The research report linked below is authored by MOI Global instructors Will Thomson and Chip Russell, managing partners of Massif Capital, a value-oriented partnership focused on the small- and mid-cap space, with special attention on industrial and commodity-related businesses.

Bakkafrost P/F (BAKKA) is a premium grade salmon producer based in the Faroe Islands. Located 200 miles northwest of Scotland, the Faroe Islands are an ideal archipelago to farm North Atlantic salmon. The characteristics of its ecosystem are unique, and the regulations in the region are supportive of sustainable farming. Combined, these factors create a high return fish farming environment that BAKKA’s management team has taken advantage of to create a business with a durable moat. Over the last ten years, management has demonstrated not only superior capital allocation acumen but also the prospectivity of the region for salmon fishing by growing operating income at a CAGR of 18%. During the recent market sell off, BAKKA’s share price fell 36% during the three-week period from February 21st, 2020, and March 12th, 2020, erasing $1.3 billion USD in market value. The downward movement in the stock price has created an opportunity for investors to buy into an industry leader at a discount of ~55% to the value of the firm.

BAKKA is a family owned and operated business founded in 1968 by the father of the current CEO. Collectively, the Jacobsen family owns 19% of the firm. As a successful family-run business, BAKKA exemplifies many of the qualities we find attractive as investors: an alignment of owner and manager interests, the presence of multigenerational time horizons, and the implementation of a value-based system versus a resource-based system. In many regards, BAKKA is a perfect case study of these traits.

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For additional background on Bakkafrost, see Robert Leitz’s presentation on the company at Best Ideas 2018.