen internal controls, which contributed to rising legal and accounting costs [9] Debt Management - Daily Journal improved its balance sheet by paying down $5.5 million on its margin loan, reducing the outstanding balance to $22 million [10]

Group 1 - The service provided by Crude Value Insights focuses on oil and natural gas investments, emphasizing cash flow generation and the potential for value and growth [1] - Subscribers have access to a model account with over 50 stocks, detailed cash flow analyses of exploration and production (E&P) firms, and live discussions about the sector [1] Group 2 - A two-week free trial is available for new subscribers, promoting engagement with the oil and gas sector [2]

Core Viewpoint - Billionaire investor Bill Ackman has reaffirmed his investment in Fannie Mae and Freddie Mac, calling their release from federal conservatorship his "Best Idea for 2026" [1] Group 1: Ackman's Proposal - Ackman's strategy involves a three-step "walk before you run" approach aimed at stabilizing the housing market while benefiting the U.S. Treasury [2] - The plan includes a repayment acknowledgment, where the U.S. Treasury and FHFA should recognize that the GSEs have repaid their initial $190 billion bailout, returning over $300 billion in profits to the government [8] - The proposal also suggests that the government should exercise its warrants for a 79.9% stake in both companies, creating a mark-to-market windfall estimated at over $300 billion [8] Group 2: 2026 Catalyst - Ackman identifies 2026 as a crucial year for this investment, projecting that if Fannie and Freddie trade at 16x and 13x their estimated 2026 earnings, their shares could see an upside of 300% to 400% [4] - The relisting of Fannie and Freddie would provide a three-year period for the Trump administration to finalize capital requirements and management structures [4] - Michael Burry has echoed a similar sentiment, suggesting that the government is preparing to re-privatize the GSEs through a massive IPO, potentially valuing them at $500 billion by 2026 [5] Group 3: Financial Implications - Ackman argues that freeing Fannie and Freddie from federal conservatorship could remove approximately $8 trillion in liabilities from the government's balance sheet [6] - This move is seen as a way to transform a crisis-era burden into a significant success story for taxpayers in financial history [6] - The final component of Ackman's plan is to relist the stocks on the New York Stock Exchange, which would enhance liquidity for institutional investors [8]

Financial Performance - Fiscal Year 2025 total consolidated revenue reached $87.7 million, a 25% increase from $69.9 million in Fiscal Year 2024[1] - Journal Technologies generated $69.9 million in revenue, marking a 32% increase from $53.1 million in Fiscal Year 2024, driven by a 51% rise in consulting fees and a 59% increase in other public service fees[3] - Operating income for Fiscal Year 2025 was $9.5 million, representing 10.9% of revenue, compared to $4.1 million or 5.8% of revenue in Fiscal Year 2024[3] - Net income for Fiscal Year 2025 was $112.1 million, or $81.41 per diluted share, an increase of 44% from $78.1 million or $56.73 per diluted share in Fiscal Year 2024[3] - The company generated $13.3 million in operating cash flow during Fiscal Year 2025[3] Market Position and Strategy - As of September 30, 2025, the fair market value of marketable securities was $493.0 million, including pretax unrealized gains of approximately $134.3 million for the twelve months ended September 30, 2025[3] - Traditional Business reported advertising and circulation revenues of $17.8 million, reflecting a 6% increase over $16.8 million in Fiscal Year 2024[3] - Journal Technologies secured 17 multi-year contracts with courts and government agencies, expanding its client base[3] - The company is focused on expanding recurring revenue, maintaining low churn, and building long-term client relationships in the courts and justice agency sector[2] - Daily Journal Corporation continues to optimize its digital publishing operations and expand online content offerings in response to market demands[3]

