PRO Weekly Digest: Focusing On Long Ideas In Mexican Equities

by: SA PRO+ Editors


We highlight a noteworthy PRO long idea and use the Idea Filter to search for long ideas in Mexican equities.

Revisiting the bullish thesis on CONE Midstream Partners.

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 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 Gullane Capital.

PRO idea playing out

Owens & Minor (NYSE:OMI) is down ~35% since Vince Martin shared his bearish thesis in September 2017 that it was a short even at the lows, as OMI was a leveraged, declining business trading at a premium to peers. In an update article, Vince said despite the continued decline in the stock, it is still a short, as there was nothing in the Q3 numbers or management commentary to suggest a turnaround, cost savings have been more than offset by margin pressure and competitive activity appears to be ramping up (including a possible entry by AMZN into the market).

PRO Weekly Digest idea playing out

Two weeks ago in the PRO Weekly Digest, we said the bullish call by Ivan K. Wu on Alterra Power (OTCPK:MGMXF) was worth revisiting. Two days later, Innergex (OTCPK:INGXF) agreed to acquire Alterra Power, and the stock is up ~55%.

Call from the archive - CNNX

CONE Midstream Partners (CNNX) is down ~10% since Michael Boyd shared his bullish thesis in June 2017, however, as the distribution has been raised twice since the article was published (and reported distribution coverage was 1.43x in the mrq), and with ~45% upside to the author's price target, this thesis may be worth revisiting.

Noteworthy PRO articles

We wanted to highlight one of our PRO editors' favorite PRO ideas this week.

SA Editor John Leonard, CFA: Jonathan Cooper makes the bullish case for Wizz Air (OTCPK:WZZAF), an under-the-radar, ultra-low cost European airline with 40% upside due to its strong competitive position, long growth runway and high margins.

New Seeking Alpha contributors to watch

Maglan Capital shares their bullish thesis on Madalena Energy (OTCQX:MDLNF), an under-the-radar junior E&P company. There is significant upside potential, as FCF continues to increase following a successful restructuring by new management, the balance sheet is strong, it is fully financed and production is expected to increase from 2,000 boe/d to >20,000 in a few years.

Eric Chung, Esq. shares his bearish thesis on Conn's (NASDAQ:CONN), as the huge run-up in the stock creates a short opportunity because the business model is unsustainable, it is overleveraged and aggressive changes to credit policies will worsen the problem of rising delinquencies.

Buyside updates

Jim Roumell provides updates on his long thesis for Sandstorm Gold (NYSEMKT:SAND), long thesis for SeaChange International (NASDAQ:SEAC) and long thesis for Marchex (NASDAQ:MCHX), including an interview with management. For current or prospective investors, these extremely high-value added interviews are a “must-see.”

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 long ideas in Mexican equities.

Fading the extreme negative sentiment towards Mexican equities following the U.S. election a year ago proved to be a very profitable contrarian trade. A year later, and after a significant run-up, is there still value to be found? I ran a screen of PRO Long ideas with Mexico as the Country tag.

2 ideas turned up in this screen that might be of interest (prices as of November 9 close):

Herdez (OTCPK:GUZBY) by Ian Bezek: Published on August 8, 2017, ~unchanged since publication, the author's price target offers ~20% upside. Even with political/economic clouds lifted, Herdez remains an under-the-radar, emerging markets consumer growth story trading at a discount to U.S. consumer staples companies with significant hidden assets and growth opportunities.

FEMSA (NYSE:FMX) by Stephen Simpson, CFA: Published on August 1, 2017, down ~15% since publication, the author's price target offers 25% upside. The recent pullback over the past three months may be an attractive entry point given the long-term growth potential and strong management team.

About the PRO Weekly Digest

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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.