Seeking Alpha
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short
    PRO Top Idea LOCO Yesterday, 5:00 AM Suhail Capital 78 Comments

    Summary

    • More like a ‘Pollos Hermanos’ than the Chipotle media comparison it is currently getting.
    • 20+ years of failed domestic expansion track record.
    • Two-year comp momentum is largely average check growth driven, and thus should be heavily discounted.
    • Existing equity holders will be very motivated sellers at lockup expiry.
    • There should be ZERO bid for this stock anywhere north of $20.
  • New Media Investment Group Offers 100%+ Upside With Downside Protection From Sustainable ~7% Dividend Yield
    PRO Top Idea NEWM Tue, Aug. 19, 5:00 AM VJ Shil 24 Comments

    Summary

    • As a post-bankruptcy equity and recent spin-off, NEWM is an undervalued and underfollowed local newspaper and online media stock that trades at 6.1x LTM pro-forma EBITDA and 7.2% dividend yield.
    • Not a secular dying business: investors get a turnaround, stabilizing business with free optionality for the company to generate substantial value through accretive acquisitions, offering a compelling asymmetric risk-reward opportunity.
    • NEWM owns 450+ local community newspapers that are more stable and have loyal readership base. NEWM purchases distressed newspapers at <3.5x EBITDA and has 1300 potential targets in M&A pipeline.
    • One of the main competitors for M&A is Warren Buffett’s B.H. Media group, which poses limited risk since they operate in different, large, and fragmented markets.
    • NEWM can leverage its strong local footprint and regional scale to cross-sell its Propel digital marketing, an organic high-growth segment with a potential $24B total addressable market.
  • Bellatrix Exploration: Deeply Undervalued And Likely To Achieve Significant Price Appreciation
    PRO Top Idea BXE Sat, Aug. 16, 5:00 AM TheValueMan 99 Comments

    Summary

    • Bellatrix Exploration is a USD $1.3 billion market cap E&P with an average trading volume of US$3.3 million on the NYSE and $34.8 million with the TSX included.
    • Bellatrix trades at a discount to peers and must appreciate 76% to reach the median peer group multiples.
    • Bellatrix has net debt / Q2 2014 EBITDA of 1.2x, which is lower than 7 out of 10 peers, and affirmed production increases of 33%, which is higher than peers.
    • Due to increased firm service capacity, Bellatrix alleviated near term constraints on production growth. Their 2015 and 2016 gas plants will fully eliminate those constraints.
    • Continued increases in production growth, and a new PR campaign in the US will cause a re-rating of this stock. My 12 month price target is C$16.
  • Why Consolidated Tomoka Is Taking Off And Headed Much Higher
    PRO Top Idea CTO Sat, Aug. 16, 5:00 AM Nat Stewart 20 Comments

    Summary

    • A hidden asset rich company (balance sheet land values are 100+ years out of date) with significant catalysts to realize value, yet still under-appreciated by investors.
    • Upcoming land sales, including 76 acres for a Trader Joe’s distribution center (set to close in the third quarter), should substantially accelerate the company’s transition to an income-producing company.
    • A motivated and highly experienced CEO on track to make a name for himself within the investor community.
    • Purchase and sale agreements for 16% of the company’s land have been signed with a total value of over $50 million, vs. the company’s market cap of only $280 million.
  • Cash America: Spin-Off Of Its E-Commerce Business Should Unlock Substantial Value
    PRO Top Idea CSH Fri, Aug. 15, 5:00 AM Eight Diamonds Advisors 12 Comments

    Summary

    • Cash America is an alternative financing company that operates through two main segments. A traditional pawnshop business and Enova, an online provider of non-secured consumer loans.
    • Cash America plans to spin-off Enova by early 2015. This provides a clear catalyst to unlock the value of the two businesses, currently not fully reflected in its valuation.
    • Based on comparable multiples, we estimate the two businesses will trade at a 40% plus premium to Cash America’s current market capitalization post-separation.
    • We think the downside is limited. Most of the bad news covering regulatory risks, suppressed gold prices and consumer confidence are well-known and most likely already priced in.
    • This is a medium-term trade. Around six months for the spin-off to unlock substantial value, then a series of further value creating catalysts could unfold over the next few years.
  • Radcom: Product Success And Operating Leverage Will Drive Upside
    PRO Top Idea RDCM Fri, Aug. 15, 5:00 AM Mike Arnold 3 Comments

