Seeking Alpha

Brian Grosso

 
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PRO Articles
PRO articles cover stocks that fly under most investors' radar screens.
  • Vectrus: Recent Spinoff With 40% Annualized Upside Over 1-3 Years
       • Sat, Nov. 15 VEC 4 Comments

    Summary

    • Spun out from XLS. Began trading late September. Spinoff enhances VEC ability to execute and resulting forced selling creates opportunity in stock.
    • High quality business: variable cost structure, high ROIC and ROA, sound management, competitive advantages created by agility and enduring customer relationships, and large TAM (less than 1% market share).
    • Risks overstated. The customer concentration is not as bad as you'd think. Afghanistan revenue phase out has largely already occurred. Business resistant to sequestration.
    • Scenario analysis indicates 40% annual upside over 1-3 years.
  • Trading At 3x What PE Deemed Reasonable Last Year; Avoid Burlington Stores
       • Thu, Oct. 9 BURL 1 Comment

    Summary

    • Stock seems expensive on absolute basis at 15x EBIT, 20x FCF, and 25x EPS..
    • In IPO last year, Bain and Burlington were willing to price as low at $14/share (37% of current price) at one point and Bain is now trying to dump shares.
    • The apparel retail industry is unattractive, economically sensitive, capital intensive, competitive, and risky. Another economic downturn is probably not very far off and BURL will suffer due to excess leverage.
    • Market expectations for further improvement in ROIC/growth/operating margin don't seem to be grounded by BURL's 20-year operating history.
    • The company should still appreciate in intrinsic value over time and, due to this and other factors, is probably not a very good short. It is best to just avoid.
  • A Simple Regression Debunks A Simple Short Thesis; Buy Sturm, Ruger And Smith & Wesson
       • Fri, Sep. 26 RGR, SWHC 29 Comments

    Summary

    • Firearm demand is simply returning to a 15-year normal trend of growth from inflated post-Sandy Hook levels, NOT going to zero. Shorts are guilty of data point extrapolation here.
    • With the above and the unlikely risk of complete prohibition of private gun ownership established, the firearm industry is actually quite attractive from an investing standpoint.
    • SWHC and RGR are great companies- high ROIC and top/bottom line growth over long periods, strong and enduring brands, solid and unconventional management, engaged employees, and excellent products.
    • Both stocks are cheap. There is a possibility of a short squeeze and/or PE takeout. RGR is slightly more attractive.
    • Risk of complete gun prohibition is improbable, but there. Lack of immediate catalyst lends to a gradual position entry.
  • American Public Education: Best Of Breed And Misunderstood; Put This Baby Back In The Tub
       • Fri, Aug. 29 APEI 8 Comments

    Summary

    • The major risks APEI faces, namely DOD funding cuts and regulatory/legal challenges plaguing most other FPEs, are significantly overstated by the market consensus.
    • It is a high-quality enterprise, as evidenced by strong governance, management, high ROIC, recurring revenue, strong margins, a highly variable cost structure, and a sustainable business model.
    • The business is struggling a bit, but the stock looks cheap in a base-case scenario, with optionality for outsized returns if revenue and margins improve within 5 years.
  • Strayer: Business Clearly Turning And Stock Remains Cheap
       • Fri, Aug. 8 STRA 5 Comments

    Summary

    • The premise that Strayer will avoid most regulatory/legal damage that other FPEs are being hurt by seems to be holding true.
    • The company's Q2 results offer clear evidence (starts, bad debt expense, RPS guidance) that the turnaround is picking up.
    • The stock remains cheap when considering the likely ROIC, multiple, and EBIT margin reversion.
    • I am not investing now due to the lack of share repurchases and chart which seems to indicate an imminent pullback.
  • Booz Allen Hamilton: Textbook Quality At A Discount
       • Sat, Aug. 2 BAH 6 Comments

    Summary

    • This article serves as a more comprehensive follow up to my initial research - Booz Allen Hamilton: A Sustainable Excellent Business At A Discount.
    • Concerns over the impact of US government budget cuts are overblown and much of the financial impact for BAH has already been realized.
    • I believe the firm is of outstanding quality for a variety of reasons, including its durable competitive advantages from security clearances, longstanding client relationships, etc.
    • Stock seems significantly discounted under 15x adjusted EPS and closer to 10x FCF.
    • $1 special dividend should bolster stock over next month.
  • Capital Southwest: A BDC To Believe In?
       • Mon, Jul. 21 CSWC 16 Comments

    Summary

    • Became interested in the stock through various mentions in Martin Whitman's "Modern Security Analysis.".
    • The company's investment strategy is unique as far as concentration and time horizon and generally aligns with my own. I did not find any qualitative deal-breakers and was generally impressed.
    • Operating valuations do not apply here. NAV/share and growth in said metric matter. NAV is somewhat arbitrarily-determined but seems reasonably representative of fair value in this case.
    • A return in stock price to NAV/share, NAV/share growth, and the small dividend make a 100% total return in 5-6 years reasonable, or 13.4% annually.
    • Sympathize with the long case, but am not investing because some of the firm's holdings don't seem to be excellent businesses and upside is insufficient for me.
  • Panera: Opportunity In The Broken Growth Story?
       • Thu, Jul. 3 PNRA 12 Comments

