NOTE: Existing members can skip to the bottom to find the full 20-page issue.
We asked a ton of ValueWalk readers what their #1 goal was for improving their value investing.
Can you guess what they said?
No, it wasn’t more coverage of Apple or Tesla, those are already well covered by the likes of CNBC, sell side firms and blogs.
Nor was it more coverage of risky leveraged trades, ETNs.
They wanted good small-cap investment ideas that are vetted and have liquidity, but not well covered by Wall Street, Bloomberg, CNBC, sell-side analysts, blogs or even closed sites like SumZero or Value Investing Club.
This answer makes sense: we all want to collect more winners in our portfolio.
But after following investments of ultra-famous investors (Buffett, Dalio, Icahn), reading diligently through 10-Qs at night, and even combing through article after article on obscure forums and blogs, it can be hard to find qualified “special situation” ideas that aren’t already widely known.
So, to meet this key need of our readers, ValueWalk launched the Hidden Value Stock newsletter.
The Hidden Value Stock newsletter is a 20+ page deep dive report that gives you detailed analysis behind specific small and mid cap stocks that two under-the-radar value investing hedge funds like, as well as interviews with the fund managers about their investing process.
The latest issue of Hidden Value Stocks is out this week and if you want to sign up to receive an issue.
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June 2017 teaser
- BlueTower was up 33.36% in 2016
- Stanphyl was 30.8% in 2016
- Livermore was up 85% in 2016
- Hazelton Capital was up 23.1% in 2016
- S&C Capital is up around 28% for 2016 stay tuned for exact numbers
- We cannot disclose performance for Boyles
- The last fund does not have final numbers yet but up about 15% in 2016 (we think)
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Our Q3 2017 issue is finally out and we think readers will enjoy – please check it out below. First is the teaser which everyone can read and send to your friends. Followed by the full version for all premium readers. You can check out our new landing page here (this is how much we love our readers we even made a goofy video for you all!) if you would like to get a free 7 day trial to learn what everyone is talking about. You can refer a friend and for each member you get $100 off your membership or $50 in cash if not a member. Refer a firm and make thousands!
Check out 23%+ returns – that is not a back test nor cherry picked – it is all equal weighted- those were the returns generated by the manager picks profiled and timed from when the interview was conducted with some up over 200%. Not bad!
Also readers can check out our new case study on small cap investing below, as well!
Full latest issue
Some of the latest from Stanphyl’s letter sent to investors on 9/29/2017 – tickers and data redacted for regular users but available for premium members below. Enjoy and let us know if you have any questions.
I added a bit in September to our position in REDACTED REDACTED after it reported a decent FY 2017 Q3 with year-over-year revenue up 6% and operating income roughly flat. REDACTED has hired an investment bank to “explore strategic alternatives”—in other words it has put itself up for sale, and thanks to its 52% (full year) gross margin and potential for large SG&A eliminations if it weren’t an independent public company, I think REDACTED should be sell-able to a strategic buyer at a significant premium to the current price; for example, an enterprise value of 1.25x 2016 revenue would be over $12.50/share, while a “worst case” scenario of 1x revenue would still be around $10/share. The company reports that the sale process is REDACTED .
We continue to own REDACTED REDACTED company with approximately REDACTED of annual 56% gross margin revenue and approximately a zero enterprise value. In August REDACTED reported slightly improved Q2 2017 revenue of REDACTED vs. Q1’s REDACTED and guided to a flat Q3, with operating cash burn continuing at around $1 million per quarter. REDACTED is now focusing its growth on “smart” commercial & municipal LED lighting as its fab-less chip business has long been in gradual decline, and if the lighting business accelerates (and it could, due to recent sales force hires and new products), I think there’s a chance it can hit a break-even annualized revenue run-rate of $40 million by late 2018 (pushed back from my earlier hoped-for timeline) at which point—assuming REDACTED of remaining net cash (vs. $21 million today) and REDACTED , an enterprise value of 1x revenue on this 56% gross margin company would put the stock at around $12/share. Additionally, Echelon has approximately $255 million in federal NOLs and $127 million in state NOLs, worth tens of millions of dollars if it can utilize them. So if it can pull this off (and theoretically, the market for the REDACTED should be huge between the U.S. and Europe), this stock can be a home run for us. So far though (as noted above) there seems to be little sign of improvement, although revenue at least seems to have stabilized and that flush balance sheet does give it a long runway to succeed. In September the company hired a new REDACTED ; let’s see if he does any better than the last guy.
Next month we will be sending out our Autumn edition, which is already taking shape. We have interviews with two value-focused funds lined up, one of which is Eric Gomberg’s Dane Capital.
Ahead of the release of our Autumn issue next month, here is Dane Capital’s second quarter letter to investors which was published last week.
We’re pleased to report that in the 2nd quarter of 2017, Dane Capital Management (the “Fund”) returned 10.6%, net of fees and expenses, resulting in the Fund generating a 22.8% return year-to-date.
We’ve stated, both when results have been disappointing and strong, that Dane’s performance should be judged over years, and not months and quarters. We remain optimistic about our ability to identify unique ideas and produce outstanding returns over time.
We’re confident regarding our Fund’s prospects over the next several quarters, particularly given recent earnings reports (regardless of positive or negative near term stock action) as they validate our theses on our core holdings. Moreover, we continue to see interesting opportunities, although we remain judicious, as always, and add new stocks to the portfolio at a conservative pace.
Interestingly, even with the Fund’s strong year-to-date results, several of our largest positions have not contributed to the positive performance (or, in some cases, have negatively contributed to the Fund’s performance), despite healthy fundamentals. We are confident, that both these companies, and our other holdings, which we view as below their intrinsic value, will reflect fair value in quarters to come.
Steven L. Kiel:
Separate from performance results, I want to highlight a project in which you will likely have interest. My friend Tom Jacobs spearheaded a campaign to republish the works of Maurece Schiller. After a Kickstarter campaign and other financial contributions to get the project off the ground, Tom is on the verge of publishing the first of five Schiller books on special situation investing. I had not previously been aware of Schiller’s contribution to investment analysis and learned that his books, originally published more than 50 years ago, were the foundation for the style of investing that Arquitos has successfully employed.
Tom’s idea was to add modern case studies from a variety of investors in the reprints of the books. I am happily supporting Tom and am also contributing a case study for one of the books. You can find my case study on ALJ Regional Holdings below:
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