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HolidayCheck: Growth to Accelerate at Leading German Hotel Review Site

June 29, 2018 in Audio, Equities, Europe, Information Technology, Micro Cap, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Daniel Baldini of Oberon Asset Management presented his in-depth investment thesis on HolidayCheck Group (Germany: HOC) at Wide-Moat Investing Summit 2018.

Thesis summary:

HolidayCheck Group is the leading German hotel review site and a major online packaged holiday booking platform serving Germany, Austria, and Switzerland. At ~1.1x revenue, the company is valued as a slow-growth business that will never achieve meaningful profitability.

The market is missing the following: HoldayCheck’s review platform gives it a sustainable competitive advantage in the form of lower customer acquisition costs. Growth is accelerating as changes to the business take hold, the German travel market improves, and the shift to online booking accelerates. Opportunities for additional improvements to the business are significant, further supporting growth and profitability. The online segment of the German packaged holiday market accounts for only one-third of bookings, presenting a long runway of growth. The company’s hotel review database is a valuable asset and makes the company an attractive acquisition candidate.

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About the instructor:

Daniel Baldini is the founder and Managing Partner of Oberon Asset Management LLC, a New York based registered investment advisor managing separate accounts for individuals, partnerships, trusts and pension plans. Prior to founding Oberon in 2001 Mr. Baldini worked for the International Finance Corporation, the private sector arm of the World Bank, as an Investment Officer in the Asia and Eastern Europe Departments. Following graduation from the Stanford University Graduate School of Business and prior to joining the IFC Mr. Baldini lived in London for three years and worked for Electra Investment Trust PLC, a UK investment firm specializing in small public company and private equity investments.

Golar LNG: Owns Assets Crucial to Filling Gaps in Natural Gas Supply Chain

June 29, 2018 in Audio, Equities, Mid Cap, North America, Transportation, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

William Heard of Heard Capital presented his in-depth investment thesis on Golar LNG (Nasdaq: GLNG) at Wide-Moat Investing Summit 2018.

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About the instructor:

William Heard is the founder of Heard Capital LLC, and serves as the company’s Chief Executive Officer and Chief Investment Officer. Prior to founding and leading Heard Capital LLC, Heard was a Special Situations Analyst for Stark Investments, a global alternative investment firm. While at Stark Investments, he covered sectors spanning telecommunications, media, technology, financials, industrials, and energy. Heard’s investment experience varies across the capital structure to include leveraged loans, high yield bonds and equity securities. Heard currently serves on the Leadership Council for A Better Chicago, City Year Chicago Board of Directors, and actively participates in OneGoal; a diverse collective of local organizations creating opportunities for today’s youth and low-income population. Heard is a member of the President’s Circle and Young Professional Network for the Chicago Council on Global Affairs, Forbes Finance Council, and is a participating Advisory Board member for the Blackstone Foundation Inclusive Entrepreneurship Council for World Business Chicago and ChicagoNEXT. As an Advisor, Heard is part of a small group that will award grants to innovative organizations that effectively support diverse entrepreneurs and scale start-ups in the Chicago area. Heard is a graduate of the Marquette University’s College of Business Administration with a bachelors in both Finance and Real Estate. During his time at Marquette, he founded and established the Applied Investment Management (AIM) Program at Marquette University. AIM was the first undergraduate business program in the nation to be selected as a Program Partner by the CFA Institute. A strong proponent of higher education, Heard gives motivational speeches to students about leadership, globalism, and the nature of competition. In his spare time, he enjoys mentoring and reading.

Hester Biosciences: India’s Second-Largest Domestic Poultry Vaccine Player

June 29, 2018 in Asia, Audio, Equities, Health Care, Micro Cap, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Gautam Baid of Summit Global Investments presented his in-depth investment thesis on Hester Biosciences (NSE: HESTERBIO, BOM: 524669) at Wide-Moat Investing Summit 2018.

Thesis summary:

Hester Biosciences is the second largest domestic poultry vaccine player in India with a market share of ~35%. In the last five years, the company has diversified its portfolio from a predominantly domestic poultry vaccine to a complete chain of veterinary vaccines, medicines and healthcare segments. Hester is expected to sharply ramp up operations at its Nepal plant which will be primarily dedicated to developing PPR vaccines for exports.

