The Long Case For Consolidated-Tomoka: 45-55% Upside
Profire Energy - A Classic Pump And Dump, Sell Before You Get Burned, Stock Worth $1.00
- PFIE is a pump and dump worth no more than $1-per share. Management has a long track record of suspicious and deceptive activities. PFIE shareholders are the latest victims.
- Promoters have caused PFIE stock to gush 325% since 2012, enabling management to sell $13mm of holdings. Promoters are so successful that the Office Manager is worth $10 million!
- Management has once again partnered with auditors and lawyers that have a suspect track record. I have uncovered numerous red flags and anomalies.
- Management’s claims to have 80% share in a market that is 2% penetrated is highly unrealistic.
- We believe PFIE is no more than a reseller of a commoditized product they don't even manufacture in-house, yet is still valued at a 140% premium to peers.
ALJ Regional Holdings: Building A Solid Holding Company, One Acquisition At A Time
- In short, we believe ALJ could be the beginning of a "baby Berkshire"; a holding company with a sharp eye for value and shareholder-friendly management.
- ALJ bought, revamped, and turned around a Kentucky Electric Steel Mill for a $76 million profit. They sold it last year.
- After paying off liabilities, ALJ returned a large portion of this profit to shareholders in the form of a 30 million "dutch auction" share buyback.
- We believe ALJ will optimize and increase profitability at the two new companies they recently acquired.
- We think ALJ could generate $175M in revenues and $25M in EBITDA and $0.50 fully diluted EPS in the next 12 months; we peg the company to be worth $7.50.
Magnetek: Expect 40% Near-Term Upside Due To Likely New Capital Allocation
- Magnetek is significantly undervalued. It would have an unlevered 12% free cash flow yield, if not for the ongoing funding requirements for its underfunded pension.
- By January, Magnetek's cash funding obligations will be materially complete and management will have flexibility as to how to utilize the company's excess cash position.
- We're hopeful that management will act expeditiously to create shareholder value, in all likelihood through establishing a dividend.
- We believe shares are likely to enjoy 40% upside in the near term as investors do the math and understand the compelling value Magnetek shares offer.
The Beauty Of Shorting Tree.com
- Tree.com appears to be an overhyped stock that saw its share price more than double since June.
- The company trades at 3x revenue with hardly any profits, its main operating segment in decline, pricing under pressure and questionable further growth possibilities.
- Revenue is supported by very aggressive and unsustainable sales practices that are hated by consumers. Competitors have structural cost advantages and grow faster.
- Its founder/CEO started selling shares in large amounts recently.
- Relative to better-positioned competitors, Tree.com is significantly overvalued. A very optimistic scenario indicates fair value of $26/share at most. This is 45% below the current levels.
Selling In Extendicare Creates A Solid Entry Point And A Need For An Activist
- Extendicare's stock has fallen almost 25% in the past month, creating a 7% yield on a great non-cyclical business.
- Pro forma for the sale of the company's US business, Extendicare will have a significant amount of cash it intends to deploy into growth opportunities.
- From a valuation perspective, Extendicare stock trades at a huge discount to competitors Chartwell and Leisureworld in Canada.
Glentel: A Free Cash Flow Machine At An Inflection Point
- Glentel trades for 7x depressed free cash flow and at a ~5% dividend yield.
- Glentel has been overly punished by the market due to a botched high yield offering and issues within its Australia segment.
- The market is overlooking strong results amongst its Canadian and United States operations.
Ashford Inc.: Should You Join Insiders In Their Aggressive Share Capture Of The Spin-Off?
- Opportunity to acquire hotel asset management company with strong revenue visibility and highly scalable model with great growth prospects.
- Large initial undervaluation on the back of excessive cost estimates and underestimated revenue.
- Large insider interest suggests strong motivation to achieve quick EBITDA increase.
No Alpha In Omega Protein
- Q3 results showcase the first of what will be several difficult quarters.
- Weak organic growth in Human Nutrition with sub-par profitability.
- SOTP yields significant downside from current share price.
Edgewater Technology Offers An Attractive Risk-Reward Opportunity To Investors Today
- Attractive 13% free cash flow yield unleveraged, and a "Fort Knox" balance sheet with 25% of market cap in cash.
- Excellent growth opportunities in the IT services industry.