    Summary

    • Radcom is at the cusp of significant earnings growth due to three key variables: (1) revenue growth; (2) gross margin expansion; and (3) fixed operating expenses.
    • A transition to a software-driven model via new product offering - MaveriQ - is rapidly expanding gross margins coupled with well-contained, fixed operating expenses.
    • The Q2 earnings release and conference call confirmed points (2) and (3) above. Recently announced contract wins should provide the last leg of the value thesis, revenue growth.
    • Radcom's share structure includes only ~8 million shares, about 40% of which are held by two insiders, Zohar and Yehuda Zisapel. Place limit orders, expect volatility.
  • Outerwall, Inc: An Attractive Out Of Favor Business
    PRO Top Idea OUTR Wed, Aug. 13, 5:00 AM David Tristan Liu 41 Comments

    Summary

    • Outerwall trades at ~4.0 EV/EBITDA and 8.9x forward P/E indicative of immediate distress.
    • Redbox is more sustainable than the market believes.
    • Outerwall business includes two other segments.
    • Debt levels are manageable and FCF will be returned to shareholders.
  • Marten Transport: Mispricing In The Industry Provides Strong Upside
    PRO Top Idea MRTN Tue, Aug. 12, 5:00 AM Alpha Gen Capital 8 Comments

    Summary

    • Marten is one of the premier niche transport operators in the business with top-notch management and very efficient operations.
    • The company is now a much more diverse enterprise with "three fingers of growth" and a very broad revenue base.
    • Further expansion into Southern California with their recent acquisition and into Western Mexico will likely push down operating cost ratios further and increase profitability as route density increases.
  • Noble Roman's New Initiatives Could Be Baking Up Some Profits
    PRO Top Idea NROM Tue, Aug. 12, 5:00 AM Whopper Investments 15 Comments

    Summary

    • Noble Roman's recent stand-alone take-n-bake initiative could be worth more than 50% of the company's market cap by the end of next year.
    • Even without the stand-alone initiative, the company trades at a discount to peers despite significant tax assets.
    • Strong insider ownership aligns management with shareholders.
  • Advanced Drainage Systems: Let The Share Price Drain Be Your Gain
    PRO Top Idea WMS Tue, Aug. 12, 5:00 AM Dallas Salazar 16 Comments

    Summary

    • WMS should be currently operating exclusively on its revolving credit facility.
    • WMS has more debt, contractual obligations, and operating expenses coming due, at best, over the next 36-48 months than it has borrowing capacity and cash flow generation capability.
    • WMS is operating at max levels of efficiency and has a mature operation overall, greatly limiting its ability to improve revenue growth from current levels.
  • magicJack: Short-Term Catalyst, And Significant Upside
    PRO Top Idea CALL Sat, Aug. 9, 5:00 AM William Delano 50 Comments

    Summary

    • Significant short squeeze possible when magicJack releases 2Q earnings on August 11.
    • Trading at 4.4x EBITDA, magicJack has no debt, high margins, and a new product launch; expect revenue growth and multiple expansion under the company's new management.
    • An acquisition or LBO is definite possibility.
  • LeapFrog: Product Cycle Refresh Provides The Road Map For Substantial Upside
    PRO Top Idea LF Sat, Aug. 9, 5:00 AM Money Investor 9 Comments

    Summary

    • LeapFrog stock has been beaten down due to an inventory glut that is a temporary problem.
    • New product releases scheduled for the balance of the FY should have investors looking back to what happened when LeapFrog first introduced the LeapPad.
    • Company maintains a pristine balance sheet and should generate acquisition overtures or an activist investor could step in to create value for shareholder.
  • Overstock.com: A High Conviction Idea With 150% Upside
    PRO Top Idea OSTK Fri, Aug. 8, 5:00 AM Mike Arnold 57 Comments

