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20 Investment Ideas

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20 investment ideas, sources and links to follow.

  1. VOD – global mobile provider. Hidden asset from 45% stake in Verizon Wireless, likely to be realised when the Verizon Wireless starts paying a dividend to shareholders.
  2. COWN – mid market investment bank and alternative asset manager. Hedge fund Ramius reverse merged into Cowen, asset management side of business will not make any money from incentive fees until investors recoup their losses. Value is in the company’s cash assets invested in their hedge fund and future earnings from incentive fees.
  3. SONC – real estate and tourism assets. Business spun off from a Portuguese conglomerate, founder went with the spin off. Trading significantly below value of real estate, business will be easier to understand after non-core assets are sold off.
  4. SATS – cash, satellites and set top box business. Company spun off from Dish Networks. Having legal battle with TIVO, Dish covering cost of any settlement.
  5. PSD – owner of data used for oil and gas exploration. Recent acquisition to boost future earnings.
  6. PMIC – demutualised insurance company. Trading below book value, expect business to be profitable now it is accountable to shareholders.
  7. SIGA – creator of smallpox antiviral (stops it spreading). Won large contract with US govt, currently in legal battle with other companies that claim they are entitled to some of the contract. Expect small (if any) settlement, and conformation of large govt order.
  8. IFT – listed infrastructure fund. Cheap based on sum of parts, recently added to share index. Have been selling legacy assets and reinvesting. Brought Shell’s NZ assets at low multiple during bottom of the cycle earnings.
  9. LOV – online dating site. Niche market, generates a lot of cash.
  10. DLAR – bank note printer. Recent problems with major customer, and PE bid refused by board. High quality business, customers unlikely to leave.
  11. PRXI – museum quality shows, assets of the Titanic. Operator of The Bodies and Titanic shows, recently won ownership of artefacts from Titanic, will either get cash value or artefacts from the courts.
  12. PNI – software platform that runs online photo printing services. Expect growth to fall to bottom line, as more sales run across the same fixed costs.
  13. PHNX – roll up of closed end life funds. Complicated capital structure that is being simplified, expect announcement of dividend to increase share price
  14. PFD – food producer and brand owner. Has large amount of debt, currently selling assets to reduce it. Likely to survive and be able to refinance debt at lower cost, while maintaining ownership of high quality food brands.
  15. YNG – gold miner. Mine closed down, now operating. Expect increase in amount of gold produced.
  16. SHLD – retailer that owns a collection of assets. Expect Chairman Eddie Lampart to allocate cash flow to best use for shareholders (not maintaining stores).
  17. SCHE – operator of retirement homes. Concerns over debt (lease obligations) and fees from govt.
  18. WINN – supermarket. Came out of bankruptcy debt free, hoping to improve margins to industry level.
  19. NFLX (short) – provider of rental DVDs by mail and streaming movies over the internet. Overvalued based on assumption streaming will be as profitable as existing DVDs by mail.
  20. IOC (short) – oil and gas company. Very promotional mgmt team, even if resources found it will be too expensive to recover.

Written by latticework01

February 9, 2011 at 5:05 pm

Posted in picks

Echostar worth US$46 – US$55

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Another pick from Tilson is Echostar, a spin off from Dish Networks. Which is trading at a discount to liquidation value.


At the beginning of 2008, satellite TV company EchoStar Communications split into two: Dish Network (DISH) and EchoStar Corp. (SATS), which is a collection of satellites, set-top box businesses and a number of investments, cash and marketable securities, all managed by legendary founder Charles Ergen. Our slides on this company are in Appendix F.

Subscribers to the Dish Network install a dish, pay a monthly fee of approximately $30 and receive lots of television channels. In 2006 there was a strong expectation that Dish Network was going to merge with one of the telcos so, in preparation for that, EchoStar Corp. was formed and received all of the assets that a telco would not want to buy, thereby making Dish Network a more attractive acquisition.

SATS has the typical spin-off dynamics: it’s smaller than the original company, had a relatively unnatural initial shareholder base that sold the stock, and management has tended to sandbag the expectations for the company so that their options are struck at a low price.

At today’s stock price, the company is being valued at its cash and investment securities, meaning an investor is paying nothing for the company’s businesses, technology and investments. This includes eight satellites (six owned and two leased, with an original cost of $1.6 billion), a high value, hard-toreplace asset.

It also includes a set-top box manufacturing business – these are the boxes that Dish Network buys – with $1.7 billion in trailing 12-month revenue. In a normal income statement environment, that revenue stream would probably be worth $2-3 billion, but the boxes are sold on a cost-plus basis to DISH, so until DISH is acquired or SATS starts selling these boxes to other customers, that business is not worth a lot today – but it has a tremendous amount of potential value.

