RCS Capital: Misunderstood With Tremendous Upside
- Institutional support helps solidify RCAP's potential upside.
- RCAP's main asset is largely untouched by the recent turmoil.
- Returning to fair value suggests upside potential greater than 100%.
- Emotions, not fundamentals, have punished this company.
QAD Inc. - Overlooked Enterprise Software Name With 100% Upside
- QAD Inc. is a nearly $300M annual revenue ERP software vendor to manufacturing companies worldwide.
- QAD has shown consistent, if not exciting, growth through its history and is solidly profitable and free cash flow-positive.
- The company now has a rapidly growing Cloud business; as this continues to gain scale, it should drive a higher multiple for the stock.
- A reasonable sum of the parts suggests a fair value of nearly $40/share, or almost 100% upside.
- Recent sell-side coverage launches mean this company will not fly under the radar at an absurdly cheap valuation of just 1x Sales for much longer.
Linn Energy: In Need Of A $100 Oil And $4.50 Natural Gas
- Linn's capital spending and distributions will be effectively funded by derivative settlements in 2015, assuming the current strip pricing.
- In the longer term, I estimate that a maintenance capital spending of $1.3-1.4 billion per year would be required to sustain production.
- The reported year-end PV-10 value disappoints, raising renewed valuation concerns.
- A long-term commodity price assumption of ~$100+ per barrel for WTI and ~$4.50+ per MMBtu Henry Hub appear to be required to justify the current price.
- The units' risk/reward profile appears skewed to the downside.
Hudson Global - Selling At 30% Less Than Activists' Cost Basis And Offers Significant Upside
- Lone Star Value Management's cost basis is at around $3.50; stock is now at $2.30.
- Valuation is 0.07x EV to sales; 55% of market cap is in cash.
- Initiatives are underway to make the company consistently profitable by 2nd half of 2015.
- Cost cutting and product shift is catalyst to move the stock meaningfully higher.
- Price target is for $9 to $11 by late 2015 to 2016.
Luxottica: Competition Will Reduce Profitability, 30% Downside
- As a near-monopoly, Luxottica has demonstrated fast growth, improving operating margins, and a high return on equity.
- However, an upstart with a unique business model is making an aggressive push into the eyewear business, undercutting Luxottica's prices by 70+%.
- Trading at 28x 2015 estimated earnings, Luxottica seems priced to perfection. Should operating profit growth slow, the author sees 30% downside.
Chesapeake Granite Wash Trust: Oil Volumes Disappoint; Recent Rally Creates Downside Risk
- Q4 2014 oil volumes came in substantially below my estimate, indicating continued weakness in well performance. There is a risk of a downward reserve revision in the year-end 2014 report.
- Oil over-hedging enhances distributions through Q3 2015. The subordination mechanism may remain in place through Q2 2017. Once protections expire, distributions will contract sharply.
- I estimate the distribution to decline 60-70% within 2 years (depending on commodity prices).
- The Trust's current $8.19 per unit price reflects ~$110 per barrel WTI and $4.50/MMBtu Henry Hub (based on the illustrative scenarios outlined in this note).
- At the current price, the risk-reward profile is skewed to the downside, in my opinion.
Beadell Resources: The Hidden Value Of Tucano Is About To Be Unlocked
- Beadell Resources has been slaughtered over the last year, and the market has now (more than) priced in all negative effects.
- The high-grade Duckhead pit isn't really empty; the Urucum Deep zone will add a lot of high-grade low-cost ounces, and the power cost will drop dramatically.
- Two major banks have refinanced the company's debt at a very low interest rate of LIBOR +3%, another sign of strength.
- Beadell could easily double from here, and I will average down my position shortly.
H&E Equipment: Exposure To Oil Is Misunderstood Presenting Strong Upside Case
- We feel that H&E is getting unfairly hit due to perceived high exposure to the upstream oil and gas industry.