- High ROIC business model.
- Important partner to Oracle and Microsoft.
- Good long-term potential to be acquired by strategic or financial buyer.
Sungy Mobile Is Sinking, While Its Executives Are Abandoning Ship
- Sungy Mobile is sinking, and the executives aren't sticking around for a rebound.
- App analytics data shows GOMO's flagship product, the Go Launcher EX Android launcher, has been declining in downloads over the past year.
- A former GOMO executive confessed that Qihoo 360 ditched GOMO and now is funding a competitor to the Go Launcher EX called Apus Launcher.
- Google just launched Lollipop, an updated Android Operating System that has its own integrated Launcher, and this will take more market share from the Go Launcher EX.
- GOMO's former executives have large holdings in the company's variable interest entities, and could use them against the shareholders' best interests.
The Long Case For Civeo
- Civeo's strategic asset position in Canada and Australia will allow it to capitalize on macroeconomic trends in energy and a commodity pricing recovery.
- The market overreacted to Civeo's choice to redomicile in Canada rather than become a REIT.
- Base case scenario offers 30% upside even assuming Civeo does not renew a large chunk of its contracts.
Here's Why Ametek Inc. Is An S&P 500 Company With Accounting Concerns And 30-50% Downside
- Ametek's aggressive roll-up story appears too-good to be true; its ability to beat Wall Street's quarterly earnings estimates 95% of the time in over a decade raises alarms.
- We believe its EBITDA margins appears 400 - 600 bps overstated, and have collected 17 financial documents across 10 countries to support our claim.
- A 2009 whistleblower case claimed improper revenue and inventory accounting. The controller who worked with him was indicted by the FBI. Ametek's Indian auditor raised similar revenue/inventory accounting concerns.
- Ametek trades at an irrational premium to the sum of its acquired businesses, many of which have no growth and declining margins.
- If Ametek were to trade in line with peers at 2x sales and 10x our Adj. EBITDA estimate, there would be up to 50% downside.
Perry Ellis: Many Avenues For Unlocking Significant Shareholder Value
- Two large activists in the shares could be the impetus needed to promote change at the management level which has been supporting the status quo for years.
- There are many avenues for significantly higher shareholder value including shedding underperforming assets and moving more towards a licensing pure-play.
- We think there is a high probability that the company gets sold in short-order and for a nice premium because of the many paths for value.
Xpel Technologies: Wrapping Up A Sticky Model And Hyper Growth Worth Multiples Of Today's Price
- Xpel's growth over the past 4 years is on-par with growth of Wal-Mart post IPO and both have many traits in common.
- Xpel is building its stickiness through an ecosystem of direct distribution, training and DAP cutting software which should give it an edge to maintain high growth.
- Company-owned install shops should provide upside and a method to exploit its direct distribution model internationally.
- Xpel trades at a significant discount due to its obscurity, stock listing and illiquidity and potentially worth multiples of today's price.
- Continued performance, a potential stock uplisting next year and a potential takeover in the mid-term provide catalysts to value creation.
Planar Systems - Mr. Market's Fat Pitch Selling Opportunity
- Channel checks indicate a commodity, hyper-competitive business.
- Undersized tech company trades at a nose-bleed multiple.
- Temporary market mispricing provides an excellent short opportunity.
Why We Believe Noah Holdings Is Poised For Success
- Wealth Management Industry in China is fast growing.
- NOAH has the best team and resources.
- Chinese Macro Environment is still good.
Valuing Furmanite With A Negative Bias Still Suggests Value For Longs
- Poor execution coupled with overly optimistic expectations have caused Furmanite shares to fall over 50% from their 52-week high.
- Negativity from shareholders, analysts, and portfolio managers is pervasive after a year of poor results.
- Even with a negative outlook and pessimistic bias, shares are now undervalued on a normalized basis.
Delta Apparel: A Beaten Down Apparel Manufacturer Trading Near Liquidation Value With 80-110% Upside
- Delta Apparel is trading at a mid-single digit multiple of normalized earnings providing significant upside potential for value investors, additionally Delta Apparel trades within 15% of liquidation value.
- Management has taken a proactive approach to rationalize underperforming business units and unlock earning power.
- Recently acquired brand Salt Life is worth almost the entire market capitalization providing a free call for Delta Apparel shareholders.
