Selected Session Highlights from Best Ideas 2019 · Annual investment conference, fully online, hosted by MOI Global, January 10-12, 2019 Page 3 of less than 0.6x net debt to cash

Annual investment conference, fully online,

hosted by MOI Global, January 10-12, 2019

Page 1

Selected Session Highlights from Best Ideas 2019

Note: The following idea snapshots have been provided by the respective instructors or compiled by

MOI Global using information provided by the instructors. The following is provided for educational

purposes only and does not constitute a recommendation to buy or sell any security.

SAHM ADRANGI, CHIEF INVESTMENT OFFICER, KERRISDALE CAPITAL MANAGEMENT

Sea Limited (US: SE) is an internet company based in Singapore and focused on the Southeast

Asian market (“Sea” stands for South East Asia). It has three verticals: (i) a gaming distribution

business (called Garena), (ii) an e-commerce business (called Shopee) and (iii) an electronic

payments business.

The gaming business, which Sahm estimates to be worth ~$4 billion, generates substantial FCF and

is the dominant distributor of video games from publishers such as Tencent, Riot Games, and

Electronic Arts. The investment thesis, however, revolves around the e-commerce business, which is

aggressively expanding and vying to become the dominant e-commerce platform (similar to Alibaba,

Amazon) in Southeast Asia, focusing on the markets of Indonesia, Taiwan, Malaysia, Vietnam,

Thailand, and Philippines. Backed by Tencent (which owns 33% of the company), SEA’s Shopee

business is a #1 or #2 player in Indonesia and a top player in the other markets as well, rapidly

gaining market share from incumbents.

The market recently valued Shopee at only $1-2 billion, but given the large addressable market,

Shopee should be worth multiples of that. Shopee and/or Sea may soon get an investment from a

strategic investor with global e-commerce ambitions (such as Walmart, Amazon, Alibaba), which will

likely value the Shopee business at a premium.

GAURAV AGGARWAL, PORTFOLIO MANAGER, METIS CAPITAL MANAGEMENT

Time Technoplast (India: TIMETECHNO) is the leading large-size plastic industrial drum

manufacturer (market size of ~$1.5-2 billion) and has a dominant position in Indian plastic industrial

packaging, used chiefly by the chemical, petrochemical, and food & beverage industries.

The management team is passionate, innovative, and transparent. Insiders own 51% of the equity.

From 2010-2014, the company expanded aggressively and has become a market leader in Southeast

Asia and the Middle East. An increased percentage of global sales of industrial packaging comes

from Asia (up from 20% to 35% over the last decade due to multiple industries shifting to a lower cost

base). India is the leader in Asia for usage of plastic drums/containers with about 55% plastic, 45%

metal. In Asia, the mix is closer to 15/85, so a runway of growth exists as the company converts

customers to safer, longer shelf life, and lower lifetime cost products.

In light of an ongoing focus on value-added products and 70+% capacity utilization in the overseas

industrial packaging business (~30% of revenue), Gaurav expects ROCE to continue to increase

toward 20+% for the next few years.



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Due to weak small-cap market sentiment and extrapolation of FQ2 numbers, the valuation is

compelling. In FQ2, EBITDA margins were affected by unusually volatile material costs, which will be

passed on with lag in FQ3 and FQ4. Gaurav estimates 50+% upside based on DCF analysis and

70+% upside based comparable company multiples.

DANIEL BALDINI, MANAGING PARTNER, OBERON ASSET MANAGEMENT

Wizz Air (UK: WIZZ) is the largest airline in Central and Eastern Europe. Similar to Ryanair, Wizz

operates as an ultra-low-cost carrier, a model its management team has executed well in the past,

creating substantial shareholder value across multiple companies. With significantly lower costs than

all competitors except Ryanair, Wizz has taken share in a market which itself has grown quickly.