Revenue and Financial Performance - Journal Technologies constituted approximately 80% of the Company's total revenues in fiscal year 2025, up from 76% in fiscal year 2024[38]. - Revenues from Journal Technologies' foreign customers were approximately $11.9 million in fiscal year 2025, compared to $6.2 million in fiscal year 2024[42]. - Consolidated revenues increased by $17.8 million (25%) to $87.7 million in fiscal year 2025 from $69.9 million in fiscal year 2024, driven by Journal Technologies' consulting fees, public service fees, and licensing fees[127]. - Total revenues increased to $87.7 million in September 30, 2025, up 25.4% from $69.9 million in September 30, 2024[180]. - Net income rose to $112.1 million for the year ended September 30, 2025, compared to $78.1 million for the same period in 2024, reflecting a 43.5% increase[180]. - Journal Technologies' pretax income increased by $10.2 million (408%) to $12.7 million, driven by a revenue increase of $16.8 million (32%)[136]. - Traditional Business revenues increased to $17.8 million from $16.8 million, with advertising revenues rising by $0.8 million (8%) to $10.1 million[141]. Operating Expenses and Cash Flow - Consolidated operating expenses rose by $12.3 million (19%) to $78.1 million in fiscal year 2025, primarily due to increased personnel costs and outside services[129]. - In fiscal year 2025, net cash provided by operating activities was $112.1 million, with non-cash items totaling $99.2 million and cash used for working capital of $0.4 million[150]. - The company reported a net cash provided by operating activities of $13.3 million for the year ended September 30, 2025, compared to a net cash used of $89,000 in 2024[185]. - In fiscal year 2025, net cash used in financing activities totaled $5.7 million, mainly due to a $5.5 million repayment on the investment margin loan[153]. Market and Competitive Landscape - The Company faces significant competition in the case management software market, with many competitors having greater scale and longer operating histories[54]. - The Company anticipates challenges in maintaining commercial advertising and circulation revenues due to competition from online platforms[82]. - The Traditional Business is expected to continue facing significant secular decline, impacting future revenues[86]. Technology and Development - The Company has begun developing next-generation development patterns and practices to address technical debts within current generation offerings[52]. - The Company has introduced AI features in some of its products and plans to further invest in cutting-edge technologies to maintain a competitive edge[53]. - The Company is investing in the development of new technologies and improving existing products to enhance profitability[87]. - Research and development expenses related to software development were $2.5 million for fiscal year 2025, up from $1.4 million in fiscal year 2024[201]. Internal Controls and Compliance - The Company has identified a material weakness in its internal control over financial reporting, primarily related to segregation of duties and access controls, which has not been fully remediated as of September 30, 2025[102]. - The Company has made significant improvements in internal controls during fiscal year 2025, including increased finance personnel and enhanced review procedures[104]. - The Company is currently evaluating the impact of new accounting standards issued by FASB, including ASU 2023-09 and ASU 2024-01, which will affect future financial disclosures[214][215]. Assets and Securities - The Company held marketable securities worth approximately $493.0 million as of September 30, 2025, with a cumulative unrealized gain of $353.9 million[94]. - The Company's marketable securities portfolio is concentrated in six companies, increasing the risk of significant declines affecting net income and shareholders' equity[95]. - The passing of Charles T. Munger in November 2023 is expected to affect the future financial performance of the marketable securities portfolio[96]. Employee and Corporate Governance - As of September 30, 2025, the Company had approximately 415 full-time employees and contractors, with a good employee relations status[60]. - The Company did not declare or pay any dividends during fiscal years 2025 or 2024, and does not expect to do so in the foreseeable future[121]. - The Company has a stock repurchase program in place since 1987 but did not repurchase any shares during fiscal years 2025 and 2024[123]. Subscription and Revenue Recognition - The Company recognizes revenues in accordance with ASC Topic 606, with deferred revenue recorded for subscription sales and recognized as earned when services are provided[156]. - Revenue from subscription-type services is recognized on a pro-rata basis over the subscription term, with proceeds deferred at the time of sale[211]. - The Journal Technologies segment generates revenues from contracts including subscription software licenses, maintenance, support, and consulting services, with revenue recognized when performance obligations are satisfied[172].

Core Insights - Daily Journal Corporation achieved annual revenue of $87.7 million for fiscal year 2025, reflecting a 25% increase from $69.9 million in fiscal year 2024, primarily driven by growth at Journal Technologies [1][2] Financial Performance - Journal Technologies reported revenue of $69.9 million for fiscal year 2025, marking a 32% increase over $53.1 million in fiscal year 2024, driven by significant growth in consulting fees (up $7.6 million or 51%), other public service fees (up $5.7 million or 59%), and license and maintenance fees (up $3.5 million or 12%) [5] - Operating income for fiscal year 2025 was $9.5 million, representing 10.9% of revenue, compared to $4.1 million or 5.8% of revenue in fiscal year 2024 [5] - Net income for fiscal year 2025 was $112.1 million, or $81.41 per diluted share, an increase of $34.0 million (44%) compared to net income of $78.1 million, or $56.73 per diluted share, in fiscal year 2024 [5] - The company generated $13.3 million in operating cash flow during fiscal year 2025 [5] Market Position and Strategy - The company sees a significant opportunity in the courts and justice agency sector, aiming to create durable value over time through modernization and implementation capacity [2] - Daily Journal Corporation's Traditional Business reported advertising and circulation revenues of $17.8 million, reflecting a 6% increase over $16.8 million in fiscal year 2024 [5] - Journal Technologies expanded its client base by securing 17 multi-year contracts with courts and government agencies [5] - The company is optimizing its digital publishing operations, expanding online content offerings, and streamlining workflows in response to evolving market demands [5] Marketable Securities - As of September 30, 2025, the company's marketable securities had a total fair market value of $493.0 million, including pretax unrealized gains of approximately $134.3 million for the twelve months ended September 30, 2025, and accumulated pretax unrealized gains of $353.9 million [5]