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Alpha Gen Capital

 
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  • A.M. Castle Has Laid Everything On The Table
     • Yesterday, 12:09 PM CAS 1 Comment

    Summary

    • The quarter was likely the nadir in sentiment and poor news as management appears to have put everything on the table in order to move forward with a blank slate.
    • Shares are undervalued based on the buyout of Metals USA last year.
    • Activist shareholders are likely monitoring the results which will provide downside protection to the share price.
  • KCG Holdings Continues To Hide Under The Radar
     • Wed, Aug. 20 KCG 1 Comment

    Summary

    • Low sell-side coverage has allowed the turnaround and upside in KCG to slip under-the-radar.
    • The firm has massively de-levered aided by significant debt repayment with interest expenses falling by half in the last three quarters.
    • The firm has several growth catalysts, both near and medium-term, including the potential on winning a piece of the Schwab business and expansion into European banks.
  • Dillard's: A Break In Share Price Momentum Means More Downside Ahead
     • Tue, Aug. 19 DDS Comment!

    Summary

    • The shares have risen substantially from the 2008 lows but the company has not realized any revenue growth over that time period.
    • The company's earnings growth has largely come from margin expansion and share buybacks, both of which appear unsustainable.
    • The second quarter earnings recently released appear to have broken what was a momentum stock and will likely create a rush to the exits.
  • WebMD: The Doctor Is Out
     • Mon, Aug. 18 WBMD 1 Comment

    Summary

    • Massive growth in competition appears likely to knock the company's growth rate down significantly. This includes long rumored big players like Google.
    • Shift towards mobile page views cutting into deferred revenue.
    • Executive turnover likely causing strategic issues and raises several red flags.
    • Margin improvement initiatives are likely played out with further improvement unlikely.
  • Amdocs Still Has Room To Run
     • Fri, Aug. 15 DOX 1 Comment

    Summary

    • While domestic and European markets have matured, with low-single digit growth, emerging markets are picking up the slack and becoming the growth engine of the company.
    • An okay quarter with several new wins, but only small backlog growth.
    • The company's financial strength, with $7.40 per share in cash and a strong buyback program, has rewarded shareholders.
  • Global Cash Access Holdings: Ka-Ching! Ka-Ching!
     • Fri, Aug. 15 GPN, GCA Comment!

    Summary

    • High barrier to entry business model with strong recurring revenue streams being priced as a commodity business.
    • New technology and product refresh cycle boosting margins and revenues.
    • Push into international markets will likely be a massive revenue generator over the next several years.
  • Furmanite: An Emerging Global Powerhouse With Upside Of 78%
     • Fri, Aug. 15 MG, TISI, FRM 2 Comments

    Summary

    • Long-term secular tailwinds from the oil and gas renaissance in the US are likely to boost revenue growth in coming years substantially.
    • The firm recently completed a five-year transition from a largely franchised organizational structure to a global powerhouse.
    • After several acquisitions, the firm has folded in a portfolio of new offerings and now has a turnkey one-stop solution.
  • Entropic Communications: Business Model Appear Broken With Significant Uncertainty As To The Future
     • Wed, Aug. 13 DTV, ENTR Comment!

    Summary

    • Shares sold off following the second quarter earnings release as the company guided down third quarter results further.
    • Design wins have been scaled back with recent wins at Comcast and Time Warner being talked back in terms of potential.
    • Second quarter results disappointed and further color surrounding restructuring plans appear to point to a more threatening situation as cash burn accelerates.
  • Nova Measurements: Secular Bull Story For Optical Metrology Provides Upside Of 30% Or More
     • Wed, Aug. 13 NVMI Comment!

    Summary

    • Nova stands to benefit from the secular shift towards Optical Metrology within the semiconductor space.
    • The company is breaking out of a niche market into a broader supplier of both integrated and stand-alone solutions.
    • Nova owns the market and is in the process of introducing newer technology while growing ancillary revenue streams, mostly within software.
  • Marten Transport: Mispricing In The Industry Provides Strong Upside
     • Tue, Aug. 12 MRTN 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.
  • KBR Inc.: Deepening Pessimism And Increased Bidding Costs Point To Possible Bottom
     • Wed, Aug. 6 KBR 2 Comments