Wizz is likely to expand its cost advantage in the future thanks to an order book for attractively priced

Airbus aircraft with improved unit costs and lower financing costs due to its recently awarded

investment grade credit rating.

Wizz should grow earnings at ~20% CAGR over the next five years yet is valued at only 14x earnings,

below its average historic multiple.

BOGUMIL BARANOWSKI, CO-FOUNDER AND PARTNER, SICART ASSOCIATES

AT&T (US: T) is a leading U.S. telecom company. The stock is down, cheap, and out of favor. A

boring name for exciting times, AT&T is a stable, slowly growing business with a healthy ~6.5%

dividend. The shares trade near a multi-year low and at a historically low valuation. The business

should benefit from 5G data rollout over the next few years.

The Time Warner acquisition offers significant long-term potential, but it has been a source of

distraction so far, both for management and investors. The nature of AT&T’s business suggests it

should do relatively well in a recession.

DAVID BARR AND AMAR PANDYA, PENDERFUND CAPITAL MANAGEMENT

Athabasca Oil (Canada: ATH) is a Canadian small-cap oil and gas producer focused on exploration

and development in Alberta’s Western Canadian Sedimentary Basin. The company has a portfolio of

long-life, low-decline thermal oil assets, light oil assets and long-term development assets. The

company has had a tumultuous history as one of the largest Canadian IPOs, subsequently facing

issues and controversies, culminating in a 90+% drop in the share price. Over the last few years a

new management team has transformed the business, diversifying assets, finding creative ways to

raise capital, entering JV partnerships, and completing an accretive acquisition. The company

recently announced the sale of non-core infrastructure assets, which were receiving no implied value,

for half the company’s market cap. The stock trades at 0.3x NAV, ~3x P/CF, with pro forma leverage



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of less than 0.6x net debt to cash flow. Amar expects proceeds from the recent asset sale to be used

for redeeming high-yield debt (accretive to cash generation), creating a catalyst for the shares.

Diversified Royalty (Canada: DIV) is a Canadian small-cap that acquires top-line royalties from

multi-location businesses and franchisors. The company holds royalty rights to three well-tenured and

defensible businesses and is seeking accretive acquisitions with the surplus capital on the balance

sheet. The company is led by founder Sean Morrison who has a unique ability to source and structure

royalty transactions in the Canadian market. Due to a selloff in Canadian small-caps, interest rate

fears, and lack of news flow, the shares have declined and trade near 52-week lows, with an 8%

dividend yield. This is a discount to less diversified Canadian royalty peers, which have historically

traded at 5-7% yields. Once cash is fully deployed, the company should re-rate given the benefits of

diversification and superior brand quality of the underlying businesses. Depending on various

acquisition scenarios, DIV should trade at $3.50-4.50 per share, or roughly 40-60%.

JOHN BARR, PORTFOLIO MANAGER, NEEDHAM FUNDS

PDF Solutions (US: PDFS) is a semiconductor data analytics company emerging from a period of

investment in new products. It supplies software and other services to improve manufacturing yield for

semiconductor manufacturing companies. PDFS has a market cap of $275 million, about $100 million

of cash, and annual revenue of nearly $100 million. The company’s SaaS offering for big data

analytics, Exensio, has ~$40 million of annual revenue and is growing 30% annually. Its solution for

next-generation chip inspection and control, Design-for-Inspection, is in use at a leading

semiconductor manufacturing company. At $200 million of revenue, the business could earn $1.50-

2.00 per share. Risk exists with regard to new products and their effect on revenue and earnings.

PDF has cash of $3 per share and $50-60 million of royalties expected over the next few years, which

could be worth another $1.50-1.80 per share. Exensio could be valued at 3-5x revenue, or $3.50-6.00

per share. These elements total $8-11 per share. Should the company’s lead Design-for-Inspection

customer not come to terms on a next order, this part of the business might not have much value in

the short term. VIEX Capital Advisors recently disclosed a 6% equity stake. Should the company fail

to execute, VIEX might push for structural changes or a sale.

