VIC Idea Summaries - Special Situation Investments

VIC Idea Summaries

Below are summaries of ideas posted on Value Investors Club. VIC is great! … but noisy. The summaries below are supposed to help sift through that noise.

Around 2-5 new investment ideas appear on VIC daily. Some are really good and some are posted just to meet membership quotas. Initially, these are for VIC members only, but all move to the public domain after 45 days. That’s when summaries will appear here and on Twitter.

Is the 45 days delay on VIC ideas before they become public a big issue? Not at all – only a very limited number of VIC write-ups actually move the markets right away. Usually, the articles age really well, with critical pushback and additional insights in the comments section.

Note: You will need to register for free guest access to Value Investors Club to be able to access VIC posts with a 45-day delay window.

Market cap is indicated at the time of posting the summary.

Oct 11, 2022

NZME Limited (NZM.AX), mcap=A$192m, price A$1.01 vs A$2.23

Dominant media company in NZ, owning half the print market; 40% of the radio market; & a quarter of the digital display market. Trades at 6x FCF. History of material buybacks/dividends. Expected to return half the mcap to shareholders over the next 3 years. Capital allocation risks have been reduced over the past 18 months.

Oct 11, 2022

Constellium (CSTM), mcap=$1.6bn, price $11.18 vs $14.20

Aluminum producer with exposure to the packaging, aerospace, defense, auto, and general industrial sectors. Macro headlines and European energy availability/concerns have weighed on the stock but the damage is too severe. The management team is executing well and focused on FCF. Company earnings are set to benefit from the recovery of aerospace earnings lost during covid, recently restructured beverage contracts as well as continued cost-saving initiatives. CSTM has materially reduced leverage and now has a favorable maturity ladder with ample liquidity. Cheap valuation across several metrics - the stock is at least double from current levels.

Oct 11, 2022

Milestone Pharmaceuticals (MIST), mcap=$255m, price $8.50 vs $8.00

Special situation biotech that is a 'process' and not a 'science' play. 90% chance of being up 100% and a 10% chance of being down 50% over the coming weeks/months. Phase I, Phase II, and Phase III have already been completed with great data. But MIST screwed up the presentation of the Phase III data resulting in denied FDA approval. Just finished re-running the trial and is due to re-present the data in the back half of the year.

Oct 10, 2022

The Allstate (ALL), mcap=$35bn, price $131 vs $130

P&C insurer that has been under-earning in their U.S. personal auto business since mid-2021. Sold-off after Q2 earnings due to inflationary headwinds, however, the auto margins are likely to be at or near trough levels. Margins are set to expand given implemented rate adjustments to counter inflation, favorable macro indicators as well as reserves already being in line with best-in-class peers. Normalized auto margins and profitability levels are expected by early 2024. ALL expected to re-rate as investors see a cleaner roadmap back to normalized earnings power.

Oct 10, 2022

Entertainment Holdings (AMC) arb, mcap=$3.4bn, price $6.53 vs $7.4

Arbitrage play between $APE & $AMC stock - both economically equivalent. 23% spread. However, borrowing for AMC is tight and there is a short-squeeze risk. New APE-preferred securities were created for AMC to have issuance currency without requiring shareholder approval.

Oct 10, 2022

Winnebago Industries (WGO), mcap=$1.73bn, price $54.43 vs $63.15

Leading North American manufacturer of towable RVs, motorhomes, and boats. Investors are wrong in thinking that the recent revenue and earnings growth is almost entirely due to it being a Covid winner. Actually, growth was mainly driven by: 1) secular growth in the RV industry and market share gains, 2) smart acquisitions, and 3) cost-cutting initiatives and efficiency gains. The business has been transformed over the last 5 years. Low investor sentiment - short interest at 18%. Normalized EBITDA has more than doubled from 2019 driven by the factors listed above.

Oct 10, 2022

LendingClub (LC), mcap=$1.2bn, price $11.36 vs $14.33

LendingClub - structurally transformed business after the acquisition of Radius Bank in Feb'21. Cheap at 6.5x 2023 earnings and 1.3x TBV. The bank enables LendingClubC to retain higher-yielding loans and fund them with stable, low-cost deposits as well as reduces reliance on third-party funding. Previously LC generated revenues from transaction fees only. With the bank's CET1 ratio of almost 19% (higher than almost any other bank) the company could potentially initiate a share buyback plan in the next 6 to 9 months. ROTCE in low to mid 20's. LendingClub is primarily used to consolidate or refinance credit card debt and save money through lower interest rates and fees. Significant run-way to take market share in the $1 Tr credit card market.