At today’s stock price, the company is being valued at its cash and investment securities, meaning an investor is paying nothing for the company’s businesses, technology and investments. This includes eight satellites (six owned and two leased, with an original cost of $1.6 billion), a high value, hard-toreplace asset.

It also includes a set-top box manufacturing business – these are the boxes that Dish Network buys – with $1.7 billion in trailing 12-month revenue. In a normal income statement environment, that revenue stream would probably be worth $2-3 billion, but the boxes are sold on a cost-plus basis to DISH, so until DISH is acquired or SATS starts selling these boxes to other customers, that business is not worth a lot today – but it has a tremendous amount of potential value.

We think SATS will start selling to other customers because it has other technologies to make better boxes. When SATS was a wholly owned subsidiary of Dish Network, no one other than Dish would buy the boxes because Dish was as competitor. Now that SATS is an independent company, we expect it will have eventually have success selling boxes to other companies.

Finally, SATS has some other interesting technologies such as Sling Media.

In summary, we think SATS is hugely undervalued, but there are no natural buyers. As a spin-off, it was likely heavily owned by hedge funds and, given that the stock was down 54% in 2008, many were likely dumping it. There’s a big margin of safety since the company can be liquidated for more than it’s trading for.

Link to the full letter with slides about Echostar at the end.

View this document on Scribd

Written by latticework01

June 10, 2009 at 2:37 pm

Posted in picks

Winn Dixie – undervalued?

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Whitney Tilson appears to be a fan of Winn Dixie, the supermarket operator. His hedge fund T2 Partners owns 494,170 shares (see recent SEC 13-F filing) in the company, making it his fifth largest position.

Below is a excert from his letter to investors which outlines his investment thesis

Winn-Dixie operates 521 supermarkets, 70% in Florida and the rest in Alabama, Louisiana, Georgia and Mississippi. Thanks to poor management, run-down stores and fierce competition, the company, which had 1,000 stores at the time, filed for bankruptcy in early 2005. Having shed all of its debt and approximately half of its stores, Winn-Dixie emerged from bankruptcy in late 2006 under the leadership of Peter Lynch, who for the previous three years had been the President and COO of Albertsons, where he’d been in charge of operations, merchandising and marketing for the company’s 2,500 stores. While there, he had led a 200-store asset rationalization and $500 million expense reduction program.

During bankruptcy, Winn-Dixie shed its worst stores and is now investing in the remaining ones (it plans to remodel 75 annually until all of its stores have been remodeled), with good results so far: in the most recently reported quarter, gross margins rose, same-store comps at newly remodeled supermarkets were +11.6% and overall same store sales were +3.0%.

Winn-Dixie’s stock is remarkably cheap in our view. It has a market capitalization of around $860 million, but an enterprise value of $700 million after netting out cash of $162 million (the company has no debt, though it does have lease-related liabilities). That’s cheap for a company with more than $7.3 billion in revenues and projected EBITDA this year of $110-$125 million, even before factoring the value of the company’s $550 million net operating loss carryforward from the bankruptcy.

Even if one counts lease liabilities as debt, Winn-Dixie’s enterprise value is a mere 12% of sales, which is far below its peers.

Winn-Dixie has a much stronger balance sheet than these companies (all but these have 6 – 36x more debt than cash), but Winn-Dixie trades at a far lower EV/S multiple due to its lower margins.

If we thought Winn-Dixie’s margins had no room for improvement, then we wouldn’t own the stock at today’s price. However, we see no reason why, over the next couple of years, as Winn-Dixie continues to remodel stores and grow sales, its EBITDA margin won’t double (at which point, it would still be well below normal industry levels), which we believe will result in at least a doubling of the stock.

Eventually, we think Winn-Dixie will show sales and income growth to a point where it will be a nice acquisition for a company seeking to expand in the rapidly growing southeast region. There are probably three natural suitors.

Here is a link to the full letter:

View this document on Scribd

And a link to his article on Seeking Alpha

Written by latticework01

June 10, 2009 at 2:27 pm

Posted in picks

Sonae Capital worth €4 – €6 a share

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Todd Sullivan at Valueplays posted about Sonae Capital in October last year.

Sonae Capital is a spin off of tourism assets and various other related businesses from Sonae Group, a large company based in Portugal.

The company now trades at €0.70 a share, up from a low of €0.42 in March 2009 and a high of €1.80 in Feburary 2008.