Investment Technology Group: A Profitable Investment In The Global Capital Markets
- Despite a 3-decade presence on Wall Street, few investors are likely to have heard of ITG.
- ITG has a clean balance sheet, with over 16% of its market capitalization in net cash.
- Increasingly diverse revenue base, from both a geographic and business perspective is helping drive double-digit growth in operating profits and EPS.
- Management has a solid track record of returning capital to shareholders; since 2009, over 20% of shares have been repurchased.
Silicon Image Will Add A Quarter To Your Money
- Silicon Image has the potential to capitalize on the growth of HD connectivity-standards like HDMI, MHL and WirelessHD. HDMI 2.0 and MHL 3.0 are set to fuel the growth.
- MHL will be the primary driver of the company’s growth while HDMI 2.0 will follow suit. Wireless 60 GHz back-haul also holds promise for the company.
- Silicon Image has a healthy margin and an immaculate balance sheet. Valuation, with conservative estimates, reveals an upside of around 25%.
Scalable Growth And A Substantial Addressable Market Make Health Insurance Innovations A Compelling Buy
- Health Insurance Innovations will report Q3 earnings after the market close on Monday, November 10.
- I expect a revenue and earnings beat (excluding any one-timers), and bullish guidance from management.
- Given the tight share structure, high short interest and limited free float, a significant "beat and raise" could cause a parabolic rise in the share price.
- Limited downside risk from potential 60%+ top-line growth in Q3. Bear thesis centers around HIIQ brokering short-term medical plans not exempted from Obamacare penalties which is short-sighted.
- Recommendation: Buy. $25/share price target in 6 to 12 months as investors get excited about the sexy growth story and platform-based business model. Bear thesis underestimates ancillary revenue streams.
HCI Group - Insurer Selling At 3.2xBV With 15% Organic Decline Is About To Hit A Brick Wall
- HCI Group is no-moat Florida P&C insurer operating in commoditized industry currently trading at 3.2xBV while having negative organic growth of -15% annually.
- Superior HCI performance was caused only by profitable policy take-outs from the state-owned insurer Citizens. The potential for any further take-outs from Citizens is now fully exhausted.
- With no organic growth, no marketing channels, high churn and intense competition HCI business will decline sharply without further Citizens policy take-outs.
- A recent 50% share price spike creates a well-timed short entry opportunity.
- Target price of $20/share is 60% below the current share price levels.
DeeThree Exploration: This Well-Run, High-Growth, Low-Debt, Undervalued Company Has A Very Bright Future
- 11 out of 11 professional analysts covering DeeThree Exploration rate it a buy with a median 12 month price target 109% higher than the current price.
- DeeThree has rapidly increasing proved reserves, production, operating cash flows, and recycle ratios combined with declining F&D costs.
- The company’s netbacks are very healthy with NYMEX WTI at $78.4/bbl and NYMEX Henry Hub Natural Gas at $3.9/mmBTU. Those netbacks are robust enough to withstand further commodity price declines.
- DeeThree controls approximately 2.5 billion barrels of oil equivalent in place and should book another massive reserve increase due to their 2014 drilling campaign in early 2015.
- This company has very low leverage at 0.69 net debt/cash flow and they have plenty of spare borrowing capacity at their credit facility. They are well positioned for potential adversity.
Sanderson's Farms: Fat Roosters Mean Fat Wallets For Shareholders
- Sanderson's Farms, once a high-flyer, has seen some recent weakness in stock price due to lower-than-expected growth.
- Some analysts are concerned why company is not showing growth in spite of this favorable environment for corn and soy prices.
- Less pounds of chicken were sold in Q3, 2014 due to a breeder issue with a particular class of rooster, which is discussed in detail below.
- Its new upcoming processing plant in Palestine, TX would be a catalyst for growth in 2015 and going forward.
Oaktree: Sum-Of-The-Parts And Secular Tailwinds Point To Undervalued Units
- Oaktree is a premier asset manager that is trading at a substantial discount to its intrinsic value which we think is due to hidden assets, complex corporate structure and accounting.
- The company trades at multiples that are less than traditional asset managers despite having 73% of assets locked for 10 or 11 years and an incentive fee.