    Summary

    • Overstock.com is trading at a wide discount to my estimate of private market value.
    • Management is introducing higher-margin service offerings such as Supplier Oasis and an insurance broker which should lead to incremental margin expansion.
    • Clear tailwinds in eCommerce, a capital-light operating model and optionality in terms of monetizing developed in-house software and accretive capital allocation provide downside protection and significant upside potential.
  • ArcBest: 20% Earnings Related Decline Presents A Great Entry Point For Investors
    PRO Top Idea ARCB Fri, Aug. 8, 5:00 AM Money Investor 7 Comments

    Summary

    • ArcBest fell over 20% after reporting substantial revenue growth with a noisy EPS number that missed expecations.
    • The company is now experiencing significant revenue and EBITDA growth and short-term operational efficiency growing pains will not persist.
    • 30% upside for ArcBest in the next 12 months.
  • Kennedy-Wilson: European Venture Should Shine A Spotlight On Its Own Significant Upside Potential
    PRO Top Idea KW Sat, Aug. 2, 5:00 AM Eight Diamonds Advisors 1 Comment

    Summary

    • Kennedy-Wilson is a vertically integrated global real estate investment and services company with a reputation for thriving in distressed property markets.
    • Despite generating an average equity multiple of over 1.60x on its investments, the market is currently valuing them at just 1.10x book value. We estimate 25% plus upside for Kennedy-Wilson.
    • The investment process that generates these returns is complex, with Kennedy-Wilson normally taking minority equity positions in commingled funds and JVs. This confuses the market, resulting in the gaping discount.
    • We believe Kennedy-Wilson’s European venture will act as a catalyst, leading investors to question why its own investments are valued by the market well below their fair value.
    • This is a medium-term opportunity. The downside is limited due to the existing discount to market value and Kennedy-Wilson’s proven ability to generate outsized returns from a crisis.
  • Lynden Energy - Unknown Permian Basin Pure Play Could Triple
    PRO Top Idea LVLEF Sat, Aug. 2, 5:00 AM TheValueMan 145 Comments

    Summary

    • Lynden Energy is a Midland Basin pure play with zero net debt and a current USD market capitalization of $106 million.
    • Undervalued relative to peers by 220% on Enterprise Value/EBITDA, 230% on EV/Production, and 218% on EV/1P Proven Reserves.
    • Currently worth $321 million in an asset sale or takeover which is triple the current enterprise value.
    • Recent horizontal drilling partnership with Diamondback Energy increases Lynden Energy’s value and probability for asset sale/ takeover.
    • Current drilling at Mitchell Ranch asset could easily double market cap of Lynden Energy or more by itself.
  • Tree.com: When Investors Ignore, You Win!
    PRO Top Idea TREE Fri, Aug. 1, 5:00 AM Alpha Gen Capital 17 Comments

    Summary

    • The return to lower lending standards and secondary financing including second lien mortgages like HELOCs should benefit TREE strongly.
    • Investors are expecting a decline in volumes as interest rise which is counter to what we think as lenders increase lead generation usage in order to offset refinancing declines.
    • New products, including many in the non-mortgage space, continues to enhance the company's growth trajectory.
  • Mart Resources: It's The Right Time To Buy This African Oil Play
    PRO Top Idea MAUXF Thu, Jul. 31, 5:00 AM Street Smart Investor 37 Comments

    Summary

    • Mart Resources has inched higher by 22% in the last five months on some crucial positive developments.
    • Production and revenue for Mart Resources is likely to surge in FY15 as the company starts using its export pipeline for oil sale to Shell.
    • Mart Resources is undervalued based on relative valuation with a potential 63% upside over the next 12-18 months.
  • Invacare Dramatically Undervalued Due To Temporary FDA Issue
    PRO Top Idea IVC Thu, Jul. 31, 5:00 AM Dr. Hugh Akston 27 Comments