Global agencies Food and Agriculture Organization (FAO) of the United Nations and the World Organization for Animal health (OIE) have earmarked US$7.2 billion (~US$500 million annually) for the eradication of peste des petits ruminants (PPR) disease, globally by 2030. In addition to PPR vaccine, Hester has also developed Brucella cattle vaccine. As per the management, the export opportunity for Brucella vaccine is likely to be even higher than the PPR vaccine. Looking at the size of the opportunity in PPR and Brucella vaccines, even gaining marginal market share could provide very strong revenue traction for Hester.

High net profit margins of ~24% are expected to further improve going ahead, driven by operating leverage (optimum utilization of Nepal plant which is currently reporting a loss) and better realization in PPR vaccines by drawing on its “untapped” pricing power since Hester enjoys a significant low-cost advantage among its global peers for these vaccines.

Businesses with such a long runway ahead for growth and a high degree of predictability enjoy premium valuations for a very long time and are compounding machines. Given Hester’s significant pricing differential for PPR vaccines in the global market, there is a high probability of Hester winning many of the upcoming PPR tenders. Ascribing a “price target” to such a business would not be meaningful as the stock price is expected to keep factoring in the tender win announcements till 2030. Thus, the stock returns are expected to be derived in an irregular and lumpy manner over the next many years. And for patient investors, it is the cumulative total returns over the long-term which ultimately matter. As Buffett said – “Charlie (Munger) and I would much rather earn a lumpy 15 percent over time than a smooth 12 percent.”

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About the instructor:

Gautam Baid, CFA, is Portfolio Manager, Global Equities at Summit Global Investments, an SEC-registered investment advisor based out of Utah, USA. Prior to his current role, he served at the Mumbai, London and Hong Kong offices of Citigroup and Deutsche Bank as Senior Analyst in their healthcare investment banking teams. Gautam is a CFA Charter holder from CFA Institute, an MBA in Finance from Nirma University, Ahmedabad, India and an MS in Finance from ICFAI University, Hyderabad, India. He is a strong believer in the virtues of lifelong learning and is an ardent student of the value investing philosophies of Benjamin Graham, Warren Buffett, Charlie Munger, William O’Neil and Joel Greenblatt.

School Specialty: Education Distributor with High FCF Yield and Catalysts

June 29, 2018 in Audio, Consumer Discretionary, Equities, Micro Cap, North America, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Patrick Retzer of Retzer Capital Management presented his in-depth investment thesis on School Specialty (OTC: SCOO) at Wide-Moat Investing Summit 2018.

Thesis summary:

School Specialty is a leading distributor of supplies, furniture, technology products, supplemental learning products and curriculum solutions to the education marketplace. The company provides educators with innovative and proprietary products and services, from basic school supplies to 21st-century classroom designs to science, reading, language, and math teaching materials as well as planning and development tools.

Recently, the company has received recognition as a leader in the area of school safety and security, which is likely to favorably impact not only their operating results but their brand. SCOO already serves 95+% of the school districts in the U.S., a remarkable accomplishment considering the size of the company and the complexity of dealing with schools and districts. SCOO carries 100,000+ SKUs, bringing more breadth and depth than any competitor to this $12 billion addressable market. Perhaps most importantly, SCOO has strengths in the two most critical issues facing U.S. public education today – safety and security and the lack of acceptable levels of favorable outcomes.

SCOO trades at a ~17% FCF yield and 5.2x estimated EBITDA to enterprise value. Considering the recent valuation and several catalysts on the near-term horizon, Patrick expects SCOO to trade in the $30-40 range over the next eighteen months.

