Why I'm Buying Aviat Networks Hand Over Fist
- Net cash represents nearly 70% of market capitalization.
- Currently trades for just 7% of revenue (EV/Revenue basis).
- Trades 30% below tangible book value.
- Management forecasting a return to profitability during second half of calendar 2014.
- Bullish long-term outlook in a growing industry.
Ignite Restaurant Group: Hidden Value In The Company's Attractive Assets
- IRG's valuation has been weighed down by the Macaroni Grill acquisition, but the company's other assets are worth much more that the current enterprise value.
- Recent management shake-up at Macaroni Grill and management commentary leads me to believe that this segment is stabilizing.
- If we were to assign a valuation of zero to Macaroni Grill, instead of its current negative valuation, we could see IRG's stock move into the $20-25 range.
- Even if the business does not stabilize, the segment's attractive real estate portfolio allows for conversions to Brick House Taverns at a lower cost than new builds, or possible monetization.
Staples: Industry Consolidation Leading To 50% Upside
- The poor quarter was negatively skewed by difficult comps against a 53rd week, unfavorable foreign exchange rates, and 109 store closures.
- The market systematically underestimates the speed at which industry consolidation will take place between Office Depot and Office Max.
- The street under appreciates Staples market leading position, as well as its growing e-commerce business.
- Private equity is likely a potential suitor in a non-levered high free cash flow retailer with significant hidden value in its online business.
- Business trades at around 10x LTM earnings, with significant free cash flow levers starting in 2015.
VASCO Data Security To Benefit From Heartbleed Bug, Opportunity To Unlock Value Via Tender Offer/Special Dividend
- VDSI positioned to benefit from Heartbleed bug raising awareness of fixed password vulnerability.
- Wall Street expectations for FY 2014 look too low, Q1 earnings should be catalyst.
- VDSI should conduct tender offer for 10% of the shares outstanding at $8 per share and pay a one-time dividend of $1 per share.
- The economic situation in Europe is on the mend, will benefit VDSI order intake.
Lifetime Brands: A Mundane Company, With Exciting Profit Potential
- Lifetime's mundane business belies its profit potential.
- The company expanded gross margins during the key holiday quarter, alongside rising revenues and EPS.
- With insiders owning 22% of outstanding shares, capital is being deployed in an accretive fashion.
- Continued moves to enlarge brand portfolio and international presence will increase Lifetime's addressable market.
Kodiak Oil & Gas: A New Paradigm - A Moderate-Risk Development 'Story'
- The article provides illustrative valuation analysis of Kodiak’s drilling inventory, including risks and upsides.
- The stock is priced very reasonably relative to its value potential.
- The transition into full development mode and substantially reduced operating risk should help to close the gap between the stock price and the underlying NAV.
1347 Property Insurance Holdings: An IPO Left For Dead With Upside Of 50%-100%
- National property insurers continue to reduce their exposure to Louisiana and other coastal markets.
- Premiums have skyrocketed in certain states allowing Maison to cherry-pick high margin policies.
- The volatile insurance climate as it pertains to more weather losses has been overrated and biased by Katrina.
- Lower reinsurance rates should be a nice tailwind in the near-to-medium term.
Tronox - Time To Focus On The Future
- Tronox is in a solid cash position.
- The TiO2 industry is stabilizing.
- Tronox could make an acquisition or be acquired.
- Nice reliable $1.00 per dividend per share.
- Tronox’s bankruptcy and litigation are now a thing of the past.
Rio Alto: Potential Double, Limited Downside
- Market has failed to account for excellent resource update in February.
- This resource update gives RIOM the financial flexibility to build Phase II of the La Arena mine without diluting shareholders.
- Phase II feasibility study results this summer offers catalyst for sudden repricing of stock higher.
- The market currently values Phase II at nearly zero. As such, Phase II is a nearly free call option on 4 billion pounds of copper/4 million ounces of gold.
- Existing operations are worth roughly $2/share, limiting downside even if Phase II doesn't work out.
Nighthawk Energy Sees Triple-Digit Growth By Hitting Sweet Spots In The Denver-Julesburg Basin
- Nighthawk Energy is a very well-run company with a sound financial plan.
