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Teekay Offshore: Abandoned Public Stub of Mission-Critical Marine Infrastructure Business

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas 2018 Featured, Best Ideas Conference, Deep Value, Equities, Ideas, North America, Small Cap, Special Situations, Transportation

Jeremy Deal and Seth Lowry of JDP Capital Management presented their in-depth investment thesis on Teekay Offshore LP (NYSE: TOO) at Best Ideas 2018.

Teekay Offshore is an abandoned public stub of a mission-critical marine infrastructure business, re-capitalized by Brookfield Business Partners, trading at a ~25% cash flow yield. TOO is the largest independent owner/operator of mission-critical offshore pipeline infrastructure assets used by the largest E&Ps in deepwater drilling. The company is misunderstood to be dependent on rising oil prices, but instead operates in a niche duopoly insulated by long-term contracts with large oil companies. The recent enterprise value of $5 billion makes TOO a high-capacity idea to invest alongside one of the most successful real asset managers globally, at roughly the same valuation. Assuming mean reversion to historical multiples implies ~300% upside from the recent market quotation of $2.50 per share.

About the instructor:

Jeremy Deal is the Founder and Managing Partner of JDP Capital Management LLC, a San Diego-based hedge fund manager launched in 2011. The firm’s research process and culture utilizes a private equity-like approach to public company investing focused on deep value, distressed, and special situations within North American mid cap and micro cap equities. Prior to launching JDP Capital, Jeremy was a fundless private equity sponsor and co-founder of Secure Wireless Inc., a designer and manufacturer of intrusion security electronics sold to Nortek (NASDAQ: NTK) in 2006. Jeremy graduated from U.S. International University with a B.S. in Business and a minor in International Relations.

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Cousins Properties and Scheid Vineyards: Two Undervalued Companies, with Catalysts

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Consumer Staples, Deep Value, Equities, Ideas, Micro Cap, North America, Real Estate, Small Cap

Aaron Edelheit of Mindset Capital presented his in-depth investment theses on Cousins Properties (NYSE: CUZ) and Scheid Vineyards (OTC: SVIN) at Best Ideas 2018.

Cousins has quietly transformed into a high-quality office REIT focused on Sunbelt markets such as Atlanta, Austin, Charlotte, Phoenix, and Tampa. Investors are not giving the company credit for this transformation taken in the last six years. NAV is $11-12 per share. The company could see a boost if Amazon picks Atlanta or Austin for its new headquarters, as Cousins generates nearly 40% of NOI from Atlanta and 20% from Austin. There are few ways to publicly play Amazon’s announcement, upon which Cousins could be worth up to $17 per share.

Scheid Vineyards is an unknown, illiquid microcap that trades at an estimated 65+% discount to NAV per share. The company owns and leases ~4,000 acres of prime Monterey County, California vineyards and also owns a state-of-the-art winery worth $75 million. The company, after years of not filing with the SEC and not reporting to investors, has started to send out quarterly financial statements. NAV could be as high as $244 per share, compared to the recent share price of ~$75 per share. The illiquidity notwithstanding, investors receive a sizable discount to quality assets.

About the instructor:

Aaron M. Edelheit is the CEO and Founder of Mindset Capital, a private investment firm. In his previous role as CEO of The American Home, Aaron founded and managed a company that owned 2,500 single family rental homes and was sold in April 2015 to a publicly traded REIT. Prior to The American Home, Aaron founded and ran Sabre Value Management, a money management firm from 1998-2011, averaging 11% annualized returns over that time period. Aaron has been featured and quoted in the Wall Street Journal, New York Times, Bloomberg, and CNBC among others. Aaron currently serves on the board of the Moishe House Foundation and is a member of Social Venture Partners in Santa Barbara working on homelessness. Previously he served on the board of the Global Village Project, a non-profit school for refugee girls in Atlanta, Georgia. Past volunteer work also includes being a Big Brother a Mentor and volunteering at Children’s Healthcare of Atlanta.

