Burnham Holdings Inc (BURCA)

(Image: Zen Buddha Silence, by Marilyn Barbone)

August 2, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Select Interior Concepts (SIC): http://boolefund.com/select-interior-concepts-sic/

Manitowoc (MTW): http://boolefund.com/manitowoc-mtw/

Ciner Resources LP (CINR): http://boolefund.com/ciner-resources-lp-cinr/

Global Ship Lease (GSL): http://boolefund.com/global-ship-lease-gsl/

Alico, Inc. (ALCO): http://boolefund.com/alico-inc-alco/

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Burnham Holdings Inc. (BURCA).  The company is a market leader in the design, manufacture, and sale of boilers and related HVAC products and accessories used in a wide range of residential, commercial, and industrial applications.  BURCA has a market cap of $46.5 million, with $5.4 million in cash and $15 million in debt.

 

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First we screen for cheapness based on five metrics.  Here are the numbers for Burnham Holdings:

    • EV/EBITDA = 5.04
    • P/E = 7.96
    • P/B = 0.56
    • P/CF = 4.74
    • P/S = 0.24

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

BURCA has a Piotroski F-Score of 7.  (The best score possible is 9, while the worst score is 0.)  This is good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Burnham Holdings has TL/TA of 41%, which is good.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At BURCA, insider ownership is approximately 11%.

Shareholder yield is the dividend yield plus the buyback yield.  At Burnham Holdings, dividend yield is 8.6% and buyback yield is usually zero, so shareholder yield is 8.6%.

Each component of the ranking has a different weight.  The overall combined ranking of Burnham Holdings places it in the top 50 stocks on our screen, or the top 2% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from April, 2020: https://www.burnhamholdings.com/wp-content/uploads/2020/04/2020-SH-Presentation-Version-to-post-on-website.pdf

BURCA has paid a dividend for 75 consecutive years.  Also, the company’s boilers are an essential business because people need to heat their homes.

Also see: https://valueinvestorsclub.com/idea/BURNHAM_HOLDINGS_INC/6768678962

(To access the link to valueinvestorsclub.com, you may have to create a guest membership, which is free.)

Intrinsic value scenarios:

    • Low case: Book value per share is $18.09.  BURCA could be worth 50% of book value, or $9.05 a share.  That’s 11.4% lower than today’s $10.21.
    • Mid case: BURCA is likely worth at least book value.  That’s $18.09, or 77% higher than today’s $10.21.
    • High case: BURCA may be worth 1.5 times book value.  That’s $27.14, which is 165% higher than today’s $10.21.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Select Interior Concepts (SIC)

(Image: Zen Buddha Silence, by Marilyn Barbone)

July 19, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Manitowoc (MTW): http://boolefund.com/manitowoc-mtw/

Ciner Resources LP (CINR): http://boolefund.com/ciner-resources-lp-cinr/

Global Ship Lease (GSL): http://boolefund.com/global-ship-lease-gsl/

Alico, Inc. (ALCO): http://boolefund.com/alico-inc-alco/

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look Select Interior Concepts, Inc. (SIC).  Select Interior Concepts is a leading provider of interior surface products for residential and commercial builders.  The company has two subsidiaries: Residential Design Services (“RDS”) and Architectural Surfaces Group (“ASG”).   Select Interior Concepts offers a broad range of design-oriented products across flooring, countertops, cabinets, and other highly desirable and customizable high end interior products.  SIC has a market cap of $107 million, with $37 million in cash and $211 million in debt.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Select Interior Concepts:

    • EV/EBITDA = 5.40
    • P/E = 15.30
    • P/B = 0.68
    • P/CF = 3.78
    • P/S = 0.18

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

SIC has a Piotroski F-Score of 7.  (The best score possible is 9, while the worst score is 0.)  This is good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Select Interior Concepts has TL/TA of 65%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Select Interior Concepts, insider ownership is approximately 2%.