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About the instructor:

Patrick Retzer spent the first several years of his career in public accounting and then developing tax planning software all while earning a Master’s in Taxation. He moved into investment management in 1987, joining Heartland Advisors, manager of the Heartland family of mutual funds in Milwaukee, Wisconsin. While at Heartland, he was portfolio manager of the Heartland US Government Securities Fund (#1 General US Government Fund for the 5 years ended 12/31/93 according to Lipper), he started and managed the Heartland Wisconsin Tax Free Fund (Wisconsin’s first double tax free fund) was co-manager of the Heartland Value Plus Fund, and managed private accounts. In 2000, Pat left Heartland Advisors to start Retzer Capital Management, LLC and the Retzer Fund I, LP. Pat believes his 30+ years of experience in both fixed income and equity management as well as his background as a CPA and tax specialist give him a unique perspective on the financial markets.

Turning Point Brands: Leader in Other Tobacco Products Market at Discount

June 29, 2018 in Audio, Consumer Staples, Equities, North America, Small Cap, Transcripts, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Dan Roller of Maran Capital Management presented his in-depth investment thesis on Turning Point Brands (NYSE: TPB) at Wide-Moat Investing Summit 2018.

Thesis summary:

Turning Point Brands is an off-the-radar, high-quality, branded consumer goods company with high returns on capital and good organic and M&A growth opportunities.

TPB is a leading player in the “other tobacco products” market (defined as tobacco products other than cigarettes). They market smokeless products (they are the number-two producer of chewing tobacco in the U.S.) and rolling papers (under the Zig Zag brand), and distribute various “NewGen” products such as e-cigarettes, vaporizers, and liquids.

Interests are well-aligned: it is 70%-owned by the controlling shareholder group. Standard Diversified Inc (SDI) is the holding company through which the controlling shareholder group owns TPB stock. SDI trades at a ~25% discount to NAV, and is thus a way to buy TPB at a meaningful discount.

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About the instructor:

Dan Roller is the founder of Maran Capital Management, a boutique investment manager based in Denver, CO. Dan has a firm commitment to disciplined value investing with a focus on inefficient areas of the market. He takes a long-term approach and manages a concentrated portfolio of his best ideas. Dan has been connecting dots and unearthing value for over fifteen years. Prior to forming Maran, he honed his investment philosophy and process for over a decade working in analyst and portfolio manager roles on the buyside in New York. Dan received a BSE in electrical engineering, with a second major in computer science, from Duke University in 2003. In addition to being a passionate value investor, Dan enjoys spending time with his wife and two daughters (after whom Maran is named), reading, and getting outdoors in the Rocky Mountains.

Credit Suisse: Earning Power Masked by Expensive Debt, Legacy Asset Costs

June 29, 2018 in Audio, Equities, Europe, Financials, Large Cap, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Taslim Ahmed of Eximus Partners presented his in-depth investment thesis on Credit Suisse Group (Swiss: CSGN) at Wide-Moat Investing Summit 2018.

Thesis summary:

Credit Suisse Group is a financial services company. Segments include Swiss Universal Bank, International Wealth Management, Asia Pacific, Global Markets, Investment Banking and Capital Markets, Strategic Resolution Unit, and Corporate Center.

With a market cap of CHF 39 billion (1 CHF ~ 1 USD), the bank’s income is weighed down by the winddown of legacy assets (pre- and post-2008), with related losses of CHF 1.85 billion in FY2017.

The company is experiencing tailwinds in the form of growth in Asia, with the wealth management division growing profits by 76% in 2016 and 63% in 2017 (most recently at CHF 820 million).

The main value driver is the management team led by CEO Tidjane Thiam, formerly of Prudential Management, who has done an excellent job in both companies, setting concrete targets and in virtually all cases exceeding them.

Taslim sees ~50% upside in the stock as earnings increase after retirement of expensive subordinate debt (~9% interest rate) in October should raise income by CHF 300 million, and reduced losses in the strategic resolution unit increase earnings by CHF 450 million. These “extra earnings” are virtually assured.

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About the instructor:

Taslim Ahmed is the founder and managing partner of Eximus Partners. He is currently a final year undergraduate at Bocconi University, Milan, Italy. He started Eximus Partners in 2013, after a short stint at Sigma Securities (Stock Brokerage) as an intern. He invests in the U.S and Nigerian markets with focus on the latter using an opportunistic approach to investing.

