The following idea snapshots have been provided by the respective instructors or compiled by MOI Global using information provided by the instructors. For the full investment theses, please review the in-depth slide presentations and replay the hour-long conference sessions.

The following is provided for educational purposes only and does not constitute a recommendation to buy or sell any security.


CREDIT SUISSE GROUP (Swiss: CSGN) 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.


FERROVIAL (Spain: FER) 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.


BUNZL (London: BNZL) is a family company in disguise. It has set a high bar in how a corporation slowly but steadily, with the highest ethical standards, year in and year out keeps expanding its business one well-served customer at a time. It is a grand example of what is today known as a “compounding machine”. At the face of it, Bunzl is a distributor of goods typically not for resale; to food stores, restaurants, large corporations, health care operations – the list goes on. It is the brooms to clean the stores, the kitchen disposables, the napkins in conference rooms, the first aid kits in offices, and the protection gloves in factories. But as with all great business models, Bunzl provides something more in its daily operations. By managing customers’ working capital, solving complex logistics with a 98% fulfillment rate, being just-in-time, providing consultancy around procurement and providing push-through cost savings, Bunzl is one of these businesses that provides essential services that aids an entire operation but at a very small cost. It is like an iceberg – what you see above the water (i.e. Bunzl´s fee/margin) is a fraction of its true impact. The company is governed by outstanding people, in a strong corporate culture with lots of responsibility and decentralization –words such as modest, hard-working, long-term, steadfast come to mind.


HESTER BIOSCIENCES (NSE: HESTERBIO, BOM: 524669) is India’s 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. Its 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.”


HOLIDAYCHECK GROUP (Germany: HOC) 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.


PROCTER & GAMBLE (NYSE: PG) is a prime example of a lasting, wide-moat business. It is one of the world’s largest consumer and home product companies in the world. It has a strong portfolio of global brands available in 180 countries (sales are 2/3 developed markets, 1/3 developing). PG is a quality, stable, and growing business with high margins and returns, a strong balance sheet, and a 62-year history of dividend increases. PG recently traded at 17x P/E, 12x EV/EBITDA, and a dividend yield of 3.8%. Bogumil likes the shares because they are down, cheap, and out-of-favor, while the company is possibly the most focused it has been in recent history. After a major restructuring PG has fewer brands, a leaner supply chain, and improved marketing. Management sees further cost savings going forward and meaningful return of capital. Activist investor Nelson Peltz took a seat on the board, which may further accelerate change. The stock is out-of-favor due to weaker organic sales growth, margin pressures due to elevated costs, and concerns about innovation. PG is well-positioned to get back on track and deliver respectable results over the next five years.


MIDDLEBY (Nasdaq: MIDD): Since taking the helm in 2001, CEO Selim Bassoul and his management team have transformed the company from a small “me too” food equipment maker into one of the world’s largest commercial food equipment makers, with three synergistic platforms serving the restaurant industry, large commercial bakeries and meat producers, and consumers in search of premium kitchen appliances. The food equipment industry benefits from a number of structural shifts taking place at the consumer and restaurant operator level. In addition to secular tailwinds, Middleby has an extraordinary track record outpacing the growth of the market through disruptive innovation and adding value via its proven M&A framework. David and Felix believe management’s enviable value creation algorithm remains intact. Proven compounders rarely trade at a discount to the market, but sporadic bumps in the road can push down stocks to compelling valuation levels. Of late, investors have been concerned about the weak organic growth across all three core segments as well as the full price for a proposed large acquisition (Taylor), which will increase financial leverage. Due to negative investor sentiment, the stock recently traded near the same levels as four years ago, even though intrinsic value has grown much higher. Recent concerns should prove temporary and, from a long-term perspective, are more than adequately discounted in the stock.