Shareholder yield is the dividend yield plus the buyback yield.  At SIC, dividend yield is zero and buyback yield is about 1.4%, so shareholder yield is 1.4%.

Each component of the ranking has a different weight.  The overall combined ranking of Select Interior Concepts places it in the top 10 stocks on our screen, or the top 0.4% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from June, 2020: https://ir.selectinteriorconcepts.com/static-files/d740e2ed-ec53-404b-ae7f-49920c6d46c4

Note that Select Interior Concepts has a new CEO, Bill Varner, as of June, 2020.  Previously, Varner was CEO of United Subcontractors, Inc. (USI), a leading provider of insulation installation and distribution services to the residential and commercial construction markets.  Prior to USI, Varner served as President and CEO of Aquilex Corporation, a leading provider of specialty services to the energy sector.

Select Interior Concepts has never missed a closing, and 90% of their business is repeat.  Moreover, with its asset light business model and with variable costs, the company has been able to position itself well to weather the downturn caused by the coronavirus.

Also see: https://valueinvestorsclub.com/idea/SELECT_INTERIOR_CONCEPTS_INC/3197088490

(To access the link to valueinvestorsclub.com, you may have to create a guest membership, which is free.)

Intrinsic value scenarios:

    • Low case: Book value per share is $6.20.  SIC could be worth 50% of book value, or $3.10 a share.  That’s 26.5% lower than today’s $4.22.
    • Mid case: SIC is likely worth at least 1.5x  book value.  That’s $9.30, or 120% higher than today’s $4.22.
    • High case: Normalized EBITDA is roughly $60 million.  SIC is probably worth an EV/EBITDA of at least 9x.  That would mean the stock is worth $14.46, which is over 240% higher than today’s $4.22.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Manitowoc (MTW)

(Image: Zen Buddha Silence, by Marilyn Barbone)

July 12, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Ciner Resources LP (CINR): http://boolefund.com/ciner-resources-lp-cinr/

Global Ship Lease (GSL): http://boolefund.com/global-ship-lease-gsl/

Alico, Inc. (ALCO): http://boolefund.com/alico-inc-alco/

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look The Manitowoc Company, Inc. (MTW).  Manitowoc has been producing cranes for nearly 100 years.  MTW has a market cap of $351 million, with $104 million in cash and $347 million in debt.  (The company has no significant debt due until 2026.)  The current stock price is $10.17.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Manitowoc:

    • EV/EBITDA = 4.16
    • P/E = 5.40
    • P/B = 0.56
    • P/CF = 2.59
    • P/S = 0.20

(These figures reflect the trailing twelve months of results.  Revenues, earnings, and cash flows will be down this year due to the impact of the coronavirus, but should reach even higher levels in a few years.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

MTW has a Piotroski F-Score of 8.  (The best score possible is 9, while the worst score is 0.)  This is very good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Manitowoc has TL/TA of 61%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Manitowoc, insider ownership is approximately 2.2%.

Shareholder yield is the dividend yield plus the buyback yield.  At MTW, dividend yield is zero and buyback yield is about 4%, so shareholder yield is 4%.  This is good.  (Note: The company has suspended its buybacks for now in order to conserve cash to manage through the coronavirus.)

Each component of the ranking has a different weight.  The overall combined ranking of Manitowoc places it in the top 10 stocks on our screen, or the top 0.4% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s first quarter 2020 presentation from May, 2020: https://s21.q4cdn.com/264200883/files/doc_presentations/2020/05/Q1-2020-MTW-Earnings-Call-Presentation_5-8-2020_VF.pdf

CEO Barry Pennypacker and his associates have significantly improved Manitowoc’s operations.  They have meaningfully improved margins.  They have upgraded the product portfolio.  They have reduced costs.  And they have increased operating efficiencies.  Moreover, Pennypacker has a track record of significantly improving operations, which he did when he was at Gardner Denver.  See: https://www.valueinvestorsclub.com/idea/MANITOWOC_CO/6436441136#description

(To access the link to valueinvestorsclub.com, you may have to create a guest membership, which is free.)