- Thanks to its low cost and oily wells that have high IRR and fast payouts (3 months), the company has achieved tremendous growth of late.
- Nighthawk's fast payout is the kind of short payback that any junior producer needs so that cash can be quickly reinvested in the next well to keep growing production.
- The company has plenty of running room and the continued development of its core properties will drive production, reserves and EBITDA higher over the coming months.
G-III Apparel Group: Unjustified Discount Belies Solid Execution And Opportunities Ahead
- G-III managed to not only grow revenues, EPS, and EBITDA in the holiday quarter, but posted rising gross margins across all segments.
- Despite solid performance in fiscal 2014, shares trade at meaningful discounts to peers.
- With management owning over 16% of outstanding shares, clear incentive to deploy capital in an accretive fashion.
Broadridge: New Joint Venture And Overseas Expansion A Game Changer
- Joint venture with Accenture to scale in Europe and Asia.
- Market leading position with large, defensible moats.
- Technologically advanced leading to disruption in the space.
- Low cost provider adding value to clients in the fixed income space.
Gray Television: The Unlikely Winner Amid Adverse Industry Regulation
- With FCC regulation limiting joint sales agreements (JSA), the overall broadcasting sector has been dealt a huge blow.
- However, unlike its rivals, Gray Television (the cleanest in terms of JSA usage) is likely to emerge relatively unscathed or even stronger, fundamentals-wise.
- Double-digit FCF yield (11-12% in 2014-15) is mainly due to a 30% share price decline YTD and overlooked acquisition effect.
- Compelling risk reward has arisen: an attractive (almost) 6 to 1 upside to downside ratio.
Highway Holdings Limited Move To Myanmar Should Add 50% To Its Value
- Highway Holdings Limited is struggling with rising labor costs in China.
- The company plans to move to a much cheaper Myanmar starting this year.
- Once it has moved, the labor costs savings should significantly increase its value.
Insulet: On A Sugar High With Downside Of 30% Or More
- The number of new entrants has increased the competition significantly.
- The effect of future Dilution on valuation.
- The Medtronic patent infringement settlement eliminates a significant competitive advantage.
- Alternative products coming to the market such as the Artificial Pancreas and inhaled drugs.
- The market opportunity is being overplayed.
Gannett: Compelling Risk Reward Due To Overblown Regulatory Risk
- With completed acquisition of Belo, Gannett is transforming itself into more of a broadcasting play (high growth, high margin business).
- FCF yield for Gannett is forecast at a whopping 12-13% (2014-15), pointing to significant under-valuation.
- Potential new regulation (greatest share overhang) would have immaterial impact to Gannett (5% EBITDA reduction on worst case).
- Easing regulatory risk premium and 40% EBITDA growth delivery are powerful catalysts to re-rate Gannett substantially.
- Compelling risk reward ratio mainly due to overblown regulatory risk.
LivePerson: From Chat To Data Analytics, Transition Exit Upcoming
- Market is underestimating the potential penetration of installed base with upgraded platform LiveEngage 2.0.
- Market is not fully appreciating LPSN’s large addressable market opportunity in shift from phone to chat.
- Market is overlooking LPSN’s potential in data analytics by assigning a customer service like multiple.
- Our FY14 estimated PT of $16.25 represents potential upside >35%.
Bally Technologies: Macro Headwinds Create Attractive, Best-In-Class Buying Opportunity
- BYI's recent weakness is attributable to a weak environment for US slot sales.
- Part of the weakness is due to announcements by its major competitor, which has overly impacted BYI's stock price.
- BYI is the best-in-class company and has already diversified itself away from US slots, yet it trades at a historically low multiple.
- Several major tailwinds will begin to kick in over the next 12 months, which should send shares 50% higher.
Dynasil Turnaround Not Priced Into The Stock
- DYSL has a fundamentally attractive business model with patents and IP value consistently accruing to the company.
- New management team has restored the company to profitability, divested unprofitable business lines, paid down a significant amount of debt, and regained compliance with its debt covenant ratios.
- We believe DYSL is actively in talks with new lenders to refinance out its senior debt, which should be a catalyst for the stock to rerate higher.