    Summary

    • Panera looks like an obvious broken growth story from a distance and I've found that high quality businesses can occasionally be found at discounts to fair value in such situations.
    • Positives: secular tailwinds, strong ROIC, under-utilized balance sheet, tight leash on franchisees, strong brand, strong historical performance, and timeliness.
    • Negatives: retail is tough, operational headwinds, hidden debt, high quality competition, uncertainty, personal preference, and a pricey stock.
    • Will continue to follow stock but have seen enough to rule out an investment for now.
  • Destination Maternity: An Optimal Destination For Value/Contrarian Investors?
       • Wed, Jun. 11 DEST 3 Comments

    Summary

    • DEST seems to have a strong competitive position through its scale and brand portfolio and decent industry prospects as total US births resume a century long trend of growth.
    • Company pays a nice dividend, is well-managed, and stock is exceptionally timely.
    • However, the company faces high quality competition, operates in a tough retail industry, and is vulnerable to an e-commerce shift and a culture of maternity apparel exchange in the US.
    • Stock trades at a low multiple of 14x 2014E EPS, but this implies growth in line with that the company has done historically.
    • In addition to issues mentioned above, hidden debt in operating leases and purchase obligations and a large comps decline of 5.6% in Q2 keeps me from investing.
  • The Fresh Market: A Fresh Buy In A Heated Market
       • Tue, Jun. 3 TFM 25 Comments

    Summary

    • Concerns over industry crowding have substance and company does not have strong competitive advantages, but market treatment seems overdone.
    • Strong industry prospects with natural/organic grocery expected to continue to grow low double digits to 2020.
    • Seasoned, talented, and invested management that has the right approach to growth.
    • Hardly off 52-week low, below all moving averages, and at 13.2x no-growth FCF, stock seems attractive both fundamentally and technically.
    • Intend to initiate concentrated position on day of publication.
  • Express Scripts: Just What The Doctor Ordered
       • Tue, Apr. 29 ESRX 60 Comments

    Summary

    • Great company because of economic moat, seasoned management, past and expected future performance, and the company's enviable industry prospects.
    • Great price because it's a boring, confusing, and under-followed business and because the market misunderstands the company's underlying profitability by looking at net income instead of FCF.
    • Now my largest position by far.
  • Liberty Media Sale Creates Decent Buying Opportunity In Barnes & Noble
       • Tue, Apr. 8 BKS 37 Comments

    Summary

    • The Liberty Media sale was actually a good thing for B&N in context so the market reaction seems confounding and overdone.
    • NOOK Media losses continue to mask the profitability of B&N's core ops.
    • Data suggests the threat of e-books to B&N's core business is not as bad as most think.
    • Both B&N's core business and NOOK Media have improved in the last few quarters.
    • I see 43.9% upside from $17.16 per share to $24.69.
  • Ruby Tuesday: The Next Great Turnaround Play
       • Mon, Mar. 3 RT 15 Comments
  • Strayer Education: Definitive Improvements, But Is It Still Cheap?
       • Mon, Feb. 24 STRA 5 Comments
  • Corinthian Colleges: Tread Carefully
       • Sun, Feb. 9 COCO 35 Comments
  • ITT Education: Cheap, But Not Cheap Enough
       • Sat, Feb. 8 ESI 10 Comments
  • Career Education: Recent Disclosure Does Not Change The Turnaround Story
       • Wed, Jan. 29 CECO 34 Comments
  • Parke Bank: 12% ROE For A Steep Discount To Book
       • Wed, Jan. 22 PKBK 2 Comments
  • Keating Capital: Discount To NAV Isn't Enough To Warrant Buying
       • Mon, Jan. 13 BDCV 11 Comments
  • AmTrust Financial: Potential Double With Little Downside
       • Nov. 29, 2013 AFSI 20 Comments
  • Corinthian Colleges: A Perpetual Mess
       • Nov. 12, 2013 COCO 39 Comments
  • Body Central: Time To Abandon Ship?
       • Nov. 2, 2013 BODY 24 Comments
  • Body Central: Multi-Bagger In The Making?
       • Oct. 27, 2013 BODY 43 Comments
  • Strayer: Rob Silberman Is An Incredible Asset
       • Sep. 5, 2013 STRA 10 Comments
  • Skullcandy Turnaround Story Is Music To My Ears
       • Sep. 1, 2013 SKUL 15 Comments
  • Five Below: Look Out Below
       • Aug. 31, 2013 FIVE 13 Comments
  • Exclusive Interview With GP Strategies' CEO Scott Greenberg
       • Aug. 21, 2013 GPX Comment!
  • Corinthian: Five-Bagger Or Value Trap?
       • Aug. 9, 2013 COCO 41 Comments
  • Market Overreaction Makes Body Central Attractive After Q2 Results
       • Aug. 5, 2013 BODY 14 Comments
  • ITT Educational Services: Why I'm A Bull Now And A Bear Later
       • Aug. 5, 2013 ESI 6 Comments
  • A Thinly-Traded Cyclical Turnaround With Further Upside
       • Aug. 2, 2013 NOA Comment!
  • Global Geophysical Services: A Compelling Small-Cap Turnaround Story
       • Jul. 30, 2013 GEGSQ 20 Comments