Intrinsic value scenarios:

    • Low case: Book value per share is $17.87.  Manitowoc could be worth 50% of book value, or $8.94 a share.  That’s 12.1% lower than today’s $10.17.
    • Mid case: Normalized EBITDA is approximately $230 million.  Manitowoc is likely worth an EV/EBITDA of at least 6x.  That would mean the stock is worth roughly $33.82, which is over 230% higher than today’s $10.17.
    • High case: Normalized EBITDA may be $345 million.  Manitowoc is probably worth an EV/EBITDA of at least 6x.  That would mean the stock is worth $53.82, which is about 430% higher than today’s $10.17.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Ciner Resources LP (CINR)

(Image: Zen Buddha Silence, by Marilyn Barbone)

June 28, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Global Ship Lease (GSL): http://boolefund.com/global-ship-lease-gsl/

Alico, Inc. (ALCO): http://boolefund.com/alico-inc-alco/

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Ciner Resources LP (CINR).  Ciner Resources is structured as a fixed-distribution master limited partnership.  Ciner is one of the largest and lowest cost producers of soda ash in the world.  CINR has a market cap of $255 million, with $51 million in cash and $178 million in debt.  The current stock price is $12.90.  The current dividend yield is 10.54%.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Ciner Resources LP:

    • EV/EBITDA = 4.73
    • P/E = 9.07
    • P/B = 1.49
    • P/CF = 3.41
    • P/S = 0.80

(These figures reflect Ciner Resources’s 51% ownership stake in its soda ash business.  Also, the ratio’s are based on normalized numbers—using a 30% increase in production, which will happen in the next couple of years.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

CINR has a Piotroski F-Score of 8.  (The best score possible is 9, while the worst score is 0.)  This is very good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Ciner Resources has TL/TA of 45%, which is good.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Ciner Resources, insider ownership is approximately 25.5%.  This is good.

Shareholder yield is the dividend yield plus the buyback yield.  At CINR, dividend yield is 10.54% and buyback yield is zero, so shareholder yield is 10.54%.  This is very good.

Each component of the ranking has a different weight.  The overall combined ranking of Ciner Resources places it in the top 30 stocks on our screen, or the top 1.2% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from August, 2019: https://www.ciner.us.com/wp-content/uploads/2019/08/Investor-Presentation-Q2-2019.pdf

Ciner Resources has a structural cost advantage because it is a natural soda ash producer (from trona) rather than a synthetic soda ash producer.  Ciner’s costs are about 50 percent lower than those of many international competitors.

Moreover, Ciner recently reduced its cash distribution by 40%.  Its current cash distribution is $1.36 per share annually.  That’s a yield of 10.54%.  The company is using the extra cash to boost its production by 30% over the next couple of years.  After production has been boosted, Ciner Resources will increase its cash distribution to roughly $2.60 per share annually.  Assuming an 8-9% dividend yield, the stock would be worth $29 to $32.50.  See: https://www.valueinvestorsclub.com/idea/CINER_RESOURCES_LP/1895980459

(To access the link to valueinvestorsclub.com, you may have to create a guest membership, which is free.)

Intrinsic value scenarios:

    • Low case: Even if prices were to drop, Ciner Resources  could likely pay over $1.00 per share in annual dividends.  In this case, the stock would be worth $10.  That’s 22.5% lower than today’s $12.90.
    • Mid case: Ciner Resources is likely worth at least a dividend yield of 9% based on a dividend of $2.60 per share annually.  That would mean the stock is worth roughly $29, which is 125% higher than today’s $12.90.
    • High case: Ciner Resources may end up paying $4.00 in annual dividends.  Assuming a dividend yield of 8%, the stock would be worth $50, which is over 285% higher than today’s $12.90.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Global Ship Lease (GSL)