FRESHII (Toronto: FRII) is a founder-led restaurant concept that has delivered impressive metrics over its short history. The brand is at the forefront of the global health and wellness movement, pioneering the new “healthy fast food” category. It has been one of the fastest-growing QSR brands in North America, both in terms of store count and same-store sales growth. The capital-light franchise model enables the company to use other people’s money to finance expansion and grab market share at a fast pace. Store growth is also driven by capital efficiency at the store level. As there is no expensive kitchen equipment, store build-out costs are modest relative to most other QSR concepts, which broadens the appeal of Freshii to franchise partners. With modest capital intensity at the store level, partners have been able to earn attractive cash on cash returns of 30-40%. The opportunity is resonating with entrepreneurs. The brand receives more than 7,000 applications annually from franchises and opened 120 stores last year. The company went public in early 2017 with unrealistic expectations. The stock plunged when the company reduced 2019 guidance later that year. As the underlying metrics of the business are still quite strong, the guidance miss was short-term in nature and a result of Corrin’s inexperience communicating with the capital markets rather than any meaningful business deterioration. It was a painful lesson. Going forward, David and Felix anticipate Corrin will “underpromise and overdeliver.” Factoring in continued execution by a passionate owner-operator, a capital-light business model, and long-term growth ahead, the company is reasonably priced at less than 8x 2020E EBITDA, as compared to fast-growing U.S. comps Wing Stop and Shake Shack at over 20x. Freshii has a long runway ahead driven by the concept’s mass market appeal and founder Matthew Corrin’s ability to execute on his vision.


CHARTER COMMUNICATIONS (Nasdaq: CHTR) is the second-largest U.S. cable company with 27+ million customers at the end of Q1 2018. The shares have sold off in 2018 as investors fear a slowing in the core broadband business, the impact of video cord-cutting, and the arrival of 5G fixed wireless, which some worry could be a potential competitor to cable’s core broadband business. Considering the nearly 50% DSL overlap in CHTR’s market, the core broadband business still has multiple years of growth. While video losses could negatively impact top-line growth, the FCF impact will likely be more muted given the lower gross margin profile, higher cost to service video customers and larger amount of video capex spend. While there are questions about whether there is a reasonable business case for 5G fixed wireless, at worst its impact is likely to be most acute in the largest metropolitan markets where CHTR is underrepresented. Investors may be underestimating the leveraged equity return that ultimately transpires from a business that will likely generate 7-8% EBITDA growth over the next 3-5 years, maintain leverage at 4-4.5x, pay little in cash taxes, and conceivably repurchase 40-50% of outstanding shares. By purchasing shares in Liberty Broadband (LBRDK) and GCI Communications (GLIBA), investors can conceivably generate 20+% IRRs by buying already-cheap CHTR shares at “double discounts” as the two Liberty names trade 10-20% below net asset value.


BLACKBERRY (NYSE: BB) is a software security company. It has left behind the smartphone hardware market it dominated in the pre-iPhone era. The company offers security solutions for enterprises, including nine of ten of the largest commercial banks and insurance companies, eight of ten of the largest healthcare and aerospace/defense companies, and all of the G7 governments. Blackberry’s wide moat is supported by the solid patent portfolio it has built over the past thirty years, including elliptic curve cryptography (ECC), essentially the most secure and efficient cryptography for the near future. CEO John Chen has proven an ability to monetize the patent portfolio since he took office five years ago, resulting in a company with 72% gross margins, net cash on the balance sheet, and 75% of revenue recurring in nature. While the patent portfolio provides downside protection in terms of valuation at ~$11 per share, the upside stands at a value of $25-27 per share in five years, assuming conservatively that BB maintains market share in the fragmented cybersecurity industry.


CENTRAL EUROPEAN MEDIA ENTERPRISES (Nasdaq: CETV) is a leading television network company operating in Romania, Bulgaria, the Czech Republic, and the Slovak Republic. CETV operates 26 channels and maintains the #1 market position in each country of operations. The company and its investors have endured a tumultuous decade, whereby top-tier television assets that generally hold leading market positions were paired with an inflexible and costly debt structure that led to several dilutive transactions from 2009-2014. Since the appointment of new management in Q4 2013, the company has improved revenue, cash flow, the and capital structure, with revenue growing by ~20% over the past two years and EBITDA increasing by 50+% over the same period. The company’s cost of borrowing dropped from ~11% to under 4% from 2014 to Q1 2018. CETV has reached an inflection point whereby additional levers can be pulled to drive further operating performance that should lead to additional price appreciation and a potential upward re-rating in the valuation. CETV’s progress over the past three years and potential valuation drivers in the coming years are somewhat analogous to U.S.-based television broadcasters from 2011-2016 when many of these companies experienced sharp, positive re-ratings in valuation due to increased ad revenue pricing and a higher proportion of revenue derived from less volatile retransmission fees. Similarly, CETV has the ability in its largest country, the Czech Republic, to drive growth in carriage fees as television distribution shifts from Digital Terrestrial TV to satellite, cable, and IPTV. If CETV achieves the same increase in valuation U.S. broadcasters did from 2011-2016 or if CETV achieves a multiple comparable to two of its operating segments (Slovenia and Croatia) that are in the process of being sold, the shares would be worth 100+% from recent prices.


