Broeb22

Citron likes it too https://seekingalpha.com/news/3544070-citron-sees-90-upside-in-this-innovative-drug-discoverer Somewhere there is a market bubble joke in here. How do you buy a big position in a company you like? Buy a small one and wait a few weeks. Anyhow, I sold today, even though it was just a tiny tracker. This is kind of nuts. I really liked what I read about Schrodinger based on my limited understanding of what CRISPR tech will open up for drug firms. It seemed like a good company, but only at a price that compensated for my significant limitations in the world of science and biotech. It was a leap too far for me ultimately.

CSWI

I've noticed OLLI is at a 52w low, and quite low over the past few years. Any additional thoughts you would like to share? I'm a novice retail investor buying into a founder-led business that just lost its founder suddenly. This probably ends badly but I'm betting that off-price retail has some staying power and that Ollie's will be able to achieve at least part of its growth plan to triple its store count. The stock isn't cheap today at low 20's multiple of 2020 P/E but if they can grow EPS at 15% per year then I should be able to earn about 15% per year. I also have benefited from OLLI being located in my town so I get to walk through there a lot and its usually pretty busy in an area with lots of competing retail options.

I’m not very familiar with AB but I believe they’re a traditional asset mgr. and have very limited incentive fees. Looks like they have $2.30 in trailing EPS and about $5 in cash per share so you’re paying about 12x earnings for a business (active mgmt.) that doesn’t have a ton of tailwinds. I would try to model what happens if their average mgmt. fee gets cut in half and see what you would pay then because fees are definitely not going up. If you’re comfortable with earnings after fees cut in half, then I think you’re buying a traditional asset mgr. conservatively. I don’t have the same immediate concerns about fee compression for alternative mgrs. although if returns stay low long enough everyone likely gets squeezed.

I’ll take it any way I can get it. CVET divesting a non core division for a little more than $100 million gives me confidence that new mgmt. understands the situation and isn’t wasting time.

To invert this, with CVET doing poorly, it seems that HSIC (from which CVET was spun off) dodged a bullet and ought to be a better business now. It seems reasonably valued too. I put it on my watch list together with CVET. I would be more inclined to buy HSIC here than CVET. Returns since this post: CVET 34.4%; HSIC 12.2%.

Its a combination of: Fee-related earnings at a higher multiple (maybe 15x) Incentive-related earnings at a lower multiple (maybe 5-10x) Value of the balance sheet investments in their own funds or others (OAK owned a part of Doubleline which is quite valuable)

OLLI and EVI

Bought some GDDY and KAR.

Curious what your PT is on this. I think it's more than a 100% upside and potentially a lot more if the new management team is successful in fixing margins. The crazy upside number if they can fix the business and get some revenue growth over 5 years is much bigger. Revenue is around US$1.7bn now and if they can get to US$2bn in 5 years with EBITDA margins of 15% (the goal for 2022 at the recent investor day last month), then EBITDA is around US$300m vs US$170m now. Peers generally trade north of 8x EBITDA, so that leaves an EV of US$2.4bn. The current DSO are at 90 days which is elevated for one off item in particular but management thinks they can get it to 45 days over time. Some peers are that low on DSO but even getting down to 70 days will free up over US$80m in cash. I can easily see with annual free cash flow plus improving working capital that debt will be closer to US$400m from ~US$565m now in 5 years. Also management is keen on buying back stock and there should be enough cash to do that too. If I model them buying 11.1m shares at $10 vs the current price of ~$3, there are 60m shares left outstanding. So an equity value of US$2bn and 60m shares outstanding is over a 10 bagger from here. I usually don't throw numbers like that out there because it sounds ridiculous but that's why I think the risk/reward is good at these prices. I think most investors are waiting for the resolution of the PIK and I think because of the upside that I'm sure Bain can see, they probably want to hold onto the equity. The big risk is that they turn over their shares to the bond holders who then proceed to sell into the market. I just can't see why Bain or the note holders would do that when they could run a strategic process and get a higher price or just wait to see how successful management is with the turnaround. That being said, I am constantly surprised by market participants. Is some maneuvering around in the capital structure really the big risk? What probability is a bankruptcy in the next few years? What effect would a large customer loss have? What kind of currency swing would cause real cash flow problems? Joel Greenblatt always said he bet the most on positions where he felt he could not lose much even in a bad outcome. You might be more savvy with restructuring-type situations, but this is not very asymmetrical from what I see.

gjangal, if you like EPAM check out DAVA. Smaller and arguably growing faster. 1H20 is going to be weird because Worldpay bought them out of their JV, but underlying growth should still be pretty good. Broeb22, Thanks for idea, i ll check it out. What do you think they can grow in terms of CAGR after the buyout ? Probably on par with EPAM. If anything it’s likely to be a bit higher given they are a smaller size now than EPAM. I like their partnership with Bain where it seems like Bain is using them to perform some IT modernization activities at their portfolio companies as well as do some IT due diligence at potential targets.

gjangal, if you like EPAM check out DAVA. Smaller and arguably growing faster. 1H20 is going to be weird because Worldpay bought them out of their JV, but underlying growth should still be pretty good.