(Image: Zen Buddha Silence, by Marilyn Barbone)

June 21, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Alico, Inc. (ALCO): http://boolefund.com/alico-inc-alco/

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Global Ship Lease (GSL).  Global Ship Lease is a containership lessor.  GSL has a market cap of $81 million, with $87 million in cash and $850 million in debt.  (No debt is due until late-2022.  Roughly half is due in 2024 and 2025.)  The current stock price is $4.62.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Global Ship Lease:

    • EV/EBITDA = 5.28
    • P/E = 1.93
    • P/B = 0.20
    • P/CF = 0.81
    • P/S = 0.29

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

GSL has a Piotroski F-Score of 6.  (The best score possible is 9, while the worst score is 0.)  This is decent.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Global Ship Lease has TL/TA of 69%, which is OK.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Global Ship Lease, insider ownership is approximately 35.7%.  This is good.

Shareholder yield is the dividend yield plus the buyback yield.  At GSL, dividend yield is zero and buyback yield is zero, so shareholder yield is zero.

Each component of the ranking has a different weight.  The overall combined ranking of Global Ship Lease places it in the top 10 stocks on our screen, or the top 0.4% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from May, 2020: https://www.globalshiplease.com/static-files/5a012a2c-bd35-4882-95f4-fccd60690399

Global Ship Lease focuses on mid-sized and smaller containerships, which service the majority of global trade routes.  The company has $696 million in contracted revenue and a TEU-weighted average remaining charter term of 2.3 years.

Intrinsic value scenarios:

    • Low case: Global Ship Lease may be worth 10% of book value.  Book value is $23.10 a share, so 10% of that is $2.31 a share.  That’s 50% lower than today’s $4.62.
    • Mid case: Global Ship Lease is likely worth at least book value of $23.10 a share.  That’s 400% higher than today’s $4.62.
    • High case: Global Ship Lease may be worth 150% of book value.  That’s $34.65, which is 650% higher than today’s $4.62.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Alico, Inc. (ALCO)

(Image: Zen Buddha Silence, by Marilyn Barbone)

June 14, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Genco Shipping (GNK): http://boolefund.com/genco-shipping-gnk/

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Alico, Inc. (ALCO).  Alico is one of Florida’s largest citrus growers, with over 45,000 prime citrus acres.  Alico is the lowest-cost citrus producer in Florida.  The company has an additional 65,000 acres of land, 25,000 acres of which is being marketed for sale.  Alico has a market cap of $226 million, with $220 million of debt and $80 million of cash.  The current stock price is $30.13.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Alico:

    • EV/EBITDA = 6.90
    • P/E = 6.30
    • P/B = 0.52
    • P/CF = 3.10
    • P/S = 1.95

P/B is based on liquidation value, which has been estimated at $58.07 a share.  See: www.valueinvestorsclub.com – get a free guest membership, then look up “ALCO.”  The company itself has estimated liquidation value at $47 to $68 per share.  See slide 5 in Alico’s most recent investor presentation: https://tinyurl.com/ydxz9ab3

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

Alico has a Piotroski F-Score of 7.  (The best score possible is 9, while the worst score is 0.)  This is good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Alico has TL/TA of 57%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Alico, insider ownership is approximately 15.3%.  This is pretty good.

Shareholder yield is the dividend yield plus the buyback yield.  At Alico, dividend yield is about 1%.  Buyback yield is negligible, so shareholder yield is about 1%.

