PRO Weekly Digest: Focusing On Undervalued And Under The Radar British Companies

|
Includes: AVVIY, BNKPF, EAT, MFGP, MOC, SALT
by: SA PRO+ Editors

Summary

We highlight a noteworthy PRO long idea and use the Idea Filter to search for undervalued and under the radar British companies.

Revisiting the bullish thesis on Command Security.

Welcome to the latest issue of the PRO Weekly Digest in which we publish highlights from our PRO coverage. Comment below or email us at pro-editors at seekingalpha.com to let us know what you think. Find past editions here. PRO subscribers can access interviews by following the SA Interviews account and view past interviews under the same account.

Click here to read the interview with Scott Fearon.

PRO idea playing out

Brinker International (NYSE:EAT) is down ~30% since Vince Martin said there was more downside in January 2017 (even after shares fell to a five-month low following a poor earnings report), as the secular challenges (resulting in negative comps and deleveraging) would continue to pressure shares. Vince said he covered the short in a recent update as the thesis played out as expected and cautioned investors against bottom fishing given the lack of trust in management's guidance and strategy.

PRO Weekly Digest idea playing out

In an interview with the PRO Weekly Digest, Livermore Partners said BNK Petroleum (OTCQX:BNKPF) was one of their highest conviction ideas. Since then the stock is up ~90%. Livermore Partners attributed the strong performance to strong reserve value and continued drilling success with production expected to nearly double on the year. However, given the well results and inherent value remaining, even at current strip prices, there is more to run.

Call from the archive - MOC

Command Security (NYSEMKT:MOC) is up ~10% since Inefficient Market made the bullish case for this underfollowed micro cap in May 2017. However with ~55% upside to the midpoint of the price target this may be worth another look as MOC appears to be well positioned to take advantage of the industry consolidation as revenue continues to increase (driven by new contracts) and it appears willing to walk away from unprofitable contracts.

Noteworthy PRO articles

In addition to the top idea we published this week, we wanted to highlight one of our PRO editors' favorite PRO ideas this week:

SA Editor John Leonard, CFA: Industry expert J Mintzmyer says Scorpio Bulkers (NYSE:SALT) is set to surge due to its ultramodern assets, clean balance sheet, higher shipping rates and favorable supply/demand outlook. If market rates stabilize during 2018, SALT might be the first major dry bulk stock to offer a dividend payout. Another industry expert James Catlin provides an in-depth look at how upcoming regulations will impact the industry.

Idea screen of the week

Each week we use the PRO Idea Filter to find potential ideas based on a recent news event. This week, PRO Editor John Leonard, CFA looks at undervalued (and under the radar) British companies.

For U.S.-based investors willing to look beyond their own borders, I ran a screen of PRO long ideas with United Kingdom in the Country field.

Two ideas turned up in this screen that might be of interest (prices as of October 19 close):

Micro Focus International (NYSE:MFGP) by Cestrian Capital: Published on September 21, 2017, ~unchanged since publication, author's price target offers ~30% upside. MFGP trades at a discount to peers compared to its growth prospects while the negative sentiment surrounding a transformative acquisition has created the mispricing. There are multiple routes to value and downside protection from the mission-critical nature of the company’s products.

Aviva (OTCPK:AVVIY) by Stephen Simpson, CFA: Published on September 7, 2017, ~unchanged since publication, author's price target offers ~20% upside. The undervaluation should not last forever as Aviva has sold non-core assets, continues to post strong results from its core U.K. business, realizes synergies from the Friends deal, executes on organic and inorganic growth opportunities and returns excess capital to shareholders.

About the PRO Weekly Digest

PRO members automatically receive the Weekly Digest and other PRO content in their inbox. If you are not a PRO member and would like to be notified of this, click follow at the top of this article to follow the SA PRO Editors account, or click to subscribe to the free newsletter below to receive these in your inbox. You can view all past PRO Weekly Digests here. And if you're interested in SA PRO, check out the details here to sign up or learn more.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Check with individual articles or authors mentioned for their positions.