    Summary

    • IVC is global leader in mobility and seating products, but it has been dramatically under-earning for the past two years due to an FDA consent decree.
    • Once FDA consent decree is lifted, combination of $130m high-margin revenue coupled with $10m less of compliance expenses will have an explosive impact on FCF and EPS.
    • FDA action pertains to quality control systems NOT safety of product or quality of product.
    • We believe this saga with the FDA is entering the 9th inning and expect the consent decree to be lifted within the next 12 months.
    • We see the stock offering a compelling 7.4x risk/reward opportunity and see intrinsic value being $26 per share (+73% upside).
  • The Market Is Only Just Starting To Wake Up To Largo Resources
    PRO Top Idea LGORF Thu, Jul. 31, 5:00 AM Itinerant 19 Comments

    Summary

    • A growing supply deficit will drive vanadium prices higher in coming years.
    • Commissioning at Largo Resources' world-class Maracas vanadium mine has been completed and production is imminent.
    • The market has only just started to appreciate the quality of the asset, and the outstanding execution of Largo bringing the mine into production.
    • We estimate 150% upside if past performance can be maintained throughout ramp-up.
  • Coupons.com - Crazy Growth Assumptions Necessary To Justify Valuation - At Least 55% Downside With Clear Catalyst
    PRO Top Idea COUP Tue, Jul. 29, 5:00 AM New Capital 18 Comments

    Summary

    • Coupons.com trades at P/S=10 with no profit. It is currently priced 50% above its IPO price just 4 months ago. Its addressable market is limited and not growing.
    • Company is unlikely to maintain its monopoly position as competition from better capitalized rivals will put pressure on company’s margins and market share.
    • Diluted fair value assuming 30% growth and 80% market share is $11/share, a downside of 55% from the current price.
    • Huge shareholder dilution through issuance of options and RSU – 28m shares to be issued compared to 12m during IPO.
    • Strong catalyst with September lock-up expiry.
  • Aeropostale: Why It's A High-Conviction Short All The Way Down
    PRO Top Idea ARO Tue, Jul. 29, 5:00 AM Jeremy Raper 37 Comments

    Summary

    • Despite mammoth underperformance in recent years, ARO stock still looks significantly overvalued at $3.2 per share, given the magnitude of secular challenges facing the company.
    • Even adjusting for announced store closures, ongoing cash burn, as well as allowing for some improvement in comps and margins, ARO could still burn $108mm in net assets in 2Q-4Q.
    • The current store footprint remains extremely overbuilt, suggesting ARO needs to close another 300-400 stores in coming years to rightsize the business.
    • After conducting emergency financing with Sycamore, common stockholders have been effectively subordinated in the capital structure and should expect zero in recovery.
    • Given the rate of asset destruction, a reasonable price target would be a slight premium to year-end proforma book value - that is, around $1.5 per share (45% downside).
  • If You Are An Alpha Seeker Looking For The Next Big Energy Play, Load Epsilon Energy Now
    PRO Top Idea EPSEF Tue, Jul. 29, 5:00 AM Value Digger 346 Comments

    Summary

    • Epsilon Energy is a profitable energy company with a pristine balance sheet.
    • The company has two profitable and growing segments (upstream and midstream).
    • It is drilling the sweet spot of the Marcellus shale.
    • Epsilon's stock is a sleeper and the company's current valuation is irrational.
    • Epsilon's stock has to soar to come in line with the peers' valuation.
  • Antero Resources: Rich Valuation Represents A Risk
    PRO Top Idea AR Sat, Jul. 26, 5:00 AM Richard Zeits 10 Comments

    Summary

    • Antero’s strong stock performance has resulted in trading multiples that are among the highest among large-capitalization E&P stocks and among its Marcellus and Utica peers.
    • While the company's production growth guidance is impressive, it is to some degree a result of significant outspending of internal cash flow and does not represent an organic growth rate.
    • The risk to natural gas price realizations is elevated and may contribute to the stock's price correction.
  • Tropicana Entertainment: Casino Operator Trading At A Significant Discount To Peers With At Least 30% Upside
    PRO Top Idea TPCA Sat, Jul. 26, 5:00 AM Michael A. Williams 23 Comments

    Summary

    • TPCA trades at nearly half its peer group valuation.
    • The company can recapture sizable market share in its largest market as nearly one-third of its competitors exit.
    • Carl Icahn owns 67.9% of the equity.
  • Accounting For Paycom's Accounting Heading Into Earnings
    PRO Top Idea PAYC Sat, Jul. 26, 5:00 AM Dallas Salazar 25 Comments