Oct 7, 2022

Pentamaster International (1665.HK), mcap=hkd 1.9bn, price hkd 0.79 vs 0.90

Pentamaster International - provider of automated testing equipment and factory automation solutions. Trades at only 9x earnings. Fast-growing business at a heavily discounted price, with high returns on capital, significant tailwinds, diversified revenue streams and run by conservative management who has built up a significant net cash balance across the years. The company is 64% owned by Malaysia's listed parent, which is a stock market darling and trades at 39x PE. Wide valuation discrepancy despite Pentamaster International contributing more than 100% of the parent's earnings.

Oct 7, 2022

Middlefield Banc (MBCN), mcap=$164m, price $28.49 vs $27.50

Solid bank franchise with good earnings power that has the potential to be swept up in the wave of community bank M&A over the next several years. Trades at an undemanding 1.2-1.3x TBV with 12%-13% ROE and a history of solid loan underwriting. The bank is one of the final remaining independent community banks in the $1-$2 billion asset range in a rapidly consolidating northern Ohio market. Currently, MBCN is acquiring $LBSI - this acquisition will greatly change the profile and governance of the bank. Will have Castle Creek among its shareholders and board - investor with a phenomenal track record in community banks with virtually all portfolio companies getting sold eventually.

Oct 7, 2022

Currency Exchange International (CURN), mcap=$89m, price $13.90 vs $13.50

Currency exchange service provider - both physical and digital. Trades at only 9.5x fwd earnings. Significant upside potential from both business segments and strong downside protection with net cash equivalent to the current mcap. The payments segment transformed from minuscule to $9.6m TTM revenue over the last couple of years driven by continued growth in transacting bank count. The banknotes segment (FX retail kiosks) is set to continue recovering with travel returning to pre-pandemic levels (still only at 70%-90% levels). The retail business also benefits from Travelex closing its North American operations during the pandemic. Wholesaling dollar notes internationally will add a third major revenue driver for the company. Financial performance has materially improved over the last few quarters and profitability for the whole company has already reached/exceeded pre-pandemic levels.

Oct 6, 2022

Galaxy Gaming (GLXZ), mcap=$61m, price $2.69 vs $3.37

Licensor of table games to traditional casinos - unique IP assets. Strong unit economics with 98%+ gross margins and 50% EBITDA margins. Projected to double EBITDA from '22 to '25. 200%+ upside. Potential to become a multi-year compounder. Multiple growth drivers - licenses in new states, signing up more casinos, upselling existing casinos, and iGaming. The litigation overhang is gone. An activist private investor was recently appointed to the board.

Oct 6, 2022

Bel Fuse Inc. (BELFB), mcap=$333m, price $26.33 vs $26.08

Electronics components manufacturer in the early innings of credible and so far successful turnaround led by new CEO. Trades at 5x-6x EBITDA, well below peers. Significant strides have already been made and results of the last few quarters have derisked the story. Plenty of low-hanging fruit left that will allow company to double its EBITDA margins to 15% and in turn drive re-rating closer to peer multiples. Due to a lack of oversight some-pockets of the business was operating at negative gross margins. Aside from the company-specific story - long-term secular tailwinds in "electrification of everything".

Oct 6, 2022

BFF Bank (BFF.MI), mcap=€1.3bn, price $7.01 vs $6.96

Unique bank with phenomenal returns on capital run by great management trading at 7.6x earnings. Leader in Italian factoring and specializes in the non-recourse sale of trade receivables from the National Healthcare System and the public administration. Also has similar operations in Spain and Portugal. Unique niche with very limited credit risk. 35% returns on tangible equity. Shareholder-friendly management, which understands capital allocation and pays out 100% of earnings in dividends. 11.7% dividend yield.