Jurgis' list is very good. I'm also assuming your capital is not in the billions so there are some smaller companies here that could easily be a 4x over 10 years given their size relative to their markets. FTV - Lean-based business system with acquisitions ROP = Software roll-up FSV - HOA administrator roll-up EVI - Commercial laundry roll-up AMOT - Motion control roll-up with experienced operator FB - Social media company nobody's ever heard of PINS - Social media Idea company mostly women use and women never buy anything so where's the value in that STNE - South American payments TRRSF/TSU - Fronting insurer similar to State National FRFHF/FFH - Canadian insurer nobody's ever heard of

Added TRRSF (aka TSU.TO)

Will you pay for the puts by selling puts well below the current price, or do you like to buy a little more OTM to reduce option cost? Knowing you have specific short term catalysts and willingness to have some conviction, I’m betting you’re staying pretty close to the money and buying naked most of the time. Thanks for the color on PTON.

Gregmal, seems like PTON is only modestly more difficult to short than WeWork. How big of a TAM and durable of a business can there possibly be for $2-4,000 pieces of exercise equipment and $40 per month subscriptions in an industry with a long history of fad exercise programs (and diets)?

FSV - nothing special, just like the company, expect to hold for a while, and its better than cash.

Last I checked this was an investing forum, and last I checked essentially every European index has gone nowhere in the last decade as the combination of their open border policies, rich entitlements, lax working environments/schedules, low birth rate, and internal squabbling, to name a few, has collectively left the region in a state stagnation. Cherry-picking Germany as some shining light of economic strength without mentioning the economic destruction in places like Greece, Italy, Spain, and Portugal is at best irresponsible. Germany benefits economically as part of the EU for the exact same reasons that Greece, Italty, etc. struggle.

IWG and Regus have been running this model for a while so isn't it already kind of here to stay? How many people do you know who actually use co-working space? What premium above their current rates would mature companies be willing to pay for the privilege of being close to startup culture? If they are not paying a huge premium because they have bargaining power, then how profitable are those seats from mature companies anyways? What % of the average building needs to be filled by high-margin tenants to make the building a profitable location?

I don’t care to much about NKE, maybe they want a techie CEO. NOW stock was down a lot because of general weakness in the SAAS group and the CEO transition heightened the concern that the CEO change portents bad results. I thought that the more likely explanation for NOW’s CEO is that he wants to do something completely different. I had NOW on my watchlist since Druckenmiller mentioned it in late 2018 at around $165 as a disruptor. It’s now even roughly at the same price in terms of price/sales relatively speaking, so I thought I dip my toe a bit into this. It’s one of the more moaty business in this space and might be a good value, if they keep growing and improve profitability. They are no slouch in terms of stock related comp, but are a bit better than WDAY. Having observed and used NOW at my prior job as a kind of procurement tool for my group, the UI was not super impressive to me. My teammates constantly complained about NOW's functionality.

Neumann is worse than a modern-day Steve Case. At least AOL was selling something that was actually useful. Even though it was merely a transitionary product with no real competitive advantage, at least it was somewhat beneficial. He is only slightly less bad than Holmes at Theranos. At least no people were hurt in the perpetration of this fraud. While we're on the topic of liberal politicians, maybe this whole episode with WeWork will be spun into a political thing. Maybe Son, like Gabbard and Jill Stein, is a foreign asset attempting to de-stabilize the middle east by taking billions of Saudi oil money and essentially setting it on fire through some of these investments. Less plausible ideas have been proposed by major news outlets.

This could be the greatest example of commitment bias in history. It's unbelievable, and borderline unethical, that Neumann can walk away a billionaire from a business that has not created any sustainable value for society, and is still likely to go bankrupt over time. Unless they are able to wiggle out of many of their leases in a short period of time, this capital infusion still only gets them a few years of liquidity at even dramatically reduced burn rates.

In what world can an enterprise tech CEO with no consumer goods experience transition to become the CEO of the one of the largest athletic shoe and apparel companies in the world? This can't be a positive sign for Nike. John Donahoe is a Meg Whitman type of CEO; full of consulting-based platitudes and not a lot of execution.

The Truth is that he was on the verge of bankruptcy around 1989 because he had signed personal guarantees on loans. However, the banks saw more value from leaving him a sliver of his former equity and having him be Mr. Outside and do PR for the insolvent developments than from forclosing. Since then he's been "The Donald" rather like that other valuable promotional character, Ronald McDonald. ;D Based on the book Vulture Investors by Hillary Rosenberg, Wilbur Ross (I believe) corroborated what you said about the banks seeing more value from leaving his name on the various Trump properties.

In short: The business solves a problem for its customers (vets) The end market is attractive (pet care) given its recession-resistance The valuation looks increasingly attractive given a price for the entire enterprise of $2.3 billion and unlevered free cash from the legacy Henry Schein business of about $150 million, giving us a 6.7% unlevered free cash yield on just Henry Schein. This effectively values Vets First Choice, which is why everyone was so excited about the stock in the first place, at zero. I've purchased twice now, once around $13 per share and again yesterday below $11. It's a small position for me given the leverage and somewhat limited free cash flow. In a downturn, they will generate cash from inventory liquidation, but still the free cash could be ugly and people who don't understand the business now really won't want to own it in a downturn. So, I've left some room to average down further because I think I could get a chance to. https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1080485861&serialid=LwV70A1WGcAVwyFsrunHo7%2BWJh%2FyveCGDQap19XIDWs%3D&cspId=1928917291656192000