JASON BENOWITZ, SENIOR PORTFOLIO MANAGER, THE ROOSEVELT INVESTMENT GROUP

Aptiv (US: APTV) is the leading Tier I automotive supplier in electrification and autonomous

technology. This is supporting strong win rates and pipeline growth above the industry, which Jason

expects will translate into future market share gains, outsized growth in content per vehicle, and profit

margin expansion.

Last year’s spinoff of the powertrain business has unlocked value by creating a pure-play, focused

leader in attractive vehicle technologies, to which investors could ultimately assign a premium

multiple. Aptiv management has guided conservatively, setting the company up to exceed

expectations in the medium term.



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Jason’s valuation analysis implies substantial upside in his base case scenario, while also suggesting

that downside is limited, even under a fairly draconian bear case. Investors may have priced in too

much concern about the automotive cycle and the U.S.-China trade dispute, while overlooking the

company’s leadership in markets with strong secular growth.

CHRIS BLOOMSTRAN, CHIEF INVESTMENT OFFICER, SEMPER AUGUSTUS INVESTMENTS GROUP

Cummins (US: CMI) provides diesel and natural gas engines and engine-related component

products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air

handling systems, transmissions and electric power generation systems. Cummins sells to OEMs,

distributors, and other customers. The network of ~500 wholly-owned and independent distributor

locations spans across 7,500 dealer locations in 190+ countries.

Long-standing customers include primary heavy and medium-duty truck manufacturers, including

PACCAR, Daimler Trucks North America, Navistar International, Volvo, and Fiat Chrysler. The stock

closed 2018 at $133 per share, down nearly one-third from the all-time high reached in early 2018.

The business will have produced $23+ billion in revenue and earned $2+ billion in profit in the year

just ended. Led by a shareholder-focused and long-tenured management team, returns on equity and

capital are 20+%.

The stock discounts the inevitable economic cycle as well as concerns about electrified power as a

disruptor to diesel engine technology. At 9.6x current-year expected earnings, the investment case

rests on both risks being overstated and over-discounted.

PATRICK BRENNAN, PORTFOLIO MANAGER, BRENNAN ASSET MANAGEMENT

Multiple financial names have experienced substantial declines over the past three months as

leverage concerns, tax-loss selling and recession/interest rate fears have all led investors to quickly

dispose of “risk off” names. Blind selling has driven shares of Jefferies Financial Group ($6.3 billion

market cap) and Permanent TSB Group Holdings (~€730 million market cap) far below a reasonable

fair value estimate.

Jefferies Financial (US: JEF): Despite CEO Richard Handler’s strong long-term track record at

Jefferies, investors have never embraced the company following the 2013 merger with Leucadia. But,

JEF trades (~70% of tangible book value) far below reasonable fair value estimates and below our

downside valuation estimates. A series of value enhancing actions (National Beef/Garcadia

monetizations, capital return from Jefferies, aggressive share repurchases) should serve as a catalyst

for a hated stock.

Permanent TSB (UK: IL0A): While depressing macro headlines, negative interest rates and no-deal

Brexit fears dominate any discussion of European financial names, the Irish economy continues to

post solid economic growth and experience a red-hot housing market. For Irish banks, this favorable

backdrop is masked by government ownership stakes and high non-performing loan (NPL) ratios.



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Trading at below 40% of tangible book, TSB’s bombed-out valuation offers substantial downside

protection and allows investors several ways to win. Meaningful NPL reductions following recent

securitization announcements should allow aggressive capital return in 2019/2020 with dividends

amounting to a sizeable percentage of the bank’s total value. While interest rates have been low for

years and may stay this way, even small increase would offer meaningful net interest income upside.

Finally, a sale is possible. Several U.S. financial names generated huge gains following government

exits, and this could repeat in Ireland. A long-rumored sale of TSB could repay taxpayers, drive

synergies and offer the highest shareholder returns.