Oct 6, 2022

Converge Technology Solutions (CTS.TO), mcap=1.5bn, price $7.10 vs $7.41

Consolidator of IT service providers with 30+ acquisitions since 2017. Successful roll-up that is able to extract cost & revenue synergies from its acquisitions as well as generate high-single-digit organic growth. Currently sits at 11x EBITDA, which does not incorporate recently completed acquisitions. Expected to continue growing through M&A and could double in size over the next 3-4 years. Further M&A will be financed by internally generated FCF and equity raises are being replaced by the recently announced share buyback.

Sep 28, 2022

Harley-Davidson (HOG), mcap=$5.4bn, price $37.10 vs $40.00

Harley-Davidson - iconic brand with 70+% market share in the core heavyweight bike market. Trades at 8x EPS/FCF as it is perceived as a melting ice cube due to secular demographic headwinds. However, the new CEO is reinvigorating growth and profitability by refocusing the business on core geographies and bikes. He previously succeded in bringing Puma from the brink of bankruptcy to a 4000% stock return. HOG needs to reach $70/share (75% upside) for the incentive package to kick in. Margins are already improving vs 2019 and approaching the heydays of pre-GFR Harley. Dealer $ and margin profitability in ’21 was a 25+ year high, despite inventories down 70+%. CEO personally purchased $5m of stock.

Sep 28, 2022

Black Stone Minerals, L.P. (BSM), mcap=$3.3bn, price $15.54 vs $14.68

Natural-gas weighted mineral royalty MLP with well-protected downside and potential upside coming in for free. Currently generates 11.5% distribution yield despite production hedged at $66 oil and $3 gas., hedges for 2023 protect from fall in commodity prices. Upside from expected 15-20% production growth over the next 6 quarters. Potential for significant upside should the “higher-for-longer” thesis on natural gas prices come to pass. Significantly reduced debt over the last 3 years from $400m to <$100m.

Sep 28, 2022

Hingham Institution for Savings (HIFS), mcap=$563m, price $262 vs $292

Exemplary banking operations are run by conservative managers with a deep understanding of real estate lending and an intense focus on costs. At 10x PE priced in line with the average bank despite being a far superior business. The continued compounding of equity capital will result in a 4x - 6x return over 10 years. Expected to generate ROE of 15-20% over the next decade. Sits at 1.7x BV, near its 5-year low. The bank is family run with insiders owning 31% - a long track record dispels any concerns of nepotism. Mostly single-family and multifamily residential portfolios. Only loans personally assessed by the board are on the books with an intense focus on collateral - LTV by 53%. Net charge-offs are almost non-existent. Interest rate sensitivity (especially for over longer periods) is somewhat protected due to 66% of assets in adjustable rate loans. Reinvests most of the earnings to compound capital - only 10% dividend payout ratio.

Sep 27, 2022

Motorpoint Group (MOTR.L), mcap=£165m, price £1.83 vs £1.95

UK used car retailer at 10x PE. Management recently initiated a new strategy to double market share by investing in e-commerce tech and marketing, which will result in depressed ST profits. Although investors were not excited about this (stock price halved from the peak), management is accelerating investments as the strategy is working and key competitors are fighting for survival. Profits are expected to more than double over the next 3 years with the company generating substantial cash and likely launching of buyback. CEO owns 10% of the company.

Sep 27, 2022

Tabula Rasa HealthCare (TRHC), mcap=$112m, price $4.28 vs $5.00

Pharmacy service provider priced as if it is heading for bankruptcy. 40% market share in its niche of medication risk management. Recurring, subscription-based revenue stream. Recent and pending non-core software assets sales will bring around $250-$300m and remove liquidity concerns, materially reduce leverage, and simply the equity story. The remaining business is set for double-digit annual growth over the next five years.

Sep 27, 2022

Ecovyst (ECVT), mcap=$1.2bn, price $8.62 vs $9.50

Global provider of specialty chemicals. with 75% sales in NA. #1 or #2 players in its end markets with minimal competition. At 6.5x EBITDA materially cheaper (50% discount) than peers, but with better growth, margins, and cash flow conversion. Recently announced revised capital allocation strategy with buyback plan for more than 1/3 of market cap over the next 4 years. PE overhang as CCMP is selling down its stake - reduced from 39% a year ago to 24% currently. Insiders purchased $1.2m shares at current prices.