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Grupo Mexico: Undervalued, Family-Run Controlling Holder of Southern Copper

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Deep Value, Equities, Ideas, Industrial Conglomerates, Jockey Stocks, Large Cap, Materials, North America, Special Situations

Francisco Carrillo of Mexico Value Partners presented his in-depth investment thesis on Grupo Mexico (Mexico: GMEXICOB) at Best Ideas 2018.

Grupo Mexico not only has the largest copper reserves in the world but through its subsidiary, Southern Copper (NYSE: SCCO), is also the lowest-cost producer in the world. Grupo Mexico is owned by family operators, the Larrea family, which has done a superb job of capital allocation, as evidenced by the projects in which the company has invested over the years. Investors have an opportunity to buy Grupo Mexico essentially at “negative value” of ~12 pesos per share, because the company’s 89% ownership of SCCO is worth 120% of Gropo Mexico’s market capitalization. Investors essentially pay nothing for the non-SCCO assets, including the largest railroad operation in Mexico (a duopoly, with Kansas City Southern the main competitor) with close to $1 billion in EBITDA, and other assets, including toll roads, cogeneration plants, and oil platforms in lease to Pemex, which together account for close to an additional $1 billion in value. At the recent share price, the valuation remains undemanding at ~6x this year’s EBITDA and an FCF yield of close to 10%. As new projects materialize, the company should grow cash flow in the low-teens through 2019. Francisco sees upside of nearly 40%, assuming copper prices of $2.90 per pound. The sum-of-the-parts valuation discount provides downside protection.

About the instructor:

Francisco Carrillo began his investment career some 20 years ago as an analyst at GBM Grupo Bursátil Mexicano. His tenure at GBM lasted close to 10 years and he held various responsibilities during that time, culminating with his participation in the firm’s investment committee. After GBM, Carrillo co-founded Sabino Capital, a Mexico-based investment partnership. Later, he briefly worked at Bestinver, a renowned Spanish investment advisor. In 2012 he and two other partners founded Mexico Value Partners, a Mexico-based investment partnership where he currently serves as Chief Investment Officer.

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GTT Communications: Mispriced, Cash-Generative Growth Compounder

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, North America, Small Cap

Zack Buckley of Buckley Capital Partners presented his in-depth investment thesis on GTT Communications (NYSE: GTT) at Best Ideas 2018.

About the instructor:

Zack Buckley worked as an analyst for Baker Street Capital in 2011 while launching Buckley Capital. Zack has been featured in The Wall Street Journal, Barron’s, Reuters, CNBC, Market Watch, Value Walk, Business Insider, and the Financial Post, and has also been a speaker at several Value Investing Congresses. Zack holds a Bachelor of Arts in Economics and a Bachelor of Business Administration in Accounting from the University of Miami.

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Cambria Automobiles: UK Auto Dealer Run by Capable Owner-Operator

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas 2018 Featured, Best Ideas Conference, Consumer Discretionary, Equities, Europe, GARP, Ideas, Jockey Stocks, Micro Cap

Alex Bossert of Bossert Capital presented his in-depth investment thesis on Cambria Automobiles (London: CAMB) at Best Ideas 2018.

Cambria Automobiles is a UK-based auto dealership group founded by CEO Mark Lavery in 2006 to pursue a dealership roll-up strategy. Lavery owns 40% of the outstanding shares and from a starting capital base of only £11 million has built Cambria into a business with a market cap of £64 million, with operating earnings of £12 million in 2017. This impressive performance over the past eleven years has been achieved during a period that has included two recessions in the UK. Auto dealers are good businesses, and Cambria has averaged ROE in the high-teens over time. In 2017, Cambria earned ROE of 20%. Cambria shares recently traded at just 6.9x LTM earnings. This despite two temporary factors negatively affecting earnings in 2017. The construction at the Barnet dealership has had a significant impact on profitability at this dealership. Additionally, a fire that took place in October 2016 at the Jaguar and Aston Martin dealership in Welwyn significantly hurt the profitability of that site. The Barnet project was finished in July 2017 and the Welwyn site was back in operation in June 2017.