Talked about Joel Greenblatt and his assertion that spinoff’s:

  • Outperform market by 10% a year for 1st three years
  • Largest gain is in second year

Used Marriott (MAR) / Host Marriott International (HST) as a Case Study

  • Abandoned by institutions
  • Too small
  • Made 4x money on deal

Sonae Group (SON.LS)

  • Portugal’s largest employer
  • Head, Belmiro (country’s second richest person)is very highly regarded.
  • Spun out Sonae Capital (SONC.LS)
  • Belmiro moved from larger company to the spin company.

Sonae Capital

  • 250m share outstanding
  • Belmiro owns 55%
  • Pabrai own 7%
  • 100+ real estate portfolio. Includes fitness centers, wind farms, marina, apartments etc.

Bought Troia Resort in 1997 in bankruptcy from government for nothing but the promise to develop.

  • Has 1110 acres, Top 100 in World golf course, 18km beach, Roman Ruins, nature reserve and cleanest swimming water in Portugal.
  • 170m Euros invested in it and now worth 500m to 1b Euros.
  • One of a kind asset

Palacia Hotel

  • 35m Euro investment
  • Member if “Leading Hotels in the World”
  • Valued at 100m Euros

Aqulaz Hotal

  • 4 Star hotel
  • Worth 50m Euros

Other Real Estate worth 412m Euros
Other businesses worth 250m Euros.

Total value of 1.2 to 1.8b Euros.  Intrinsic value after debt subtracted equals 955m to 1.5b Euros.

Per share equals 3.82 to 6.20 value vs .69 markets price (all in Euros). In other words, you can buy a dollar bill here for 12-20 cents.

Written by latticework01

June 10, 2009 at 2:11 pm

Posted in picks

GGP worth US$10 – US$30

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The Manual of Ideas blog has posted Bill Ackman’s (Pershing Square Capital) presentation on General Growth Properties.

GGP owns of over 200 malls, operates a management and leasing businss (that services other mall owners) and is a land developer.

GGP voluntarily entered bankrupty on the 16th of April. This was due to the disruption in the credit markets which meant GGP could not refinance its debt.

The presentation lays out a case for the company being worth between US$10 and US$30, on the basis its assets are worth more than they liabilities and it just needs reorganise its debt.

GGP currently trades at around US$2.

View this document on Scribd

Written by latticework01

June 2, 2009 at 11:04 am

Posted in ggp, picks

Value Investing Congress

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Here are a summary of the notes from Value Investing Congress by Manual of Ideas. It shows a wide variety of possible investments, most interesting ones for me are Move and Raffles Education.

T2 Partners

Wells Fargo

  • US$4.00/share in earnings power.
  • Implies a US$40 – US$50 stock price at 10-12x earnings.
  • Wachovia portfolio already significantly marked down. Buffett recently touted the stock and said he would have been willing to put 100% of his net worth in WFC when it was trading at lower levels earlier in the year.

M3 Funds

First of Long Island

  • US$1.25 billion asset bank headquartered in Glen Head, NY.
  • 140% of tangible book value and 11x LTM earnings. Hidden value in branch ownership would increase TBV by 15%.
  • Excess capital: 8.5% common tangible equity/assets.
  • 68.5% loan to deposit ratio—very disciplined underwriter. US$1 billion of high quality deposits with a 1% cost. Pristine credit quality: very low non-performing assets at March 2009.
  • Near term catalyst: Russell 2000 addition requires 400,000 shares.

Kirkwood Capital

Lancashire Holdings

  • Four year old Bermuda based insurance company (specialty insurer) trading at book value.
  • LRE is not “part hedge fund” 85% of investment book is “risk-free.” LRE has a very conservatively run investment portfolio.
  • CEO Richard Brindle has a very successful track record. The CEO cares more about underwriting, maintaining a strong balance sheet, managing capital through the cycle, and staying nimble. They’re not trying to rule the insurance world.
  • Management ROE goal = 13% plus risk free rate.
  • Valuation: Believes it could trade between 1.5x – 2x book value (profits made in the mean time are being returned to shareholders).
  • Bases this multiple on:
  1. Reserve additions being highly unlikely
  2. Investment book is not at risk
  3. Bermuda taxation
  4. Conservative management

Aquamarine Capital

Estacio De SA

  • Largest player in the private post-secondary education sector in Brazil.
  • GP Investments is involved with Estacio.
  • The founding family acquired many “mom and pop” education companies.
  • Trades at a single digit to EBITDA, has low EBITDA margins (room for improvement), management is intent on creating a lot of value.
  • Thesis relies on: Developing duopoly in Brazil for post secondary education, low penetration, no community colleges, undeveloped consumer finance sector, natural resource based economy. This is an investment that Guy plans on holding for the next 20 years.

