Geoff Gannon April 29, 2019 Premium Articles-01, Stock Ideas

VieMed Healthcare (VMD): A Founder Led Canadian Listed U.S. Ventilator Company Faces the Risk of Competitive Bidding for its Medicare Patients Starting in 2021

Write-up by REID HUDSON   (Geoff’s note: VieMed trades under the symbol “VMD” in Canada and over-the-counter in the U.S. under the symbol “VIEMF”. The stock is a lot more liquid in Canada than in the U.S. However, the price difference between the shares in Canada and the U.S. doesn’t always perfectly reflect the U.S. Dollar to Canadian Dollar exchange rate.)   VieMed Healthcare Inc. operates in the home health space and provides services and equipment to a variety of respiratory patients.  Its main market...

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Geoff Gannon April 28, 2019 Premium Articles-01, Stock Ideas

Sandridge Energy (SD): A Carl Icahn Controlled Post-Bankruptcy Oil Producer With 10-35 Years of Proved Reserves in Colorado, Oklahoma, and Kansas Trading at a Fraction of Net Asset Value

Write-up by JONATHAN DANIELSON Sandridge Energy (SD) is an upstream oil and nat gas exploration and production company with operations primarily in the Mid-Continent and North Park Basin in Colorado. The Company is an onshore driller and owns three principle assets: Mississippi Lime, NW STACK, and the North Park Basin. The Miss Lime is a mature asset that will continue to decline in production, while the STACK and N Park assets are newer, higher growth, and more economically attractive. I believe SD to be one...

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Geoff Gannon April 27, 2019 Premium Articles-01, Stock Ideas

Garrett Motion (GTX): Messy Financials, A Peculiar Indemnification Liability, & Typical Spin-off Dynamics Have Obfuscated Garrett Motion’s Attractive Underlying Economics

WRITE-UP BY JONATHAN DANIELSON Overview – Recent Events and Thesis Garrett Motion (GTX) was spun off of Honeywell in September of last year as part of Honeywell’s ongoing series of divestitures (REZI, GTX, & ASIX). GTX primarily is in the business of designing and manufacturing turbochargers for automotive OEMs. They also design and make E-boosters for hybrid vehicles. As part of the spin-off agreement, Honeywell dumped their Asbestos Indemnification Liabilities on the newly formed entity (approximately $1.4 billion in total liabilities) in addition to loading...

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Geoff Gannon April 25, 2019 Premium Articles-01, Stock Ideas

Bonal (BONL): An Extremely Tiny, Extremely Illiquid Stock that Earns a Lot But Doesn’t Grow at All

Bonal isn’t worth my time. It might be worth your time. It depends on the size of your brokerage account and the extent of your patience. So, why isn’t Bonal worth my time? I manage accounts that invest in “overlooked” stocks. Bonal is certainly an overlooked stock. It has a market cap under $3 million and a float under $1 million (insiders own the rest of the company). It often trades no shares in a given day. When it does trade, the amounts bought and...

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Andre Kostolany April 6, 2019 Idea Exchange

Citigroup Capital Securities XIII – a high yield trust preferred from Citi

This is a writeup for Citigroup Capital Securities XIII, or Citi N’s. Citi N’s are trust preferred obligations of Citigroup. Why write up a pref instead of a stock? This one has some interesting special features. A trust preferred is basically a subordinated debt obligation of the issuer. It ranks above common equity, above preferred shares but below senior in the capital structure. Coupons on subordinated debt are deferrable for up to five years but cumulative, meaning that if Citi cannot pay the coupon on...

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JakeCompounder March 30, 2019 Idea Exchange

Gaia (GAIA): A Strange Value Investment in a Strange Streaming Service

Gaia operates a streaming service like Netflix, but for yoga, meditation, and weird conspiracy videos. They have many great titles, like “The Baltic Sea Anomaly; A Crashed UFO Or Natural Rock Formation?” or “Cannabis Spirituality: Using Plant Medicine as a Sacred Tool”. The company is run by its founder, Jirka Rysavy, who owns over 32% of the company’s stock. Rysavy is an experienced entrepreneur who founded Corporate Express, which became a Fortune 500 company before merging into Staples. Gaia is growing extremely fast, but has...