- There are significant assets on the balance sheet including a 20% ownership in DoubleLine Capital, a large bucket of corporate assets, and nearly $3 per share in cash.
Newcrest Is Overvalued And A Great Gold Short
- NCM is a major gold miner facing significant operational and financial headwinds at present.
- With gold seemingly range bound at present between $1,150/oz and $1,250/oz, NCM is looking increasingly vulnerable with forecast costs of close to $1,000/oz for the next few years.
- NCM presently trades as a significant premium to its gold mining peers, which is undeserved given the risks it faces from its current operating assets.
- NCM has a very overgeared balance sheet, which could well require new equity/rights issue in the short term.
- NCM is an excellent short target.
Wyndham Worldwide: Excellent Business, A Buyback Gondola No-Brainer
- Investment-grade credit quality and excellent hotel franchise business model.
- Excellent asset-light strategy.
- As a non-bank financial intermediary, it can issue ABS to help drive demand for timeshare sales. This business additionally provides attractive financing income.
- Share buybacks will help a patient investor achieve a satisfactory return.
SuperCom: Overvalued By Almost 60%
- Due to the non-recurring and lumpy nature of government EID contracts, SPCB's pro forma revenue has not grown over the past four years.
- FY 2014 has been an unusually strong year in terms of EID adoption. Going forward, global EID adoption rate and revenue growth are expected to decline substantially.
- The Company provides commoditized EID system integration services and appears to have lost market share to competitors.
- A turnaround in the RFID division is not likely given SPCB's weak competitive position and minimal amount of R&D investments.
- SPCB shares are overvalued by almost 60% at the current price level.
hhgregg: Industry Dynamics And Expectation Reset Should Lead To Over 50% Short-Term Upside
- Company is a misunderstood retailer that has lost favor due to declining same store sales driven by management blunders and a dismal consumer electronics environment.
- Shift in focus to selling big box items and a looming product cycle refresh in the TV market will provide significant tailwinds over coming months.
- Pristine balance sheet will allow for the time needed to prune the low hanging fruit and a revamped management team with PE industry ties provides additional opportunity for upside.
SuperCom: A Small Filing Has Huge Positive Implications
- SuperCom is one of our favorite ideas trading at less than ~8x '15 EPS based on business they've already won.
- A recent 6-K filing shows substantial cash generation during 3Q. This filing suggests to us shares have a near 10% FCF yield on trailing run-rate cash flow.
- Excellent visibility, high recurring revenue, and software-like margins - ~75% gross/~40% operating, should drive a premium multiple.
- Additional wins in the core EID business or in multiple new initiatives could drive significant upside to top and bottom line in 2015 and beyond.
- We believe the opportunity is highly asymmetric, with a downside case of $10, and a 6-12-month base case of $22, nearly a double, with potential for a far greater return.
Hooper Holmes: A Fast-Growing, Health And Wellness Pure-Play With Significant Upside
- After a recent 30 percent decline in the share price of Hooper Holmes, investors are being offered an incredible entry to point to own this improving business.
- Hooper Holmes is a rapidly growing, capital-lite business that will likely be worth $150m in 5 – 6 years providing investors with annual returns well above 20% per year.
- Hooper Holmes is the only pure-play, publicly traded Health and Wellness business making it a likely acquisition target for integrated healthcare managers.
- Recent comparable transaction suggests downside is limited to 12.5% making this a unique asymmetrical bet for investors.
- At current prices, investors can purchase shares at discount to Heartland Advisors’ stake and at par with J. Carlo Cannel’s recent purchases, and align themselves with the option strike price.
EarthLink: How A Supposed Dial-Up Company Could Have 80-250% Upside
- We believe that EarthLink could be worth $6/share, potentially nearly double its current share price, based on fundamental cash flow analysis alone.
- In a value recognition scenario, which we view as potentially likely, we believe EarthLink might be worth $8/share.
- Downside case of $3 based on valuation in line with the assumption that growth rates on its key legacy businesses materially worsen with no valuation credit for its sizeable NOL.
- The risk/reward is uniquely asymmetric with potential downside of 10% relative to potential 80-250% upside.
- Upcoming catalysts over the next 6 months include quarterly earnings (potential guidance revisions upward) and potential value enhancement via a potential sale of all or parts of the company.