THOMAS BUSHEY, PORTFOLIO MANAGER, SUNDERLAND CAPITAL PARTNERS

Yatra (US: YTRA), headquartered in India, is an online travel agency catering to the evolving travel

industry in India. Yatra is the largest corporate online travel agency and the second-largest consumer

online travel agency in its market. It is well-positioned for the coming growth in travel in India. The

company is well-run, as evidenced by revenue growth of 30+% and the acquisition of leading

corporate travel agency Air Travel Bureau.

The vehicle through which YTRA went public has not been conducive to garnering a long-term

shareholder base. Since the founding in 2006, $200+ million has been invested in the company,

exceeding recent enterprise value. In essence, we are buying the business for about half the

investment it took to build it over the last twelve years. Yatra trades at a major discount to peers on

the basis of sales (and a reasonable multiple of the profitable corporate travel earning stream). The

attractive corporate business has strong growth, 15-25% margins, and has been subsidizing the

leisure business.

The company has sufficient cash to operate until it reaches cash flow breakeven on a combined

basis. Yatra’s future profile of 20-30% top-line growth justifies a higher multiple, as suggested by the

discount to peers. Idiosyncratic trading events and turnover in the shareholder base notwithstanding,

the quality of the business is underappreciated as the online travel market in India has a long runway

of growth ahead.

JOHN CARRAUX, PORTFOLIO MANAGER, PUNCH & ASSOCIATES INVESTMENT MANAGEMENT

Drive Shack (US: DS) is a unique golf entertainment business with significant growth potential that

recently traded below the liquidation value of the company’s assets. Under the leadership of a proven

management team that is aligned with shareholders, John believes that Drive Shack should be able to

build a franchise of golf entertainment locations over the next 3-5 years that will create shareholder

value. The share quotation does not reflect this growth potential as the recent market valuation is

below the cash and securities on the company’s balance sheet.



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EDWARD CHANG, PORTFOLIO MANAGER, PLEDGE CAPITAL

The Joint Corp. (US: JYNT) is the largest chiropractic chain in the U.S., employing over one

thousand of the sixty thousand licensed chiropractors in the country.

The largely franchised chain has a low-cost direct-payor model that eliminates most paper-work and

is focused on short convenient visits. Their clinics charges less than the out of pocket expense or co-

payment / consumer’s share of co-insurance; and significantly less than total fee charged by other

chiropractors. This has helped the chain grow franchise system sales from ~$22 million to ~$150

million in the last five years, a ~45% CAGR.

With new unit economics improving, unit growth is accelerating. There is still substantial room for the

chain to grow into its long-term unit potential (4x+).

BEN CLAREMON, SECURITIES ANALYST, COVE STREET CAPITAL

Axalta Coating Systems (US: AXTA) is a leading manufacturer and distributor of performance

coatings, mainly serving automotive, commercial vehicle and industrial end markets. The company

was once part of DuPont but was sold in 2013 to Carlyle Group, who then took the company public in

late 2014.

After a few years of restructuring and consistent operational improvement, Axalta has become a high-

margin, high-return, FCF-generating company whose stock has been under pressure due to a number

of issues that Ben believes to be transitory in nature. Axalta’s end markets are most certainly

impacted by short-term issues such as the cyclicality in auto manufacturing and downturns within

emerging market economies. Over the long term, Axalta should be able to grow revenue and enhance

margin as it benefits from material tailwinds.

Due to Axalta’s leading positions in the refinish and light vehicle end markets, the company has the

opportunity to be an industry consolidator or to be acquired as the global coatings players continue to

focus scale. Both Akzo Nobel and Nippon Paint expressed an interest in Axalta in late 2017. The

recent decline in the stock price has made the valuation more attractive, and with Berkshire Hathaway

as the largest shareholder, there is also a possibility that Berkshire makes a bid for the company.