Sep 26, 2022

S&P Global (SPGI), mcap=$106bn, price $318 vs $386

Post-merger S&P Global and IHS Markit - high-quality compounder set to return a significant amount of cashflow to shareholders once IHS Markit integration is complete and synergies are realized. Collection of very high-quality businesses with strong historical revenue growth, pricing power, high margins, low capital intensity, and customer stickiness. Expected double-digit growth in FCF per share coming from debt boost of incremental borrowings and repurchases of significant amounts of stock.

Sep 26, 2022

Sabre Corporation (SABR), mcap=$1.8bn, price $5.42 vs $7.88

A bet on a recovery in the global travel industry to 2019 levels. The second largest GDS with 35% market share. GDS - booking software, essentially operates as a middle man between travel agents and hotels and airline reservation systems. The business was decimated by COVID travel restrictions and stock is down 66% since 2019. Now we are at the turning point with enough outlook as things continue to open up. Management stays strong in its long-term outlook and walks down the path to recovery with confidence. Oligopolistic industry structure with 3 players commanding 80% share. The company is extremely entrenched in the US travel market.

Sep 26, 2022

Uber Technologies (UBER), mcap=$55bn, price $27.82 vs $32.00

Trades 30% below IPO, despite being on pace to 2.5x revenue vs 2019 and generating substantially improved profitability. Contrary to market skepticism, Uber's ridesharing business is already highly profitable (+25% EBITDA margins), and generates incremental margins north of 50%. Delivery business, which hardly existed at the time of IPO, today accounts for 60% of bookings and has grown +90% annually since 2018. Consolidated margins are set to continue expanding and gradually approaching an incremental 35%. Multi-product capability is an underappreciated structural competitive advantage versus its single-product competitors. Set up to meaningfully exceed investor profit expectations post-issuance of highly conservative 2024 EBITDA guidance of $5bn.

Sep 26, 2022

Dole plc (DOLE), mcap=$750, price $7.91 vs $9.00

A global leader in the distribution of fresh fruits and vegetables - busted IPO from 2021. 1.7x the size of its biggest competitor. Trades materially below peers and historical valuations. Temporary issues and product recalls have impacted profitability and caused a share price slump post IPO. Once resolved, the valuation gap to peers should close. Management is owner-operators - well-respected industry veterans with a long track record of managing the business for the long term. Insiders own 10% of the company.

Sep 23, 2022

Oyster Enterprises Acquisition (OSTRW), mcap=$280m, price $0.17 vs $0.20

Pre-deal SPAC warrants, sponsored by the most ruthless vulture hedge fund Alden Global. The market underestimates the chances of the deal getting done and prices in mostly liquidation. 10x upside on warrants upon de-SPAC. Might be one of the rare SPACs with actual positive ROI. Alden has a great track record in buying newspapers, cutting costs to the bone, and milking them for cash. 40 years of anecdotal evidence of them making a lot of money on distressed purchases. Led by Randy Smith - one of the best and most successful distressed investors of all time. Alden/Randy is allergic to losing money - and therefore unlikely to simply liquidate the trust after investing $6m. Has till Jan'23 to consummate the transaction. De-minimis closing risks as Alden can source its own funding and is not reliant on PIPE markets.

Sep 23, 2022

Cushman & Wakefield (CWK), mcap=$2.8bn, price $12.20 vs $15.68

Global commercial real estate services firm, one of three players with breadth and scale to win contracts with large, multinational clients. Trades at 7x PE after a recent 30% decline in share price. Investors fear that CWK is set for material decline due to a slowdown in the economy. However, the business is more resilient to a potential downturn than the market appreciates. 75% of earnings are from recurring and predictable services and fees, leaving only 25% of profits exposed to the economic cycle. And even for this more cyclical part, the slowdown is expected to be milder due to the dynamics of commercial real estate markets. In a longer-term - attractive industry with favorable competitive dynamics and long-term growth tailwinds.

Sep 23, 2022

Zillow Group (ZG), mcap=$7bn, price $29.33 vs $36.00

A front door to US residential real estate with 2/3 of home buyers use Zillow. Currently under-monetizes its powerful position. A recently introduced Flex pricing model will drive improved monetization by aligning Zillow's and agents' incentives better. Inroads into new products such as mortgage origination or closing services are expected to have a material impact down the road. Wind-down of the iBuying will free up capital on the balance sheet, leaving the company with meaningful net cash.

