Research

Thank you for visiting our Research page. Below is a list of research we have published on certain companies that we follow. We welcome your feedback. Additionally, we are thinking of launching a subscription service that would offer early access to our research, along with some other features that investors might find useful (i.e. general portfolio management strategies, live blog updates highlighting our reaction to breaking news, etc.). If you would be interested in subscribing to such a service, please let us know.

Symbol: PBYI (“Editor’s Pick”)
Date Published: April 11, 2019

=> Puma Biotechnology: Investors Didn't Like The EU/Africa Partnership Terms, But The Risk/Reward Is Attractive.
Investment Thesis: PBYI dropped about 8% on the EU/Africa Nerlynx licensing deal news, likely because investors wanted an immediate buyout. But the risk/reward profile is favorable, given that the current stock price is fully supported from reasonable Nerlynx sales estimates in the US and EU for the currently approved indication alone (HER2+ post-Herceptin breast cancer). Any realized milestones (up to $345M from the EU/Africa deal) or expanded approvals in other variants of breast cancer would unlock even more value.

Symbol: TLRD
Date Published: March 21, 2019

=> Tailored Brands: A Continued Overreaction You Can Exploit
Investment Thesis: The poor comps guidance for 1QFY19 caused another sharp drop (this time over 25%). But we still see healthy cash flow, a favorable forward P/E, and a safe 9% dividend even if comps at Men’s Wearhouse and Jos. A. Bank stay at -4% for the entire year. This retailer is not “dying” and has been overly punished.

Symbol: TSQ
Date Published: March 15, 2019

=> Townsquare Media: The Ups And Downs Belie A Steady Business Underneath
Investment Thesis: TSQ is a very underfollowed stock that exhibits a lot of volatility. But the core marketing solutions segment has been largely responsible for generating $40M+ of cash the past two years, and guidance indicates that 2019 will be no different. With a market cap of only $104M and a 5% dividend, this is a great buying opportunity.

Symbol: MDR
Date Published: March 12, 2019

=> McDermott International: Righting The Ship
Investment Thesis: MDR again reported additional changes in cost estimates at the legacy CBI projects. However, the recent expected completion time of the Golden Pass contract win shows that they have learned from CBI’s past mistakes. If we believe 2019 guidance (and beyond), the forward P/E is very attractive.

Symbol: CHK
Date Published: March 04, 2019

=> Chesapeake Energy Corporation: The Thesis Is Playing Out
Investment Thesis: CHK’s 4Q18 results showed demonstrable progress on the two main transformation drivers: increased oil production (as a percentage of total production volume) and increasing adjusted EBITDA (per boe). They will still be FCF negative for 2019, but the market’s reaction indicates that it sees very solid earnings in 2020 and beyond.

Symbol: SVVC
Date Published: February 26, 2019

=> Firsthand Technology Value Fund: An Update
Investment Thesis: Since our previous article on SVVC was published, one of their top holdings, PHUN, has exhibited extreme volatility, soaring to $300+/share in early February before dropping back down to below $40/share. Management’s updated NAV/share value has barely budged, given that they do not yet value PHUN at market price due to the extreme volatility. We felt that an update was required to demonstrate that even with the collapse of PHUN’s share price, SVVC is still an asymmetric opportunity.

Symbol: XIN ("Editors' Pick")
Date Published: February 22, 2019

=> Xinyuan Real Estate Co.: Buy The Misplaced Fear As It Offers Solid Earnings And A Steady Dividend
Investment Thesis: XIN is a Chinese real estate developer and property manager that is trading at a very depressed valuation, which is common for Chinese companies of this nature. But we feel that the real estate projects outside of China (NYC, UK), the substantial investment by global private investment firm TPG, and the 28 consecutive quarters of paying a dividend significantly de-risk this. It may take awhile for investors to give it a more fair valuation, but in the meantime we will continue to collect the 8% dividend.

Symbol: SVVC ("Top Idea")
Date Published: February 5, 2019

=> Firsthand Technology Value Fund: A Quasi-Arbitrage Opportunity
Investment Thesis: SVVC is a publicly traded venture capital fund. Just like GSVC, another publicly traded venture capital fund, it has historically traded at a steep discount (50%) to the NAV/share of its combined holdings. Based on some recent IPOs of 3 of its top 5 holdings (one of which has increased in value astronomically), the calculated NAV/share has increased significantly since the last update from management. But the stock now trades at a 70%+ discount to NAV/share, creating a very compelling buying opportunity.

Symbol: CHK
Date Published: January 18, 2019

=> Positive Outlook For Chesapeake Energy
Investment Thesis: CHK recently announced preliminary 4Q18 results. In addition to meeting/exceeding production expectations, profitability per rig is improving. The merger with WRD continues to offer big upside for both companies, given the very low forward PEs they both exhibit, driven by merger synergies and CHK’s billions in NOLs.