- Actual industry exposure is actually quite low, around 12% of revenue. Even still, we think the thesis surrounding the bearish stance is overdone given oil economics.
- Relative valuation with their main competition, United Rentals, presents a strong long case. H&E shares have fallen 55%+ while URI has only seen a 22% drop, despite higher oil exposure.
Tuesday Morning: A Retail Turnaround Priced For Perfection, Up To 40% Downside
- TUES, a close-out retailer of home furnishings, operates a structurally low-margin business in a hyper-competitive environment.
- A modestly successful 2-year turnaround has precipitated a beyond-frothy valuation of 29x current-year EV/EBITDA and ~15x FY16 EV/EBITDA - a level many turns above larger, more cash-generative competitors.
- TUES' recent comp sales gains and margin improvements likely reflect the "low hanging fruit" of restructuring. Go-forward margin improvement and comp gains will be much harder to achieve.
- With the stock priced for perfection, any misstep in execution will be punished severely. A more appropriate multiple - still at a premium to all comps - suggests ~40% downside.
Intersections Inc.: Company At Inflection Point Positioned For Sustainable Growth With 95% Upside
- Intersections Inc. primarily provides subscription based identity protection services through both direct and third party channels.
- After years of working through regulatory setbacks stemming from the financial crisis, the company is now at an inflection point where it is positioned for sustainable profitability.
- The market has subsequently written off INTX, leaving it at an attractive valuation with a conservative two-year price target of $7.00.
Forestar Group: A Land Of Opportunity As Change Appears On The Horizon
- Land has historically represented a very profitable investment offering consistent and stable annual appreciation.
- Landowners such as Forestar Group sell at a significant discount to homebuilders, yet operate higher-margin businesses that can withstand significant drops in housing prices.
- Forestar sells at a 30% discount to our conservative $20.05 estimate of NAV per share. Significant upside to NAV exists if Forestar successfully exits the energy business to focus solely on real estate development.
- The Company can create significant shareholder value if it pays heed to the direction of the newly appointed activist-backed directors who bring credibility and real estate expertise to the board.
- Our NAV does not include the potential value of water rights, and uses discounted valuations that reflect the potential impact that weak oil prices might have on the company's assets.
Continental Building Products: High FCF Yield, Asymmetric Upside Make This Our Largest Position
- Continental Building Products is a ready-made LBO just starting to hit its stride.
- We expect double-digit revenue growth, meaningful margin expansion, and significant deleveraging of the balance sheet to drive attractive equity returns going into 2015.
- With a projected ~13% free cash flow yield and at least $80 million of debt repayment in 2015 (7% of current enterprise value), CBPX provides a nice margin of safety.
- With the opportunity to invest in the low cost producer in - what we believe - is the early innings of the U.S. construction cycle, CBPX offers asymmetric upside.
- Pay attention to this stock going into the Q4 print (February 23, 2015).
SIGA Technologies: Uncovering Hidden Value In Bankruptcy
- After an $195 million unfavorable court ruling against SIGA, the company's stock has been slammed and SIGA has filed for relief under the Chapter 11 bankruptcy code.
- Investors are most likely selling on panic and ignoring that SIGA's bankruptcy is non-insolvency driven, and primarily filed to allow an orderly appeal against PharmAthene.
- With only $2.5 million of outstanding debt, $110 million of cash on the balance sheet, and another $165 million expected, SIGA's equity should remain unscathed in a worst-case scenario.
- As the government's primary supplier of the Smallpox antiviral, SIGA has tremendous upside as it looks to renew its contract sometime over the next year or two.
SS&C Technologies: Advent Acquisition A Game Changer
- SS&C's acquisition is a bit out of the box compared to most of their 49 past acquisitions given Advent already carried EBITDA margins above 30%.
- Folding in Advent will add in the fast growing RIA channel to their mix, a segment that they have little current exposure.
- We think the synergy estimates by the firm are likely very low and that the company can achieve large accretion in '15 and '16.