DARLING INGREDIENTS (NYSE: DAR) 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.


SODA SANAYII (Istanbul: SODA), established in 1969 as part of SiseCam Group’s chemical business segment in Turkey, is Europe’s 4th-largest and the world’s 10th-largest soda ash producer, with total production of 2.3 million tons in its Mersin, Turkey and Bosnia plants together with the production joint venture Solvay Sodi in Bulgaria. The company has soda ash market shares of 48% in Turkey and 15% in Europe. Additionally, producing chromium chemicals at Kromsan Chromium Compounds Plant in Turkey and Cromital in Italy, Soda Sanayii maintains a position as the industry leader in Europe, with 14% market share. The shares recently traded at 6.3x P/E, 4.1x EV/EBITDA, and a 5% dividend yield. Mesut expects growing consumption of chemical products from emerging markets should lead to sustainable mid-single digit earnings growth.


CANADIAN AGRICULTURE EQUIPMENT DEALERS: Two publicly-traded Canadian agricultural equipment dealers have consolidated ownership of significant clusters of local dealerships of the two large, global equipment manufacturers. Rocky Mountain Dealerships (TSX: RME) is the largest North American dealer of Case / New Holland agriculture equipment and Cervus Equipment (TSX: CERV) is a major Deere dealer. At the manufacturer level, agricultural equipment is a well-established oligopoly, and many of the industry’s favorable competitive dynamics apply to the dealership business as well. While there are certainly offsets to the local dealers’ competitive strengths, given their intermediary position and dependence on the manufacturers, these are counter-balanced by their close relationships with end customers (farmers), exclusive distribution rights, and the critical support role they play in sustaining the manufacturers’ competitive position. RME and CERV trade at modest valuations that give little recognition to their competitive position or their prospects for profitable growth. David believes this combination of factors sets the conditions for good investment returns.


TRUPANION (Nasdaq: TRUP) may become a multi-year or even multi-decade compounder, according to Artem. It has the three characteristics that Warren Buffett wrote about in connection with GEICO in 1976: “I have always been attracted to the low cost operator in any business and when you can find a combination of (1) an extremely large business, (2) a more or less homogeneous product, and (3) a very large gap in operating costs between the low cost operator and all of the other companies in the industry, you have a really attractive investment situation.” Trupanion also has the following features: (i) a founder/CEO who is an “intelligent fanatic” founder; (ii) strong alignment of management with shareholders (the CEO’s equity stake is worth more than 160 times his executive compensation in 2017); (iii) a moat based on proprietary data and virtuous cycle flywheels; (iv) a massive, under-penetrated market with a multi-year or even multi-decade growth runway; (v) a product with the best customer value proposition; and (vi) a mission-driven culture. Trupanion is the leading provider of medical insurance for dogs and cats. The company has ~15-20% existing market share and ~40% incremental market share, i.e., the number of new pets insured whose owners choose Trupanion. Artem estimates conservatively that of the 185-190 million pets in North America, 3% will be insured in ten years, resulting in ~5.7 million insured pets. At 35% market share, Trupanion would have two million enrolled pets. Based on Artem’s analysis, this scenario would result in share price upside of ~275% in ten years, implying a ten-year CAGR of ~14%.


