Gladstone Land Has Gotten Cheap On Tax-Loss Selling With 40% Upside
- Gladstone Land has become unusually cheap due to the interaction of tax-loss selling with low trading volume.
- Our estimate of fundamental value is around $14 as compared to the $9.90 market price.
- Total returns will be catalyzed primarily by a cessation of tax-loss selling.
Why ModusLink Global Could Be A Double
- ModusLink is a $115mm TEV business with a $2BB NOL.
- Activist Steel Partner owns almost 30% of the company and is seeking an acquisition.
- Steel Partners' long-term track record is excellent, and an accretive deal could unlock substantial value for MLNK.
Rosetta Stone: Misleading Financials Mask Continued Deterioration In Business
- RST management is using questionable financial reporting practices which significantly overstate the financial performance of the business.
- In Q4 2013, RST changed its definition of Adjusted EBITDA to a methodology which significantly inflates performance via aggressive deferred revenue add-backs.
- A more reasonable method for calculating EBITDA indicates that management’s FY 2014 Adjusted EBITDA guidance of $18mm - $22mm is overstated by at least $22mm.
- In addition to aggressive financial reporting, RST’s business has continued to deteriorate due to competitive pressures.
- RST shares are overvalued by over 40% at the current price level.
WhiteHorse Finance: An Orphan BDC At A Deep Discount To Tangible Book Value
- WhiteHorse Finance trades for 0.75x tangible book, which is steep considering its underlying asset quality.
- WHF is an orphan stock after the Russell BDC Index deletion and low float due to high inside ownership.
- The Company is not currently earning its dividend on a net investment income basis yet that should change in the near future.
Orbital Sciences Could Explode... Again
- Occasionally one can find attractive, wide spreads around the periphery of merger arbitrage.
- One exploitable example from today's market is ATK-ORB.
- We own ORB, a security that costs about $25 and is worth about $35. Here is why.
Trinseo S.A.: Event-Driven Play With Catalysts To Close The Heavy Discount
- Debt refinancing and deleveraging should de-risk cash flows and create significant value for shareholders.
- Market overreacted to weaker than expected 2014 results since significant impact was on the back of one-off charges.
- Restructuring impact would be fully reflected from 2015 and hence provide significant increase to firm's earnings.
Intrepid Potash: New Mine And Changing Industry Dynamics Point To Significant Upside Potential
- Fertilizer stocks have been decimated due to oversupply and lower pricing that has crushed realizations of their production.
- A bottom in prices has likely been reached as a host of variables will likely curtail capacity while demand continues to grow.
- Intrepid's new HB Solar mine in New Mexico will complement smaller versions in Utah which carry significantly lower operating costs boosting profitability.
- The company is able to realize prices well above the industry thanks to a geographic advantage. We think this is missed by the market with valuations based on industry averages.
POSCO: Short-Term Risks Open Up Opportunity For Long-Term Investment
- Short-term pessimism drove share price to attractive levels.
- Strong competitive position as low-cost producer.
- Shifting towards more economically attractive products.
- Embarking on shareholder accretive restructuring.
- Incremental earnings will flow from non-core segments.
Cosan Ltd.: My Best Idea For 2015
- Cosan's stock price has been crushed with the recent unfavorable election in Brazil and the downturn in commodity prices.
- The market appears to be pricing Cosan as a pure-play ethanol/sugar producer, when in fact, over two-thirds of the company's EBITDA is derived from non-commoditised businesses.
- A conservative sum-of-the-parts analysis implies over 80% upside to the current share price.
CorEnergy Is Substantially Undervalued With Upside Of 75% And An 8.5% Yield
- CorEnergy is mispriced on a variety of misconceptions and temporary issues.
- CORR is fundamentally worth about $11.00 per share.
- 75% upside and an 8.5% dividend while we wait.
PrairieSky: Highly Valued Canadian Oil And Gas Trust Faces Potential Distribution Cut
- Unhedged Canadian royalty trust trading at +30x my estimate of 2015 cash flows.
- Barring a significant rally in oil and Canadian NGL prices, I believe PrairieSky will need to cut its distribution by +40%.
- Exposure to high-cost Canadian oil and gas plays may result in asset impairment in the "new oil" environment.
ChipMOS: Oligopoly At 4x EBITDA, 8x EPS With Pending Buyback - A Holiday Gift
- ChipMOS trades at 4x trailing EV/EBITDA and 8x 2015 EPS ex-cash, shockingly low multiples for any company, let alone one enjoying strong growth and a near 20% ROE.
- The market has failed to recognize that ChipMOS, like its number 2 customer Micron, participates in an oligopoly, which will continue to drive sustained profitability and free cash generation.
- A $15 million buyback set to begin this week should provide a near-term lift to shares. Substantial excess capital should drive additional accretive share repurchases in 2015.
- Strong business momentum and the recognition that ChipMOS plays in a defensible niche should drive a multiple re-rating. We value shares over $37 - 65% upside to yesterday's close.
Adcare Health: Near-Term Propco Event With Valuation Arbitrage
- Adcare presents a “must own” vehicle with near-term catalysts and limited risk.
