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  • PolyOne's Transformation Is Ongoing And Will Drive Profits Further
     • Wed, Jan. 21 POL Comment!

    Summary

    • The shares have stumbled in recent months, likely due to a new CEO and the risk surrounding the change. But this is a healthy consolidation after a strong run.
    • The transformation to a specialty company is not complete and the firm, through organic growth and acquisitions, will drive specialty to 75% of revenue in 2 years.
    • We think an upside catalyst will arrive sometime in 2015 where the firm's debt is upgraded to investment grade, which could propel the equity along with the debt.
  • Resources Connection: A Beneficiary Of The Regulatory State
     • Wed, Jan. 21 RECN Comment!

    Summary

    • Recent job growth trends are very favorable to the highly-skilled consultant industry allowing the company to raise billing rates and capture the bill-pay spread (all profit).
    • The company's recent results have been affected by weakness in their European operations which have been strategic. Once over, the overall company results should improve.
    • Regulatory and compliance changes are driving a significant demand for their business and will likely continue to do so over the coming years.
  • Why We Think McGrath RentCorp Is Misunderstood
     • Wed, Jan. 21 MGRC 1 Comment

    Summary

    • The equipment rental business where McGrath operates creates strong cash-on-cash returns with relatively stable income streams.
    • We think the company can lever up the balance sheet and improve those returns significantly, which is making it a target for private equity.
    • The modular business appears to have turned a corner and is likely to boost EBITDA growth in 2015, while investors are unfairly punishing Adler for its energy exposure.
  • TecnoGlass: Inflecting Towards Faster Growth
     • Wed, Jan. 21 TGLS 1 Comment

    Summary

    • New Trump Tower contract is worth $40 million directly but indirectly, could be the start of many more large projects.
    • The new bonding capacity, increasing over ten times in the last 18 months, is allowing the firm to bid on larger US projects.
    • The US - Colombian free trade pact and Alutions business are expanding out the firm margins by lowering costs and pushing mix towards higher margin products.
  • Blackhawk: Cardpool Business A Hidden Gem
     • Sat, Jan. 17 HAWK Comment!

    Summary

    • The market opportunity within this aspect of the alternative financial services industry is massive with Blackhawk's market share at less than 5%.
    • Cardpool subsidiary is a hidden gem with extraordinary growth potential and a new distribution outlet through the Coinstar partnership.
    • International is growing at an exceptional rate through two avenues: new geographic expansion as they enter more countries and new partners within existing locations.
  • EnPro: Unconsolidated Subsidiary A Hidden Asset
     • Wed, Jan. 14 NPO 3 Comments

    Summary

    • 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.
  • What Went Wrong At Ocwen, And What Happens Next?
     • Tue, Jan. 6 OCN 56 Comments

    Summary

    • The settlement with the DFS was announced on December 22nd with what we think is mostly a positive outcome for the company.
    • The largest negatives are Mr. Erbey's ousting and the hold on any new MSR purchases, while the rest of the settlement will likely be a positive for the company.
    • We think the shares are massively undervalued due to a confluence of events, including end-of-year tax loss selling and window dressing.
    • Upside catalyst is coming in the next 6 months, when the Monitor okays the resumption of MSR purchases and when the company announces its plans for the agency MSR gains.
  • Our Best Ideas For 2015
    Tue, Jan. 6 EZPW, HIMX, HTZ 6 Comments

    Summary

    • These are our ten best ideas for 2015 that include real, identifiable catalysts that are likely to occur in the next twelve months.
    • We think valuations in the broader market are rich with P/E multiple expansion hard to come by like in previous years.
    • We would argue that the risk is to the downside this year due to geopolitical and/or a global macro slowdown infecting our economy and market.
  • Anixter International: No Suitor Could Be Found
    Dec. 27, 2014 AXE Comment!

    Summary

    • The company has been "up for sale" several times over the last decade and rumors earlier this year have failed to produce a suitor which is a giant red flag.
    • The recent Tri-ed acquisition appears extremely expensive to us when factoring in interest costs, leverage risks, and amortization expenses.
    • We are not keen on the company's middleman position, the value proposition they provide, nor the long-term prospects of the industry.
  • Community Health Systems: Conduit To Doubling Of EBITDA Comes Into Focus
       • Dec. 27, 2014 CYH 2 Comments

    Summary

    • The acquisition and integration of HMA should boost the target firm's margins significantly while substantially boosting their core EBITDA generation.
    • Health care reform is looking more like a boon for the firm as the uncertainty risks subside and a clearer picture of its benefits comes into focus.
    • Synergies from the recent acquisition are likely low given management's penchant for giving out conservative guidance and then boosting them each quarter.
  • Intrepid Potash: New Mine And Changing Industry Dynamics Point To Significant Upside Potential
       • Dec. 23, 2014 IPI 3 Comments

    Summary

    • 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.
  • Clean Harbors: Strategic Review And Activism Could Reward Shareholders
       • Dec. 22, 2014 CLH 1 Comment

    Summary

    • The company has engaged in several acquisitions over the last few years in the CEO's attempt to make the firm a more diversified one-stop solution in environmental services.
    • Management is attempting to cost cut and share buyback their way to profit growth while ignoring the fledgling conglomerate business.
    • We think the activism and strategic review could return positive recommendations to pare the firm down to their prior core operations.
  • VWR Corp: Turnaround In North America And Deleveraging Should Boost Shares
       • Dec. 16, 2014 VWR Comment!