Sep 23, 2022

MTY Food Group (MTY.TO), mcap=C$1.4bn, price $55.66 vs $58.00

Restaurant franchisor in US and Canada at 11x FCF. 80 banners and 6.7k units. High-quality business with sustainable double-digit growth potential. It relies on the combination of attractively priced acquisitions and effective cost-cutting to grow at attractive rates of return. Investors misperceive the company as a melting ice cube with weak and unprofitable franchisees. However, management is gearing towards generating value through acquisitions of less-sexy (and in turn cheaper) mature brands and not necessarily growing the existing operations. Organic growth is zero/negative almost by the design of the strategy. Tons of dry powder to deploy in a proven and underappreciate acquisition strategy with high returns.

Sep 22, 2022

Embraer (ERJ), mcap=$1.8bn, price $10.49 vs $9.90

Producer of Embraer jets and other aircraft - undervalued on every valuation metric and historical multiples. The core business is set to recover to mid-cycle levels over the next 1-2 years. A strong backlog - the highest level since 2015 - suggests several years of significant growth. Owns 90% of $EVEX - a recent spin-off developing electric vertical takeoff and landing vehicle with deliveries expected in 2026. The current ERJ market cap is 20% below the value of retained EVE ownership.

Sep 22, 2022

KLX Energy Services (KLXE), mcap=$74m, price $6.24 vs $5.05

Highly levered oilfield service company. Extreem optionality on rapidly improving US onshore oil services activity and pricing. Stock could be 7x by 2023. Gradually growing revenues and EBITDA are expected to lead to organic deleveraging and positive FCF by 2023. Limited capex needs going forward, with half of EBITDA expected to transalte into FCF. Revenue is highly correlated to industry activity. The E&P industry underinvested since 2014 and now needs to catch up with the demand.

Sep 22, 2022

Ziff Davis (ZD), mcap=$3.4bn, price $72.66 vs $82.00

Operator and serial acquirer of web-properties trading under 9x EBITDA and runway for further consolidation and growth in the mid-term. Parent of the recent $CCSI spin-off - investors still anchor valuation to the spun-out legacy fax assets. Current assets include Pcmag.com, Mashable, and BabyCenter). Earns revenues from advertising and subscriptions. Over the last 5 years grew revenues and EBITDA at a 20% CAGR. Platform to grow via a proven M&A strategy - 500 opportunities evaluated during 2021 alone. Management aims to double the size of the business every 5 to 6 years.

Sep 22, 2022

Anebulo Pharmaceuticals (ANEB), mcap=$68, price $2.92 vs $3.00

Pharma company in phase 2 clinical trials for an innovative cannabis intoxication treatment - no alternatives for it currently and presents a huge market opportunity worth hundreds of millions or even billions. ANEB's drug has already been validated by several studies and excellent Phase II topline results. Hopes to file IND with FDA by the year-end. Large and growing target market with increasing legalization/consumption of cannabis. 90% are owned by insiders. The existing cash balance of $16m is likely to prove inadequate to reach FDA approval, i.e. expected dilution.

Sep 22, 2022

Etsy, Inc. (ETSY), mcap=$13.2bn, price $104 vs 103

A high-quality business with high margins, strong cash flow, and potential for future margin expansion as the business grows. Unlike other covid beneficiaries, ETSY is likely to keep the gains it experienced during the pandemic. Strong network effects. Set to benefit from continued commerce shift online. Currently trades at only 20x FCF. With mid-single-digit growth, a slight increase in the take rate, and some incremental margin leverage the stock is expected to compound at double-digit rates moving forward.

Sep 21, 2022

International Petroleum (IPCO.TO), mcap=C$1.5bn, price C$11.02 vs C$15.65

O&G company with cash-flowing energy assets in Canada, offshore Malaysia, and France. Cheap on the valuation of its reserves and relative to peers. Flush in cash today - set to generate 28% of its market cap in 2022 FCF. Stands out from its peers in terms of capital allocation with management extremely capable of increasing company per-share value during the lean times.

Sep 21, 2022

FAR Limited (FAR.AX), mcap=A$76m, price A$0.77 vs A$0.84

Potential liquidation: busted oil exploration junior now in quasi-runoff mode, offering at least a ~35% gross return and potentially a ~69% IRR over a likely 12-month period. The wind-up has not been formally announced, but all signs are there. Cash covers 58% of the market cap and the remaining upside/value comes from earnout on the previous asset sale. The earnout is very likely to pay out fully by mid-2025 or management will find a way to monetize it earlier.

