MOI Global | The Membership Community of Intelligent Investors

Procter & Gamble: Fewer Brands, Leaner Supply Chain, Lower Costs

June 28, 2018 in Audio, Consumer Staples, Equities, Large Cap, North America, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018

Bogumil Baranowski of Sicart Associates presented his in-depth investment thesis on Procter & Gamble (NYSE: PG) at Wide-Moat Investing Summit 2018.

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About the instructor:

Bogumil Baranowski has a Master’s degree in Finance and Strategy from Institut d’Etudes Politiques de Paris (Sciences Po), and a Master’s in Finance and Banking from Warsaw School of Economics. He has over 13 years of investment experience. Before joining Sicart Associates, LLC, he worked at Tocqueville Asset Management L.P. as a portfolio manager and senior equity analyst. He is the author of Outsmarting the Crowd – A Value Investor’s Guide to Starting, Building and Keeping a Family Fortune (2015). He is a TEDx Speaker, an Executive Board member of one of the oldest and most advanced Toastmasters International clubs in New York City, and an Instructor at MOI Global (The Community of Intelligent Investors). His articles regularly appear on Seeking Alpha.

Value Investing 3.0: Thoughts on the Evolution of Intelligent Investing

June 28, 2018 in Audio, Commentary, Equities, Transcripts, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Dan Sheehan of Sheehan Associates and Credit River Partners shared his thoughts and insights into the evolution of value investing at Wide-Moat Investing Summit 2018.

Read a related article by Dan.

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About the instructor:

Dan Sheehan is the general partner of Sheehan Associates Limited Partnership, an investment partnership created in 1999. He is also the senior partner of Credit Partners LLP which is the general partner and investment manager of Credit River Value LP, founded in 2011. Dan has a degree in economics from McMaster and an MBA from York. He lives in Toronto, Canada.

Ferrovial: Moat Supported by Exceptional Toll Road in Canada

June 28, 2018 in Audio, Communication Services, Equities, Europe, GARP, Ideas, Jockey Stocks, Large Cap, Transcripts, Transportation, Wide Moat, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Luis Garcia Alvarez of MAPFRE AM presented his in-depth investment thesis on Ferrovial (Spain: FER) at Wide-Moat Investing Summit 2018.

Thesis summary:

Ferrovial is a multinational infrastructure, services and construction group headquartered in Madrid, Spain. It owns significant stakes in Canada’s 407 ETR toll road (43% equity) and London Heathrow airport (25% equity), plus four “managed lane” projects in the United States (of which two are currently operational).

During recent quarters, adverse market conditions in the Services activities in the UK and a lower contribution from projects in Construction, together with a couple of loss-making projects, have compressed operating margins on the contracting side. However, Luis considers this a case in which investors are simply not focused on the right issues and misunderstand the relative weight of each division in the company’s valuation.

The most important asset in terms of equity value, the Canadian 407 ETR toll road (close to 50% of estimated intrinsic value for Ferrovial), has continued to report solid results. The exceptional terms of this concession are the source of the company’s competitive advantage in building and operating high complexity toll roads, which constitute an efficient solution for mobility problems in congested western urban cities.

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About the instructor:

Luis García Alvarez, CFA is an Equity Portfolio Manager at MAPFRE AM, the asset management unit of the global insurance company MAPFRE Group. He previously worked at Banco Santander as a Market Risk Analyst and at BBVA as a Senior Equity Research Analyst. Luis is also an Associate Professor for the MBA program at Ostelea Business School. He holds a Bachelor’s degree in Economics from the Francisco de Vitoria University, a Master’s degree in Economics and Finance from CEMFI and a Value Investing Diploma awarded by the Ben Graham Chair at Richard Ivey School of Business. Luis is a CFA Charterholder since 2013. Also on the academic side, he has co-authored a series of papers on the field of finance which he has presented at several workshops held at the University of Warsaw, University of Munich, Humboldt University of Berlin, the European Central Bank and the Spanish Finance Association (AEFIN).

Maui Land & Pineapple: Under-the-Radar Land Bank with Catalysts

June 28, 2018 in Audio, Equities, Ideas, Micro Cap, North America, Real Estate, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Nitin Sacheti of Papyrus Capital presented his in-depth investment thesis on Maui Land & Pineapple (NYSE: MLP) at Wide-Moat Investing Summit 2018.

Thesis summary:

Maui Land & Pineapple is an under-the-radar land bank with 900 acres of prime, beachfront land in Kapalua, Maui, which Nitin believes is worth multiples of MLP’s $200 million enterprise value, based on recent comps of $1-3 million per acre. MLP is in the process of developing much of this land. The company also owns 10,800 acres of comparable agriculturally zoned land and 9,000 acres in conservation land. Finally, MLP operates profitable real estate and resort-related businesses. Nitin sees upside from the recent share price of $11 to $41 over the next two years.