CARGOJET (Toronto: CJT) is the largest overnight air cargo company in Canada, with ~90% market share. This industry is a natural monopoly, as better utilization drives greater efficiencies and lower costs for shippers. Cargojet’s network has been assembled opportunistically over the past twenty years and would be nearly impossible to replicate at any reasonable return on capital. Foreign ownership restrictions create additional barriers to entry. The two major value drivers for Cargojet will be growth in e-commerce (customers expect shorter delivery times) and operating leverage (high returns on incremental revenue in light of the fixed-cost nature of the business). The company is nearing the end of a significant capex cycle, and as FCF growth begins to accelerate, Reno and Jeff expect management to increase the return of capital to shareholders through a growing dividend. Despite the effective monopoly, secular tailwinds, and high returns on capital, Cargojet trades at a similar multiple as do trucking operators, a valuation disconnect that should correct as the company grows in size, liquidity, and institutional following. Between growth in intrinsic value and multiple expansion (a narrowing of the NAV discount), Cargojet’s share price could double over four years.


HARLEY DAVIDSON (NYSE: HOG) is a motorcycle manufacturer with a widely recognized brand and ~50% cruiser/touring market share in North America, its most important market. Dominant size, proprietary dealership network, and a fan base willing to brand themselves with Harley’s logo ensure margins and ROIC double that of the competition. Due to concerns about the North American motorcycle market and an unusual capital structure that includes the debt of the financing business, Harley trades at an FCF yield of 10+%. All of the FCF is paid out to shareholders in the form of dividends and buybacks. The North American large motorcycle market is assumed to be in terminal decline due to changing preferences of younger consumers. However, registrations are near all-time highs and an increase in the average age of motorcycles suggests there is no change in preferences and that cruiser/touring sales should be 20% higher than recent levels. Adjusting for leverage and the value of the highly profitable financing business, Harley Davidson trades at a mid-single digit EV/EBITDA multiple, well below fair value for high-quality business with a moat.


UNITED STATES LIME & MINERALS (Nasdaq: USLM): Lime tends to have the quality of being much heavier than it is costly. This quality establishes a radius around each lime plant that generally defines the plant’s market. This dynamic existed even as the lime industry was a subpar business; it alone was not, seemingly, enough. But soon, the industry began to consolidate, and disadvantaged plants closed. The combination of local advantages, along with environmental regulations, and zoning and permitting restrictions created, for some of the surviving lime plants, a form of moat, what Jonathan calls “protected proximity”. The latter is where local economic advantages exist and are reinforced by regulatory processes. When coupled with a large, growing population center, protected proximity can be powerful. A well-positioned plant can reap the advantages of its proximity while also enjoying a dearth of new entrants because of barriers to entry. USLM eventually emerged from the industry-wide shakeout with impressive returns on tangible capital despite increased capital intensity.

Disclaimer: Accounts managed by Quilt Investment Management, LLC currently own shares of USLM, and may transact in the shares without future updates. USLM has a relatively low public float, has a relatively low average daily trading volume, is closely held, and sometimes quotes at a wide bid/ask spread. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of specific securities, investments, or investment strategies. Additionally, this information should not be construed as Quilt Investment Management, LLC’s solicitation to effect the rendering of personalized investment advice for compensation, over the internet or otherwise. This is not a research report or a recommendation. Investing involves the chance for loss. Always be sure to first consult with a qualified financial adviser and/or tax professional before investing. Past performance is not indicative of future performance.


NIC (Nasdaq: EGOV) 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.


5N PLUS (Canada: VNP) is the leading global supplier of niche specialty metals, chemicals, and engineered materials to the diverse end-markets in which it competes. Following the departure of the founding CEO in 2015, a new management team is transforming VNP from a struggling low-value-add metals pass-through business (high revenue with low margins) to a high-value-add (lower revenue with high margin) materials technology company. Based in Canada, this under-the-radar company is rich with catalysts, including imminent revenue inflection due to 3x growth at its largest customer (First Solar) and strong but masked top-line trends. The shares trade at ~7x/6x 2018/2019 consensus EBITDA, as compared to specialty metals peers at ~10x, with upward pressure on 2019 consensus estimates. Shawn sees 50/75% stock price appreciation potential in his base/upside case.


TEXHONG TEXTILE (Hong Kong: 2678) is by far the world’s leading producer of spandex yarn. Founder, CEO, and 53%-owner Hong Tianzhu started Texhong from scratch by buying distressed PP&E. Today, the company has become what Buffett refers to as an “inevitable”. Texhong is now vastly larger and more profitable than any of its direct competitors and is consolidating this fragmented sector. Cotton price volatility is a distraction — tough times put competitors out of business or up for sale. Tangible book per share plus cumulative dividends has grown at a CAGR of 29% since 2001, yet the shares trade at 1.9x tangible book and less than 7x EV/EBIT or P/E on 2018E estimates.