Sep 21, 2022

Semler Scientific (SMLR), mcap=$259m, price $38.02 vs $31.45

Medical device company with a QuantaFlo product for detecting Peripheral Artery Disease (PDA). The product is easier to use and lower cost compared to other PDA testing methodologies. Studies have shown that QuantaFlo is at least as good as other testing alternatives. The upside is based on continued gradual penetration increase and revenue growth. PDA is a chronic disease that so far goes undetected in c. 30% of a given doctor's older population. Bearish concerns of QuantaFlo being to-good-to-be-true or regarding lack of clarity if insurers will compensate testing are overly exaggerated.

Sep 21, 2022

The Charles Schwab (SCHW), mcap=$139bn, price $73.35 vs $67.00

Online brokerage for retail customers and provider of services for RIAs. Set to benefit from: (1) asset gathering tailwinds for electronic brokerage firms, attracting net new client assets of $20-60bn each month; (2) Inflation and higher interest rates as it sweeps clients' excess cash into its bank; (3) massive synergies from its TD Ameritrade acquisition, management estimates these at $4.3-4.8bn.The company is accelerating capital returns with increased dividends and $15bn buyback authorization. CEO / co-Chairman recently made a $9.5m open market purchase.

Sep 20, 2022

enCore Energy (ENCUF), mcap=$123m, price $1.05 vs $1.02

A top pick for a bet on Uranium price spike for $150/lb by 2026. The company has 90m lbs of M&I resources across 4 locations in the US, coming online in 2023-2027. Fully funded to start production in Texas by Q323, reducing the risk of dilution. Great management track record - Chairman has grown his previous mining company 1000x before selling it to Uranium One, albeit that was 15 years ago.

Sep 20, 2022

Tidewater (TDW), mcap=$1.1bn, price $24.26 vs $20.00

Offshore support vessel operator with 174 vessels globally. Well-positioned play for a recovery in offshore activities - cleanest balance sheet of major competitors and one of the most modern fleets. Enormous operating leverage if industry economics return to 2014 levels. Tight vessel supply amidst growing demand and premium vessel fleet expected to shrink over the next few years given limited incoming new builds and age/emission restrictions from the clients.

Sep 20, 2022

LG Corp. (003550.KS), mcap=KWR 12.9T, price KWR 80300 vs KWR 78900

LG Corp - holding company at 67% discount to SoTP of listed subs. Something like 29 trading for 12.5. The listed subs are cheap at single-digit PEs. The key asset is LG Chem, which owns LG Energy Solutions - the second largest auto electric battery manufacturer - a highly prized global business. But this is in Korea where the sum of the parts valuations go to die. Still, there is a chance this will reverse to something like a 25% discount typical for Europe.

Sep 20, 2022

Winnebago Industries (WGO) short, mcap=$1.9bn, price $59.13 vs $58.64

The RV industry is in the eye of the storm - driven by higher gasoline prices, higher rates, and a weakening consumer. Management's upbeat commentary is misguided. Massive demand pull-forward during Covid. Demand is down significantly vs 2021 and WGO’s dealers went into selling season with the heaviest inventory levels in years. Consensus numbers are way too high and about to be brought down to earth. Used inventory is flooding the market and could create a prolonged overhang. WGO has a high fixed cost base - during GFC gross margins went from +11% to -15%.

Sep 20, 2022

Arconic (ARNC), mcap=$2.2bn, price $21.13 vs $29.15

Manufacturer/supplier of rolled aluminum products for industrial uses. Undervalued relative to peers. Favorable growth tailwinds with healthy demand for aluminum rolled products at all ARNC's end markets. Due to execute a few 25-35% IRR projects. The company expects to grow run-rate EBITDA by 40%+ over the next 3 years.

Sep 19, 2022

Clear Channel Outdoor (CCO), mcap=$863m, price $1.81 vs $1.34

Clear Channel Outdoor - the second largest out-of-home advertising company globally behind JCDecaux. Constantly trades at a discount to its US pureplay peers $LAMR and $OUT, partially due to high leverage. Catalysts for change - divestment of European business + undergoing industry/company transformation towards digital out-of-home advertising. The long-term growth and profitability profile is vastly underestimated due to a poor understanding of this transformation. Although only 4% of display inventory was converted to digital, digital revenue already represents 35% of the total. 20-40% IRR on each conversion with a very long runway ahead. Highly levered equity stub, but no maturities till 2025 and no covenants.

