NOTE: The following was originally published on our website, www.sevencornerscapital.com, on July 31, 2019.
CCUR Holdings Inc. (CCUR) presents an investor the chance to partake in an entrepreneurial alternative finance company with high insider ownership for less than two-thirds of book value. The company has recently transformed its business model into one that could prove quite profitable, which would necessitate a re-rating of the stock to a more conventional 1.25X book value, implying a target price of $7.47/share (or double the current market price). Compared to mainstream financial stocks, such as mega-cap JPMorgan (which trades at ~1.6X book), 1.25X does not seem too much to ask, considering we believe that CCUR can eventually earn a mid single-digit return on assets (versus just a ~1% ROA for JPM). At JPM’s multiple of 1.6X book value, CCUR would trade at $9.56/share, nearly 160% higher than the recent market price.
Often the best values in the stock market are companies that are underfollowed and misunderstood (and, hence, underpriced), because they are small enterprises undergoing significant change (think Berkshire Hathaway circa 1965, then trading around the same P/B multiple as CCUR currently). Investors cannot see what the finished product will look like, so they refuse to pay up for it. CCUR clearly falls into this category: no analysts cover it, so there are no earnings estimates; social media chatter is virtually nonexistent (one finds only bot mentions); a Google News search returns no legitimate results (just bot- produced “articles”); and there is but one lonely Seeking Alpha article on the company since its transformation began. Bottom line? Investors have the chance to get in on the ground floor at CCUR. So if “buying low” is one’s principal investment goal, we believe this stock fits the bill.
Please see attached a PDF of our full writeup regarding CCUR.
Disclosure: I am/we are long CCUR.