A Low-Risk Entry Into A Hated Sector: The Uranerz Takeover
- Energy Fuels shareholders have overreacted to a proposed takeover deal of Uranerz. The sell-off has created an opportunity to enter this takeover story.
- A combination of Energy Fuels and Uranerz makes sense strategically and operationally. The combined business will be positioned to act as a consolidator of US-based uranium mining.
- We see 150+% upside for the combined business once rational valuation principles replace emotional overreaction.
Farmer Mac: Super Profitable But Cheap Due To GSE Aversion
- Farmer Mac, the Fannie Mae of agriculture, trades at 1 times book and 7 times earnings despite delivering sustainable 15-20% ROEs.
- Organizational improvements are finally enabling Farmer Mac to rapidly gain share; penetration remains low, so the growth runway is long.
- Investors drew the wrong lesson from Fannie Mae's failure. GSE privileges enable super profits from mundane activities. Fannie failed because it strayed from its core business.
- TSEM's Non-GAAP EPS is grossly inflated due to the exclusion of depreciation as an expense.
- Severe and consistent shareholder dilution greatly limits TSEM's future earnings potential.
- TSEM management has a history of over-promising and under-delivering, as well as enriching themselves at the expense of shareholders.
- The company has underperformed its peers for the past several years, and may have a hard time maintaining its market share due to increasing competitive pressures.
- Shares are overvalued by over 65% at the current share price level.
RadiSys Is Reaching A Meaningful Inflection Point
- RadiSys sits before a large market opportunity in the VoLTE deployment cycle, and is an enabling technology provider for various LTE telecom equipment manufacturers such as Mavenir and Nokia Networks.
- After a significant restructuring, RadiSys' target operating model now has meaningful operating leverage to drive EPS growth. RSYS trades at 10x expected run-rate earnings (Q4 midpoint EPS, $0.06).
- The RadiSys narrative going forward should feature revenue stabilization/growth, customer wins in new verticals, margin expansion from a growing portion of software revenue, positive cash flow and consistent profitability.
- RadiSys is an asymmetric long bet (with expected better than 10:1 odds) at the current $84 million valuation with a clean balance sheet. No one cares... yet.
- Earnings are set to be released February 3 after the market close.
- Quick summary of Q3 figures and analysis of initial market reaction.
- Refined calculations on terms of trade with Apple.
- Current quarter outlook and catalysts.
- Summary and commentary on longer-term technology development.
- Long-term valuation analysis and risk factors.
ARI Network Services: Deep Discount For Market Leader With Expanding Market Opportunity, Build-And-Sell Management Team
- ARI generates 90% recurring revenue at 80% gross margin, and recently expanded its addressable market considerably.
- The company is a leader in its niche, and its products are tightly integrated into customer workflows, resulting in high barriers to entry.
- It is run by a skilled management team, with incentives aligned with shareholders, and a history of value creation.
- ARI trades at a fraction of comparable multiples, due to several transient factors that we expect will dissipate in the coming quarters.
Sizmek: Immediate Catalysts Lurking
- We believe the company’s earnings report on February 19th will be the first of several catalysts to reignite interest in the stock.
- We conservatively forecast 14% EBITDA growth in 2015 and believe investors will reward the company with significant multiple expansion on improved operating results and favorable repurchase activity.
- We believe the company will aggressively implement its recent $15mm share repurchase program with follow-on programs throughout 2015.
- Assuming a multiple in-line with the ad-tech space at 10x EBITDA, Sizmek could reach $12.00 per share. If the company is successful in aggressively repurchasing shares at these levels, the upside could be even more pronounced.
Vectrus: Incentives And Black Swans Make A Compelling Long
- Vectrus was a recent ugly duckling spin-off that is quickly morphing into a lovely swan and a compelling investment.
- Traditional spin dynamics provided motivation for management to undersell the story day 1. Prospects are much better than advertised.