- Stock is currently trading at half of its intrinsic value. Fair value at $3.00 per share equates to over +100% appreciation from here.
Weight Watchers: Excellent Business At A Fire Sale Price
- Weight Watchers has a great brand and business model -- plain and simple.
- Weight Watchers has had over $200m+ in free-cash-flow for each of the last 10 years.
- If the company can earn $150 million long term (in FCF or GAAP net income) the corporation is easily worth $1.9 billion -- 75%+ upside.
Stellar Biotechnologies: Low Risk Biotech Provider With Significant Upside
- Stellar's main product (KLH) is involved in 20 active clinical trials.
- Studies include cures for cancer, Alzheimer's, arthritis and AIDS.
- Stellar's valuation is only $125 mm vs. peers valued in the billions.
Comstock Resources - Oil And Gas Turnaround Play With A 40% Upside
- Eagle Ford Growth and TMS Optionality Provide Plenty of Near-Term Catalysts.
- Initiating Coverage with a $30 Target Price.
- Turnaround of portfolio has been successful.
Wesco Aircraft Holdings Distributes Attractive Risk/Reward
- Business is characterized by sticky long-term recurring revenues and many competitive advantages.
- Managed by owner operator that has proven to be highly successful over the long term.
- Potential synergies of recent Haas acquisition seem to go under appreciated by the market.
- Protection against capital impairment and significant growth/synergies could produce large gains in the next two years.
Tower's Merger Offers Opportunity For Double-Digit Annualized Returns
- Market underestimating odds of Tower's merger with ACP RE closing.
- Filing of 10-K by end of month should alleviate market's concerns.
- Opportunity for over 15% annualized returns with limited risks given nature of ACP's guarantees.
Nevada Copper Is A Rare Opportunity
- Nevada Copper is moving towards production at its Nevada copper mine.
- The Pumpkin Hollow is a world-class project which has been greatly de-risked.
- Several compounding factors have led to a crass under-valuation of the company.
- Nevada Copper currently represents a rare LONG opportunity.
American Eagle Outfitters: Risk/Reward Now Becomes Too Compelling To Ignore
- The current bear thesis on AEO is contradicted by the company's brand relevance rankings.
- Brand relevance should provide support for the company to weather the current teen retailing storm, setting the company up for future market share gains.
- The current risk/reward dynamics of the stock are compelling.
Willi-Food International Should Be Taken Private For A Potential 100% Gain
- Willi-Food International was already trading at a large discount to its fair value.
- The market misinterpreted the owners share sale to an investment group as "an insider sell".
- The new owners should take the company "private" easily realizing a tremendous gain.
Is The Tuesday Morning Turnaround Story A Myth Or Reality?
- Tuesday Morning Corporation's turnaround is already fully priced into the stock, leaving no room for the tough reality of the discount retail environment.
- First Stage of a Turnaround strategy.
- Undercapitalized Distribution Channel.
- Insufficient Technology Infrastructure.
- Insider Selling by Shareholder Activist.
Steel Excel - Shell Company Turning Into Profitable Business
- Steel Excel (SXCL) is a holding company / acquisition vehicle owned and managed by an activist value investor with a good track record - Warren Lichtenstein.
- Following Black Hawk acquisition in Dec 2013, operating cashflows are due to increase by 70-80% during 2014. This improvement will be reflected already in Q1 2014 results due in May.
- Conservative sum of parts valuation indicates 25% upside. With earnings boost from Black Hawk operations and ongoing share buybacks, gap between market price and intrinsic value is likely to narrow.
Underfollowed SaaS Provider GlobalScape Has Substantial Upside In Years Ahead
- GSB has missed the market run-up in recent years and remains one of the few companies remaining with compelling valuations.
- Secular tailwinds and incentivized insiders should help yield at least 72% upside in next two years.
- Fortress balance sheet provides substantial downside protection and minimizes risk of permanent loss of capital.