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About the instructor:

Nitin Sacheti is the Founder and Portfolio Manager of Papyrus, where he continues to implement a successful bottoms-up investment process, honed over 10 years, focusing on free cash flow generation over time. Prior to founding Papyrus, Mr. Sacheti was a Senior Analyst/Principal with Equity Contribution at Charter Bridge Capital where he managed the firm’s investments in the technology, media and telecom sectors as well as select consumer investments. At Charter Bridge and in his prior role at Cobalt Capital, he managed over 25 names in a ‘mini-PM’ capacity with significant autonomy ensuring a seamless transition to Portfolio Manager at Papyrus. Previously, Mr. Sacheti was a Senior Analyst at Tiger Europe Management, managing mostly the fund’s non-European investments. Mr. Sacheti began his investment career in 2006 at Ampere Capital Management, a consumer, media, telecom and technology focused investment firm, initially as a Junior Analyst, later becoming Assistant Portfolio Manager. He graduated from the University of Chicago with a BA in Economics and was a visiting undergraduate student in Economics at Harvard University.

Darling: Recurring Cash Flow and Longer-Term Societal Tailwinds

June 28, 2018 in Audio, Consumer Staples, Equities, Ideas, Mid Cap, North America, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Ian Clark of Dichotomy Capital presented his in-depth investment thesis on Darling Ingredients (NYSE: DAR) at Wide-Moat Investing Summit 2018.

Thesis summary:

Darling Ingredients is a global developer and producer of sustainable ingredients from edible and inedible bio-nutrients. The company has transitioned from a cyclical business whose profits were driven exclusively by the agricultural cycle to a lower-risk business that is less cyclical, while still generating prodigious cash flow.

Darling has several longer-term tailwinds. Chief among them is increased integration of biofuels into the worlds transportation fleets. A largely unknown asset is the Diamond Green Diesel joint venture, of which Darling owns 50%. This JV is capitalizing on Low Carbon Fuel Standard Credits. By Ian’s estimates, Diamond Green Diesel may produce more FCF than the entire core Darling business.

Darling offers investors the opportunity to invest in a business with recurring cash flow and longer-term societal tailwinds.

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About the instructor:

Ian Clark is the Managing Partner of Dichotomy Capital, a broad mandate investment manager that looks for uncorrelated returns in the public and private markets. He began his career in chemistry designing organometallic catalysts and novel synthetic routes. He received his M.S. in Chemistry from the University of Oregon. The dislocation of 2009 led him to research a better way to invest. Applying the same approach utilized in his science background, Mr. Clark began publishing his investing ideas to receive feedback and criticism. Applying his science background to investing, Dichotomy Capital focuses on sectors where technical expertise can lead to better investment returns.

NIC: Well-Financed Provider of Digital Services to Governments

June 28, 2018 in Audio, Equities, Ideas, Information Technology, North America, Small Cap, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Chris Karlin of Aquitania Capital Management presented his in-depth investment thesis on NIC (Nasdaq: EGOV) at Wide-Moat Investing Summit 2018.

Thesis summary:

NIC provides digital services and solutions to governments. NIC’s outsourced portal businesses enter into long-term contracts with governments to design and operate enterprise-wide online portals that allow businesses and citizens to access government information online.

NIC’s business is entirely self-financing, with minimal capital needs, carrying no debt, and a significant cash balance. Concerns over the loss of a large contract and slow growth have compressed the valuation even as the new tax bill should provide a 10-15% FCF boost.

NIC recently traded at its lowest valuation since 2008 at 11x TTM EV/EBIT, 14x 2019E EV/EBIT (likely ebb-year), and 10x normalized EV/EBIT. Either growth investments are successful and boost the valuation or growth investments are unsuccessful and the cost structure shrinks in response. Without the need for external financing, there is little reason why NIC should be a public company, and Chris believes it could attract interest from strategic and financial acquirers. Using conservative assumptions, Chris’s target price is $19 per share on normalized earnings and $22 per share in an M&A scenario.

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About the instructor:

Christopher Karlin has been in the investment business since 1991. Prior to founding Aquitania Capital Management in 2012, Christopher held positions as a Research Analyst and Portfolio Manager at First Pacific Advisors, Kestrel Investment Management and Fairview Capital Investment Management. Christopher interned with Farallon Capital Management while pursuing his MBA. He began his career with Wells Fargo Nikko Investment Advisors which later became a part of Blackrock. Christopher received his BBA from the University of Wisconsin in 1990 his MBA from Yale University in 1998 and has held the CFA designation since 1994.

GrafTech: Graphite Electrode Producer with FCF Opportunity

June 28, 2018 in Audio, Equities, Ideas, Mid Cap, North America, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

William Thomson of Massif Capital presented his in-depth investment thesis on GrafTech (NYSE: EAF) at Wide-Moat Investing Summit 2018.