    Summary

    • Paycom had a blowout first quarter that I believe has largely been misunderstood by the retail community.
    • Analysts seem to have a universally bullish rating on the stock, and I might be the most bullish of all.
    • Paycom shares have been under constant pressure since the IPO, but second-half bottom line growth should accelerate much quicker than first half.
  • Comverse Inc: The Transition To Positive Free Cash Flow Is Upon Us
    PRO Top Idea CNSI Fri, Jul. 25, 5:00 AM Alpha Gen Capital 2 Comments

    Summary

    • Former spin-off and orphan stock that has had many passed transgressions. Largely misunderstood accounting issues cloud the firms true operating performance.
    • New management and activist shareholder appear motivated to shed significant operating expenses and expand margins closer to peer average.
    • New product offerings appear poised to leverage existing install base while appealing to a whole new market of potential clients due to the easy install process and SaaS model.
    • Valuation points to an asymmetric return profile with our bear-case scenario showing just 8% downside.
  • Hennessy Advisors Would Be A Perfect Addition To One Of Its Own Funds
    PRO Top Idea HNNA Wed, Jul. 23, 5:00 AM John Leonard, CFA 10 Comments

    Summary

    • The stock trades at a discount to its peer group as historical AUM growth has been driven by acquisitions rather than organic inflows.
    • However, the strong FCF provides more than sufficient coverage for the acquisition-related debt, which only has a 4% interest rate.
    • The highly accretive acquisition of a fund family from FBR in 2012 provided the critical mass necessary to fully benefit from the scalable business model.
    • The recent turnaround in fund flows provides reassurance of the organic growth potential.
    • The skin in the game trifecta for the CEO (large equity ownership, highly incentivized compensation structure, name on the door) results in a perfect alignment of interests with shareholders.
  • Iteris: Accounting Delay Offers Compelling Entry Point
    PRO Top Idea ITI Tue, Jul. 22, 5:00 AM Dr. Hugh Akston 21 Comments

    Summary

    • 10-k was delayed due to a mix of bad luck and poor execution; however, we do not see this delay impacting the intrinsic value or being a harbinger of further bad news.
    • Our research indicates the revenue recognition question only impacts the timing of revenue and pertains to less than 2% of total revenue.
    • Our research also indicates the financial data on the cash flow statements and balance sheets is correct and will not be restated.
    • The underlying business is experiencing fundamental strength. With stock trading below book value and pristine balance sheet ($20m in cash and zero debt), we see an attractive risk/reward profile.
    • We estimate the intrinsic value for ITI is $2.40 per share or +55% upside.
  • BioFuel Energy - Day Traders Pushed The Price Above Reasonable Limits
    PRO Top Idea BIOF Tue, Jul. 22, 5:00 AM New Capital 14 Comments

    Summary

    • Biofuel has been engaged in reverse merger transaction with home builder JBGL since March. During the last week share price has increased 45% with daily volume exceeding free-float.
    • Media coverage of recent events was incorrect and misleading which likely added to irrational exuberance on investor side. Complicated deal structure makes real motives behind transaction less transparent.
    • As part of the transaction, insiders (Einhorn included) are cashing out half of their investment at a lower price than the market is currently trading at.
    • Merged company will be loaded with high yield debt. Share count will increase five fold and new shares will be distributed at $5/share vs current price of $8.8/share.
    • Investment bankers have used unreasonable and exaggerated growth assumptions when evaluating the fairness of the transaction for minority shareholders.
  • Municipal Mortgage And Equity: Still Trading At A 40% Discount To NAV, 65% Upside Remains
    PRO Top Idea MMAB Fri, Jul. 18, 5:00 AM Michael A. Williams 13 Comments

    Summary

    • Messy consolidated balance sheet obfuscates the investment story.
    • GAAP accounting prohibits MuniMae from realizing gains on real estate-related assets until they are sold.
    • Shares currently trade at 40% discount to NAV, before adding the value of $405.9 million of NOLs and other considerations.
  • Despite Run, ALJ Regional Holding's Deal Making Offers Continued Upside
    PRO Top Idea ALJJ Fri, Jul. 18, 5:00 AM Whopper Investments 14 Comments