    Summary

    • VWR is a recent IPO with substantial leverage on their balance sheet. As they de-lever, we think they will improve their financial flexibility to undertake better acquisitions.
    • The North American business has been dragging overall results but we think the sluggishness is transitory due to a new ERP system and a revamp of their sales strategy.
    • The private label and value-added services businesses differentiate them from competition and could be massive opportunities to partner with small labs and improve their efficiency.
  • Vector Group: Strategic Moves Likely To Unlock Significant Value For Investors
       • Dec. 16, 2014 VGR 22 Comments

    Summary

    • 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.
  • Teton Advisors: A Micro-Cap Manager At A Micro-Cap Valuation
       • Dec. 15, 2014 TETAA 1 Comment

    Summary

    • Teton is a new, niche asset manager that has access to the distribution network of a large asset manager, allowing it to grow at a 39% CAGR over 5 years.
    • The company has been expanding its fund lineup and augmenting its research team to enhance performance and diversify the asset base.
    • The shares trade at a cheap valuation, and assuming just mid-single digit AUM growth, the upside case becomes very compelling.
  • Trimas: Strategic Options Could Unlock Significant Value
       • Dec. 9, 2014 TRS 1 Comment

    Summary

    • Recent missteps appear transitory and management has been focusing on execution which could improve profitability significantly going forward.
    • The company has multiple levers to expand margins across the diverse set of operating segments and boost underlying growth.
    • Strategic options could unlock significant value through the divestiture of the slower growing and lower margin Cequent businesses.
  • Galaxy Entertainment: Game-On
       • Dec. 9, 2014 GXYEY, GXYEF 2 Comments

    Summary

    • The long-term industry trend is still on track for Macau as new infrastructure investments should drive a larger mass market to the area.
    • Galaxy's Phase II development should see first mover advantage over the new wave of supply that is expected to hit the market in the next two years.
    • Improving margins from a shift towards the resorts should continue with EBITDA possibly hitting 21% of sales in 2016.
  • EZCorp: New Management Team And Strategy Could Finally Be The Catalyst Needed
       • Dec. 9, 2014 EZPW 4 Comments

    Summary

    • The company has a new management team in place, most of whom are veterans of the company during its heyday.
    • The company issued a "back to basics" strategy to focus on their core mission of a customer-centric financial services business model- centering on pawn and unsecured lending operations.
    • We think the company is on track to reducing the bloated operation costs that have severely reduced profitability. Small reductions in this line item can have large effects on profitability.
    • There is a small chance that the firm spins out their financial services business, similar to the recent transaction that Cash America completed, unlocking significant value.
  • Computer Sciences Corp.: Positioned Better For A Sale
       • Dec. 8, 2014 CSC Comment!

    Summary

    • The company is currently seeking private equity to take the firm out in an LBO. An LBO would likely reap significant returns for private equity.
    • The NPS (government) segment has been an anchor on the corporation but we think that may change as deficits decline and gov't agencies outsource more functions.
    • As the company moves towards next-generation services which offer higher growth, a re-rating of the shares could occur giving investors a significant return.
  • LittelFuse: Oversold And Likely To Jump Due To Automotive Sensor Business
       • Dec. 8, 2014 LFUS Comment!

    Summary

    • Automotive industry exposure has been driving growth and is becoming a large portion of the company's overall sales at 35%.
    • We think management will continue to pursue more accretive acquisitions now that they have added balance sheet flexibility.
    • Shares have been impeded by the notion that the firm is headed for lower operating margins. However, this has not materialized and appears overdone.
  • Gencor: Lower Oil Prices And Highway Funding Bills Point To Asymmetric Upside
       • Dec. 5, 2014 GENC 6 Comments

    Summary

    • The drop in oil prices is likely to lead to a dual benefit for the company: lower input prices for their main product as well as increased demand for it.
    • The company is a net-net play with over $10 per share of cash on the balance sheet and no debt.
    • We think a catalyst may be in store early next year when the new congress authorizes a long-term highway funding bill.
    • A movement is underway, led by individual states, to replace the gas tax as a funding mechanism for infrastructure projects. This could lead to more demand.
  • Quality Distribution: Deleveraging Should Free Up Cash For A Big Move By Management
       • Dec. 5, 2014 QLTY 12 Comments