KEVIN COPE, CHIEF INVESTMENT OFFICER, HUTCHINSON CAPITAL MANAGEMENT

National Oilwell Varco (US: NOV) is the dominant supplier of the equipment used by oil and gas

exploration companies to find and extract energy resources. With #1 market share in 80% of its 28

product lines, and no position lower than #3, the company has the scale and financial resources to

adapt to the changing energy exploration market. As E&P companies have transitioned their capex

budgets from large offshore projects to unconventional land drilling, the intensity of the equipment

they consume has risen sharply. NOV has “followed the money” and transitioned their product

offerings to match client needs.



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NOV offers an opportunity to buy a company in the late stages of transition at generationally low

industry conditions. This investment may appeal to (i) long-term buyers who look through the cycle,

and (ii) opportunistic investors who transact within the cycle to take advantage of valuations that

reflect overly pessimistic expectations.

The devastating downcycle for oil-related companies, which began in June 2014, has been so severe

that it necessitated transformation for providers like National Oilwell Varco. The company’s superb

management team navigated the treacherous cycle while transforming the company from one

dependent on large offshore rig construction to one more broadly diversified. The company has a

massive installed base with stable proprietary aftermarket revenue.

At the recent market quotation, investors are getting stable cash flow from the onshore business plus

a free embedded option on the offshore recovery. NOV’s business has low capital intensity but sells

to clients that commit large sums of capital to their businesses. Strong FCF generation enabled NOV

to pivot the business model toward shifting E&P spend while also developing the emerging

technologies necessary to extend its competitive advantage. We use long-term cash Economic Value

Added models to estimate intrinsic value. Traditional multiple analysis is not constructive for this

cyclical company that has undergone such a significant transformation.

JAMES DAVOLOS, VICE PRESIDENT AND PORTFOLIO MANAGER, HORIZON KINETICS

Viper Energy Partners (US: VNOM) was taken public in 2014 by Diamondback Energy (US: FANG)

in order to monetize a royalty position in the Midland Basin on acreage owned and operated by

Diamondback. The transaction facilitated an independent valuation for royalty acreage, which requires

minimal working capital, as compared to capital-intensive operated acreage. Diamondback maintains

a sizable stake in Viper Energy.

In contrast to most public energy “royalty” companies at the time, Viper was the first growth-oriented

company, which has been facilitated by drop-down transactions with the parent. Viper has expanded

beyond sponsored transactions from the parent and acquired assets from third parties. Royalty

acreage has grown by 4.4x since the IPO.

Viper and its peers have limited acquisitions to cash flow accretive deals. This has resulted in an

accretive acquisition mechanism, whereby the company can purchase acreage at a 50+% discount to

the implied value of the acreage. A critical variable to this compounding mechanism is capital

structure; historically the company has only utilized short-term debt in the form of a revolving credit

facility to close acquisitions. Subsequently, the company issued shares to pay down the revolver. To

the extent that the company can issue shares at a material premium to the acquired acreage, the

transactions are accretive on a cash flow and NAV basis.

Based on trailing distributions, Viper trades at a forward distribution yield of ~8%. While declines in oil

prices will impact this rate in the short term, James expects organic production growth and hub basis

differentials to mitigate the impact over the next year.



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STEPHEN DODSON, PORTFOLIO MANAGER, BRETTON FUND

Carter’s (US: CRI) is the largest children’s apparel maker in the U.S. Founded 150+ years ago, the

company has consistently and steadily grown, establishing a dominant position in baby clothes,

counting 80% of new families as customers. Recently hurt by the closings of Toys R Us and Bon-Ton,

the brand remains strong and customers will find other ways to buy Carter’s goods. Trading at ~12x

earnings (the lowest multiple since 2010), Stephen believes this consistent grower is a bargain.