Read Alex Bossert’s write-up on Cambria.

About the instructor:

Alex started Bossert Capital in February of 2017 to invest money on behalf of a select group of long term oriented, business minded, wealthy families and individuals. He began investing his own money at 10 years old. Alex has studied and modeled his investing strategy after investors such as Warren Buffett, Charlie Munger, Benjamin Graham, Joel Greenblatt, Seth Klarman, Mohnish Pabrai and Guy Spier among others. Prior to starting Bossert Capital, Alex held analyst roles at multiple investment firms. From 2010 – 2013 he was an analyst at Milestone Capital, a value focused investment firm based in Minneapolis, Minnesota. And from 2014 – 2016, he was an analyst at Granite House Capital Management in Boston Massachusetts. In 2014, he was accepted as a member of the Value Investors Club. He is also the youngest ever admitted member of the SumZero buyside network and was one of 14 buyside analysts in the nation to be named to the 2012 SumZero Buyside Analyst Honors which was published in the Wall Street Journal and CNBC. Over 8,000 analysts were considered. He is also featured in a chapter in the biography of investor Warren Buffett called “Of Permanent Value: The Story Of Warren Buffett.” He maintains a blog “Alex Bossert‘s Thoughts On Value Investing” with over 450 subscribers and over 250,000 site views.

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School Specialty: Well-Managed Education Business with Hidden Growth Drivers

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Deep Value, Equities, GARP, Ideas, Micro Cap, North America, Small Cap, Special Situations

Daniel Baldini of Oberon Asset Management presented his in-depth investment thesis on School Specialty (OTC: SCOO) at Best Ideas 2018.

School Specialty is a well-managed, attractively valued business (5x EBITDA, 8.5x earnings, 17% FCF yield), with an improving return on tangible capital, hidden growth drivers, and restive shareholder base.

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.

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Future Enterprises: Infrastructure Provider for India’s Leading Retailer

January 12, 2018 in Asia, Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, Jockey Stocks, Small Cap

Gautam Baid of Summit Global Investments presented his in-depth investment thesis on Future Enterprises (India NSE: FEL, BOM: 523574) at Best Ideas 2018.

Future Enterprises develops, owns and leases the retail infrastructure for the Future Group of companies, India’s leading retailing chain, led by Kishore Biyani, an astute dealmaker and the “father” of organized retail in India. As part of a merger between Bharti Retail and Future Retail in May 2016, the latter was spun out from Future Enterprises as an asset-light front-end retailing company and Future Enterprises became a debt-laden holding company with stakes in Future Group’s various subsidiaries and joint ventures outside retail, including general and life insurance, textile manufacturing, and supply chain and logistics, with a stated intention to sell those stakes over time to deleverage the balance sheet. In the next two to three years, the value of these stakes is expected to be more than the recent market cap of Future Enterprises. The shares trade at 7.8x EV/EBITDA based on current-year guidance. With listed comparable peers in India trading at 11-15x and one of them acquired in 2015 at 12x EV/EBITDA, limited scope exists for multiple compression at Future Enterprises with its sustainable contracted rental income. As a result, the aftertax sale proceeds from stake sales over time should flow to the equity side, implying upside of 100+% for Future Enterprises over the next three to four years.

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.

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Randall Abramson on His Investment Process and Selected Ideas

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Equities, Ideas, Portfolio Management

Randall Abramson of Trapeze Asset Management discussed his investment process at Best Ideas 2018.