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Geoff Gannon March 30, 2019 Premium Articles-01, Stock Ideas

Revisiting Keweenaw Land Association (KEWL): The Annual Report and the Once Every 3-Year Appraisal of its Timberland Are Out

Accounts I manage hold shares of Keweenaw Land Association (KEWL). I’ve written about it twice before: Keweenaw Land Association: Buy Timberland at Appraisal Value – Get a Proxy Battle for Free And Why I’ve Passed on Keweenaw Land Association – So Far I didn’t continue to pass on Keweenaw Land Association. Like I said, the stock is now in accounts I manage. There are really two things worth updating you on. One is the annual report. The other is the appraisal. The appraisal is something...

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Geoff Gannon March 26, 2019 Free Articles 1 Comment

Ball (BLL): A Debt Laden, “Economic Value Added” Obsessed Organization with a Super Wide Moat

Write-up by Mister Compounder

 

The 3 most important variables to the Ball (BLL) investment thesis are:

  1. The industry structure and the symbiotic relationship with beverage companies, that naturally leads to “survival of the fattest”.
  2. The EVA approach that links interesting site economics to the creation of shareholder value.
  3. Credit risk (having the right level of debt).

 

Ball is one of the world’s leading suppliers of metal packaging to the beverage and food industry. The company has a long history and was founded in 1880. Through its entire history, Ball has been involved in close to fifty different segments. Today, the business is mainly based on delivering aluminum beverage containers to the beverage industry. The company’s business is about delivering aluminum cans to large consumer staple companies like: Coca Cola, Unilever and AB InBev.

This sounds like a really dull, capital intensive and boring business. So, why should it interest you?

 

Interesting Site Economics

The source of Ball´s competitive advantage is dependent on local scale and switching costs, resting on a highly consolidated industry among both producers and customers. The plants making the beverage container cans are huge. This is best illustrated by the size range of the production plants from about 100,000 square feet to around 700,000 square feet. The company’s largest site is the Findlay, Ohio plant (733,000 square feet) that produces both beverage cans containers and food containers.

 

To get an understanding of the underlying unit economics driving both revenue and profitability at Ball, it might be interesting to do some guesstimates on the profitability of the site locations.

 

In the North American segment, the beverage container industry represents about 110 billion units, where five companies dominate the market in the U.S, Canada and Mexico. For fiscal year of 2017, Ball produced 46 billion units, hitting a market share of 42%. This volume is served by 19 plants in the US, 1 in Canada and 2 in Mexico. They have also one joint venture production facility, but I have not included that one in this calculation. In total 22 plants, which means an average of 2.1 billion units per plant per year.

 

This means that – each year – the typical Ball plant should make:

  • 1 billion units
  • $190 million in revenues
  • $37 million in gross profit at a 19.5% gross profit margin
  • $25 million in operating profit at a 13% operating margin
  • Which is: $624 of revenue per square foot in and $81 in profit per square foot

 

Ball typically generates 9 cents in revenues per beverage can and 1.2 cents in operating profit per can. This is what generates sales and earnings at Ball. In other words, these are huge operations. Just like with distributors, it will be difficult to compete with a fully functioning and operative production plant. Given this, it is highly unlikely that a competitor would add excess capacity near an existing plant. It leads naturally to local markets as it does not make sense to transport the products …

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Geoff Gannon March 21, 2019 Premium Articles-01, Stock Ideas

IEH Corporation (IEHC): May Be a Good, Cheap Stock – But, Definitely in the “Too Hard” Pile for Now

As this is an initial interest post, it’ll follow my usual approach of talking you through what I saw in this stock that caught my eye and earned it a spot near the top of my research watch list – and then what problems I saw that earned it a low initial interest score. I’ll spoil it for you here. IEH Corporation (IEHC) is a stock I’m unlikely to follow up on because of the difficulty of digging up the kind of info that would...

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JakeCompounder March 18, 2019 Idea Exchange

Inspira Financial (LND.V): Liquidation of Business Provides Low Risk Opportunity

*I own shares in this company, and it is a very illiquid stock Inspira Financial trades under the ticker LND.V on the TSX Venture exchange in Canada, and trades OTC under the ticker LNDZF in the US. While the stock has more volume in Canada, LNDZF is very illiquid. For most of my purchases of LNDZF, my trades accounted for the entire trading volume that day of the stock. Inspira Financial is selling for about $4.8 million USD, or $6.4 million CAD. The company reports...

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