$SWAG Empire

https://www.reddit.com/r/pennystocks/comments/1otra2d/swag_empire/

A long time ago there was a boring company called $POOL Corp. It reinvested its profits every year to buy up small distributors of pool supplies. It was in a large and fragmented industry with thousands of regional distributors serving sticky customers that made repeat purchases. As $POOL got bigger, it got more efficient with increasing scale. Investors in $POOL Corp made a 650x return over a 26-year period, better than Apple investors:

Stran ($SWAG) is a boring company reinvesting its profits to buy small distributors of corporate swag (promotional products). It is in a large and fragmented industry with thousands of regional distributors serving sticky customers that make repeat purchases. As $SWAG is getting bigger it is getting more efficient with increasing scale.

I bought 2% of $SWAG:

And potentially 2% more from warrants (SWAGW):

$SWAG is Cheap

Stran is a growth company, but it’s not priced like one. Look at these financials:

$SWAG is a profitable company that grew 95% last year. $108M revenue, turning a profit with increasing margins. No debt. Never diluted. Buying back shares. Founder-led. A decade of strong growth behind it and ahead of it. Normally the market would pay up for this, but it’s still at 39M!

Subtracting $18M capital we’re only paying $20M enterprise value. That’s only 8 months of gross profit ($33M) and 0.16x sales for a profitable growth company. Our AI overlords agree this is wild:

Compare $SWAG to $MAMA, a rollup play that sells deli items to grocery stores, not exactly exciting. $MAMA has worse growth and margin:

And it has a market cap of $450M, vs SWAG’s $39M:

$SWAG is a better company than $MAMA, and $MAMA is trading 12x higher.

There’s low volume on this ticker and only 2-3 tweets a month, no recent analyst coverage. It’s likely Wall Street is only skimming the financials and only a handful of people are really digging into the story.

The surface-level financials aren’t great since Stran was purposely sacrificing profits for faster growth. Starting in 2025 Stran decided to refocus on profit, and it already showed a profit in Q2 which is normally one of its worst quarters. Stran is now heading into the profitable holiday season:

“Historically, the second half of the year has been our strongest part of the year because of the holidays…very excited for the outlook of our top line revenue growth to be significant by the end of the year.”

Stran is buying back shares:

“So we look at our stock, obviously, we feel that we’re undervalued…we’re excited to continue our buyback”

The Promotional Products Industry

Stran brands clothing:

And gift items:

Make promo kits:

Pop-up stands for stores:

Brands fun stuff:

They have a ton of big clients (Coca-Cola, WWE, Comcast, DraftKings, etc):

As you dig in it keeps going. They host events. They have a huge loyalty program subsidiary that does the reward program for DraftKings. They run online stores for companies that handle inventory and shipping. They have a design team. Set up trade show booths. This is a sophisticated company that positions itself as a full-fledged marketing agency centered around physical products. Large corporations trust them, and that earns Stran a much higher profit margin than if they were competing on price alone.

Stran’s Early History

Andy Shape (and Andy Stranberg, who later moved on) founded Stran 30 years ago, going door to door asking companies if they had someone to make their branded mugs, shirts and pens. Through good customer service and word of mouth, his company got 22% bigger for 26 straight profitable years:

22% a year wasn’t fast enough for Mr. Shape. Andy wants to grow faster with acquisitions.

So around 2021, he talked to private equity:

“Private equity was looking to build a balance sheet and get a quick flip in 3 years.”

“We want to become a leader and a player within this industry, a true leader.”

So Andy went public and raised $38M dollars with a plan to acquire smaller promotional products companies.

Acquisition Plan

Stran is telling us it is a special rollup.

Safety: Stran acquires companies for a minimal price and pays the owners back with a 3-4 year profit-sharing plan. This reduces risk to Stran if key salespeople or customers leave.

Profit: Stran buys companies that are already profitable and then removes their fixed costs (buildings, software, etc). Stran specifically targets companies that aren’t being run well, makes them efficient, treats their customers better, upsells the customers on other services, and lowers their purchasing cost of goods.

Scale: Each acquisition also makes Stran more efficient by giving it more scale to negotiate with suppliers, spreading out fixed costs over a larger base, adding new services that can be sold to existing customers, and adding new customer verticals and geographies.

Post-IPO

Stran IPO’d at the height of the 2022 bubble, and the ticker crashed shortly after.

A couple things happened:

• Stran grew 50% but lost $14.5M in Covid and census contracts, so reported growth was flat

• Going public on Nasdaq costs about $2M a year between auditors and fees

Investors misread the numbers as a net loss and flat growth and largely abandoned the ticker.

