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PRO articles cover stocks that fly under most investors' radar screens.
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.
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.
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.
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.
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.
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.