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Update: Artal Purchases Of Weight Watchers Indication Shares Are Undervalued
- Artal has always been a net seller of Weight Watchers shares since the IPO in 2004 and has never purchased shares on the open market.
- Artal purchases are said to be in anticipation of equity-based award dilution, but dilution will occur over three years, not immediately.
- Artal has high insider knowledge so the share purchases on the open market up to another >1% of outstanding shares is material and an indication shares are undervalued.
Update: Efficiency Driving PostNL
- PostNL reached our original thesis and due to other more attractive opportunities we exited at the end of last year.
- Cost cutting measures are being achieved quicker than the company initially anticipated and is likely to continue.
- The company is likely to be earning much more operating cash next year and a likely credit upgrade will catalyze a higher share price.
Update: Resolute Forest Products' Pension Liability Continues To Decrease
- Pension liability continues to contract with a higher discount rate.
- Still some downside in worse case scenario, however, the company is likely to reach profitability next year.
- Continues to trade for low EV/trailing EBITDA multiple although the company is likely to achieve much more in the future.
Winmark's 'High' Book Value Caused By Economic Goodwill
- Standard accounting is misleading with companies that earn high returns on very little net-tangible assets.
- Economic Goodwill is real and is hard to quantify but estimates using market rates gives a ball-park idea of a company's true net asset value.
- Winmark does not trade at 20x book, but 1.6x including Economic Goodwill. Historically, that is a lower multiple to pay for the company.
Update: Winmark Leasing Portfolio Growing, And Share Repurchases Continue To Indicate Shares Are Undervalued
- Lease income timing is masking true growth.
- The lease portfolio grew at 33% annualized, and is on track for further growth.
- Company share repurchases and open market purchases by John Morgan continue to indicate shares are undervalued.
Update: Wesco Aircraft Holdings Even More Attractive Valuation
- The market's short-term nature has sent shares in this high quality business further down.
- It will take time for the integration of Haas to bear fruit.
- Tom Bancroft's Makaira Partners continues to purchase shares and holds Wesco as one of their largest positions at ~16.5% of fund as of the end of last quarter.
Update: Bankwell Business Quality Still Intact
- CEO and board member Peyton Patterson resigned, share price rises.
- Latest-quarter performance indicates business quality still intact.
- New leadership is likely to be quality, since the board continues to own 30% of the bank.
Platform Specialty Products: Rare Opportunity Continues To Be Available
- PAH has deep bench of high quality, unconventional managers.
- Agriphar acquisition fits the roll-up strategy.
- Mr. Market continues to not fully understand the opportunity and assigns an average price for an above average business and management team.
- The risk/reward for long-term investors is very appealing.
Mr. Market Might Be Mistaken With Creative Learning Corporations' Auditor Change
- CLCN changed their auditor, yet looks to be related to KLJ merger, not a result of bad accounting.
- Franchises have been growing at a fast clip.
- Earnings yield is above 10% and the company is likely to continue to add to their cash pile.
Female Health Company: Disaster De Jour With Attractive Risk/Reward
- Uncertainty in the new strategy and the forced selling from dividend seekers makes this a disaster de jour.
- Recent earnings re-iterates that FHCO's business quality continues to be intact.
- FHCO has limited downside at today's price and significant optionality if marketing is moderately successful.
- Certainty from an upcoming detailed strategy on marketing as well as a potential large share repurchase could send shares much higher.
Avante Logixx: Mr. Market's Unwarranted Reaction Has This Quality Security Roll-Up On Sale
- Avante Logixx has an edge in technology and the M&A experience to roll-up the highly fragmented industry.
- The security business model is quality with high FCF, recurring revenues and negative working capital; all are attributes that are good ammunition to "chase a few more rabbits".
- Market's reaction to the decline in non-recurring revenues and lack of acquisition insight is unwarranted providing compelling opportunity.
Post Holdings: Great 'Cereal' Acquirer Meaningfully Undervalued
- Post Holdings is rhyming much of the history found in Ralston Purina's annual reports from 81-00.