- Vectrus trades at less than 9x adjusted-EPS, substantially below peers, and has a ~10% FCF yield. Vectrus is a single large project win away from being a solid growth story.
- A black swan event – ISIS, Ukraine/Russia crisis, etc., could enlarge the opportunity set, and provide a natural hedge to a market correction.
- We see 50% upside over the next 12 months to $42 per shares based on modest top-line growth in 2H15 and multiple expansion to the low end of peers.
National General: 100% Upside, A+ Management, High-Quality, Under-The-Radar
- A high-quality specialty personal lines insurer which writes insurance in sticky niche markets, and growing rapidly.
- Strong competitive advantages, including superior technology and analytics, low cost structure, and strategic relationships.
- A seasoned management team with excellent capital allocation and risk management skills.
- Asymmetric risk-reward. 100% upside vs. only -16% downside in the next 2 years.
- Innodata is a misunderstood and forgotten microcap where cash-cow part of the business is overshadowed by investments into growth businesses.
- The company currently trades close to 5-year lows at 3.5x forward EBITDA with strong cash buffer and no debt.
- Innodata is at the inflection point whereby cash generation and growth potential of the business will become fully evident during 2015.
- Insiders have bought the stock recently at higher prices and company launched a buyback program.
- Innodata has at least 100% upside within a year and could easily triple or quadruple in a few years. Strong downside protection from recurring cash flows.
A Creditor-Imposed Liquidity Risk For Cross Country Healthcare Is Looming
- CCRN is in imminent danger of being bankrupted by its largest creditor (Providence Equity Partners) through a series of events that will likely lead to Providence's takeover of the company.
- In order to finance an acquisition in June 2014, CCRN entered into $55 million of debt with Providence under extremely unfavorable terms.
- The provisions of this debt allow Providence to cause a default of all of CCRN's secured debt at any time by acquiring an additional 22.8% beneficial ownership of the company.
- As a result, CCRN would immediately owe $100.8 million to its creditors ($96.3 million of which is due to Providence), exhausting its liquid assets. CCRN would be forced into bankruptcy.
- It is in Providence's interest to trigger these events prior to February 4. Adak Capital considers CCRN's stock essentially worthless, and predicts a corresponding price drop in the near future.
EXCO Resources: Overleveraging, Underhedging, And Blind Order Flow Offer A Compelling Short
- EXCO Resources is a Texas based oil and gas exploration and production company with a history of unprofitability, even at much higher energy prices.
- EXCO is heavily levered and trades well above latest reported book value - even before the inevitable asset writedowns.
- EXCO hedged improperly by selling put options on natural gas futures which are now in the money, leaving them exposed to downside in energy prices.
- Share prices have been propped up by energy sector ETFs, resulting in a structural inefficiency creating a very attractive short opportunity.
- Shares have been trading flat in spite of rapidly widening credit spreads and bearish analysts - potential catalysts include restructuring, equity offering, or ETF rebalancing.
Carnival: Declining Fuel Costs To Lift Profits In 2015 And Beyond
- Far too little has been written about the benefits of lower oil prices to the global cruise industry, which is led by Carnival.
- Carnival is the market leader within the cruise industry on both a global basis and in the industry's most important growth market: China.
- Carnival has the industry's strongest balance sheet on a net-debt-to-EBITDA basis.
- Growth in yields set to continue into 2015 alongside double-digit falls in fuel expenses.
- Assuming current oil market conditions continue, pressure will likely increase on Carnival to restructure/abandon its fuel derivative portfolio, upside potential of this move not currently in forward estimates.
B Communications: An Amazing Upside Opportunity In Telecommunications Right Under Our Nose
- B Communications is a holding company that has one major asset - 31% of the shares of Bezeq.
- By lowering its leverage and the necessity of paying dividends to the company that holds it, it creates tremendous value to shareholders.
- B Communications is devoted to keep spreading the value to its shareholders in the future.
