“Bull markets end when the perception of earnings growth disappears […]. Manias, on the other hand, end when the market runs out of buyers.” – Andy Kessler
2020 ended with the world collectively eager to put a challenging year in the rear-view mirror while looking forward to the light at the end of the tunnel. The US election results are now (mostly) behind us, and we have two approved Covid-19 vaccines being distributed in the US with an additional 5 being used in other parts of the world. What is most surprising to me is, having witnessed a year where we endured the worst global pandemic in a century, the fastest bear market in history, a global recession, and a contentious presidential election; that I would find myself in the same place I was exactly a year ago: contemplating whether the market accurately reflects the reality of our economy.
Read More “Blind Spots”
“And so I moved that very day into the heart of a quince, where the seeds are few and almost silent.” – Khalil Gibran, from the poem “The Pomegranate”
I was always taught that evolution is a slow process that occurs over generations. The reality is that evolution can occur quickly. A meteorite slams into the earth, smoke and debris deny plants of sunlight, and the dinosaurs begin to die as their food sources whither. Mammals emerge from their tunnels and thrive as they realize their former predators are quickly dying away. Any change in our external environment can lead to faster evolution as species do what it takes to survive. Scientists have even shown that a species can evolve in real time.
Read More “Stepping Back from the Noise”
Company: Viemed Healthcare, Inc. (VMD)
Sector: Healthcare – Healthcare Equipment
Price/Market Cap: $9.85/$358M
Target Price/Implied Upside: $15/52%
Specializing in respiratory healthcare services, Viemed Healthcare (VMD) is a fast growing, free cashflow generating business serving an underserved niche market with tremendous runway ahead. VMD is building a moat by developing strong relationships with hospital systems and doctors while generating cost savings benefits to the healthcare system.
Read More “Viemed Healthcare (VMD) – “Healthcare from Home””
“When you put a fire under a pot, you learn what’s in it.” — Malcolm X
If a deadly pandemic overtakes the world, but the market looks past it, did the pandemic really happen?
The equity markets staged a dramatic rebound during the quarter as local economies opened across the country. The question for investors is, how can the market turn so positive when data points to rough months ahead?
The short answer is “because the market is forward looking.” Investors are peering many months into the future to a point when Covid-19 fades away, the population gains herd immunity, or researchers find an appropriate treatment or cure. Investors are looking past current data towards a recovery.
Should the Market be so confident?
Read More “The Market Looks Forward”
“Crisis does not create character; it reveals it.” – Jim Stovall, Wisdom for Winners
In just a few short months, our world has changed.
Even the word “pandemic” is scary. Health officials have labeled the coronavirus as “novel,” because the human species has never been exposed to it. We seemingly have no natural antibodies. As the news of the virus has unfolded, and nations and communities accepted that our first (and possibly only) line of defense was the concept of “social distancing,” I gained a newfound respect for survivors of previous pandemics. The Bubonic Plague. The Spanish Flu. Or even 1612 when Native Americans welcomed the Pilgrim settlers traveling from Europe bringing with them smiles, smallpox, and leptospirosis.
Read More “Our World Has Changed”
Sector: Technology – Internet Services and Infrastructure
Price/Market Cap: $40.71 / $362M
Target Price/Implied Upside: $92 / 125%
Intelligent Systems (INS) has established itself
as the go-to payments-processing software provider specializing in complex
credit. Previously under the radar, the company is attracting attention after
being tapped by Goldman Sachs and Apple to support the new Apple Card. The announcement was a whale for the company
and, if the partnership is successful, could set Intelligent Systems on a path to
multiply in size while attracting other large clients seeking highly flexible
and customizable software to manage authorizations, fraud identity, interest
and rewards calculations, and other merchant processing functions. Intelligent
Systems’ CoreCard software was purposely built to uniquely address the rapidly evolving
merchant processing market with solutions that other large software providers
are not built to handle. They have made investments
in their software technology that create a barrier to entry for competitors.
Read More “Intelligent Systems (INS) – “Small and Focused Wins””
2019 was quite a year with most indexes increasing by roughly a third. From a historical perspective, the period
from 2010 through 2019 was the first contiguous decade in the history of the market without a
recession. During this
period, we had only one (2018) negative year.
The gains of 2019 were phenomenal
in light of the many headwinds facing investors heading into, and throughout,
Read More “Defying Gravity”
A company we have been tracking and researching for better than two years now is GameStop (GME). Our initial research on GME was predicated on the thesis that the company was highly overvalued with eroding earnings and reverse network effects. For reasons described briefly here, we now believe there is value in the stock. However, investors will be unlikely to realize this value.
Read More “GameStop (GME) – “Swimming Against the Current””
July, the current U.S. expansion became the longest on record. Gross Domestic
Product (GDP) in the second quarter increased at an annual rate of 2.1% and
there are still new jobs being created. While these and other government
figures suggest that U.S. and global economies are continuing to expand, there
is growing evidence of weakening economies internationally and signs that the
current U.S. expansion is losing momentum.
Read More “A Return to Rationality”
Company: PAR Technology (PAR)
Sector: Technology – Application Software
Price/Market Cap: $26.30/$458M
Target Price/Implied Upside: $41/55%
PAR Technology Corp. (PAR) is an underappreciated, cloud-based, Point-of-Sale (POS) software provider anchored by its legacy as a government contractor. New leadership has redirected the company to be laser focused on their future in the cloud. The Balance Sheet has been recapitalized with a $80M convertible debt raise. Proceeds will be used to accelerate the growth of their cloud based recurring revenue, and solidify their market position through bolt-on acquisitions. Growth of SaaS recurring revenue will improve margin and profitability profile and force a multiple revaluation. The Government business will continue to be a source of cashflow until the company finds an attractive buyer leaving the company as a pure-play, cloud-based restaurant and hospitality solution. Longer-term, the real growth opportunity may be in their nascent merchant services business launching in 2H 2019.
Read More “Par Technology (PAR) – “Uncovering the Crown Jewels””