About the instructor:

Randall Abramson is President, CEO, and Portfolio Manager of Trapeze Asset Management Inc., a firm he co-founded in 1999 shortly after founding its affiliate broker dealer, Trapeze Capital Corp. Randall was named as one of Canada’s “Stock Market Superstars” in Bob Thompson’s book Stock Market Superstars: Secrets of Canada’s Top Stock Pickers: Insomniac Press, 2008. Trapeze’s separately managed accounts are long/short or long-only and mostly have an all-cap orientation as Trapeze selects securities which meet strict value criteria. Since 2009, Randall and his team have developed four proprietary methodologies: TVMTM, TRACTM, TECTM and TRIMTM which now provide Trapeze with a multi-pronged approach for stock selection, buy and sell signals, economic cycle changes and gauging extreme market sentiment respectively. Randall graduated with a Bachelor of Commerce from the University of Toronto in 1989 and began his career in investment banking with The Hathaway Corporation. From there, he specialized in Canadian and U.S. Equities as an analyst and portfolio manager at both Hodgson Roberton Laing Limited and Connor Clark & Co.

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KNR Constructions: Indian Road Construction Company with Strong Tailwinds

January 12, 2018 in Asia, Audio, Best Ideas 2018, Best Ideas 2018 Featured, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, Small Cap

Anuj Didwania of Redart Capital Advisors presented his in-depth investment thesis on KNR Constructions (India: KNRCON) at Best Ideas 2018.

KNR Constructions engages in construction activities (EPC segment) focused on the road sector and collecting tolls and maintaining road projects. The road sector in India is one of the focus areas of the government to increase job growth and kick-start the investment cycle, which has been stuck for six to seven years. KNR has demonstrated an ability to deliver steady EBITDA margins of ~15% even through the downcycle. Management continues to follow strict financial discipline in bidding for road projects and has the lowest debt-to-equity of any road company in India (~0.1x). Three-fourths of the order book is from the road sector. The order book provides visibility for 15-18% sales growth for next two years. Strong capital allocation by management has led to steady and healthy ROEs of 15-20% consistently on the back of sales growth of 25+% for the last twelve years. Promoters hold 58% of shares outstanding. The company trades at 19x earnings for FYE March 2018, with the tailwind of being in the right sector and visibility of 17-20% earnings growth for the coming two years.

About the instructor:

Anuj Didwania is the fund manager of Redart Capital, a fundamental value oriented investment management firm based in India. Prior to Redart Capital, from 2004 to 2005, Anuj was a Vice President solely responsible for the India proprietary trading desk at Merrill Lynch in Hong Kong and also assisted with managing Merrill Lynch’s $2 billion P-note product. From 2000 to 2004 Anuj was a proprietary trader for HSBC in Mumbai and was also responsible for setting up the equity derivatives desk for the company in India. From 2005 to 2009 Anuj has been working in the capacity of an executive director in his family business that is focused on logistics. He introduced strong processes and systems which helped increase margins and deliver consistency whereby the profits of the company have increased 800% since his joining. Since 2009 Anuj has been focused on investing proprietary capital of his family and developing his investment and risk management processes. Anuj received his post graduate degree in Business Administration (MBA) from Manchester Business School (UK) in 2000 and received his undergraduate degree in Commerce (B. Com) from Sydenham college in Mumbai.

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Viad: Compounder with Strong Management and Spinoff Catalyst

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, North America, Small Cap, Special Situations

Peter Rabover of Artko Capital presented his in-depth investment thesis on Viad (NYSE: VVI) at Best Ideas 2018.

Viad is a combination of two unrelated compounder business units, with an identifiable spinoff catalyst over the next 12 to 36 months. Excellent management, a decent balance sheet, and a valuation of less than 7x forward EBITDA and an FCF yield of ~10% provide a good margin of safety and create a compelling risk-reward tradeoff.

About the instructor:

Peter Rabover is the principal and portfolio manager of Artko Capital LP. His focus and expertise lies in value investing, small caps, special situations and M&A. Prior to founding Artko Capital, he was a Senior Analyst for a large San Francisco mid cap value fund and a Santa Cruz large cap value fund, as well as stints in the Peace Corps as an Economic Development Volunteer and various private equity/M&A consulting roles. Peter holds a B.S. in Finance from Duquesne University and an MBA from University of Virginia’s Darden Graduate School of Business. He has also attained the Chartered Financial Analyst designation.

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