FORMULA ONE GROUP (Nasdaq: FWONK) is a tracker stock of Liberty Media Corporation (one of three trackers) and comprises the Formula One (F1) operating group, some private assets, and a number of public equity holdings, including Live Nation, Time Warner Inc., and a quasi-interest in Liberty Braves. Liberty Media is controlled by John Malone and run by Greg Maffei. The crown jewel of Formula One Group is F1, the race car organization that controls the brand’s intellectual property rights via television programming, digital, merchandising, advertising, and sponsorship rights; hospitality; and the negotiation with circuit tracks worldwide to stage F1 races. When Liberty Media purchased F1 via its tracker, named at the time “Liberty Media Group”, F1 was an underinvested asset. Malone and Maffei brought in media veteran Chase Carey to reinvest in the brand and to grow it even more. They have already paid down $1+ billion in debt since their purchase in January 2017, and are looking for potential venues for additional races. Potential investors have a hard time not only peeling back the other assets within Formula One Group, but also understanding what is needed to reinvest in the brand. Nathaniel believes that after “digging into the weeds”, one will find F1 to be a valuable asset.


MONSTER BEVERAGE (Nasdaq: MNST) is one of the leading global brands in the fast-growing energy drinks category. The business is gaining share in existing markets, entering new distribution verticals, and entering new geographies. It is also debt-free, capital-light, and significantly profitable with a 36% EBIT margin. The shares have pulled off their recent highs and the company has taken advantage by repurchasing ~1.6% of the stock thus far in 2018. Lastly, the business may also be acquired at some point by Coca-Cola, which is thirsty for growth and already has a strategic investment in Monster.


BOFI HOLDING (Nasdaq: BOFI), based in San Diego, is a branchless pure-play internet bank that began operations as a private company in 2000. In the last eighteen years, BOFI has built a fast-growing nationwide banking platform that should continue to generate high returns on equity and assets for some time to come. BOFI’s low-cost business model is differentiated and underappreciated and not correctly valued by the market, partially due to periodic short attacks that are based on a misguided understanding of their business model or even misrepresentations. The management team has done a great job with capital allocation, growing the bank profitably by developing new products, adding distribution channels, and via acquisitions. The bank completed its IPO in March 2005 at a split-adjusted price of $2.88 per share and recently traded at $43 per share. A price-based CAGR of ~23% annualized over the thirteen years since its IPO, over the same period of time the bank compounded BV per share at an annualized rate of ~17% per year and EPS by ~20% per year. BOFI is a compounding machine that can continue to grow EPS and BV per share at above-market rates for many years. Trading at a forward P/E of 18x, the quality and consistency of BOFI’s differentiated model, low-cost position, quality of execution, and growth prospects offer patient investors an attractive opportunity to compound capital.


SPIRIT MTA REIT (NYSE: SMTA) is a classic “bad bank” recently spun from Spirit Realty. While the market views SMTA as an overlevered, “too difficult” stock, properly analyzed, Chris views SMTA as a simple story: a portfolio of high-quality (aka “wide-moat”) real estate assets, with minimal recourse leverage, that is likely to be liquidated and the cash returned to shareholders in the next three years at nearly $30 per share, a 200% return. Chris believes the recent spin dynamics and a lack of investor familiarity with the ABS structure of SMTA’s largest asset provide a favorable entry point. Compensation incentives strongly align the board and management with shareholders.


ALLERGAN (NYSE: AGN) 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.