Finmeccanica: You Can Fool All The People Some Of The Time
- Finmeccanica is not as attractive as it looks.
- A proper understanding of the company and its stakeholders raises many concerns.
- A FactSet presentation claims Finmeccanica is a bargain but I challenge the findings.
- All revenues and backlogs are not created equal. Beware valuation shortcuts.
Broadwind Energy: Strong Idea For 2015 With Extremely Compelling Risk/Reward
- BWEN’s Tower segment (~80% of revenue) generated $25m in YTD EBITDA, and is positioned for an incremental $10m in FY15 revenue. The entire company's enterprise value is just $50m.
- 2015 estimates are too low at $0.18 EPS and $13m EBITDA. BWEN earned an adj. $0.17 in 2Q14 alone, and already produced $11m in YTD company-wide EBITDA.
- Valuation is extremely favorable; BWEN prices at a paltry 0.2x revenue/backlog, 3.5x EBITDA, and 0.8x book, even though the company is CF-positive with a sold out 2015 order book.
- A six-month buyback is in place for 15% of the entire company; the short duration/large magnitude of the buyback suggest management is extremely confident in FY15 top-line growth/earnings power.
- BWEN was a $100 stock in 2009, a time when the PTC had gone 5 years without expiration - this free call option adds to an already powerful investment case.
Synergy Resources: E&P With A Premium Valuation That Could Decline 80%
- Synergy is within 10% of its 52-week high and carries a 20x EBITDA valuation that is 2.5x that of comparable companies.
- Management missteps and questionable stock sales are highly concerning.
- Continued low prices and infrastructure challenges in the Wattenberg will make profitable production growth near impossible.
Exxon Mobil: Slow But Steady, Value Erosion Is Underway
- Despite $100 oil and much higher capital spending, Exxon's oil production has continued to decline at a high rate.
- When measured on a free cash flow basis, after adjusting for production declines, financial returns over the past five years were poor and the outlook remains bleak.
- Even assuming the company will stabilize its liquids volumes, the stock appears dependent on $100+ oil to yield minimally acceptable free cash flow returns.
- In a weaker price environment, Exxon may have to borrow to sustain dividends and share buybacks at the current level.
- Exxon needs a radical Upstream strategy re-evaluation and deep cost reductions to restore competitiveness.
QEP Midstream Partners: 20% Near-Term Upside In A Takeout, And 40-60% Longer Term
- Tesoro Logistics recently offered to acquire QEPM for 0.2846 shares per share of QEP Midstream, a ratio that likely improves given what it paid to the parent.
- The stock trades on top of the exchange offer as the QEPM board considers the offer.
- Tesoro and QEPM are both cheap, attractive, fee-based midstream MLPs that have significant upside assuming any stability in oil prices.
My Best Idea For 2015 - American Airlines
- Price target - $120.
- 2015 EPS forecast of $12 per share.
- Airfare prices should remain relatively stable thanks to favorable economic tailwinds.
Trinseo - Compelling Price, Bain Capital Pedigree, And Excellent Risk/Reward
- Trinseo S.A is a global chemicals business that Bain Capital took public in June of last year after having acquired the business from Dow Chemical in 2010.
- Trinseo's IPO last year at $19 per share soared to nearly $23 per share, and Bain Capital did not sell a share of their own position. All proceeds repaid debt.
- TSE is off 24% since the IPO and 37% from its high, while making significant progress towards their operational/financial goals, yet trades at a 5x P/E on 2016 EPS.
- Headline multiples are already attractive, but the valuation becomes extreme once normalizing for the abnormally high capital expenditures the company is incurring over the next 24 months.
Discounting Coupons.com: Follow The Insider Selling And Clip This Coupon Before The Coming Crash
- Coupons.com was founded in May 1998 and remains unprofitable almost 17 years after its inception.
- After 16 years of floundering as an unprofitable business, the company took advantage of the JOBS Act and frothy IPO market to create a liquidity event for management and sponsors.