Each component of the ranking has a different weight.  The overall combined ranking of Alico places it in the top 20 stocks on our screen, or the top 0.8% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from May, 2020: https://tinyurl.com/ydxz9ab3

Intrinsic value scenarios:

    • Low case: Alico may be worth 50% of liquidation value of $58.07 a share.   That’s $29.04, which is 4% lower than today’s $30.13.
    • Mid case: Alico is likely worth at least liquidation value of $58.07 a share.  That’s 92% higher than today’s $30.13.
    • High case: Not only has Alico made itself the lowest-cost citrus producer; but it has also increased its plantings over the past several years, which will increase their annual harvest.  Normalized earnings are about $40 million.  At a P/E of 18, Alico would be worth $96.13 a share.  That’s about 220% higher than today’s $30.13.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Genco Shipping (GNK)

(Image: Zen Buddha Silence, by Marilyn Barbone)

June 7, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

SEACOR Marine (SMHI): http://boolefund.com/seacor-marine-smhi/

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Genco Shipping (GNK).  Genco Shipping is  a leading provider of international seaborne drybulk transportation services.  The company has a market cap of $290 million.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Genco Shipping:

    • EV/EBITDA = 4.60
    • P/E = 6.52
    • P/B = 0.34
    • P/CF = 2.07
    • P/S = 0.70

(Normalized EBITDA is about $140 million, while normalized earnings is approximately $45 million.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

Genco Shipping has a Piotroski F-Score of 6.  (The best score possible is 9, while the worst score is 0.)  This is decent.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Genco Shipping has TL/TA of 38.4%, which is pretty good.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Genco Shipping, insider ownership is approximately 1%.  This is low.

Shareholder yield is the dividend yield plus the buyback yield.  The company has not bought back shares, but the dividend yield is 1.2%.  So the shareholder yield is 1.2%.

Each component of the ranking has a different weight.  The overall combined ranking of Genco Shipping places it in the top 50 stocks on our screen, or the top 2% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from May, 2020: http://s21.q4cdn.com/456963137/files/doc_financials/2020/q1/Genco-Q1-2020-Earnings-Presentation.pdf

Intrinsic value scenarios:

    • Low case: Genco Shipping may be worth 50% of current book value (which is understated) of $20.36 a share.   That’s $10.18, which is over 45% higher than today’s $6.94.
    • Mid case: Genco Shipping is likely worth at least book value (which is understated) of $20.36 a share.  That’s over 190% higher than today’s $6.94.
    • High case: Genco Shipping may be worth 150% of book value (which is understated) of $20.36.  That’s $30.54, which is about 340% higher than today’s $6.94.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

SEACOR Marine (SMHI)

(Image: Zen Buddha Silence, by Marilyn Barbone)

May 31, 2020

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Tidewater (TDW): http://boolefund.com/tidewater-tdw/

TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at SEACOR Marine (SMHI), which was spun off from SEACOR Holdings (CKH) in June 2017.  SEACOR Marine is a provider of global marine and support transportation services to the offshore oil and gas industry.  The company also provides its services to offshore wind farms.  SEACOR Marine has a market cap of $36 million.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for SEACOR Marine:

    • EV/EBITDA = 5.60
    • P/E = 1.19
    • P/B = 0.08
    • P/CF = 0.52
    • P/S = 0.07

These figures make SEACOR Marine one of the top ten cheapest companies out of over two thousand that we ranked.  (Normalized earnings is approximately $30 million.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

Tidewater has a Piotroski F-Score of 6.  (The best score possible is 9, while the worst score is 0.)  This is decent.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  SEACOR Marine has TL/TA of 52.9%, which is OK.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At SEACOR Marine, insider ownership is approximately 10%.

Shareholder yield is the dividend yield plus the buyback yield.  The company has not bought back shares, but has instead issued shares.  The company pays no dividend.  Thus, shareholder yield is close to zero.

Each component of the ranking has a different weight.  The overall combined ranking of SEACOR Marine places it in the top 20 stocks on our screen, or the top 0.8% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation from September, 2019: https://ir.seacormarine.com/static-files/111f9bd0-64bb-42c4-adbe-3b9239c3f817

Offshore oil drilling—which is what SEACOR Marine primarily supports—has slowed significantly due to a drop in oil demand caused by stay-at-home orders to deal with the coronavirus.  In response, OPEC+ has cut oil production by a record amount.  Eventually, a vaccine for the coronavirus will be found.  In the meantime, widespread testing plus contact tracing will allow the world economy to gradually return to a more normal existence.