    Summary

    • Deleveraging should reduce interest cost and leverage which will likely boost free cash flow yield significantly.
    • The chemicals business is seeing a resurgence with a number of new plants and plant expansion under construction currently.
    • We think the share price is trading based on its energy business and the exposure to oil prices, but so far volumes have not decreased and its a small segment.
  • Cooper-Standard: Margin Expansion And New Joint Ventures Present Upside Case
       • Dec. 2, 2014 CPS 1 Comment

    Summary

    • 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.
  • Hertz Global: New CEO, Easing Overhangs And Long-Term Industry Fundamentals Point To Strong Upside
       • Nov. 25, 2014 HTZ 15 Comments

    Summary

    • The first of three arrows includes finding a CEO, which occurred last week. The pick, with Icahn at the vanguard of the selection process, improves the firm's yield management abilities.
    • Once the company releases its restated financial statements, it will remove a significant risk overhang to the shares.
    • A separation of the equipment business, off-airport segment growth, and company-specific initiatives should improve the operating performance of the company.
    • The spin-off could create in excess of $2.5 billion in fresh capital for the Hertz company, which would be used to pay down high-cost debt and buy back shares.
  • MDC Partners: New Infiniti Award And Margins Will Reward
       • Nov. 21, 2014 MDCA 1 Comment

    Summary

    • The company saw its shares plummet and not recover earlier this year when a 'botched' secondary distorted the market.
    • Margins are set to expand as the firm monetizes the investments they have been making over the last several years.
    • We think the Street estimates are far too low due to the weak second quarter results and new Infiniti contract that should boost profitability.
  • Natus Medical: Hearing Is Believing
       • Nov. 21, 2014 BABY 2 Comments

    Summary

    • The company's new Peloton hearing test service could be a game-changer in the newborn hearing screen market.
    • The change from an acquisitions growth strategy towards organic growth is likely to significantly boost operating margins.
    • New products and an expansion into under-penetrated international markets could drive future growth for many years to come.
  • International Speedway Corp: The Bumps In The Road Are In The Rear-View Mirror
       • Nov. 18, 2014 ISCA 3 Comments

    Summary

    • The new network deal was a surprise given the lower viewership and attendance of the sport. We feel the deal is still not adequately priced into the shares.
    • The new capacity management program will reduce excess seats, mostly low-quality obstructed view seats, forcing more season pass buying and boosting pricing power.
    • The joint venture with Penn Gaming helps diversify the company away from racing and into ancillary businesses.
  • Are The Bad Times Over For Ruby Tuesday?
       • Nov. 18, 2014 RT Comment!

    Summary

    • Ruby Tuesday continues to implement its turnaround strategy which has recently entered its third year following the founding CEOs departure.
    • We think investors are overplaying the real estate valuation and impounding the recent small portion of sales across the entire real estate portfolio.
    • The market is factoring in a full rebound in their same store sales and EBITDA margins despite only two quarters of positive figures.
    • The last two quarters of results appear better than they are given year-over-year comparisons and a rebound from poor weather during last winter.
  • ClubCorp Holdings: Secular Headwinds To The Game Will Weigh On The Shares
       • Nov. 18, 2014 MYCC Comment!

    Summary

    • Golf has been in secular decline for more than a decade and continues to shed golfers while failing to attract the younger crowd.
    • Golf courses are closing around the country due to high maintenance capex and operating expenses.
    • The longs in the name have focused on the fact that reduced supply of courses will aid ClubCorp in the long-run - but most closures are low-end public and 'weak' courses.
  • Perry Ellis: Many Avenues For Unlocking Significant Shareholder Value
       • Nov. 14, 2014 PERY 2 Comments

    Summary

    • 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.
  • Orion Engineered Carbons: Mispriced Given The Opportunity And Profitability
       • Nov. 12, 2014 OEC 1 Comment

    Summary

    • Lower oil and rubber prices should help Orion see lower input costs and increased end-market demand for tires.
    • The company is refinancing their debt and restructuring the operations in order to reduce interest and operating expenses. This should boost margins approximately 250 bps over two years.
    • The firm's specialty carbon black business, which carries better pricing and margins, is being expanded which should boost the company's growth trajectory and profitability.
  • TEVA: Copaxone Patent Expiry Worries Are Overblown
       • Nov. 11, 2014 TEVA 10 Comments

    Summary

    • Copaxone worries are overblown and being compared to typical small molecule expiration's and not to biologics, which have higher retention rates behind patent expiry.
    • The company has been preparing for Copazone's loss for years now diversifying its business mix with new acquisitions in the pharma space and growing biosimilar business.
    • Management has been wringing out the expenses to grow operating margins and boost profitability.