CHINA MOBILE (NYSE: CHL) provides a compelling value investment opportunity with 30+% upside and numerous moats serving as value drivers. A major moat comes from a powerful industry leadership position, as the company is the world’s largest telecom provider with 1+ billion users, and has local market share 60+% in China. A second moat comes from the financials, a share price that is ~30% below intrinsic value, net cash comprising ~40% of the market cap, and excellent profit margins. China Mobile is a state-owned enterprise, which is important in light of the moats arising from the industry’s heavy infrastructure investment requirements, which may lower competition via a high barrier to entry, as well as the regulations involved in telecom. The company is well-positioned to benefit from China’s middle class as consumers transition from simple phones on 4G networks to smartphones on faster and higher-margin 5G networks. Many typical risk factors are less of a concern here, specifically that competitors have smaller market share and focus on less lucrative landline businesses, as compared to CHL’s focus on the growing data segment. CHL offers a compelling opportunity with a discount to intrinsic value and strong moats providing upside if A.J.’s thesis is correct, balanced by a margin of safety if A.J.’s thesis is incorrect or takes longer to develop. A.J. believes CHL could be worth $60 per share over the next 18-36 months.


THE WALT DISNEY COMPANY (NYSE: DIS) is a premier global media and entertainment company primarily focused on branded intellectual property and licensed sports content. Disney is able to monetize its IP at a high and sustainable rate by leveraging its content across movie theatres, home video, theme parks, consumer products, and live entertainment. This strategy has built and constantly widened Disney’s moat, but the moat can be extended further when Disney launches its own streaming service. At 16x earnings, investors can purchase a great business at a good price.


PAR PACIFIC HOLDINGS (NYSE: PARR) is a small-cap energy and infrastructure company. Its strategy is to own and operate assets with attractive competitive positions. The primary operations are refining, logistics and retail assets in Hawaii, Wyoming, and the Pacific Northwest. The commonality between these markets is lower competition and harder to serve areas. The company is underfollowed by Wall Street and insiders own 30+% of the company. PARR is valued around 8.5x LTM EBITDA, and a high-single digit FCF yield. Based on a mid-cycle refining margin, PARR is valued closer to 7x EBITDA and should generate a 10% FCF yield (at constant stock price). PARR also is a minority owner in a Western-Colorado E&P company that is a “hidden asset” valued at 15+% of PARR’s market cap and could be monetized over the next 12-24 months. The company has a $1.6 billion NOL carryforward, which boosts FCF generation and is an added benefit to the acquisition strategy targeting assets with similar competitive characteristics to the existing portfolio. The company is undervalued based on the current portfolio, and there is a long runway of high-ROIC opportunities, both organic and through M&A.


SCHOOL SPECIALTY (OTC: SCOO) 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.


TURNING POINT BRANDS (NYSE: TPB) 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.


MAUI LAND & PINEAPPLE (NYSE: MLP) 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.


CERNER (Nasdaq: CERN) is a leading IT company focused on the healthcare industry. The company is the #2 global provider of electronic health records software. Cerner also sells revenue cycle management software, healthcare IT outsourcing services, and population health management software which is a predictive analytics subscription product. Electronic health records software is critical IT infrastructure for hospitals and serves as the basic foundation for a hospital’s IT ecosystem. Cerner is deeply integrated with customers, creating a sticky client base (99% retention rate). The company benefits from secular tailwinds that should enable revenue to grow at a high single-digit rate over the next ten years. Cerner is executing a plan to increase operating margin by 50-100 basis points per year. The combination of tailwinds and margin enhancement should enable the company to compound earnings growth at a double-digit rate for the foreseeable future. Recently trading at ~14-15x EBITDA, investors can buy Cerner at a slight premium to the overall market for a high-quality asset with stronger earnings growth prospects.


STARBUCKS (NYSE: SBUX) 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.


BUZZI UNICEM (savings shares) (Italy: BZUR), together with its subsidiaries, manufactures, distributes, and sells cement, ready-mix concrete, and aggregates. The company has operations in Italy, the U.S., Germany, Luxembourg, the Netherlands, Poland, the Czech Republic, Slovakia, Ukraine, Russia, and Mexico. Buzzi is run and majority-owned by the Buzzi family. Buzzi has increased BV and dividend per share by 5% per year, EBITDA by 5% per year, and FCF by 15% per year over the past five years. The savings shares recently traded at a P/BV ratio of 46%, look-through free cash multiple of 7.7x, and look-through EV/EBITDA of 3.0x. The savings shares (non-voting common shares) trade at a 45% discount to the common voting shares. Reasons for the discount include concerns about governance (but management is modestly compensated and owns 50+% of the stock), concerns about where we are in building cycle and competitive position in Italy. Future catalysts for Buzzi shares include U.S. and Mexican infrastructure programs, a recovering European economy, consolidating Italian industry, pent-up demand for housing in the U.S., and reduced savings/common discounts in conversion transactions. If the shares traded at 9x EBITDA, lower than the industry average of 11x EBITDA, the stock would be more than a double, not including gains from dividends or a recovery in the Italian cement market.