Short AmerisourceBergen: There's No Easy Cure For What Ails This Drug Wholesaler
- Gross margin at AmerisourceBergen (ABC) continues on a downward spiral that was in existence well before its partnership with Walgreens/Alliance Boots;
- ABC has made some accounting decisions that attempt to shore up its income statement—counting a gain as an offset to COGS and reducing its Allowance for Doubtful Accounts;
- ABC’s cash inflows are now very dependent upon an accounts receivable securitization program, which would also benefit from a lower Allowance for Doubtful Accounts;
- However, over the next 6 to 9 months, fundamentals will make it harder to mask deteriorating margins and cash flows—target $45 per share.
Pizza Inn's 'Growth' Plans Are Overrated
- Pizza Inn Holdings is priced in the market as if it could earn $2.5 to $5 million – but its current earning power is negative.
- Pizza Inn Holdings is priced as if it were growing – but it is on the decline. It even posted negative comps in its “growth business.”.
- Pizza Inn Holdings has historically made money through selling inventory through its franchisee system – a system which is shrinking dramatically.
Willis Group: Lollapalooza Ahead
- Willis Group is well positioned to benefit from a whole series of tailwinds in the near future.
- The company enjoys a very stable business with over 90% of revenues recurring every year.
- The new CEO thinks like a value investor and has outlined a credible path to double digit growth.
- While the downside is well protected by Willis' stable revenue base, the compounded effect of several tailwinds together will likely produce tremendous upside over the next 2 years.
Armada Hoffler: Developing A Path To Outperformance
- Armada Hoffler is presently undervalued consequent to a variety of temporary negative catalysts. As these catalysts expire, we expect the FFO multiple to improve.
- It is positioned to grow FFO/share through a large (relative to its market cap) pipeline of accretive development opportunities.
- The combination of FFO/share growth with FFO multiple expansion could generate material capital gains.
Hillenbrand International: Why Shares Present A Compelling Short Opportunity
- Hillenbrand is seeing negative organic growth in 3 of its 4 businesses.
- The company has seen margin contraction, which may continue.
- Amidst all this, the stock is trading at historical premiums.
Zargon Oil And Gas Is In The Bargain Bin And Ready To Take Off
- There are always hidden gems in the oil and gas sector.
- Zargon Oil and Gas is grossly undervalued no matter how you slice it.
- Zargon Oil and Gas is too cheap to ignore and has some strong catalysts.
After 25% Pullback, Lenovo Looks Extremely Interesting
- After peaking in January, Lenovo's shares have pulled back nearly 25%.
- While indigestion concerns loom after the acquisition of Motorola Mobility and IBM's X86 server group, the growth opportunity is enormous.
- Shares trading at just an $11 billion market capitalization grossly undervalues the company's long-term earnings power.
UQM Technologies: Many Clues That An Inflection Point Is Upon Us
- Investors may currently be focusing on the car opportunity with Audi and Saab, but overlooking the real upside in the short term, which is a major bus deal in China.
- The company's recent secondary offering and announcement of ISO/TS 16949 Certification lead me to believe that a bus deal in China is imminent.
- Even if this bus deal does not come to fruition in the short run, the company has several other opportunities that could expand over the coming year.
Global Sources: Special Situation And Value
- The company is offering to buy back shares at $10 per share.
- Shares of GSOL trade for just $8.
- For shares that aren't tendered, the shares still represent great value.
Nexstar Broadcasting Group: In 2014, Its Star Will Continue To Shine
- Sizable pullback has created an attractive entry point in NXST.
- Balance sheet is stronger than a cursory glance suggests.
- Dividend increase in early 2014 suggests confidence in future cash flows.
D.E. Master Blenders 1753: A Low-Risk Squeeze-Out With An 8.2% Gross Return
- D.E. Master Blenders is squeezing out minority shareholders at EUR 12.50 per share.
- Contrary to the company's guidance, the statutory buyout proceedings is likely to close by late April.
- Shareholders are likely to receive an 8.2% gross return in 1.5 months.
Image Sensing Systems: An Undervalued Opportunity In The Intelligent Traffic Solutions Industry
- High margin royalty income protects downside and provides upside potential.
- License Plate Recognition ("LPR") hardware/software solutions offer upside optionality.
- Management has multiple levers to drive cash flow generation and profitability.