OPEC+ will maintain supply cuts until oil is at least $50 to $60, if not higher.  Countries including Saudi Arabia and Russia (the two largest producers in OPEC+) need oil to be at least $50 to $60 to fund their states.

In brief, oil should return to at least $50 to $60, if not higher, within a few years.  Offshore oil drilling will gradually recover.  Offshore service vessel operations will be needed more and more.

SEACOR Marine is very well managed and appears to have greater upside than Tidewater—which we looked at last week (http://boolefund.com/tidewater-tdw/).  However, SEACOR Marine could run into liquidity issues, which makes it somewhat riskier than Tidewater as an investment.  SEACOR Marine has $69 million in cash and $420 million in debt.  $309 million of that debt is due in 2023 or later.  Thus, the company’s balance sheet is decent, but could still present problems as the offshore oil drilling recovery becomes more protracted.

Intrinsic value scenarios:

    • Low case: In a distressed scenario, SEACOR Marine may be worth 10% of current book value of $19.76 a share.   That’s $1.98, which is over 25% higher than today’s $1.55.
    • Mid case: SEACOR Marine is likely worth at least book value of $19.76 a share.  That’s over 1,170% higher than today’s $1.55.
    • High case: SEACOR Marine may be worth 150% of book value of $19.76.  That’s $29.64, which is over 1,810% higher than today’s $1.55.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

Tidewater (TDW)

(Image: Zen Buddha Silence, by Marilyn Barbone)

May 24, 2020

We continue with examples of Boole’s quantitative investment process in action.

Last week, we looked at TravelCenters of America (TA): http://boolefund.com/travelcenters-america-ta/

The week before last, we looked at Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Previously, we looked at Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Before that, we looked at Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at Tidewater (TDW), the largest OSV (offshore service vessel) owner globally.  Tidewater has 198 OSVs and is the most geographically diverse OSV operator.  Also, the company has become the most cost efficient OSV operator.  Tidewater has a young, modern fleet with high-specification tonnage.  Moreover, the company has a strong balance sheet, with $188 million in cash and $282 million in debt.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Tidewater:

    • EV/EBITDA = 3.85
    • P/E = 2.95
    • P/B = 0.21
    • P/CF = 2.06
    • P/S = 0.43

These figures make Tidewater one of the top twenty cheapest companies out of over two thousand that we ranked.  (The current market cap is $206 million, while current enterprise value is $308 million.  Normalized earnings is approximately $70 million.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

Tidewater has a Piotroski F-Score of 7.  (The best score possible is 9, while the worst score is 0.)  This is very good.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Tidewater has TL/TA of 23.4%, which is excellent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At Tidewater, insider ownership is approximately 3%.

Shareholder yield is the dividend yield plus the buyback yield.  The company has not bought back shares, but has instead issued shares.  The company pays no dividend.  Thus, shareholder yield is close to zero.

Each component of the ranking has a different weight.  The overall combined ranking of Tidewater places it in the top 20 stocks on our screen, or the top 0.8% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s investor presentation: https://investor.tdw.com/static-files/7165abb8-c732-424b-a90c-09998c6e8f83

Offshore oil drilling—which is what Tidewater supports—has slowed significantly due to a drop in oil demand caused by stay-at-home orders to deal with the coronavirus.  In response, OPEC+ has cut oil production by a record amount.  Eventually, a vaccine for the coronavirus will be found.  In the meantime, widespread testing plus contact tracing will allow the world economy to gradually return to a more normal existence.

OPEC+ will maintain supply cuts until oil is at least $50 to $60, if not higher.  Countries including Saudi Arabia and Russia (the two largest producers in OPEC+) need oil to be at least $50 to $60 to fund their states.