ADO Group: Pure-Berlin Residential Real Estate Operator at Discount

June 29, 2018 in Asia, Audio, Equities, Financials, Small Cap, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Omri Velvart of Legacy Value Partners presented his in-depth investment thesis on ADO Group (Israel: ADO) at Wide-Moat Investing Summit 2018.

Thesis summary:

ADO Group, an Israeli company, offers a unique, risk-averse opportunity — a ~30% discount to NAV in one of the better-positioned residential markets in the world — Berlin, Germany.

The company controls Frankfurt-listed ADO Properties (Germany: ADJ), a one-of-a-kind among public markets, pure-Berlin residential play that owns a portfolio of 23,000+ residential and street-commercial units and operates these assets superbly on its more than a decade-long built platform. ADO Properties has combined an excellent management team with favorable demand trends in Berlin’s residential market to grow like-for like rents at 5+% for many years.

Berlin rent prices still being the lowest among German peers and major urban hubs in Europe and North America, alongside a 40+% gap between recently signed contracts and legacy tenants, suggest this like-for-like growth rate will continue for years to come. ADJ has developed a platform that allows it to keep expanding the residential portfolio in an efficient manner, consistently growing EPRA NAV per share, while maintaining a conservative LTV ratio of ~40%.

Through ADO, we get ADJ shares at a ~30% discount to NAV. A proxy fight in Israel (Apollo Group is involved with a ~22% stake) may be a catalyst for minority shareholders.

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About the instructor:

Omri Velvart runs Legacy Value Partners L.P, a Tel-Aviv based research-oriented hedge fund, focused on Israeli and Global publicly listed equities. His main investment philosophy involves identifying investment opportunities in quality businesses with durable competitive advantages, which present an asymmetric risk-reward profiles that will benefit a patient investor, aiming to compound capital through long periods of time.

Marine Shipping: Industry Economics and Supply/Demand Outlook

June 29, 2018 in Audio, Equities, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Harsha Gowda of BlueShore Capital Management shared his research insights into the marine shipping industry at Wide-Moat Investing Summit 2018.

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About the instructor:

After working for several years in both the investment banking and the hedge fund industries in New York City, Harsha Gowda saw the need for a different type of investment company that focused on generating long-term returns for investors. Indeed, Harsha’s friends and family members continually sought his investment advice and expertise for their own savings. And therefore, Harsha founded BlueShore Capital Management in late-2006. Harsha has continued to grow BlueShore both organically as well as through referrals from his current investors.

Manhattan Associates: Transitioning to Recurring-Revenue Model

June 29, 2018 in Audio, Equities, Information Technology, Mid Cap, North America, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Adam Zuercher of Hixon Zuercher Capital Management presented his in-depth investment thesis on Manhattan Associates (Nasdaq: MANH) at Wide-Moat Investing Summit 2018.

Thesis summary:

Manhattan Associates develops, sells, deploys, services and maintains software solutions designed to manage supply chains, inventory and omnichannel operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Customers include many of the world’s premier and most profitable brands.

MANH is a highly profitable company, consistently generating FCF equal to 20-25%+ of sales. The company has produced returns on invested capital 50+% greater than its cost of capital for the past two years – a strong combination of high ROIC and high FCF. The company is shifting from selling software licenses to a cloud-based software-as-a-service solution.

Adam believes the market is overlooking MANH’s value due to the recent revenue decline and slowdown in earnings growth. On the surface, it appears the company is in decline, but the real story is they are transitioning to a better economic model. Based on Adam’s projections, the company is modestly undervalued.

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About the instructor:

Adam Zuercher is co-founder, Chief Executive Officer, and Chief Investment Officer of Hixon Zuercher Capital Management. As Chief Investment Officer, he oversees investment research and the development and implementation of the firm’s investment strategies. Adam serves as a co-Portfolio Manager and as chairman of the firm’s Investment Committee. Adam is also a member of NAPFA. Adam has experience providing investment management and financial advisory services since 1999. Prior to co-founding Hixon Zuercher Capital Management in 2002, Adam worked at a CPA firm for three years specializing in financial planning and investment advisory services for high net worth individuals.

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