    Summary

    • Lack of annualized numbers obscures the value of ALJJ's key subsidiary.
    • Shares trade at a material discount to comps.
    • Investors offered upside from continued deal making and company NOLs for free.
  • Countrywide PLC: 11.5x Trough Earnings With Ample Buyback Capacity; 90-130% Upside
    PRO Top Idea CTYWY Wed, Jul. 16, 5:00 AM Weighing Machine 22 Comments

    Summary

    • Countrywide PLC is the leading UK's largest residential real estate agency. It trades at just 11.5x 2014 estimated earnings.
    • 2014 housing transactions in the UK are expected to be 33% below the 30 year average level of housing transactions. Normalization of the housing market provides significant upside to earnings.
    • At a normal level of housing transactions, Countrywide could earn L0.66 per share. At today's price of L4.70, Countrywide trades at just 7x my estimate of normal EPS.
    • Countrywide is nearly debt free and highly cash generative. Were Countrywide to lever its balance sheet to 2x EBITDA, the company could repurchase ~25% of outstanding shares.
    • Countryside could make an attractive acquisition target for a strategic buyer like Berkshire Hathaway or a private equity group.
  • GreenHunter Resources Could Rise 150%
    PRO Top Idea GRH Tue, Jul. 15, 5:00 AM Marjac Capital Management, LLC 47 Comments

    Summary

    • Announcement of pipeline and splitter project is transformative for GreenHunter Resources.
    • Pipeline to significantly reduce the cost of brine water disposal for producers by 50%.
    • No capital required from GreenHunter for the pipeline construction due to creative deal structure with private pipeline company.
    • 2016, 2017 earnings could potentially value GreenHunter at nearly $1B.
    • Current price target $5.
  • Loral - To Sell Or Not To Sell Is Not The Question
    PRO Top Idea LORL Tue, Jul. 15, 5:00 AM Chris DeMuth Jr. 35 Comments

    Summary

    • Loral is in the final chapter of its corporate life and is in the process of selling its last significant asset, Telesat.
    • The ‘noise’ around the sale of Loral is disguising the true value of Telesat’s business.
    • By purchasing shares of Loral, one gets Telesat’s valuable and growing business for a significant discount.
  • Marchex: Another Bubble Basket Stock
    PRO Top Idea MCHX Sat, Jul. 12, 5:00 AM Ariana Research 6 Comments

    Summary

    • Marchex is a low margin business with poor returns on capital trading for a staggering ~49x EBITDA.
    • The Company is heavily reliant on search engines such as Google and Yahoo combined with a concentrated customer base.
    • The bull thesis overlooks the Management team's poor capital allocation skills, numerous business flip-flops and finally insider sales.
  • Ocwen Financial: Wells Fargo Deal Resolution Will Mean Significant Upside
    PRO Top Idea OCN Thu, Jul. 10, 5:00 AM Alpha Gen Capital 53 Comments

    Summary

    • Hold on MSR deal has irrationally suppressed the share price despite continued strong organic growth.
    • Surge in home prices over the last two years could potentially create another flood of foreclosures.
    • Home price increases have created large gains on the held portfolio which could be liquidated for large gains.
    • OASIS securitization program lowers cost of capital adding to competitive advantage.
    • Use of burgeoning free cash flow likely to propel share buyback program.
  • An Office And Industrial REIT Positioned To Deliver Alpha - Chambers Street Properties
    PRO Top Idea CSG Wed, Jul. 9, 5:00 AM Dane Bowler 23 Comments

    Summary

    • Chambers Street Properties trades at a substantial discount to its intrinsic value.
    • It provides exposure to the fundamentally desirable office and industrial REIT sectors at a cheaper price than is otherwise available.
    • Strong properties and tenants along with an oversized dividend should result in extra returns for CSG investors as its multiple expands.
  • UCP, LLC's Lot Portfolio Is Worth 84% Of Its Enterprise Value, Giving Shareholders Homebuilding Exposure At A Discount
    PRO Top Idea UCP Fri, Jul. 4, 5:00 AM John Ford 23 Comments