In sum, oil should return to at least $50 to $60, if not higher, within a few years.  Offshore oil drilling will gradually recover.  Offshore service vessel operations will be needed more and more.  Tidewater will be a survivor due to its high cash balance and low debt, whereas some other OSV operators may go bankrupt (like Hornbeck Offshore).  Also, as noted earlier, Tidewater is the lowest cost OSV operator.

Intrinsic value scenarios:

    • Low case: Tidewater is probably worth at least 50% of current book value (which is understated) of $24.77 a share.   That’s $12.39, which is over 140% higher than today’s $5.12.
    • Mid case: Tidewater is likely worth at least book value (which is understated) of $24.77 a share.  That’s over 380% higher than today’s $5.12.
    • High case: Tidewater may be worth 150% of book value (which is understated) of $24.77.  That’s $37.16, which is 625% higher than today’s $5.12.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.

TravelCenters of America (TA)

(Image: Zen Buddha Silence, by Marilyn Barbone)

May 17, 2020

We continue with examples of Boole’s quantitative investment process in action.

Last week, we looked at Teekay Tankers (TNK): http://boolefund.com/teekay-tankers-tnk/

Previously, we looked at Ranger Energy Services (RNGR): http://boolefund.com/ranger-energy-services-rngr/

Before that, we looked at Macro Enterprises (Canada: MCR.V): http://boolefund.com/macro-enterprises-mcr-v/

This week, we are going to look at TravelCenters of America (TA), which operates 232 travel centers in the United States.  (Franchisees operate an additional 29 travel centers.)  TA is in 44 states.

 

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for TravelCenters of America:

    • EV/EBITDA = 2.55
    • P/E = 2.90
    • P/B = 0.14
    • P/CF = 1.40
    • P/S = 0.01

These figures make TravelCenters of America one of the top ten cheapest companies out of over two thousand that we ranked.  (The current market cap is $77 million, while current enterprise value is $319 million.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here: http://boolefund.com/piotroski-f-score/

TravelCenters of America has a Piotroski F-Score of 8.  (The best score possible is 9, while the worst score is 0.)  This is excellent.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  TravelCenters of America has TL/TA of 59.8%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At TravelCenters of America, insider ownership is approximately 9%.

Shareholder yield is the dividend yield plus the buyback yield.  The company has not bought back shares, but has instead issued a small amount of shares.  But the company pays no dividend.  Thus, shareholder yield is close to zero.

Each component of the ranking has a different weight.  The overall combined ranking of TravelCenters of America places it in the top 10 stocks on our screen, or the top 0.4% of the more than two thousand companies we ranked.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items,  hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

Here is the company’s Q120 earnings presentation: http://s22.q4cdn.com/786577010/files/doc_financials/2020/q1/TA_Investor_Presentation_Q120_V3.pdf

Jonathan Pertchik was hired as the new CEO in December, 2019.  Pertchik has a track record of successfully turning around companies, including most recently InTown Suites, where he doubled EBITDA.

Intrinsic value scenarios:

    • Low case: Normalized EBITDA is at least $125 million.  TravelCenters of America is probably worth an EV/EBITDA of at least 4x, which works out to $31.01 a share.   That’s over 230% higher than today’s $9.29.
    • Mid case: If the new CEO Jonathan Pertchik is successful in cutting costs and turning around TravelCenters of America, then the stock is probably worth at least book value of $66.54 a share.  That’s about 615% higher than today’s $9.29.
    • High case: If the new CEO Jonathan Pertchik exceeds expectations, then normalized EBITDA may be $150 million and TravelCenters of America is probably worth an EV/EBITDA of at least 7x.  That works out to $97.12 a share, over 940% higher than today’s $9.29.

 

BOOLE MICROCAP FUND

An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:  http://boolefund.com/best-performers-microcap-stocks/

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.

 

If you are interested in finding out more, please e-mail me or leave a comment.

My e-mail: jb@boolefund.com

 

 

 

Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.