Author Topic: Ideas with Catalysts  (Read 21127 times)

BG2008

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Ideas with Catalysts
« on: April 09, 2013, 06:25:27 PM »
Just want to create an ideas list of potentially undervalued companies with activist and/or management looking to affect changes.  Some of these are actionable and some of them have already appreciated significantly

1.  Digirad - Cash balance is over 50% of MC, activist group 1 was accumulating shares via 10b5 programs. Recently announced plan to buy back shares.  Activist Group 2 is now wagering proxy battle against activist group 1.  Bought and sold in the $1.90/$2.25 range. Was never too comfortable with the underlining business and thought that group 1 was going to sell the company for a 2x of what it trades at.  M&A didn't materialize and I took the profit and left.

2. EPAX - High cash balance, owned real estate, business running at 10 year lows, may have room to trim fat, Lane Five is the activist.  Lots of operating leverage in business

3. Commonwealth REIT - several hedge funds wants to oust the externally managed structure.  There is even an offer to buy out company at a 10% premium to current price. 

4. Sandridge Energy - see thread

5. Integrated refiners that either have or will list their refining assets in MLPs and spin off gas stations - Northern Tier, Alon USA, Tesoro, HollyFrontier etc

6. PropCo and OpCo splits - Penn National Gaming, most of the gains have been realized

7. Xyratex - Baker Street Capital bought over 20% position in Net Net hard disk driver manufacturer.  Shares have appreciated from $7 to $11 and a special $2 dividend paid in late 2012

More to come



LC

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Re: Ideas with Catalysts
« Reply #1 on: April 09, 2013, 07:04:32 PM »
I was looking at Ambassador's Group (EPAX) today as well. Do you think their business is in terminal decline? That was the question I could not get past. If that is the case, the company appears fairly priced.

I don't know what can turn around sales. Management is already alluding that 2013 revenue is expected to be lower than 2012.
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GrizzlyRock

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Re: Ideas with Catalysts
« Reply #2 on: April 09, 2013, 07:48:56 PM »
InfuSystems (only works for small funds or PA)

BG2008

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Re: Ideas with Catalysts
« Reply #3 on: April 09, 2013, 08:33:35 PM »
I don't think their business is in terminal decline in the way of video rentals or yellow pages.  I think there is certain value add of going on oversea trips where the student get to meet politicians and/or important figures.  They are certainly in the premium niche of the market.  With the current economics, $5,000-$7,000 discretionary trips for high school students are tough to sell.

Phaceliacapital

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Re: Ideas with Catalysts
« Reply #4 on: April 10, 2013, 12:03:10 AM »
A short 3 bullet point premise for Infusystems?
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Eric50

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Re: Ideas with Catalysts
« Reply #5 on: April 10, 2013, 12:17:24 AM »
Novus Energy is cheap and looking for a buyer.

GrizzlyRock

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Re: Ideas with Catalysts
« Reply #6 on: April 10, 2013, 04:17:59 AM »
A short 3 bullet point premise for Infusystems?


- Market leader in oncology drug infusion pumps and pump servicing. Equipment overly specific & expensive for most hospitals & med service providers to economically own & service.
- Medicare only 1/3rd of the business with private payer contracts negotiated independently
- New CEO.  Chairman capable capital allocator with reasonable incentive to sell.
- Trading at 0.9x price to book while accounting regs specific faster amort of med equipment than economic life.
- Trading at half of intrinsic value: 4.9x EV to EBITDA, 9.8x PE, 15% FCF yield

I'll take any other conversation offline.

jay21

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Re: Ideas with Catalysts
« Reply #7 on: April 10, 2013, 05:38:39 AM »
Every one of my ideas has a catalyst and most ideas on the board do.  Catalysts can be intelligent growth (BRK), industry tailwinds (autos, rails, banks), workouts (post re-orgs, spin offs), recaps (buybacks, reduction of debt), etc.

The poorest investments are ones where a small discount exists between price and IV and the risk of IV falling is high.  The best ideas are where there is a large discount between price and IV and IV is growing.

To give examples:

Recap - DTV
Industry tailwinds and workout - GM
@jay_21_

Kraven

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Re: Ideas with Catalysts
« Reply #8 on: April 10, 2013, 06:05:07 AM »
Every one of my ideas has a catalyst and most ideas on the board do.  Catalysts can be intelligent growth (BRK), industry tailwinds (autos, rails, banks), workouts (post re-orgs, spin offs), recaps (buybacks, reduction of debt), etc.

The poorest investments are ones where a small discount exists between price and IV and the risk of IV falling is high.  The best ideas are where there is a large discount between price and IV and IV is growing.

To give examples:

Recap - DTV
Industry tailwinds and workout - GM

What about value being it's own catalyst?  And who would make what you label the "poorest investments"? 
Buy cheap and something good might happen.

jay21

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Re: Ideas with Catalysts
« Reply #9 on: April 10, 2013, 06:23:20 AM »
Every one of my ideas has a catalyst and most ideas on the board do.  Catalysts can be intelligent growth (BRK), industry tailwinds (autos, rails, banks), workouts (post re-orgs, spin offs), recaps (buybacks, reduction of debt), etc.

The poorest investments are ones where a small discount exists between price and IV and the risk of IV falling is high.  The best ideas are where there is a large discount between price and IV and IV is growing.

To give examples:

Recap - DTV
Industry tailwinds and workout - GM

What about value being it's own catalyst?  And who would make what you label the "poorest investments"?

I only do extensive work on companies I feel are growing in value.  From what I do know, I would consider the poorest investments to be some tech companies like DELL, RIMM, and HPQ, where I don't really see how they are growing value.  The discount to IV could be large with their low PEs but the risk of IV halving or more seems real to me.   I am also talking about the universe of investments that people on this board look at.  Obviously buying a company above IV and the probability of IV decreasing is high is worse than if there is a discount to IV.

I am not sure if value can be it's own catalyst.  I much prefer the adage, if it is cheap a catalyst will emerge to narrow the gap.  But you could probably frame it so that the value is the catalyst that causes the catalyst? 
@jay_21_