    Summary

    • Over 70% of UCP's lot portfolio was acquired from 2008-2010, so the value is significantly understated on the balance sheet.
    • My valuation model shows a significant margin of safety in purchasing the stock due to the firm's net asset value cushion.
    • Star homebuilding analyst Ivy Zelman, who predicted the housing crisis in 2006, thinks fundamentals are strong nationwide and even stronger in UCP's California markets.
  • Alacer Gold Is A Case For The Bears
    PRO Top Idea ALIAF Fri, Jul. 4, 5:00 AM Itinerant 7 Comments

    Summary

    • Alacer Gold has finally released information on how it plans to expand the Cöpler mine in Turkey.
    • The sulfide expansion will use a pressure oxidation plant to process the refractory ore, for initial capex of $660M.
    • We believe that the total value of the Cöpler mine cannot support the current share price and predict a downside of 30% or more.
    • We speculate that Alacer Gold may have lost the support of its major shareholder setting up an opportunity to short the stock.
  • Vera Bradley: Colorful Handbags, Bleak Future, 25% Downside
    PRO Top Idea VRA Thu, Jul. 3, 5:00 AM Jeremy Raper 14 Comments

    Summary

    • Vera Bradley, formerly a success story in women's retail, has reached a tipping point in recent quarters with comp store sales deceleration increasing and margins under pressure.
    • The company's niche brand is suffering from lower engagement, exacerbated by heavy competition from both handbag specialists and 'fast fashion' players.
    • Company management has made it very clear that reinvigorating the brand will be a painful, multi-quarter exercise.
    • Whether you comp VRA to a large or small retail comp group, the stock looks 20-25% overvalued despite much weaker earnings momentum and structural challenges.
  • Manitok Energy: Highly Undervalued And Poised For Price Appreciation
    PRO Top Idea MKRYF Thu, Jul. 3, 5:00 AM TheValueMan 110 Comments

    Summary

    • Manitok Energy Inc. is a highly undervalued junior oil and gas company and it has well over 100% 6-12 month upside and even higher upside longer term.
    • The stock is undervalued relative to peers by 125% based on EV/EBITDA, 155% based on EV/Production, and 100% based on EV/1P Proven Reserves, and trades at 2.87x Q1 2014 annualized cash flow.
    • Exceptional continuing growth with a debt/cash flow ratio of 0.4 in Q1 2014 and a stated corporate goal of maintaining debt to cash flow less than 1.25x.
    • Affirmed guidance on June 19 of annual production increases of +48% and funds from operations +68%, yet it still trades at an irrational discount to peers.
    • Due to positive drilling results released last week, it's extremely likely Manitok will hit year-end guidance, causing much of the large discount to unwind.
  • International Paper's Spin-Off And Its Subsequent Merger Creates Veritiv, A Prime Short Candidate
    PRO Top Idea VRTV Thu, Jul. 3, 5:00 AM Eight Diamonds Advisors 16 Comments

    Summary

    • International Paper’s spin-off, xpedx, will merge with the parent of Unisource Worldwide to form Veritiv on July 1, 2014.
    • Veritiv is a prime short candidate. Its core business is in secular decline, margins are razor thin and it carries an outsized debt burden.
    • We estimate the downside opportunity is significant if Veritiv’s management is unable to stabilize its struggling business.
    • This is a multi-year play. The most likely downside catalyst will be a liquidity crisis, probably triggered by the continued decline in revenue and the failure to realize merger synergies.
    • Upside risk is limited, due to the presence of a large stock overhang and a potential earn-out of up to USD100 million due to International Paper.
  • Nautilus: Robust Early-Stage Cash Growth, New Products, And Secular Trends Fuel Strong Gains
    PRO Top Idea NLS Wed, Jul. 2, 5:00 AM Bishop Research and Analytics 5 Comments