Zooplus: Fast Growing But Undervalued Online Retail Opportunity
- Company is growing fast: 27.2% sales growth during 2013.
- Valued at 0.66x current year’s sales vs. much higher multiples for peers.
- Market leader in online pet supplies category in Europe.
- Pet supplies category is very suitable for online retail.
- New distribution center opened in Poland leaves room for more growth.
Ophir Energy Has A Potential 67% Upside
- Ophir Energy is trading at a discount of 40% based on individual asset valuation, implying an upside of 67%. The valuation gap is likely to be closed within 12-24 months.
- Ophir Energy has strong partners, rich assets and is fully funded through 2015 for high level of exploration and development activity.
- Ophir Energy has multiple triggers in the form of divestment, government approval and new discoveries that will take the stock higher.
MV Oil Trust And VOC Energy Trust: A Tale Of Two Trusts
- MVO has outperformed VOC massively YTD.
- This should reverse based on expected dividend paths.
- Both trusts appear rich versus their expected yield, MVO egregiously so.
Black Diamond: A Very Attractive And Timely Short With A +50% Near-Term Return Potential
- Sold off its most attractive, highest margin and only profitable brand.
- Ongoing business with much lower margins and sharply negative earnings.
- Now expanding into highly competitive and mature categories where it has zero prior experience.
- Large recent discounts and unfavorable channel checks indicate these ongoing new product roll-outs are a disaster.
QLogic: A Logical Buy For 2015
- Despite clear signs of progress in its turnaround, shares of QLogic remain undervalued on both an absolute and relative basis.
- Signs of stabilization in the Fibre Channel market and continued growth in Ethernet sales have allowed the company to expand its market share.
- Despite gross margin pressures, tight cost controls have helped minimize the impact to operating margins.
- Pristine, debt-free balance sheet, with almost 30% of market capitalization in cash.
Playmates Holdings: Deep NAV Discount Gives 70% Upside From Rental Properties And Ninja Turtles Toys
- Playmates Holdings is an undercovered investment holding company in Hong Kong that's selling at a deep discount to NAV with positive catalysts ahead.
- 2 main growing businesses to drive narrowing discount and stock re-rating, being (1) property investments and (2) TMNT toys.
- (1) Property investments: Upside in rental income and valuation from prime-located commercial building with improving tenant mix including a global retail brand.
- (2) TMNT toys: Sales upside driven by product range expansion and new markets penetration, leveraging strong entertainment pipeline in TV and movies.
- Recent selloff offers attractive valuation now for an entry point. The selloff was driven by subsiding hype after airing of TMNT movie, but TMNT pipeline is far from over.
HealthEquity IPO Implies 50%+ Upside For Webster Financial
- The market is assigning virtually zero value to Webster's HSA Bank, the largest HSA custodian in the country.
- Meanwhile, smaller HSA custodian, HealthEquity, has recently been awarded a $1B+ market value via a successful IPO.
- With superior size and scale, HSA Bank should be awarded a valuation at least as high as HealthEquity's.
- In addition, the company's core banking operations are outperforming peers yet valued less expensively.
- Considering the low volatility associated with a regional bank stock and Webster's massive upside potential, its risk/reward profile is among the best we've seen recently.
Orocobre's Recent Retreat Might Be The Final Opportunity To Get In
- Orocobre's Olaroz project should be in production within weeks.
- The recent contraction on the commodity markets has sent Orocobre's shares tumbling.
- I see an easy 45% upside potential to the company's fair value.
Quiksilver: Restructuring The Quicksand Capital Structure
- Quiksilver's primary business segments have faced significant brand equity erosion and market share losses over the past twelve months, particularly across Roxy and Quiksilver brands.
- Weak wholesale revenue led to an EMEA goodwill impairment charge of $182 million in FQ3'2014, including a $38 million non-cash charge for the impairment of DC Shoes goodwill.
- Quiksilver's common stock is a terminal short; 17% of outstanding common shares are sold short and the common stock has realized a Y'o'Y price per share decline of -76%.
- Quiksilver's USD-denominated senior secured and senior unsecured notes may appear to offer attractive relative value but expected recovery rates do not support current trade levels.
SandRidge Permian Trust: Distribution Is Safe; Could Return +55% Within 1 Year
- PER’s share price has been hammered by a drop in oil prices.
