MEI Pharma is an idea brought to my attention by a fellow value investor. Thanks a lot!
I believe that the essence of value investing lies in the uncovering of highly positively skewed bets. Such bets feature the favourable combination of very little risk for permanent impairment of capital and high reward. Value investors focus primarily on the mitigation of downside risks when evaluating whether or not a security is investible. Doing that they seek comfort in robust cash-flows or tangible asset bases that serve as solid lower bound to share prices. Only when it can be assured with reasonable certainty that the downside is minimal an investment awakens interest.
Pre revenue cancer therapy developer MEI Pharma exactly ticks this box. Immediate downside is very limited given the equity is trading at net cash, while the upside is a nice 7.5x. Continue reading
Turning Point Brands (TPB) is a textbook low risk, high return investment with immediate catalysts. Based on conservative assumptions I estimate that Turning Point Brand´s equity provides at least 80% upside to today´s valuation. The company is in the business of selling other tobacco products, which among others includes moist snuff, chewing tobacco, cigars, cigarette paper and liquid vaporisers. A 2016 IPO has provided relieve to TPB´s sky-high pre IPO debt load. Further refinancing and deleveraging of the balance sheet, which is supercharged by utilisation of loss carry-forwards, will reveal true earnings power of the business in 2018. Fetching a conservative multiple on 2018e earnings of 15x, implying an earnings yield of 7%, I arrive at a fair value of USD 23 per share. Continue reading
WEBCO Industries is a classic Graham net net, or in Buffett´s words a cigar butt with one last puff remaining. Buying the equity provides investors with 63% upside to NNCAV and 120% upside to liquidation value. The business of WEBCO is unattractive yet good enough to earn meaningful profits over the cycle. WEBCO manufactures tubes for various end users in different industries such as upstream/downstream oil, agricultural and auto/trucking among others. In simple words raw materials are purchased and then processed into tubing solutions. Continue reading
I have been interested in Baidu for quite a while and today decided to open a position in the company by buying 6 shares at a price of USD 163. I will increase the position when prices turn more favorable.
On SeekingAlpha I have outlined why shares are a buy at current levels in detail. You´ll find the pitch including my valuation model here:
For all the folks in a rush, here´s a fast track introduction as to why Baidu may be suitable for a value investor´s portfolio despite being an internet company and Chinese:
- Sum of the parts valuation results in value of USD 255 per ADR
- or 60% upside until end of FY2017
- Baidu search is significantly undervalued trading at 11x FY2017 after tax profits while growing at a > 20% clip
- Comparable businesses command multiples in excess of 20x profits
- High search margins are buried under large investments into O2O and iQyi
- Sale of online-to-offline businesses and Chinese Netflix pendant iQyi will reveal true earnings potential or provide upside optionality if turning profitable.
Here´s a brief update on what Chinese think of the company and its services. Headline here is that Baidu is unloved but there is no alternative for it, which will ensure growing profits for years to come.
I am currently long Baidu (BIDU)
I felt I had to shed a little more light on a conviction buy of mine, RCI Hospitality (RICK). While I have briefly outlined the thesis for investing in RICK, I feel to better comprehend the rational behind taking a position in the company requires a little more detail.
I have decided against publishing the article on my own page in favor of SeekingAlpha. Due to the large audience on this platform authors are usually confronted with critical feedback on their argumentation, which I consider essential for the investment process. This is not a click and bait action of any kind. Compensation on this article will be minor since even on Seeking Alpha this stock is underfollowed and the write-up will generate only few views upon which compensation is based on.
Going forward I hope I can evoke similar feedback for my ideas on Investing0711.com and am able refrain from publishing my ideas on 3rd party websites.
Finally, here´s the link to the article: http://seekingalpha.com/article/3985498-rci-hospitality-holdings-sin-stock-50-percent-upside-assuming-zero-growth
Here´s a brief update on recent released Q3 sales figures of RICK: http://seekingalpha.com/article/3987995-rci-hospitality-holdings-reports-solid-sales-disappoints-capital-allocation.
I have used the turmoil over Brexit to purchase 550 shares of Clydesdale Yorkshire Banking Group (CYBG). An undervalued mid-size British bank active in mortgage, credit card and small business lending.
The out-vote of the Brits caught markets off guard, which were clearly pricing in a remaining of the UK in the EU. In the following equity markets crashed because of a flight to safety, in particular into U.S. Dollar, Japanese Yen and Swiss Franc denominated assets. Naturally high rated gov. bonds were in demand sending yields down to record lows. Consequently risk assets all around the world, especially equities witnessed drops not seen since Lehmann Brothers in 2008. Among equities banking stocks have been battered down the hardest. Continue reading
RICK (long): 154 shares, 8.42€/Share
Much has happened to RCI Hospitality (RICK) after having pitched why I bought into the firm. Since last week the price dropped below 8 USD, which translates into a FCF-yield just short of 20%, I decided to up my position by 70 shares. Due to a shortage of cash I sold my CB&I holdings to finance the purchase. This shifting out of CB&I into RICK has two reasons. First, I believe RICK is valued much more attractively and its real-estate portfolio, takes a lot of risk out of the equation. Second the recent developments at CB&I (impairment and selling of their nuclear segment) haven´t exactly bolstered confidence in the current management to create shareholder value. Continue reading
RICK (long): 94 shares, 9.58€/Share
I recently purchased 94 shares of RCI Hospitality (RICK) and briefly want to update you why I did so. After having talked about the Greenwald Valuation for companies in my last article (before my creative time-out) I have been busy finding companies that are undervalued according to exactly these standards. At the end of this search was RCI Hospitality, a value investment gem. The company, as the title of this blogpost might hint, is active in the adult entertainment business and runs several what they call “cabarets” aka. strip clubs across America. Their business model results in the holding of a large real estate portfolio. The firm is a small cap with a market capitalization of about 80 million as of last week. Due to its size it is largely ignored by analysts. The combination of a lack of analyst-attention and what some people would call dubious industry might have created this very attractive opportunity. Currently RICK trades at a P/B of just 0.7 and a P/E of 9.0 and a free-cash-flow yield north of 15%. Continue reading
Wie erwartet hat sich das U.S. Wachstum weiter verlangsamt und betrug im zweiten Quartal nur noch magere 0,2 %. Erwartet wurde ein GDP-Wachstum von 1 %. Dies bestärkt meine Entscheidung CSX aufgrund der hohen Bewertung verkauft zu haben. Die Erlöse aus dem Verkauf der CSX Aktien wurden für eine Aufstockung meiner IBM Position zu USD 170 pro Aktie verwendet. Mehr Kapital in IBM zu investieren war aufgrund der Continue reading
National Oilwell Varco (long): 9 shares 44.72€/share, 3.5% YOC
Im Zuge des rasanten Ölpreisverfalls der vergangenen Monate und der starken Kursverluste fast aller ölverwandten Aktien habe Ich nach günstig bewerteten Unternehmen, mit starker Bilanz und nachhaltigem Wettbewerbsvorteil gesucht und bin überzeugt fündig geworden zu sein. Continue reading