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  • Medley Capital: Another Gift From Year-End Tax Loss Selling
     • Fri, Jan. 9 MCC 44 Comments

    Summary

    • 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.
  • OHA Investment Corporation: Special Situation In A Busted BDC
     • Tue, Jan. 6 OHAI 10 Comments

    Summary

    • 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%.
  • A Focused High Yield ETF: What Could Go Wrong?
    Dec. 18, 2014 HYLD 20 Comments

    Summary

    • Disaster at an actively managed high yield ETF demonstrates the importance of fund structure when selecting investments.
    • Understanding the liquidity of the underlying securities is paramount to selecting the right fund structure (i.e. ETF, CEF, open-ended mutual fund, etc.).
    • Ignoring liquidity constraints of the lower grade high yield market has created an ongoing liquidity crisis for HYLD and significant losses for shareholders.
  • A PIMCO CEF Strategy For The 'New Neutral'
    Editors' Pick • Nov. 4, 2014 PCI 32 Comments

    Summary

    • PIMCO Dynamic Credit Income Fund provides an attractive leveraged credit strategy for navigating the "New Neutral".
    • Relative valuation is attractive compared to other Taxable PIMCO CEFs given the 9.5% discount to NAV.
    • Good distribution coverage and capacity to pay another year-end special dividend.
  • Rethink Your Fixed Income Portfolio Strategy
    Editors' Pick • Sep. 30, 2014 BOI, FPF, MWTIX 25 Comments

    Summary

    • Many investors have locked in unattractive IRRs in their fixed income portfolios that make little sense after considering their investment time horizon and liquidity needs.
    • Investors can estimate their expected future returns for fixed income portfolios by understanding the risk premia embedded in their portfolio. Unconstrained bond funds primarily just rearrange these risk premia.
    • Investors can improve returns in fixed income portfolios by accessing the "illiquidity premium" through careful analysis of closed-end funds (CEFs).
  • CSS Industries: Stable Fundamentals, Cash-Rich Balance Sheet, And Deep Undervaluation Argue For 30%+ Upside
       • Sep. 30, 2014 CSS 11 Comments

    Summary

    • CSS Industries is a micro-cap consumer products company (~$225 million market cap); its primary business is designing, manufacturing, marketing, and selling “social expression products” (i.e. gift wrap, bows, cards, etc.).
    • High, stable level of return on assets excluding cash (i.e. 12-15%) points to a very profitable niche business.
    • Balance sheet is cash rich with a $77 million in cash and short-term investments, no debt, and an insignificant $5 million in long-term obligations (mainly property leases).
    • CSS is deeply undervalued on nearly every metric (EV/EBITDA = 4.4x, EV/EBIT = 5.6x, FCF yield = 12%, P/E ex. excess cash = 8.2x, and Dividend Yield = 2.5%).
    • Potential for Private Equity buyout.
  • Chefs' Warehouse: Over Eating At The M&A Table
       • Sep. 23, 2014 CHEF 2 Comments

    Summary

    • CHEF is a market leader in an attractive, simple-to-understand industry. The Company has no direct, scaled competitor, and its owner-operator management team is strongly aligned with minority shareholders.
    • The Company has largely financed its M&A roll-up strategy through external capital raises - both debt and equity.
    • CHEF's balance is already fully levered (2.9x) and valuation is fair to rich, pointing to an intermediate mid to high single digit IRR of over the next several years.
  • Spin-Off NOW, Inc: Market Leadership, Experienced Management, And Pristine Balance Sheet Point To Compounding Value
       • Sep. 12, 2014 DNOW 22 Comments

    Summary

    • DistributionNOW or NOW, Inc. (DNOW), the recent spin-off from National Oilwell Varco, Inc. (NOV), ranks second by market share in the fragmented but fast consolidating energy distribution market.
    • DNOW’s pristine balance sheet – $236 million in cash, no debt – and low cost of capital should facilitate organic market share gains and rapid growth via M&A activity.
    • In contrast, DNOW’s primary competitor and market leader, MRC Global (MRC), has much higher leverage and now needs to enter a period of de-leveraging, which will likely slow growth.
    • DNOW’s management team has a 10 year, successful track record of accretive M&A. The spin-off is only the most recent in a long series of strategic actions to create value.
    • DNOW’s operating margins are likely to inflect significantly higher after digesting two large acquisitions and transitioning to a global ERP system.
  • Cherry Hill: Strong Value With Low Credit & Interest Rate Risk
       • Jun. 14, 2014 CHMI 8 Comments

    Summary

    • Cherry Hill has structured and is executing on a low risk strategy, investing in residential mortgage assets.
    • Founder and owner-operator's interest are strongly aligned with smaller shareholders.
    • At least ~30% undervalued relative to closest peers.
  • Managed Duration Investment Grade Muni CEF: ~10% Tax-Equivalent Yield, 9% Discount To NAV
    Editors' Pick • Mar. 4, 2014 MZF 22 Comments
  • The First Trust Intermediate Duration CEF Offers 8.7% Yield, Total Return Potential Of 19%, And Minimal Rate Risk
       • Feb. 5, 2014 FPF 39 Comments
  • Brookfield Property Partners: 'Fair Value' Or Inflated Value?
       • Jan. 10, 2014 BPY 18 Comments
  • MSC Industrial Direct: Owner-Operators Consolidating The Attractive MRO Distribution Market
       • Dec. 20, 2013 MSM 10 Comments
  • Leucadia National: SOTP Points To 20-30% Upside
       • Nov. 15, 2013 LUK 21 Comments
  • The Long Case For Ingredion, Inc.
       • Aug. 20, 2013 INGR 3 Comments
  • CST Brands: Valero's Spin-Off Is Currently Undervalued And Under-Earning
       • May. 13, 2013 CST 21 Comments
  • Aviv REIT: Attractive Roll-up Opportunity In The Healthcare REIT Sector
       • May. 3, 2013 AVIV 28 Comments
  • VeriFone Systems: Recent Sell-Off Overly Discounts Opportunities In EMV & Conversion To PaaS
       • Mar. 28, 2013 PAY 13 Comments
  • Look To Buckeye Partners For Current Yield And Long-Term Growth
    Editors' Pick • Dec. 24, 2012 BPL 16 Comments