- Ongoing FCPA investigation creates uncertainty; 2013 earnings results hampered by non-recurring professional services costs. Management believes all FCPA related expenses are finished except for potential fine.
- Image Sensing Systems is a takeover candidate; the company adopted a shareholder's rights plan in 2013 to avoid being acquired at a discount.
Renewable Energy Group, Inc.: A Textbook Dollar Bill For Fifty Cents, Maybe Less
- Mkt. cap.: $445.27mm as of March 10, 2014.
- Tangible book value: $504.37mm as of December 31, 2013.
- Book value: $594.1mm as of December 31, 2013.
- Earnings, 2013: $186.36mm.
- Dividend: $0.00/share.
Fortress Paper Ltd. - A Misunderstood, Unfollowed Gem With Multiple Catalysts In Place
- Fortress Paper is a producer of banknotes (Euro, Swiss Franc) and dissolving pulp (Viscose).
- Wrongful association with the faltering paper industry left Fortress deeply undervalued.
- Multiple short-term catalysts are set to reverse current market perception.
- Investors and analysts are extrapolating past issues into the future while ignoring underlying fundamental factors that lead to a very favorable risk-return profile.
- Management has been operating in an incredibly tough environment with multiple setbacks while still limiting the downside for investors.
Puma Biotechnology: A Short Thesis For Investors
- Lead asset Neratinib is not best in class or first in class. Significant Grade 3 or 4 diarrhea is a major side-effect.
- The drug carries the risk of class effect given it’s similarity to Tykerb that doctors use sparingly due to toxicities.
- Given that Neratinib in most indications will be 3rd or 4th to market, PBYI will find it challenging to promote the drug in a space dominated by Roche.
- Although, Neratinib is being studied as treatment for various types of HER2+ breast cancer, the clinical and regulatory pathway for most indications is unclear.
- I believe the class effect and toxicity risk associated with Neratinib are being overlooked in the stock’s current valuation. My PT of $86.27/share reflects an appropriate risk rate.
Morguard Corp: A Diverse High Quality Real Estate Portfolio That Sells At A 50% Discount
- Morguard owns US and Canadian real estate, two REITs, and an asset management business that manages over $15 billion in real estate assets.
- Combined, these assets are worth $2.46 billion or $195 per share.
- The value of Morguard's assets represent a 50% premium to the current market cap, which is just $1.6 billion or $129 per share.
Lancashire - Money Making Machine With At Least 45% Upside
- Lancashire Holdings is a London based niche insurance/reinsurance company with a track record of spectacular financial performance: average ROE of 19%, combined ratio of 60% and 10% dividend.
- The company trades at PE=10 (or forward PE=6.9), and the market currently attaches no value to its newly started/acquired businesses, which will increase 2014 earnings by 45%.
- Recent decrease in share price (22% during the last year) gives a asymmetric buying opportunity with at least 45% upside within one year.
Sequans Communications: Public Stock With Venture-Like Multiple Returns
- Sequans is an early leader in the multi-billion dollar single-mode LTE market opportunity.
- Impressive design wins with Verizon among others, can create at least a 2x - 4x stock boost.
- Sequans is a high-risk/high-return stock. So investors should read the risks in the article before buying.
Revisiting Idenix: Continues To Have Big Potential With Low Risk/High Reward
- Lawsuit with Gilead over Sovaldi patents could lead to a settlement worth over $1 billion in the next few years.
- Seth Klarman's Baupost has almost doubled their ownership in Idenix and are highly bullish.
- A combination of the net present value of a potential settlement and future drug developments = >400% upside.
Zygo: Overlooked, Cash-Heavy, And Ready To Rebound
- Tailwinds in key markets and a positive shift in product mix benefit bottom line results.
- Hedge fund MAK Capital One (holding ~23% of ZIGO shares) recently took over as Board chairman; an unlocking/creation of shareholder value expected soon.
- Zero sell-side coverage of ZIGO shares has aided an inefficiency gap; any uptick in investor awareness could narrow the gap.
- Limited downside, with 30% of MV in cash and consistent institutional support at ~1.1-1.2 tangible BV.
- Our estimated CY2014 price target of $22 represents potential upside of 40%.