Thesis summary:

GrafTech is a uniquely positioned graphite electrode producer that is vertically integrated into the petroleum needle coke market, the primary raw material required to make ultra-high power graphite electrodes. GrafTech’s vertical integration allows it to sell electrodes on long-term contracts, 85% of which are five-year contracts signed in the last year at a weighted average price per metric ton of electrode that is more than twice the weighted average price GrafTech received during the last ten years for their electrodes.

Rationalization of the graphite electrode market has resulted in a decrease of 20% of the global production capacity during the previous five years, that when combined with the tight needle coke market, creates a window of opportunity between five and ten years in length, during which GrafTech should generate FCF well in excess of 50% of the recent market cap of the company, the vast majority of which management intends to return to shareholders.

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slide presentation audio recording

About the instructor:

Will Thomson is a Managing Partner at Massif Capital, a value-oriented investor partnership focused on global opportunities in the small and mid cap space, with special attention given to industrial and commodity-related businesses. He has previous energy and mining related work experience in private equity, credit analysis, insurance and government policy. Massif Capital combines a fundamentals based approach to individual company assessment with in-depth capital cycle analysis to find compelling investment opportunities.

Allergan: Inelastic Demand, Growing Botox and Medical Aesthetics Franchises

June 27, 2018 in Audio, Diary, Equities, GARP, Health Care, Large Cap, North America, Wide Moat, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Gary Mishuris of Silver Ring Value Partners presented his in-depth investment thesis on Allergan (NYSE: AGN) at Wide-Moat Investing Summit 2018.

Thesis summary:

Allergan is a pharmaceutical company with three components of value: (1) Botox and medical aesthetics medications – the economics are more similar to luxury goods than to typical drugs; (2) other medications – a mix of stable niche specialty drugs and regular drugs with a steep patent cliff; and (3) future pipeline sales derived from substantial R&D investment. Gary’s estimate of the intrinsic value puts the stock at less than 65% of his base-case value (50%+ expected return) with a downside to the worst-case value of less than 25%. As a sanity check, the stock recently traded at less than 10x normalized EPS. The market is overly concerned with near-term patent losses while underestimating the inelastic demand and growth characteristics of the Botox and medical aesthetics franchises. The pipeline, which has meaningful value on an expected-value basis, is also overly discounted due to few readily identifiable blockbusters close to launch.

Listen to this session:

slide presentation audio recording

The following resources have been shared by an MOI Global member:

Bloomberg article

Proxy fight-related Allergan presentation

About the instructor:

Gary Mishuris is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm with a concentrated long-term intrinsic value strategy. Prior to founding the firm in 2016, Mr. Mishuris was a Managing Director at Manulife Asset Management since 2011, where he was the Lead Portfolio Manager of the US Focused Value strategy. From 2004 through 2010, Mr. Mishuris was a Vice President at Evergreen Investments (later part of Wells Capital Management) where he started as an Equity Analyst and assumed roles with increasing responsibilities, including serving as the co-PM of the Large Cap Value strategy between 2007 and 2010. He began his career in 2001 at Fidelity as an Equity Research Associate. Mr. Mishuris received a S.B. in Computer Science and a S.B. in Economics from the Massachusetts Institute of Technology (MIT).

Starbucks: International Growth Opportunity Remains Intact

June 27, 2018 in Audio, Consumer Discretionary, Diary, Equities, GARP, Ideas, Jockey Stocks, Large Cap, North America, Restaurants, Transcripts, Wide Moat, Wide-Moat Investing Summit, Wide-Moat Investing Summit 2018, Wide-Moat Investing Summit 2018 Featured

Dave Sather of Sather Financial Group presented his in-depth investment thesis on Starbucks (NYSE: SBUX) at Wide-Moat Investing Summit 2018.

Thesis summary:

Starbucks is the premier roaster of specialty coffee with a brand name valued at $17 billion by Forbes, trading at fair value. For a variety of reasons, such as negative press attention, lower comparable store sales growth, and desertion by growth investors, Starbucks trades at the lowest point in three years. Management has raised its target for cash returned to shareholders to $25 billion through FY20, including a 20% dividend increase.

Trading at a market multiple, most investors are overly concerned with slowing U.S. growth. In reality, it is an international growth opportunity harnessing digital relationships via data analytics. SBUX is fairly priced based on conservative estimates. If anything goes right, the upside should accrue to the patient investor.

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About the instructor:

Dave Sather is a CFP and President of Sather Financial Group, a $600 million firm managing individual accounts, in Victoria, Texas. Dave has degrees in business from Texas Lutheran University and Texas A&M University. Dave is also a Director of Business Bank Of Texas and serves on the Investment Committee and Board of Regents at Texas Lutheran University. He developed and teaches the Bulldog Investment Company internship at Texas Lutheran University (www.BulldogInvestmentCo.com).

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