2022’s losses were intentional, Andy is focused on growth:

Q4 2021: “So our pipeline for acquisitions is very strong. We are speaking with dozens per week about opportunities out there and it’s very strong.”

Q3 2022: “Even though we reported a slight loss… this is part of our deliberate investment in infrastructure and capabilities to further accelerate our growth… this market is ripe for consolidation, the time to strike is now.”

“We got to ~$40M last year; to be a $100M+ company, we need to invest in that infrastructure… We have a clear path to profitability… It’s just a matter of scaling up to give us the ability to do that.”

Lots of new staff was hired.

Stran acquired 6 companies:

• G.A.P. Promotions (strong creative team specializing in beverage display racks)

• Trend Brand Solutions (entry into Texas market)

• TR Miller (promo company Andy emulated when starting out)

• Premier NYC in 2023 (NY market entry)

• Gander Group in 2024 ($60M revenue gaming marketing)

• Wildman Imprints (1200 Midwest customers)

In 2023 Stran got back to break even profitability. Andy is named person of the year by PPAI.

In 2024, the company got derailed by a reaudit. Stran was too small to afford being a public company when it ipo’d, so they chose a popular but cheap auditor which the SEC banned in 2024. The reaudit cost millions of dollars in fees, causing a loss in 2024, but they came out cleanly.

Rollup is Paying Off

Spreadsheet here.

The market is pricing Stran like a company with a history of losing money:

Stran made a profit every year for 26 years and recently has been in growth mode, purposely reinvesting all profits and running break-even to grow faster. The 2024 reaudit added millions in accounting fees and caused a temporary loss. Now Stran is switching to profit mode in 2025, and expenses are flattening:

Aside from a few bad quarters caused by the reaudit disruption, gross profit (money kept after product cost) is on an upwards trend:

Margins are going up, especially in 2025 with the new ERP system:

All said and done Stran is delivering on its plan. Gross profits have tripled while margins have increased nearly 10%. Net income hasn’t risen much as Stran has invested heavily in new staff, buildings and technology, but they know it’s now time to shift to profit mode. We already saw a surprise profit in Q2 which has historically been an unprofitable quarter, so we can be hopeful that Q3 and especially Q4 will show a strong profit.

The bigger picture though is Stran has proven itself through the first round of acquisitions. It acquired and integrated 6 companies, tripled its scale, and laid down a foundation to acquire many more companies. As this company continues to scale up and outpace fixed costs we are hoping for a long-term 8-10% profit margin, comparable to industry peers like 4Imprints.

Valuation

Let’s start by comparing $SWAG to its peers.

The first thing to note is that none of the other promotional products companies are still growing. They’re all also down this year in a bull market due to tariff fears. So I don’t think it’s a fair comparison because we’re comparing a proven growth company to slow-growth peers. But if the comparison has to be made, $SWAG’s market cap is 1.06x gross profit, which is right betwen $SGC and $PEBB.L, both of which aren’t growing and barely make a profit. So we’re paying nothing extra for $SWAG’s 276% 3-year growth.

If we’re going to compare $SWAG to other rollups, we saw the market is paying 12x more for $MAMA, which has lower growth and margins than $SWAG and is barely profitable.

The best way to evaluate $SWAG is forecasting future growth. I built a dcf model you can play with here which already factors in warrant dilution. Here’s a simpler model that only forecasts 7 years and assumes the market will pay a higher p/e based on Stran’s growth rate:

It is very difficult to set a target price for a growth company like this. $POOL only grew revenue 14% a year (41x total revenue growth) but at its peak gave investors a 650x total return as the market rewarded a proven compounder with higher multiples. Stran is in its early stages, which is good because it has a ton of runway left but also bad because it still needs to prove itself more. At $2.10 we have a good margin of safety, Stran doesn’t have to grow much to justify its current price.

Technical Analysis

Industry Veteran Interview

I interviewed someone who recently sold their promotional products company. I found it very reassuring. My takeaway is that customers are sticky and value creativity and reliability more than raw price, which means long-term profits can be defended. Profits in this industry can be 25% - 40% of gross profit once fixed costs are covered. Tariffs didn’t worry him.

“The key to success in this industry is building long-term relationships.” “Most customers are very sticky with their existing sales people. Some of my relationships lasted 35 years.” Customers are corporations, they’re somewhat price-sensitive but they care more about reliability, fast delivery, and quality creative products that market their brand.