NEXEN CORPORATION (preferred shares) (Korea: 005720) manufactures and sells rubber products in South Korea. It offers tubes and flaps, solid tires, carbon masterbatch pellets and sheets, golf balls, and bladders for tires. The company also exports and distributes products to ~140 countries. Nexen also owns 42% of Nexen Tire (~75% of Nexen’s value), a multinational tire company. Nexen Tire has increased BV and dividends per share by 17% per year and sales by 9% per year over the past five years. The shares recently traded at a “look through” earnings multiple of 2.5x, and EV/EBITDA of 3.7x. The preferred shares (non-voting common shares) trade at a 28% discount to the common voting shares. Reasons for the discount include concerns about governance (but management is modestly compensated and owns 50+% of the stock), concerns about where we are in automobile sales cycle, and the competitive position of auto suppliers with electric cars. Future catalysts for Nexen shares include continued use and increased demand for tires in electric cars, large aftermarket (not dependent upon the automobile sales cycle) contribution to profits, and decline in preferred/common discounts in Korea securities. If the shares traded at 7x EBITDA, the stock would be more than a triple, not including gains from dividends or increase in cash flows.

KT CORPORATION (Korea: 030200) is a holding company that provides telecom services in Korea and internationally. The company offers local, domestic long-distance, and international long-distance fixed-line and voice-over-Internet-protocol fixed-line telephone services, as well as interconnection services; broadband Internet access service and other Internet-related services, including IPTV services; and data communication services, such as leased line and broadband Internet connection services to institutional customers. KT also develops real estate, provides FSS satellite and satellite TV service, credit card processing services, digital media agency services and video content and music production and distribution. KT Corporation has been transformed over the past three years from a declining legacy telecom conglomerate to growing and more profitable and competitive telecom provider. Over the past three years, KT Telecom has generated three-year average ROE (adjusted for excess real estate) of 10% and BV-plus-dividend growth of 11% per year. The shares recently traded at a “look-through” FCF multiple of 5.8x, and look-through EV/EBITDA of 1.5x. Reasons for the discount include a perception of a poor corporate governance (due to past CEOs) and a declining telecom business. KT is actually more of a quad telecom service provider that uses legacy telecom infrastructure as opposed to being a legacy telecom provider. Catalysts include using IT legacy infrastructure to provide quad telecom services, further development of FT’s real estate, and development of video and music content. If the shares traded at 6x EBITDA with a holding company discount, the stock would be more than a triple, not including dividends, buybacks or cash flow gains from a growing telecom business.


LANDSTAR SYSTEM (Nasdaq: LSTR) is a third party logistics company serving the trucking market. With 90% of the big rigs on the roads owned by the driver and most drivers owning just one truck, shippers need a logistics intermediary to find truckload capacity. Likewise, truckers need access to a large inventory of loads in need of shipment so they can keep their big rig full and not drive long distances without a paid load. While some investors worry about app-based startups disrupting the industry, these fears are misplaced given the lack of unutilized capacity in the industry which was a key characteristic of successful new logistics companies such as Uber and Airbnb, which successfully brought new supply into their industries.


GRAFTECH (NYSE: EAF) 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.


IAC/INTERACTIVECORP (Nasdaq: IAC) is a diverse holding company, incubator, and investor in Internet businesses created by Barry Diller. IAC trades at a discount to the value of its holdings in two publicly-traded subsidiaries (Match Group and ANGI Homeservices), implying a steeply negative market capitalization for the stub. The stub itself is a diverse mix of mature, highly cash-generative assets and young, rapidly scaling, cash-burning growth engines. The moat is derived from a culture and history of sharp business acumen, shared resources and lessons learned from building successful web companies to scale, and a sustainably lower cost of capital than competitors with a longer-term investment horizon. The stub benefits from a net cash position and should be worth, at a minimum, some number meaningfully greater than zero. IAC has several tools at its disposal to close the stub discount and will do so when the strategic timing is appropriate. Merely closing the gap would generate ~15% upside to shareholders in IAC. Meanwhile, each of the constituent parts continues to compound value, offering the potential for something far greater.