- The company will focus on increasing its payout via accretive acquisitions while simultaneously remaining dedicated to selling itself to a larger REIT as an ultimate exit strategy.
- At its current share price, ADK is trading at an implied cap rate of 9.75% versus publicly traded peers at ~6.00%.
- Applying a 7.5% cap rate yields a price target of $6.50 per share. As the company pursues accretive acquisitions, we believe the stock price will approach $8.00 per share.
Best Long Idea For 2015: BNCCORP
- Before each year starts, Rangeley Capital writes our best idea for the subsequent Jan 1-Dec 31.
- This year, we focused on something that is unlikely to lose value in the next year.
- We looked for an investment idea with an upside return of over 50%. Here is what we found.
Rand Worldwide: Growth By Autodesk
- Strong growth at Autodesk should trickle down to this value added reseller.
- Rand is severely undervalued if management projections turn out to be correct.
- Confusion regarding tender suggests the market for RWWI shares are highly inefficient.
Vector Group: Strategic Moves Likely To Unlock Significant Value For Investors
- The tobacco business is not in massive decline as many investors believe, and generates substantial free cash flow and growing operating margins.
- The consolidation of the real estate assets improves the valuation of the shares and expands the screening of the name.
- We think that management and the board will attempt to spin out one of the two main but disparate businesses, and unlock significant shareholder value.
Ag Growth International Cleared For Takeoff
- AGI is a premier grain handling business based in Winnipeg, Manitoba. It has the largest share of portable grain handling equipment in the United States.
- AGI agreed to buy Westeel, the largest provider of grain storage bins in Canada, for $221.5 million.
- The deal was financed with a $90 million subscription receipt and convertible debenture deal which closed December 1. Until just recently, most analysts covering the stock were restricted on it.
- Six analysts have come out with EPS targets implying 22% growth in 2015 and 15% in 2016. Target Prices are in the $53.50-$65 CAD range versus the $52.01 close.
- I think AGI/Westeel will be competitive with leaders GSI and Brock and will gain a higher P/E multiple, leading to my 12 month price target of $72.20.
Acacia Mining: This Turnaround Is For Real
- Acacia Mining has turned free cash flow positive and has finally presented its vision for the mid-term future.
- We are convinced that a turnaround has been accomplished and we are expecting significant growth going forward even at today's gold price levels.
- Management has succeeded on just about the most difficult task available in the gold mining industry. We are confident that it will deliver on its 5 year plan.
- Acacia Mining remains severely undervalued and should rerate over time to account for its successful reinvention.
Badger Daylighting: Undervalued Industry Giant With A Clear Path To Long-Term Shareholder Value Creation
- Hydrovac truck demand is growing rapidly in North America, as oil and gas companies and utilities turn to safer methods for servicing, upgrading, and building out the continent's aging energy infrastructure.
- Badger owns and operates the largest fleet of hydrovac trucks in the U.S. and Canada, boasting a dominant leadership position in this highly fragmented industry.
- The Company is well positioned to maintain its impressive growth trajectory as strong capex trends in its end markets and rising safety pressures are providing a strong tailwind.
- Conservative DCF analysis suggests shares are trading at ~25% discount to intrinsic value; with considerable margin of safety and bull-case suggesting 100% upside, BADFF offers compelling risk-reward.
Freshpet Inc.: A Fresh JOBS Act Short
- Freshpet operates a capital-intensive business reaching maturation.
- It is a non-differentiated business facing increasing competition.
- The stock faces 50%-80% downside.
Watch Out Below When Five Below Reports Today, Target Price: $30
- Watch Out Below when Five Below (FIVE, $43.07, target $30, +30%) reports today.
- Tween weakness suggests Q4 comp/EPS downside.
- 50% multiple contraction before attractive to GARP investors.
- BGC Partners is just beginning to benefit from sweeping changes in the credit derivatives markets.
- BGC's buyout offer for rival GFI Group represents a uniquely complementary pairing, and the market is underestimating the chances of success.
- The value in the current financial metrics for BGCP mitigates downside risk, should the company fail to acquire GFI.
Medallion Financial: Classic Case Of A Thought Virus Gone Wild
- App threat is overblown: a fleet of part-timers will drive down wages to an unacceptable level for public safety and will trigger regulation.
- Some livery app companies externalize their cost of operations on their drivers including maintenance, depreciation and insurance (that is, if the driver does want to commit insurance fraud).
- TAXI has an established business in NYC where yellow cabs are most entrenched due to their monopoly on street hails in Manhattan. This will protect NYC medallion values.
- Furthermore, nearly half of the business is today unrelated to taxi medallions.
- We see a price to value discrepancy of some 30%+, ignoring dividends and share repurchases.
Dover Downs Is An Asymmetric Wager
- The company has a mid-single digit P/FCF.
- Management has been using the FCF to pay down debt, keeping interest coverage very safe.
- Potential upside exists in the form of tax relief, as the legislature recognizes the industry's economics are currently poor.
Avid Technology - Shares Poised To Appreciate Following Recent Completion Of Restatement And Re-Listing To Nasdaq
- Avid Technology is a high quality software company trading at a discount to peers due to a recently completed financial restatement.