- The company is ultimately a "print at home" coupon business, and it is no secret that consumer inkjet printing is in secular decline.
- We believe that the company has masked its weak underlying growth trends by utilizing a combination of opaque disclosures, non-recurring contract wins, and acquisitions.
- We view the recent strength in the share price as being the result of management's efforts to boost the stock in order to get the ball rolling on secondary offerings.
- An acceleration of carrier Voice-over-LTE (VoLTE) and Voice-over-Wi-Fi (VoWi-Fi) launches in 2015-2016 will drive demand for Mavenir’s market-leading solutions.
- Mavenir’s unique software-focused business model provides a significant competitive advantage that will allow it to continue to gain share from incumbent vendors, and open up a TAM of billions.
- As more wireless subs roll on to LTE, MVNR will shift its business from hardware to high-margin software sales, massively expanding its margins and moving towards high profitability.
- Shares are highly undervalued on low Street estimates for 2015-2016; the Street’s avg price target is just $17/share, but we see the shares headed to $30.
- Management, VCs, and Cisco (CSCO) own 57% of the shares. 1.6m shares (~13% of the float) is short making a short squeeze a real possibility.
Sell NovaGold: Market Vastly Overvaluing Donlin
- NovaGold's primary prospect, Donlin, is receiving a $2bn valuation from the market.
- This is inexplicable given comps to neighboring projects.
- Donlin also is valued at roughly 4x its Net Present Value, which is equally illogical.
- NovaGold has a spotty record of developing mining projects; this is particularly troublesome as environmental headwinds to Donlin mount.
- Recent 30% run-up in NovaGold shares offers perfect opportunity to sell.
EnPro: Unconsolidated Subsidiary A Hidden Asset
- The Garlock (GST) subsidiary was deconsolidated back in 2010. We think the market is missing the true value of the business.
- Recent court rulings were extremely favorable for the subsidiary and company, and have jump-started the work to get the subsidiary out of bankruptcy.
- A turnaround in Europe is offsetting headwinds from their oil and gas exposure, which we also think is overstated.
Tribune Media: Outsmarting The Market's Misinterpretation Of Retransmission Renegotiations
- Investors misunderstand the implications of broadcasting fee-split renegotiations for Tribune and sold off the stock.
- However, Tribune underwent bankruptcy from 2008-12 and never profited from otherwise industry-wide increases in retransmission revenues; unlike its peers, it will benefit from the upcoming renegotiations.
- Tribune's business is therefore at an inflection point, whereby industry tailwinds from sports and political advertising and the conversion of WGN to a cable network drive additional upside.
- The market has also been overlooking Tribune's valuable hidden and soon-to-be monetized assets, including spectrum, equity stakes, and real estate.
- This leads to an +80% fair-value discount and merely 11% premium to liquidation value which, in combination with multiple catalysts, makes Tribune an incredibly compelling investment opportunity.
Pending Class-Action Lawsuit Creates A Short Case For Eagle Materials
- Eagle Materials achieved a 74% increase in gypsum wallboard price in just 3 years, and it currently stands close to the peak level of 2007.
- Housing starts activity is at significantly depressed levels and industry-wide wallboard capacity utilization is only at 63%.
- Based on the balance of probabilities, Eagle Materials and other wallboard manufacturers are not operating in a clean competitive environment with the pending antitrust lawsuit in place.
- The upcoming break-up in suspected price-fixing creates a short case for Eagle Materials since 70% of its operating earnings are derived from the wallboard.
Green Plains Inc. Shares Can Double Despite Cheap Oil
- GPRE's shares have fallen by 53% since September as gasoline prices have collapsed.
- GPRE's forward P/E ratio is less than half of its 5-year historical average.
- Rebounding RIN prices will insulate GPRE's earnings from gasoline price volatility.
- A return to the 5-year average P/E ratio would cause shares to double from their current price.