Sep 19, 2022

Gildan Activewear (GIL), mcap=$5.7bn, price $31.19 vs $28.76

Dominant supplier of blank t-shirts which are sold to wholesale distributors. Unwarranted stock price decline over the last 6 months as GILs EBITDA & EPS forecasts are up meaningfully during this period. Trades at almost all-time low 8x fwd PE. Inventory levels at the distributor level are still below pre-covid levels, and it’ll take until 2023 to get fully restocked. Over 80% market share. Unassailable cost advantage via manufacturing scale and vertical integration. Margins have been structurally improved from 15% to 20%. A streamlined cost base will help drive accelerated top-line growth. Defensive long-term compounder run by great management.

Sep 19, 2022

Global Atomic (GLO.TO), mcap=C$660m, price C$3.71 vs C$2.25

A bullish bet on the Uranium industry with multi-bagger upside from GLO's uranium mine in Niger. Detailed thesis of why the uranium market will be in sustained deficit over the next decade and why uranium prices are expected to reach $100/lb. GLO mine will begin production in 2024 and has >250m of U3O8 and a 50-year mine life. Limited geopolitical risks as Niger is a top-tier jurisdiction for uranium producers. Management owns 15% of the company.

Sep 19, 2022

Ether Capital (ETHC.NE), mcap=C$73m, price C$2.03 vs C$2.1

A company that owns and stakes $ETH at a 20% discount to the value of ETH holdings. Better investment than owning ETH directly with all the benefits. Upside from upcoming #EthereumMerge and the start of staking. Expected to start trading at a premium to its ETH holdings on the balance sheet. Material upcoming income from ETH staking rewards. Minimal cash burn with operating expenses covered by consulting income.

Sep 19, 2022

Micron Technology (MU), mcap=$58bn, price $52.85 vs $61.29

Manufacturer of digital memory and storage solutions at 7.5x PE. Expected to continue transitioning from the lower margin, “commodity” memory and storage chips into the “complex,” high-end, higher-margin chips used in Data Centers, Automotive, and Industrial markets. The target market is expected to double in size by the end of the decade. Recent technological strides were masked by industrywide headwinds. Mid to high teens ROIC. The robust balance sheet recently shifted from net debt to material net cash.

Sep 7, 2022

Pyxis Oncology (PYXS), mcap=$89m, price $2.70 vs $2.76

Pre-clinical biotech at a 50% discount to its cash balance. Baby thrown out with the bathwater in biotech sell-off - down 80% since its $16/shr IPO at the end of 2021. Priced as if R&D will only destroy value - all programs are very early stage, so that is an overly exaggerated assumption. Very experienced management - led by former $PFE exec.

Sep 7, 2022

Energy Transfer (ET), mcap=$35.6bn, price $11.54 vs $10.31

MLP, the largest owner of energy transportation assets in the country. The market is wrong in valuing ET as if its cash flows are going to be in rapid decline - in fact, the company is positioned to meaningfully grow its already high (25%) cash flow yield. Expected to re-rate on the back of stabilizing CAPEX and market starting to appreciate cashflow inherent in the company. Stable revenue stream with built-in inflators tied to PPI. The global demand for hydrocarbons continues to grow and is expected to do so for at least the next 10 years. The US has some of the best combinations of infrastructure, and quality rock, and is not a war-torn country, political basket case, or nationalization risk. And ET with its unparalleled breadth and scale is exposed to all these positive trends with its comprehensive network of infrastructure.

Sep 7, 2022

IntegraFin Holdings (IHP.L), mcap=£905m, price £2.73 vs £2.55

Financial advisor custody platform in the UK. High-quality and capital-light business. Trades at 17x NTM, which is the lowest historically. Industry tailwinds. Revenues are a take rate of AUM, currently around 25bps. Secular share winner - low teens today and expected to continue gaining. Stands out from the competition with a fully owned and modernized tech stack. Down 50% YTD due to transitory issues.

« Previous
1
…
3
4
5
6
7
…
11
Next »