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Bankwell Financial: Returning To Thesis, Buyout Seems More Likely
- Original thesis did not fully pan out, however, the underlying economics have driven the share price to my minimum price target.
- Since Patterson has left the company, a CEO replacement is hard to find and BWFG has a lot of idle capital it is likely that the bank will be sold.
- The board and executives' ownership of the bank could be the incentive that drives the sale.
Female Health Company: Clearing Up Q4 And Beyond
- The market does not like that FHCO reported a loss for the quarter although it was due to a non-recurring expense.
- The back-log has tripled showing the Brazilian orders should be pouring in which will positively impact next quarter and beyond.
- Booking taxes are not a cause for alarm, but to us indicates management is conservatively looking toward the future.
- Shares are back at a 10% cash flow yield and 2015 looks to be a vastly different year than 2014, so shares are extremely cheap.
Xpel Technologies: Wrapping Up A Sticky Model And Hyper Growth Worth Multiples Of Today's Price
- Xpel's growth over the past 4 years is on-par with growth of Wal-Mart post IPO and both have many traits in common.
- Xpel is building its stickiness through an ecosystem of direct distribution, training and DAP cutting software which should give it an edge to maintain high growth.
- Company-owned install shops should provide upside and a method to exploit its direct distribution model internationally.
- Xpel trades at a significant discount due to its obscurity, stock listing and illiquidity and potentially worth multiples of today's price.
- Continued performance, a potential stock uplisting next year and a potential takeover in the mid-term provide catalysts to value creation.
Monitoring Avante Logixx Results: Under Promise, Over Deliver
- The INTO acquisition is higher profitability then we first imagined.
- Recent earnings results at first glance look poor but accounting for one-time charges recurring revenues are growing at a healthy pace.
- Q3 earnings and a potential acquisition announcement could catalyze value in the short to medium term to more than double today's price.
Platform Specialty Products: The Architect And The Builder
- Arysta acquisition is highly accretive, diversifies the Agrosolutions business towards both higher growth markets and higher growth products.
- Acquisition brings more talent to the company and increases the magnitude of synergies.
- The architect Martin Franklin and the builder Dan Leever can pick up the pace of mergers.
- The company continues to be undervalued if it is able to compound capital at high rates via mergers.
Female Health Company: Putting The Brazil Tender In Perspective
- Male condoms did not always have a high adoption rate. Female condoms are likely approaching an inflection point with FHCO starting marketing.
- The Brazil tender of up to 50 million units is multiples higher than FHCO's previous record and the market is not fully appreciating the order.
- The long term potential of FHCO >5 years in the future discounted at 25% shows shares are highly undervalued.
Auxilio: Cross-Selling Potential Uncovered
- Auxilio's shares have fallen along with the broader small-cap market.
- AUXO could add a minimum $5 million in yearly revenue by achieving a low cross-selling adoption rate and potential for much more.
- A conservative $5 million in revenue could double trailing EBIT indicating that regardless of growth and margin expansion, shares are cheap.
- Auxilio has takeover potential at much higher multiples.
Cherokee Group: Brand Management ATM
- Brand management business model is a very attractive, scalable business model that prints money.
- Cherokee is very rare example of wonderful micro-cap posting >30% annual ROEs over a decade and is likely to continue to compound intrinsic value at high rates.
- CHKE trades at a fair multiple and is likely to be much larger 3-5 years into the future.
Update: New Hire Executive Vice President Of Global Operations Shows Female Health Company Is Getting Right People On The Bus
- FHCO hires Martin Tayler as EVP of Global Operations.
- New hire continues to strengthen our original thesis that the market is getting it wrong with FHCO.
- Our previous article stated that details on Female Health Company's new strategy will likely come with time and new hires are top importance now.
Commercial Bancshares Continues Banking Gains, Possible Takeover
- CMOH continues to increase efficiency, income, book value and asset quality.
- Average metrics of similarly sized banks continues to be below CMOH's.
- We think CMOH continues to go under the markets radar even though it has limited downside, quality operations and potential for >30% returns.
Beneficial Bancorp's 2nd Step To Catalyze Value
- Beneficial is set to execute their 2nd step conversion.
- Excess capital is likely to be used to drive loan growth in higher yields and acquisitions of attractive small community banks.
- The bank continues to trade at a discount and is likely to see ~20% upside in the near term with minimal downside.
Wizard World: Obscure Marketing Machine Offers Attractive Risk/Reward
- Wizard's convention business is the quintessential low asset high return business.
- Wizard's scale provides barriers to entry in marketing, celebrity draw and attendance.
- Comic cons benefit from continued monetization of superhero assets by movie studios.
- Even with the >70% increase in share price this month, we continue to see at least 46% upside in the near term, limited downside and plenty of optionality.
Tracking Small-Cap Super Investor MSD Capital - Q2 Update
- MSD Capital is a vehicle for Michael Dell to "diversify" his funds away from Dell.
- MSD Capital runs a highly concentrated long portfolio of public small-cap companies.
- A new material purchase for WAIR indicates shares currently are undervalued.
Auxilio: Short-Term Headwinds Provide Significant Opportunity
- Auxilio's business model is quality with high returns on little assets and should benefit greatly from the Delphiis acquisition.
- The company's recurring revenues are sticky with only one non-renewal in the past few years.
- Recent fall in share price likely caused by debt to stock conversion in July and weak Q2 results from poor weather.
- Significant upside of up to 100% with very limited downside for those who are patient.
Tracking Small-Cap Super Investor Bares Capital Management - Q2 2014
- Tracking small-cap super investors might be more worthwhile for smaller investors than tracking large-cap super investors.
- Bares Capital has been graduating to larger small-cap equities.
- The firm's reduction of small and micro-caps is likely due to both the graduation and also due to the Nine Ten Partners LP transfer.
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 Du Jour With Attractive Risk/Reward
- Uncertainty in the new strategy and the forced selling from dividend seekers makes this a disaster du 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.