CASE STUDY: TravelCenters of America (TA)

October 3, 2021

Our investment in TravelCenters of America (TA) has been one of our best ideas thus far.

I first wrote up the idea of TA in May 2020 here:

At the time, the stock at $9.29 a share was extremely cheap based on our five measures of cheapness:

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

These figures made TravelCenters of America one of the top ten cheapest companies out of over two thousand that we ranked.

However, just because a stock is quantitatively cheap does not mean that it’s a good investment.  In fact, before launching the Boole Microcap Fund on 6/9/20, I had bought TA at quantitatively cheap prices.  But the company was being chronically mismanaged and so the stock was deservedly cheap.  I ended up selling at a loss.  But this experience is what prepared me to buy TA for the Boole Microcap Fund.

Studies have shown that if you systematically buy quantitatively cheap stocks, then your portfolio will beat the market over time.  This is called deep value investing, which is what the Boole Microcap Fund does.  See this classic paper:

However, if you’re doing deep value investing, roughly 57% of your quantitatively cheap stocks will underperform the market.  It’s only because the other 43% increase a great deal that the overall deep value portfolio beats the market over time.

But there are ways to decrease the number of cheap but underperforming stocks in your deep value portfolio.  This will boost your long-term performance.

One example is the Piotroski F_Score, which the Boole Microcap Fund uses.  A high F_Score indicates improving fundamentals.  See:

Another thing that can greatly improve your odds is if new management with a track record of success is brought in to turn around an underperforming company.  This is what happened with TravelCenters of America.

Turnaround specialist Jon Pertchik was named CEO of TravelCenters of America in December 2019.  Pertchik has a track record of significantly improving the performance of underperforming companies.

With Pertchik in charge, it now seemed probable that TravelCenters of America would be worth at least book value of $66.54 per share, which was 615% higher than its May 2020 price of $9.29.

Furthermore, the company could be worth close to $100 a share if Pertchik’s turnaround efforts exceeded expectations.

We bought TA stock in July 2020 at $13.04.  Today the stock is at $53.14.  The position is up over 300% so far.  We sold some along the way, but have kept most of it because Jon Pertchik has set very aggressive goals and is meeting or exceeding those goals.

Normalized EBTIDA is approximately $300 million (trailing EBITDA is $190 million).  Normalized earnings are about $200 million.  Normalized cash flow is close to $300 million.  The current market cap is $657 million while current enterprise value (EV) is $599 million.  That means that:

    • EV/EBITDA = 2.0
    • P/E = 3.29
    • P/B = 1.17
    • P/CF = 0.29
    • P/S = 0.14
  • TA stock is still cheap.

But how cheap is it?   What is TA’s intrinsic value?

Intrinsic value scenarios:

    • Low case: The current book value per share is $45.63.  That is about 14% lower than today’s $53.14.
    • Mid case: Normalized EBITDA is about $300 million.  A conservative EV/EBITDA is 5.0.  That puts EV (enterprise value) at $1,500 million.  The market cap would be $1,558 million, which works out to $106.86 per share.  That’s over 100% higher than today’s $53.14.
    • High case: Normalized EBITDA could reach $350 million.  At an EV/EBITDA of 6.0, the EV would be $2,100 million.  The market cap would be $2,158 million, which works out to $148.01 per share.  That’s over 175% higher than today’s $53.14.

Insider ownership is 15%, which is pretty good.

The Piotroski F_Score is 5, which is mediocre.  But the company is improving fast and is investing heavily to create the best customer experience.



Since the Boole Microcap Fund bought TA stock at $13.04, the stock is up over 300%.

Today, thanks to the great performance of the new CEO Jon Pertchik and everyone at TA, the stock still appears cheap.  $106.86 a share is 100% higher than today’s $53.14.

Also, $106.86 is about 720% higher than $13.04.



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:

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.




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.