- Bear thesis overlooks the secret sauce of Bill Stiritz and the corporate culture he creates.
- Post Holdings is trading for a forward 10x EBITDA, which we believe is a very fair price.
Update: Dividend Cut Provides At Least 50% Upside For Female Health Company
- Dividend suspension has sent yield seekers to the exit and is likely the only reason for the 24% drop in the last two days.
- Company is actively searching for ways to diversify operations and proper marketing could lead to strong consumer franchise.
- Zero debt and quality operations should allow moderate leverage for a large dutch tender at an extremely attractive price.
- FHCO is also an attractive acquisition target for large consumer product companies.
Bankwell Financial Group: Significantly Undervalued While Outsider CEO Crafts Encore Performance
- Peyton Patterson fits the outsider CEO mold described by William Thorndike and is repeating her success with a much smaller bank.
- The community banking environment is ripe for consolidation in the Connecticut and surrounding areas.
- Mr. Market has been selling BWFG off because of media headlines allowing one to purchase the bank at 1 times tangible book.
- Upcoming catalysts should quickly close the discount to intrinsic value.
Creative Learning Corp: Attractive Education Franchise Systems
- Creative Learning Corp's franchise opportunities focus on an attractive market with sustainable long-term demand.
- CLCN is run by Brian Pappas who has extensive experience running and growing franchise businesses, which is an advantage over competitors.
- Although Pappas is the largest shareholder, we question some related transactions.
- CLCN is trading at a fair value and if one overlooks related transactions, the business franchise should provide ample margin of safety.
Winmark Corp: Win Is A Common Theme For John Morgan
- John Morgan has turned Winmark into a capital compounding machine with returns over 24% annualized compared to the measly 2% achieved by S&P 500 over the same period.
- Both the franchise and leasing businesses are quality with high returns on little capital and there is plenty of growth in both left.
- John Morgan has been recently purchasing shares on the open market and share repurchases provide a catalyst.
- The company is currently trading at a slight premium to the current leasing portfolio and franchise businesses. We get the growth in the leasing business for free.
Female Health Company: Sustainable Moat Through Education
- FHCO's focus on education and training is a significant advantage in attaining continuous usage by females who need it most.
- Public health organizations are not focused on lowest price.
- Growth in the consumer global condom market will be difficult but provides significant growth optionality.
- Valuing the NOLs and ongoing business strictly in the global public sector, FHCO is trading at a significant discount to intrinsic value.
Commercial Bancshares: Mighty Little Bank Meaningfully Undervalued
- Quality assets and operation that were able to grow market share during financial crisis.
- Bank continues to grow and be profitable with consistent ROA of nearly 1% and ROE of 10%.
- Management and board own significant stake in company and have continued to purchase shares in the open market.
- Bank trades at a discount to book and multiple of earnings.
Cherokee Group's GARP: Growing Attractive Royalty Profits
- Quality business model: asset-light, low operational risk, high returns on minimal capital.
- Expanding global economy provides organic growth, and acquisitions will add further growth.
- Past three acquisitions have been accretive, and the company announced an 11% share repurchase program, which would be accretive at current prices.
- Plenty of downside protection, with $85 million in minimum royalty guarantees.
Southside Bancshares And OmniAmerican Bancorp Merger Insights
- The combined bank would continue to outperform peers on an performance basis.
- The combined bank would continue to have high asset quality.
- The market's negativity has driven down the shares of SBSI, but negativity could be temporary.
- OABC shareholders could potentially get a better offer, however, the combined bank would be powerful in the long-term.
Harvard Illinois Bancorp: Stilwell Might Win The Proxy Marathon
- Joseph Stilwell is currently in his third proxy contest with HARI to appoint a nominee to the board.
- Despite HARI's focus on share increase since 2/1/2012, the bank has been performing below savings institution peers.
- The bank continues to trade below book value, because the market thinks that excess capital will continue indefinitely and does not factor in a potential for a sale.
- A 45% chance of a merger in the near term would equal 24% upside.