ADO GROUP (Israel: ADO), 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.


ALMACENES EXITO (Colombia: EXITO) is South America’s largest retailer, with a footprint covering 75% of the population of South America. It is the leading food-based retailer in Brazil, Colombia, and Uruguay, with formidable and defensible market shares in each country. It commands 42+% share of the formal Colombian retailing market, operating across different store formats (including e-commerce) that span the country geographically and across income segments. This dominant market position has allowed it to dispatch two (of four) new Chilean retailers that had arrived in Colombia a few years ago. Both of Exito’s principal markets, Brazil and Colombia, are slowly emerging from significant economic downturns, during which retailing has been particularly hard hit. By virtue of being listed in Colombia, a market far less well-trodden than that of Brazil or Mexico, the company has escaped the attention its peers have attracted. The company trades at 7x EBITDA, based on relatively depressed earnings, as compared to proximate peer Walmart de Mexico at 15-16x EV/EBITDA on earnings that are arguably not depressed.


TRANSCONTINENTAL (Toronto: TCL) engages in print, flexible packaging, publishing, and digital media operations in Canada and the U.S. TCL is the largest printer in Canada and a key supplier of flexible packaging in North America and recently completed a transformational acquisition in flexible packaging. TCL has been written off over the last several years as a declining printer with no growth potential, and the recent multiple continues to reflect this sentiment. As one looks closer, it becomes evident that TCL has an excellent management team with a compelling strategy (still partially executed) to create a strong, resilient and sustainable business over the long-term. It is becoming clearer that TCL could become a major player in flexible packaging in North America over the next five years. TCL is using the strong and steady cash flows of its unique print segment to position itself as a major player in flexible packaging in North America.

TCL completed a transformative acquisition of Coveris Americas for C$1.7 billion in May 2018. Coveris generated ~C$1.26 billion in revenue and ~C$165 million in adjusted EBITDA for FY2017. The Coveris Americas acquisition makes TCL one of the top ten flexible packaging converters in North America, among Bemis, Sealed Air, Berry, and Print Pak. On a pro forma basis for 2017, TCL’s revenue is ~C$3.3 billion, operating income is ~C$362 million, and adjusted EBITDA is ~C$564 million. Packaging will represent ~48% of revenue, 23% of operating income, and 37% of adjusted EBITDA. Jim expects TCL to rapidly deleverage the balance sheet over the next two years. Net debt to adjusted EBITDA is ~2.7x at closing, expected to decline below 2x over the next 24 months.

Over the past six years, TCL has generated cumulative cash from operations of close to C$2 billion or ~90% of enterprise value prior to the Coveris Americas acquisition. Pro forma for Coveris, TCL is attractive at 1.3x revenue, 7.5x 2017 EBITDA, and a 9% unleveraged FCF yield. Pro forma for Coveris, TCL’s adjusted net income per share is ~C$3, so TCL trades close to 10x adjusted EPS. The print segment is a better business than most investors realize – adjusted operating income from the print segment has grown from C$185 million in 2008 to C$295 million in 2017.

TCL has ~88 million Class A and Class B shares trading at ~C$32 per share for a market cap of ~C$2.8 billion. Class B shares are controlled by the Marcoux family of Canada. After the Coveris America acquisition and a follow-on 10 million share Class A stock offering to help finance the acquisition, TCL has ~C$1.5 billion of net debt, resulting in EV of ~C$4.3 billion. If TCL grows the packaging segment and print segment results remain relatively stable, investor perception could improve. TCL could achieve C$600 million in adjusted EBITDA by 2020 and trade for 8.5x adjusted EBITDA or EV of ~C$5.1 billion. TCL could reduce net debt to ~C$1 billion by yearend 2020. Based on net debt of ~C$1 billion and 88 million diluted shares outstanding, TCL stock could trade for ~C$47 per share, or close to 50% higher than the recent price of C$32 per share.


MANHATTAN ASSOCIATES (Nasdaq: MANH) 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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