- Avid shares are poised to rerate as the company re-lists on the Nasdaq and re-engages with the investment community.
- Avid has the potential to significantly increase earnings power over the next 3 years as management's turnaround strategy comes to fruition.
- Significant insider buying signals upside is ahead for Avid shares.
Peak Resorts Is Skiing Just Ahead Of An Avalanche
- Recent IPO Peak Resorts looks moderately interesting on the surface.
- A deeper dive into the company’s IPO filings reveals major capital structure problems.
- The company is a strong sell and underwriters should be ashamed of themselves.
Quiksilver's Margin Problem, Covenant Breach Risk, Increasing Cash Burn: Why The Common Stock Is Likely To Get Wiped Out
- Despite mammoth underperformance this year, the scale of deterioration in ZQK's business and balance sheet suggests full equity impairment could be as little as two quarters away.
- Worsening performance in recent years has been driven mostly by sales declines, not margin declines. With margins still largely higher than peers, discounting remains a key risk this holiday season.
- Cash conversion has been favorably pushed out in the recent 3Q, suggesting payback in coming quarters; ZQK likely breaches debt covenants on its senior credit facilities in 1-2 quarters.
- Recent non-core asset divestitures provided a significant cash buffer that has now been exhausted, meaning senior creditors will have to fund any future cash burn.
- Tangible book equity is negative, suggesting shareholder value in any restructuring (not just bankruptcy) should be de minimis; and even assuming a massive recovery, the stock is not cheap.
Home Loan Servicing Solutions: A Potential Tax-Avoidance Scheme Hidden Behind A Veil Of Complexity With 35% Downside
- HLSS’ business model is unique and is a new post-recession structure never before seen in the mortgage industry. We believe it is significantly misunderstood amongst investors.
- HLSS depends solely on Ocwen for its revenue. Recent negative impacts on Ocwen are not reflected in HLSS, unlike in Ocwen’s other affiliated company (Altisource).
- HLSS provides tax-avoidance benefits to Ocwen shareholders and does not exist with its own business purpose, which we believe is unsustainable and can potentially come under investigation.
- We believe current lawsuits against Ocwen and its affiliates will unveil HLSS’ complexity and tax-avoidance scheme to provide significant tax-adjusted downside of at least 35%.
Cooper-Standard: Margin Expansion And New Joint Ventures Present Upside Case
- Cooper is an orphan stock with zero Street coverage that is set to benefit from a shift in auto manufacturing to global production platforms.
- The company has several joint ventures including new ones in China and an expansion of an existing one, which we think is going unnoticed by investors.
- As the company has restructured their European business to benefit from lower cost of production, management is finally seeing underlying growth.
- We think the company has a target on them for a leveraged buyout or strategic acquisition given the scale and low leverage.
Vertex Energy: Oversold And Under-Appreciated
- Pressure in the oil market combined with misunderstood Q3 results present excellent buying opportunity.
- Recent acquisitions bringing new re-refining capacity become operational in FY 2015.
- Significant year over year EPS growth could yield 214%+ return.
Best Idea For 2014: Sanofi Rights Post-FDA Approval
- The Sanofi right tied to Lemtrada is Rangeley Capital's best idea for 2014.
- Recently the FDA approved Lemtrada; here is our updated analysis.
- This idea is backed by high conviction and a large investment; here is why.
My Favourite Value Stock: AGCO Corporation
- Following an in-depth analysis of the farm equipment sector, I feel that AGCO is materially undervalued.
- At the current price levels, the downside is very limited and I feel there is 45-55% upside in a fairly conservative scenario.
- The stock has sold off heavily following 2014 challenges, without recognising that some of these are short-term and the stock's operating margins should improve significantly.
Peak Resorts: Neglected IPO Yields 6.5% With Three Catalysts For Imminent Upside
- Peak Resorts was the victim of a weak and neglected IPO.
- Thanks to this, we can buy Peak with a fat 6.5% yield.
- The 2014-15 ski season is shaping up great: Strong snows and low gas prices bode well.
- 30% near-term gains: Peak should trade to north of $11 this quarter, this stock won't yield more than 5% for long.
Wesco: Compounding Machine On Sale - 40-100% Upside
- After a disappointing earnings release, Wesco has been punished with a 20% sell-off despite its solid business with 78% of recurring revenues.
- Former Berkshire investment manager, Tom Bancroft, owns a large long-term Wesco position in his fund and has been adding at much higher prices than today's.
- Through an accurate analysis of Wesco's business model and its inventory management, we will understand what ultimately drives profit growth.
- We will see that double-digit profit growth rates are virtually certain and make Wesco an incredible bargain, especially after the recent 20% price drop.
The Long Case For Consolidated-Tomoka: 45-55% Upside
- The market values Consolidated-Tomoka (CTO), a diversified real estate operator, at less than its land holdings net of debt.
- A wide margin of safety comes from hugely undervalued hidden assets coupled with a highly talented, shareholder-aligned management motivated to realize value.
- All told, CTO offers conservative upside of 70%.
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.