“When I sold my business to another sales guy, he retained 85 to 90% of the business…the largest customer has a company store (like most of Stran’s customers) and he has them tied into our software with a purchase system so he’s as locked in as you can be.”

“My arrangement was 25% of the gross profit for four years.” (Cheap!) “I paid my umbrella company 20% of my gross profit to cover software, payroll services and other things I didn’t want to get tangled up with. Out of the remaining 80% I paid my payroll and rent for my office. After expenses my net profit ranged from 25% to 40% (of gross profit).”

“We went through a tariff time and it had almost 0 effect on the business. However, those tariffs were not as significant as they are now. Still, I’m not sure I would be terribly concerned about that”.

“Once fixed expenses were covered, net income could hit 25% or more (of gross profit)”.

“Company stores can be profitable and add stickiness (Stran specializes in company stores)”.

Me: “Should I be worried about Alibaba-like companies like 4Imprints taking over?”

A: “When I saw a 4Imprint catalog on a customer’s desk I was happy. We could get the same items faster, delivered on time at a better cost all the time. Plus provide better ideas that communicated for the customer more effectively because we understood their business. Stran needs to not follow 4Imprint’s pattern.”

Risks

Warrants: There are 10M warrants ($SWAGW), versus 18M current shares. If they execute Stran would get $50M to fund acquisitions.

Tariffs:

Stran has contracts that let it pass on its costs to customers. Although tariffs do weaken their customers overall purchasing power, margins have been protected. Stran imports less than 20% of its goods from China and reshuffled its supply chain in Q1 to move away from China specifically. Tariff concerns weren’t mentioned on the Q2 call and Stran left us on a bullish note for the back half of the year.

Other industry sources are reporting resilience. Distributors reported a 5% rise in sales in Q3. One of Stran’s competitors $SGC is projecting 5% year over year sales growth for Q4. Several companies, including Stran, have actually framed tariffs as an opportunity. This is an industry where distributors distinguish themselves by reliability, communication, and navigating complex supply chains. This industry’s job just got harder, but that’s also an opportunity for sophisticated players like Stran to wrestle customers away from smaller companies.

Overall, yes, tariffs are definitely bad for this industry. Still, Stran left us on an optimistic note for the back half of the year, and other companies are reporting growth. We will have to see if this holiday season turns out as profitable as normal. The US Supreme Court is leaning towards overturning the tariffs.

Recession: Promo industry sales fell 7% in the 2001 recession and 13% in 2009. Businesses view promotional products as a revenue-generating part of their marketing budget, not discretionary fluff. If Stran’s revenues do take a hit due to tariffs or a recession, less profits will be paid to acquired company’s owners through earnouts and lower commissions will be paid to sales staff. This is a 30-year old business with no debt that has survived past recessions, Stran is able to trim expenses and lay off staff when it needs to.

Conclusion

Stran is perhaps the most overlooked growth stock on the market. Tesla has to build an omniscient robot army just for its stock to double. All Stran has to do is keep buying profitable companies cheaply and maintain them without adding too many middle managers. Stran has already acquired 6 companies successfully while somehow becoming more efficient and profitable in the process. It’s now covering its fixed costs and has crossed the profitability threshold.

Success definitely isn’t guaranteed. There are industry headwinds from tariffs and a potential recession. It’s also a competitive industry. What we do know is we’re paying bottom-barrel prices for a company with a proven growth plan led by an ambitious leader with a 30-year background of success. At $2.10 that feels like a good deal. The market will want to see a consistent profit before it will pay up for this company but hopefully it won’t have to wait long.

If you want to monitor this company, the main things to watch are efficiency and fixed costs. We have a great story so far, they turned on their new ERP system and we saw profit margins rise to all time highs in Q1 and Q2. We would like to see that continue. We also want to see fixed costs stay in check, expenses rose strongly as Stran acquired staff, buildings and software and then increased in 2024 due to reaudit costs. Sales commissions are included in these expenses so it will continue to rise, but it needs to grow much slower than gross profit.

Q3 and Q4 are normally the most profitable quarters and Stran left us on an optimistic note. If we’re lucky Stran will make millions in profits this winter, the market will wake up and $SWAG will rerate 20x higher. If not, the business will keep compounding. Regardless of how the market reacts, this is a 30-year old company and its long-term success doesn’t hinge on one or two quarters. The Q3 report is out Thursday, Q2 was surprisingly good so I wouldn’t be surprised if there was some tariff-related order pull-forward that lowers Q3 revenue. Q4 is always the best quarter.