Platform Specialty Products: AgroSolutions Acquisition Is Just The Beginning
- Acquisition of Chemtura's AgroSolutions is immediately accretive to earnings, cash flow and margins which should grow significantly over time.
- AgroSolutions is a new vertical for PAH to build in and produces stable cash flows, with low capex needs, that provide ample ammunition for acquisitions.
- PAH continues to trade for an average multiple which could look very undervalued a few years out if company is successful in their acquisition strategy.
Greer Bancshares: You Get Much More Than You Pay For
- Greer Bancshares has a dominant deposit market share % in an attractive local economy.
- GRBS' asset quality trends are positive while the bank has adequate reserves available.
- Market overlooks this little bank's profitability at a sustainable $4 million.
- GRBS has $6 million in deferred tax assets or 1/2 the company's current market cap.
- GRBS is trading significantly below tangible book at 0.8 times and intrinsic value is at least double today's price.
First Business Financial Services: Small Bank With High Quality
- The bank has a unique operating structure that has led to significant organic revenue growth.
- Further cross-selling of services to clients will lower cost of deposits and increase NIM while further solidifying sticky client relationships.
- The bank is trading at a reasonable price and management/board owns more than 10% of the bank.
Catalysts Present For Northeast Community Bancorp's 2nd-Step Conversion Offering Attractive Risk-Adjusted Returns
- Mutual thrift conversions continue to provide investors a time-tested way to earn attractive risk-adjusted returns.
- Northeast Bancorp management miscues have led to poor performance post first-step conversion.
- Joseph Stilwell's continued lawsuit provides a catalyst to add additional board members who will institute a second-step and better shareholder value in the near term.
FNBH Bancorp: Recent Re-Cap Could Spell Upside
- A recent recapitalization puts the company in a good position to rid itself of the OCC Consent Order.
- Financial sites overlook the dilutive effects of the preferred shares and skew the true market cap of the company.
- Positive economic growth in Livingston County, MI and higher interest rates could mean that shares are very undervalued, although with risks.
Amcon Distributing Co: Increasing Shareholder Value In A Conservative Low-Risk Fashion
- Amcon seems to go unnoticed for the industry in operates in, small size, % of cigarette sales but has sustained high margins for a wholesale distributor.
- Christopher Atayan has shown to be a competent owner operator increasing book value significantly under his tenure.
- Amcon trades at a significant discount to the closest peer and trades near the pre-tax multiple Buffett bought MacLane Co.
Wesco Aircraft Holdings Distributes Attractive Risk/Reward
- Business is characterized by sticky long-term recurring revenues and many competitive advantages.
- Managed by owner operator that has proven to be highly successful over the long term.
- Potential synergies of recent Haas acquisition seem to go under appreciated by the market.
- Protection against capital impairment and significant growth/synergies could produce large gains in the next two years.
BNC Bancorp: Big Community Bank, Premium Price
- BNC has been successful in acquiring several banks over the past two years.
- Focus on small to mid size businesses provides a competitive advantage over regional and smaller community bank peers.
- Management has skin in the game but current valuation is well above peers and there seems to be little margin of safety at the moment.
First Security Group Continues Transformation, Yet Still Undervalued
- Recapitalization has allowed the bank to restructure the balance sheet.
- Management's four niche loan initiatives, along with lower costs set the bank up for profitability this year.
- Shares continue to trade at a discount, and a buyout could be possible in the near-to-mid term.
Update On Resolute Forest Products: Wood In Hand Still Worth Two More In The Forest
- Pension obligation continues to decline and replacement of pension deficit corrective measures is positive for RFP.
- Fourth quarter business performance is an indication that RFP's business performance is improving.
- Shares continue to trade at a discount to intrinsic value and RFP continues to be Prem Watsa's largest equity holding.
Weight Watchers: Free App Fad Will Soon Dissipate
- Free weight loss apps are essentially a fad effecting Weight Watchers in the short-term but not in the long-term.
- Weight Watchers business model has proven to work through previous fads.
- Weight Watchers could potentially earn 24.8% annual returns over the next decade.