Key Tronic: A Cheap, Quality, Growth Play On EMS Re-Shoring
- Superb management let this electronics manufacturer outperform peers in tough past environments - profitable every quarter 2004-2014 - despite geographic, scale and scope constraints.
- Each of those constraints have either been lifted or shifted in their favor. EMS work now flows back to Mexico; organic growth has delivered scale; and acquisitions broadened capabilities.
- Worth $16, or 15x the $1.15 run-rate I expect within 12 months. Potential to trade to $32 within a couple years if operating margin nudges through past plateau.
Medley Capital: Another Gift From Year-End Tax Loss Selling
- Medley Capital is a busted BDC trading at a +25% discount to NAV. Its portfolio of predominantly senior secured floating rate mezzanine debt is well diversified and strong.
- MCC has suffered from tax loss selling and fears of a potential but needed dividend cut. The December price decline is an overreaction to a down-tick in MCC's fundamentals.
- Equity issuance at a deep discount to book value is unlikely given management's promises to the contrary and history.
- MCC represents one of the strongest risk-reward investment opportunities in the BDC space today (TR of 40-50%), even with the projected dividend cut.
Advanced Drainage Systems: Inside Selling Is Worth A Thousand Words
- Advanced Drainage Systems is the leading US manufacturer of plastic pipe, used in the waste management, infrastructure and construction sectors.
- If your first reaction to that was “sounds like a tough industry”, you’d be right – margins and returns are typically low, in the mid-single digits.
- The stock is trading on optimistic growth forecasts and huge margin expansion, both of which seem misplaced and reliant on external factors.
- We argue that the correct price for a commoditized, low-quality business in a cyclical sector is far from the 20x+ EV/EBIT on which the stock is trading.
- .. But you don’t just have to take our word for it – the private equity house which took the business public is aggressively selling down its stake.
Value Trap, Or Why The Prospects For Dorian LPG May Be Bleak
- VLGC vessel orderbook stands at 54% of the existing global fleet size.
- Upcoming US export terminals to boost LPG trade flows but insufficient to balance the VLGC fleet growth.
- Major deterioration in the VLGC charter rates would lead to further decline in Dorian LPG's stock.
SEC Action Forces RAIT Financial Book Value To Plummet
- Our analysis indicates the SEC settlement will cause book value to drop by -35% to $4.73 per share.
- We expect investors will continue to value the stock on a price/book multiple and therefore expect the stock price to decline by a proportionate amount.
- We believe the current dividend is not sustainable according to the pro-forma income statement filed in the Company’s 8-k on December 29, 2014.
- Dividend growth has been fueled by dilutive equity raises. The dividend is really just a “return of shareholders’ capital” rather than a “return on shareholders’ capital”.
- Two executives facing enforcement actions from the SEC were given golden parachutes at the expense of shareholders.
OHA Investment Corporation: Special Situation In A Busted BDC
- Busted BDC trades at +40% discount to book value due to a misread 3rd quarter, a tiny float, low institutional ownership, and year-end tax loss selling.
- Last quarter, there was a complete turnover in the Board of Directors, management team, strategy and opportunity set for this BDC that the market completely overlooked.
- Strong insider buying points to a total return potential of 30-50%.
MiX Telematics: A Rare Opportunity To Buy A Stake In An Excellent Company At An Excellent Price
- MiX Telematics operates in the Fleet Management industry which is growing fast, yet is under-penetrated.
- Its excellent management team has grown MiX from a start-up to becoming a differentiated and profitable global player.
- Temporary headwinds and selling pressure have weighted on the stock since the August 2013 secondary IPO, resulting in an attractive valuation.
Medical Properties Trust Presents 40% Upside As Discount Evaporates
- MPW trades at 11.5X normalized FFO compared to peers which trade at 16X on average.
- The discount is unwarranted as MPW is equal or better than peers in key areas such as growth and reliability of earnings.
- A return to proper market pricing is catalyzed by a potential buyout and room for substantial dividend raises.