Ashford: REIT Advisor with Strong Balance Sheet and Service Businesses

Mike Boroughs and Paul Misleh of Fortis Capital Management presented their in-depth investment thesis on Ashford Inc. (NYSE: AINC) at Best Ideas 2018.

Ashford is the external advisor to two publicly traded REITs, Ashford Trust (AHT) and Ashford Prime (AHP). AINC is a capital-efficient business that can be purchased for less than 8x next year’s EBITDA and can grow EBITDA at 30+% for years to come, with minimal additional capital needed. AINC has roughly $6.3 billion of “AUM” at the two REITs, on which it earns around 70 bps. AINC also owns service businesses, the largest of which is J&S which is an audio-visual company its REITs use. The power of AINC comes in its ability to responsibly grow the REITs (which it controls) and also buy top-notch service businesses and direct the REITs to use these. J&S was bought for ~6x EBITDA, which becomes 3x EBITDA once the REITs use the business. The company has a $40 million net cash position on a diluted market cap of $240 million. They are a full U.S. tax payer and will benefit significantly from the reduction in corporate taxes.

About the instructors:

Mike Boroughs, CFA, CPA is the Managing Partner and lead portfolio manager at Fortis Capital Management, a Seattle-based RIA focused on value investing with a behavioral overlay. Prior to Fortis, Mike was an Assistant Portfolio Manager at Glacier Peak Capital. Glacier Peak Capital is a registered investment advisor with approximately $190 million in assets under management spread across two discretionary hedge fund portfolios. Mike played a key role in launching Glacier Peak Capital as a spinoff from Summit Capital Group, where he formerly worked as an Equity Analyst. Prior to Summit, Mike was an auditor for Ernst & Young LLP where he earned his CPA designation, specializing in financial statement investigation. He graduated as Valedictorian from University of San Diego.

Paul Misleh, CFA, CPA is the Director of Research at Fortis Capital Management. He focuses on analyzing overall market conditions, sectors, geographies and individual securities. Paul spent nine years at Ernst & Young focusing on financial statement investigation and business valuation (auditing and financial due diligence) and Big Data/Advanced Analytics. Paul’s audit work was primarily for large US based companies (including IPOs, spin-offs and other transactions). His work in financial due diligence was focused on assisting major private equity firms in their valuation of businesses based on recurring “owner’s earnings”. He graduated Summa Cum Laude from the University of San Diego.

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