- The market correction is undervaluing PER’s near-term distribution hedges.
- Even with the drop in oil prices, PER’s near-term distribution is on target for a near 30% forward yield.
- An additional return in share price appreciation of more than 25% is possible in the next year.
- PER’s fair value today is $12.72, resulting in a significant margin of safety; however, the trust is exposed to further oil price declines.
Check Point Software Technologies: Calling Activists As Cash Balances Continue To Increase
- Check Point's balance sheet is bloated with cash, with net cash & investments amounting to almost a third of the company's market capitalization.
- The company's operating margins and cash flow generation are higher than any of its competitors, including Microsoft.
- Combination of steady, but uninspiring revenue and EPS growth and continued growth in cash balances has created an attractive entry point for activist investors.
- Check Point has a long track record of share buybacks; since 2006 the company has bought back over 20% of its shares.
Monster Worldwide: Deeply Undervalued With 'Monster' Potential
- MWW trades at 50% of book value even though the company is profitable, FCF positive, and repurchasing stock hand over fist.
- Monster is poised for bookings growth in the upcoming 3Q followed by a return to sales growth in 4Q, suggesting a reversal from years of shrinking revenues.
- Software business is a hidden, unknown asset which should result in positive mix shift favoring high-margin recurring software revenue.
- Management has laid out 30%+ EBITDA margin targets to be achieved within 24 months. This breaches MWW’s prior peaks when the stock was $50+.
- MWW is the most hated/disliked in its industry and risk-reward is compelling even in the absence of revenue growth.
GrafTech: Cost Optimization, Hidden Asset, And Panic Selling Offer Outstanding Upside For Contrarian Investors After 60% Sell-Off
- Following this year's 63% selloff the valuation of GrafTech offers a highly compelling value proposition with solid margin of safety.
- Departure of previous CEO and board reshuffle after proxy contest led to major shareholder controlling the company and significantly improved management.
- Optimization of production and corporate structure improvements will produce significant cost savings with the effect being realized from the second half of 2014.
- GrafTech has a highly valuable hidden asset in the form of Engineered Solutions segment, where value is hidden by temporary headwinds and non-recurring expenses.
- Move to leaner corporate structure should lead to improved margins and free up additional $100mil of cash via lower inventory holding.
News Corp: Australian Assets Create Upside Catalyst
- News Corp is largely believed to be a newsprint company with little upside potential given the exposure to a dying industry. Of the total NAV, newsprint accounts for 1/5.
- The Move acquisition adds significant digital real estate assets to their fold with a substantial market opportunity.
- The disparate set of often hidden assets obscures a solid set of franchises with significant upside potential.
- The news business is the pinnacle in the space with a growing underlying WSJ business along with strong other assets like Dow Jones and Barron's.
- Over time, we think the FOX Sports 1 franchise expanding to the US (just last year) could be a significant growth driver for the cable networks division.
Monsanto: Engineering EPS Growth
- Most of Monsanto's recent 10-year EPS growth can be attributed to commodity price inflation that is now unwinding and the ethanol-driven corn boom that has ended.
- Monsanto lacks true, sustainable pricing power, and corn seed prices are now declining.
- Monsanto is a "premium" commodity business whose profits rise with rising crop prices and fall with falling crop prices.
- The company's profits should fall with lower crop prices.
- I estimate Monsanto's future earnings per share to be less than $4.50.
GAIN Capital: Uptick In Forex Volatility Bodes Well For Profits
- Price has drifted down throughout the year but there has been a marked increase in forex volatility in September. Forex volatility = more opportunities for GCAP to profit.
- A near-term profit improvement appears highly probable.
- Limited downside, probable but speculative upside.
Park City Group: An Imaginary Growth Story With 65% Downside
- 75% of receivables from Park City Group’s suspicious and largest customer, Repositrak, have yet to materialize since the beginning of their agreement in February 2012.
- Most recent 10-K filing by Park City Group shows that Repositrak booked only $197,775 of revenue in its lifetime compared to the $3,500,000 it still owes to PCYG.
- Repositrak represents 20% of PCYG’s total revenues and a write-down in notes receivable owing from Repositrak would drastically lower PCYG’s current grossly overvalued market cap of $158m.
- Realistic valuation based on comparable companies point to a share price of $3.12, representing 64% downside.