Symbol: TLRD
Date Published: January 17, 2019

=> Tailored Brands: The Recent 40% Drop Is Unwarranted And Creates An Opportunity
Investment Thesis: Comps have come down a bit, but fears that this is the start of a downward trend are unwarranted. TLRD is still very profitable, debt is being paid down, the 6% dividend is safe, and the low forward PE offers a good entry point.

Symbol: ODP
Date Published: January 4, 2019

=> Office Depot: The December Sell-Off Was Unfair
Investment Thesis: The December market downturn clipped 30% off the market cap. The last 3 earnings reports have seen guidance either reaffirmed or raised, but the stock has now given back all the previous gains. With bankruptcy off the table, ODP is now focused on integrating CompuCom and continuing its transition into services, aiming to become a one-stop-shop for small and medium-sized businesses to obtain help with marketing, IT, accounting, etc. The safe 4% dividend, $100M share buyback that started January 1, and the low forward PE make this a top pick.

Symbol: OTIC
Date Published: November 15, 2018

=> Otonomy: Patience Can Well Be Rewarded
Investment Thesis: This is a very long-term investment, as the follow-up phase 3 Otividex trial will not read out until 2020. But the cash situation remains excellent, and the commercial prospects remain unchanged. The drift down from $6/share at the beginning of 2018 presents an excellent entry and accumulation point.

Symbol: MDR
Date Published: November 5, 2018

=> McDermott International: Profit From Sunk Costs!
Investment Thesis: Management’s poor due diligence on the CBI backlog (missing the cost overruns on legacy projects) and the very dilutive financing deal with Goldman Sachs justify shareholder anger. But the 43% drop in stock price is an overreaction, as these are now sunk costs, and the financials going forward look good.

Symbol: CHK
Date Published: November 1, 2018

=> Chesapeake Energy: The Baby In The Bathwater
Investment Thesis: Given the expected cost savings from the merger of $1-$1.5B by 2023, the ability of CHK and WRD to manage their debt together is certainly higher than their ability to manage it separately. Because of this, the negative market reaction to the merger announcement is unjustified and creates a buying opportunity.

Symbol: IRIX
Date Published: October 2, 2018

=> Iridex Corporation: A Pretty Safe Penny Stock, If There Ever Was Such A Thing
Investment Thesis: IRIX offers much less risk than what is usually found among stocks of such small market cap size. Prior to the drop from the recent public offering (which derisked the balance sheet), two consecutive earnings reports showed very strong growth from their Cyclo G6 laser platform, making it clear that they are on their way to disrupting the global glaucoma treatment market.

Symbol: AMSC
Date Published: July 11, 2018

=> American Superconductor: Where To Now?
Investment Thesis: The market was clearly not happy with the court settlement, given that after more than five years of litigation, AMSC was only able to recoup $58M in damages, even though losses in annual revenue stemming from IP theft at the hands of Chinese wind giant Sinovel totaled more than $500M. However, while news regarding the wind segment is pushing down the stock price, the company's other operating segment is set to begin commercialization of a technology that could revamp the electric grid nationwide, allowing neighborhoods that lose power from a storm or terrorist attack to regain it much faster than legacy technology allows.

Symbol: KERX ("Editors' Pick")
Date Published: July 6, 2018

=> Keryx Biopharmaceuticals and Akebia Therapeutics: Was The Reaction To The Merger Announcement Justified?
Investment Thesis: The commercial prospects of KERX’s lead drug Auryxia and AKBA’s lead candidate Vadadustat remain unchanged post-merger announcement. At a minimum, the value of the combined company should be equal to the value of each company separately, given the expected $250M in synergies. The downward market reaction seems unjustified, and offers a good entry point.

Symbol: STDY
Date Published: June 8, 2018

=> SteadyMed: The Merger Is Good, But There Is More Upside Left
Investment Thesis: The recently announced merger with UTHR was a nice reward for investors who bought the dip in September 2017. But the likelihood of Treyvent hitting the pre-specified commercial milestones seems high (given its advantages over market leader Remodulin in the pulmonary arterial hypertension space). Our NPV calculations show that STDY is still a great buy at this elevated price.

Symbol: TUSK
Date Published: April 22, 2018

=> Mammoth Energy Services: Buy The Dip From The Recent Blackout In Puerto Rico
Investment Thesis: Puerto Rican officials were justified in voicing strong criticism over the TUSK subcontractor that caused back-to-back blackouts across the island due to negligent electrical work. But the 15% hit to the market cap seems like an overreaction, given that the subcontractor has already been fired, and prior to the dip, TUSK's stock price had been on a tear, driven largely from their quality work rebuilding Puerto Rico's electrical grid, which had garnered them several contract extensions.