    Summary

    • Nautilus is in the early stages of a strong growth cycle after restructuring its business after the financial crisis.
    • Several new product launches and the success of its new MAX Trainer device in early 2014 have the potential to accelerate the growth trajectory.
    • Fear about this stock hangs over investor sentiment as memories of its epic decline leading up to the financial crisis linger after its turnaround.
    • Strong free cash flow indicates an estimated valuation 76 percent higher than current share prices.
    • Macro tailwinds provide Nautilus with fertile target markets for its products for years to come.
  • Bankwell Financial Group: Significantly Undervalued While Outsider CEO Crafts Encore Performance
    PRO Top Idea BWFG Tue, Jul. 1, 5:00 AM Unconventional Capital Wisdom 11 Comments

    Summary

    • Peyton Patterson fits the outsider CEO mold described by William Thorndike and is repeating her success with a much smaller bank.
    • The community banking environment is ripe for consolidation in the Connecticut and surrounding areas.
    • Mr. Market has been selling BWFG off because of media headlines allowing one to purchase the bank at 1 times tangible book.
    • Upcoming catalysts should quickly close the discount to intrinsic value.
  • Lipstick On A Pig: Why Elizabeth Arden Is A High-Conviction Short Even After The Big Move Down
    PRO Top Idea RDEN Sat, Jun. 28, 5:00 AM Jeremy Raper 10 Comments

    Summary

    • Despite the move yesterday, Elizabeth Arden trades at a massive premium to key comps despite worryingly bad fundamental trends, a structurally lower-margin business, and further restructuring/balance sheet risk.
    • Takeover risk, significant until recently, is much lower now that LG Household, the purported Korean suitor, has lost its interest.
    • If the stock trades back to similar multiples it was historically when EBITDA margins troughed (as they look set to do), it could trade to the $11-12 range (~45% downside).
  • Stallergenes: An Unknown, Predictable Biotech With 50% Upside
    PRO Top Idea STLEF Fri, Jun. 27, 5:00 AM Early Retiree 7 Comments

    Summary

    • Following Ares' unsuccessful takeover bid in 2010, Stallergenes has lagged the market rally.
    • Presently the stock trades 10% below the takeover price offered back then, which was deemed to be far too low.
    • In the meantime, sales and earnings have increased 30%, indicating substantial undervaluation.
    • While Stallergenes trades at 18 times expected earnings for 2014, Danish competitor ALK trades at 24 times 2016 forward earnings.
    • Another buyout offer is in the cards as well as a substantial re-rating of the stock.
  • DragonWave: After Years Of Disappointment, Big Upside Potential In 2014
    PRO Top Idea DRWI Fri, Jun. 27, 5:00 AM Matthew Dow 62 Comments

    Summary

    • After years of heavy operating losses, DragonWave is seeing greater than 50% revenue growth with a cyclical upswing in 4G/LTE network spending.
    • Besides a general upswing in the market, a new contract with telecom Reliance Jio coupled with improvements in the Nokia relationship should lift the stock further in 2014.
    • With the stock down more than 90% the last 4 years and all expectations deflated, good execution in the coming months will likely make for a quick multi-bagger.
  • Halcón Resources: Success In The TMS Redefines Upside Potential
    PRO Top Idea HK Thu, Jun. 26, 5:00 AM Richard Zeits 29 Comments

    Summary

    • Recent drilling results in the Tuscaloosa Marine Shale, both by Halcón and other operators, indicate that the play’s ultimate success is increasingly probable.
    • A week ago, Halcón received an important endorsement of its TMS asset from Apollo Global Management in the form of the first tranche of a $400 million mezzanine financing.
    • Given the scale and quality of Halcón’s position in the TMS, the asset may prove defining for the stock’s valuation.
    • Factoring in the potential impact from the TMS, the stock’s risk/reward profile appears favorable.
  • IDT's Hidden Value Should Call To Value Investors
    PRO Top Idea IDT Thu, Jun. 26, 5:00 AM Whopper Investments 15 Comments

    Summary

    • With legacy businesses largely phased out, the rapid growth in IDT's core business should be unmasked.
    • The market appears to be ignoring the significant potential upside in the smaller Zedge and Fabrix divisions.
    • Investors also get a "grab-bag" of other goodies, including NOLs, significant excess cash, and some real estate.