    Summary

    • Recent class action suit has beaten down the shares providing a decent entry opportunity.
    • CEO replacement has also caused near-term anxiety.
    • Operational improvement plan likely will boost margins and improve efficiency of the firm.
    • Quarterly results and legacy issues have pummeled the share price boosting the pessimism level to elevated proportions.
  • Pitney Bowes: Risk-Reward Opportunity Decidedly Negative
     • Wed, Aug. 6 PBI 3 Comments

    Summary

    • Longs are banking on their much smaller, digital marketing business offsetting the physical mail decline.
    • Cost cutting has largely been played out with very little additional benefit likely achievable.
    • Cash flow is in terminal decline with free cash flow decidedly negative putting pressure on the company's investment grade credit rating.
  • Tree.com: When Investors Ignore, You Win!
     • Fri, Aug. 1 TREE 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.
  • Chipotle: One Overstuffed Burrito
     • Sat, Jul. 26 CMG 37 Comments

    Summary

    • Rising threats from food inflation, labor and occupancy costs, contradict the assumption of ever expanding restaurant margins.
    • Competition is heating up in the space where once Chipotle had free reign over the fast casual Mexican food category.
    • Focus on throughput (productivity), which has likely reached a ceiling in the near term, could degrade quality over time.
  • Comverse Inc: The Transition To Positive Free Cash Flow Is Upon Us
     • Fri, Jul. 25 CMVT, CNSI 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.
  • Equinix: Expensive As Investors Front-Run The REIT Conversion Ignoring Threats
       • Fri, Jul. 18 EQIX 4 Comments

    Summary

    • Declining top line growth and gross margins are pressuring the valuation.
    • REIT conversion largely priced into the stock.
    • Increasing competition and churn in the business likely to further slow growth.
  • Safe Bulkers: Best-In-Class Shipper Poised To Gain As TC Rates Rebound
       • Tue, Jul. 15 SB 6 Comments

    Summary

    • Decline in expected growth of fleet expansion over the next few years bodes well for shippers pricing power.
    • Demand for higher quality coal in China to ease poor air quality is likely to drive cap rates.
    • Decline in iron ore prices below $125 per metric ton favors imports over Chinese domestic production.
    • Downside is protected from liquidation value of the fleet.
  • Ocwen Financial: Wells Fargo Deal Resolution Will Mean Significant Upside
       • Thu, Jul. 10 AAMC, ASPS, HLSS 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.
  • IPC The Hospitalist: Exactly The Cure For What Ails Your Portfolio
       • Tue, Jul. 1 IPCM Comment!

    Summary

    • Strong secular growth story in small, niche health care space.
    • Justice Department lawsuit is overhyped and has unfairly punished the share price.
    • Confusion surrounding seasonality of net physician adds.
    • Long-term, the hospitalist field appears greatly needed due to a dearth of primary care physicians entering the field.
  • EZCORP: Reset Of Expectations And New Management Focus Provide Significant Upside
       • Wed, Jun. 25 EZPW 28 Comments

    Summary

    • Stabilization of gold prices should stabilize the operating of the business.
    • Increases in consumer and producer price indexes could mean future gold price increases.
    • Inventory levels should clear as they offload their load of new retail jewelry through their online channel.
    • Slower store growth and acquisition integration should lower their operating expenses by 5-8% over the next two years.
  • MeadWestvaco: Ride Along Starboard For Profit
       • Thu, Jun. 19 MWV 5 Comments

    Summary

    • Hedge Fund activism was recently confirmed in the shares with Starboard Value LP taking a 5.6% stake in the company.
    • Capital spending projects are rolling off improving margins and free cash flow.
    • Margins are already improving with current valuation expecting no further improvement.
    • Second quarter margins should benefit from weather effect turnaround and improved pricing power offsetting input inflation.
  • 8x8: Virtual Office With Real Potential On Sale Now
       • Tue, Jun. 17 EGHT 5 Comments

    Summary

    • Infonetics Research 2014 Scorecard results show 8x8 as the clear market leader.
    • Build-out of their indirect sales channel should maintain or accelerate subscriber growth.
    • Acquisition of Voicenet creates meaningful international foothold and start of expansion.
  • Himax: Cut Through The Hype And Look At The Facts
       • Wed, Jun. 11 HIMX 48 Comments