Raffles Education

  • Headquartered in Singapore.
  • They are different than other education companies in China in that they turn out English-speaking graduates.
  • The company is cheap and has a dividend yield of 5-6%. Company is trading at a single digit multiple to EBITDA.

Passport Capital

Springhouse Capital

ModusLink Global Solutions

  • Company is a supply chain management provider.
  • Main products are consumer electronics (Sandisk, AMD, and HP are largest customers).
  • Company does not take ownership of customer inventory.
  • Largest player in outsourced space. The industry still has a large number of players who want to outsource for either strategic or legacy reasons. Several competitors are distressed, versus a strong balance sheet at MLNK.
  • Largest risks here are management acquisition risk (company has a huge NOL), operational cash burn, and complete unwind of global growth and consumer electronics business.
  • Company has been good at managing costs, running positive EBITDA (US$9+mil EBITDA last quarter).
  • Valuation: Low = US$4.00/share (downside protection: there’s US$4.70/share of liquid net working capital), Base $7.00/share, Homerun is $20/share. He only gives the NOL value in the “homerun” scenario.

Market Leader

  • They have a site called
  • Stock price is US$1.90, cash/share is US$2.40, cash burn = breakeven, views the business as a legacy in wind-down and small upcoming spend on option.
  • Made US$20 million in EBITDA when the market was good. Thinks it could do US$5 million – US$7 million in EBITDA and could be worth more than US$5.00/share.


  • Brokerage agency, operates mainly online.
  • Gives you a 20% kickback if you buy through ZIPR.
  • Stock price is US$2.80, cash/share is US$2.32, losing US$10 million – US$12 million (US$0.50 cents per share).
  • A high risk/high reward opportunity.

International Value Advisers


  • If you strip out stake in L’Oreal and other stakes, you pay 9x EBIT for food business.
  • Good balance sheet.
  • Accused of overpaying for acquisitions.
  • The company appears cheap and safe.

Centaur Capital


  • Holding company that operates primarily in the specialty and property & causualty insurance industry.
  • Long term track record of value creation by building, acquiring, and selling businesses particular expertise in the insurance, investment management, and natural resource areas.
  • Investment results are in high teens. Alleghany uses a “total return” approach to investing its float and has a good investment track record. Over the past five years, the company has produced a 10.6% annualized return vs. a -2.2% annualized return for the S&P 500 Index.
  • The company has a $4.1 billion investment portfolio and has a portfolio of valuable assets.
  • Valuation: Sum of Parts: RSUI (insurance with 80% combined ration in 2008) 1.5x book = US$1.65 billion, Capitol Transamerica – 1.2x book = US$360 million, EDC 0.75x book = US$125 million, cash and investments at parent = US$800 million.

Odyssey Re

  • Globally diversified insurance and reinsurance company, one of the top 20 reinsurance companies in the world.
  • 71% owned by FFH, investment portfolio managed by Prem Watsa.
  • Grown BV/share by more than 20% annually since going public in 2001.
  • Buying back a ton of stock below book value. ORH spent US$351 million on share buybacks in 2008, ~13% of shares outstanding in 2008.
  • Bottom Line: ORH is classified as a medium risk stock. Current book value is about US$43.80/share (as of Mar. 31), thinks BV/share should increase to $47-$48. At 1.3x book, company would be worth upwards of US$55+/share.

D3 Family of Funds


  • Leading online network of websites for residential real estate search, with the most comprehensive and up to date database of existing homes for sale on the web. Largest shareholder of the company.
  • Main asset is
  • Serves three primary constituents:
  1. Consumers, 8.1 million average users/month
  2. Real estate agents and brokers
  3. General advertisers
  • Online ad penetration has not penetrated the real estate brokerage industry compared to other industries. D3 believes that this trend is not likely to last. Dollar advertising by US real estate agents in newspapers is down 71% over the past few years. Believes this represents a great opportunity for web based advertising and will benefit MOVE. Revenues have remained stable from 2006-2009, the most visited website for real estate brokerage advertising.
  • Recent Changes: Company has closed underperforming businesses, took $20 million out of annualized operating costs, New CEO Steve Berkowitz named CEO in JAN 2009, currently searching for a new CEO.
  • D3 has a “punch list” for MOVE
  1. Continue to improve product and grow site traffic
  2. Hire new CFO
  3. Continue expense reduction
  4. Monetize ARS
  5. Establish relationship with “The Street”
  6. Eliminate 100 million shares to drive EPS, EPS growth and ROE.
  • Bottom Line: MOVE basically has no leverage, ~US$1.00/share in net cash. Believes that 2013 EPS could grow to US$0.58/share. Thinks it could appreciate 5x based on a 17.5x to 20x multiple.

Written by latticework01

May 12, 2009 at 10:38 am

Posted in picks