    Summary

    • Google rumors are a sideshow as the wearables story is much larger than one player.
    • Innolux headwind subsiding.
    • Mobile and tablet tailwinds likely to accelerate in the back half of '14 and throughout '15.
    • Valuation is ridiculously cheap and assumes no growth from two of the company's four segments.
  • Fleetmatics: A Reset Of Expectations Creates Significant Upside Potential
       • Tue, Jun. 3 FLTX 24 Comments

    Summary

    • New REVEAL+ product set to ramp up sales.
    • Inside sales model is a strong competitive advantage.
    • Large and growing database could become a large asset creating optionality.
    • Geographic expansion should start creating meaningful unit growth in the second half of this year and especially in 2015.
  • Manning & Napier: An Inflection Point In Its Business Has Been Reached
       • Wed, May. 28 MN 1 Comment

    Summary

    • Push into DC plan space, including corporate restructuring.
    • New products coming up on three-year anniversaries.
    • Margins can expand and grow above the industry average.
    • 2100 Xenon acquisition brings it into the fast-growing alternatives space.
    • Performance of flagship products set to roll off poor performance from three years ago.
  • Barrett Business Services: Growing Pains Have Subsided Leaving Large Upside Potential
       • Wed, May. 21 BBSI 12 Comments

    Summary

    • ACA and other regulatory expenses are pushing small businesses to PEOs.
    • Large proportion of revenue recurring making the cash flow stream more stable.
    • Expansion of both its geographic footprint and their margins means substantial future growth potential.
    • Rebound in CA employment provides significant tailwind to the business.
    • Stock unfairly being hit due to their lower forecasted revenue from dumping low-margin clients.
  • Biglari Holdings: Sum Of The Parts Indicates Strong Upside
       • Tue, May. 13 CBRL, BH 24 Comments

    Summary

    • Compensation plan a sideshow for the real value.
    • Company is diversifying away from restaurant operations with new acquisitions.
    • Cracker Barrel proxy rejection sent shares lower but his initiatives to enhance shareholder value continue to be implemented.
    • Most importantly, the ownership structure clouds the real underlying value of the conglomerate firm.
  • Och Ziff: On A Path To Becoming A Mega Firm
       • Wed, May. 7 FIG, PZN, OZM 5 Comments

    Summary

    • SEC probes have depressed share price presenting great long-term opportunity.
    • Inflows remain on track and star manager likely to be a big draw of new assets throughout the rest of the year.
    • Valuation remains very compelling with asymmetric risk-reward potential.
  • Iron Mountain: REIT Conversion And Emerging Markets Fuel Upside Of 40%
       • Tue, May. 6 IRM 8 Comments

    Summary

    • Growth channels change the profile and trajectory of the firm, improving valuation.
    • REIT conversion provides solid return to shareholders and reduces risk profile.
    • International operations poised to boost growth trajectory.
    • The death of tape vaulting is overplayed and offset by cloud services IRM offers.
  • Ally Financial: Transition Near Completion, Will Lead To Core Focus And Strong Upside
       • Wed, Apr. 30 CACC, SC, ALLY 10 Comments

    Summary

    • Once US Treasury is paid off, the company will have more flexibility to grow Ally Bank and enhance profitability.
    • Regulation normalization and net interest margin expansion will drive returns on equity to double digits over the next several years.
    • The focus on the core business reducing non-interest expenses will help expand operating margins.
    • Moving from captive to market-driven financing firm increases the flexibility to grow market share.
    • Ratings upgrade and flexibility should reduce interest expense and improve profitability.
  • Hemisphere Media Group: A Value Unlocking Story With 30+% Upside
       • Tue, Apr. 22 HMTV 1 Comment

    Summary

    • Large exposure to fast growing cable segment.
    • Election year booms.
    • Unfairly hit by Puerto Rico troubles.
    • Expected to be quickly ramped up and sold.
  • 1347 Property Insurance Holdings: An IPO Left For Dead With Upside Of 50%-100%
       • Tue, Apr. 15 PIH 4 Comments

    Summary

    • National property insurers continue to reduce their exposure to Louisiana and other coastal markets.
    • Premiums have skyrocketed in certain states allowing Maison to cherry-pick high margin policies.
    • The volatile insurance climate as it pertains to more weather losses has been overrated and biased by Katrina.
    • Lower reinsurance rates should be a nice tailwind in the near-to-medium term.