MESUT ELLIALTIOGLU, CHIEF INVESTMENT OFFICER, TALAS TURKEY VALUE FUND

Arcelik A.S. (Turkey: ARCLK) is the leading household appliance manufacturer, produces and

markets consumer durable goods, consumer electronics, small home appliances and kitchen

accessories as well as in the provision of after-sales services. With eighteen factories in seven

countries (Turkey, Romania, Russia, China, South Africa, Thailand, and Pakistan), marketing and

sales organizations in 33 countries, Arcelik provides goods and services in 130+ countries.

Arcelik is by far the leader in Turkey with roughly 50% market share. It is also the third-largest home

appliance company in EMEA, the UK, France, and Poland. Arcelik is the number-one appliances

company in Romania, South Africa, and Pakistan. Arcelik’s focus is on international growth via market

share gains and organic growth in the underpenetrated markets of Sub-Saharan Africa, India, and

South East Asia.

Operations outside Turkey comprise 65% of Arcelik’s revenue. The economic slowdown in Turkey

has led to a substantial 55% decline (in USD terms) in Arcelik’s share price. The recent market

capitalization of Arcelik is near a ten-year low of $1.9 billion, as compared to $4.2 billion in 2017.

Arcelik trades at a 2020E P/E of 6x, EV/EBITDA of 4x, and EV to revenue of 0.4x.

AVI FISHER, FOUNDER AND CHIEF INVESTMENT OFFICER, LONG CAST INVESTMENT ADVISORS

Intelligent Systems (US: INS) Intelligent Systems is a micro-cap company ($120 million market cap,

$100 million EV) that traditionally licenses card issuer processing software and is on the verge of

selling its largest license to date (to an undisclosed customer, but “scuttlebutt” is Goldman Sachs /

Marcus). Concurrently, the company is moving into the processing-as-a-service side of the business,

which has substantially higher recurring revenue and incremental margin component, and where it

has been gaining traction.

Revenue doubled from 2015 to 2016 on the processing business and will double again from 2017 to

2018 to $20 million on processing + customization around the pending license sale. Management is

guiding to continued growth next year as it expects to book the license and backfill that with continued

growth in processing revenue. The company has a history as a “holdco” but is down to one operating

segment. The founder and long-time CEO owns 25% of the stock.



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RICK FUJIMOTO, MANAGING PARTNER, SILVERADO INVESTMENT PARTNERS

Tech Data Corporation (US: TECD) is one of the world’s largest wholesale distributors of technology

products. It distributes PC systems, mobile phones, printers, consumer electronics, data storage,

networking, servers, and more. TECD connects 1,000+ hardware and software vendors like Apple,

Cisco, HP, and Microsoft to 125,000+ value-added resellers that serve end users.

Tech Data serves as a key link in the technology ecosystem because it allows resellers (IT companies

serving small businesses) fast and efficient access to any technology product without having to

maintain or negotiate pricing for their inventory. With revenue of $38 billion and customers in 100+

countries, Tech Data has built a strong and geographically diverse network.

While the company appointed a new CEO in 2018, Richard Hume was promoted from within. The

company has a good capital allocation record, with large buybacks and accretive acquisitions. Net

income for the year ended January 31, 2019 should approach $315 million, but Rick estimates the

company actually earns more, making it attractive at the recent market price.

RENO GIANCOLA, PORT INVESTMENTS, AND JEFF HALES, PROVIDENT CAPITAL

Chemtrade Logistics (Canada: CHE.UN) is a global provider of industrial chemicals, diversified

across three operating segments: sulphur products, water solutions, and electrochemcials. Unlike

traditional chemicals companies, Chemtrade’s business is stable with little commodity exposure or

economic sensitivity. Chemtrade had an awful 2018, which has created an attractive opportunity for

long-term investors.

The company faced rail congestion issues, extensive plant maintenance, costly litigation, a reduction

in sulfur supply from a key supplier, and margin pressure in its municipal water solutions business

driven by a lag in passing-through raw materials inflation. These issues have been resolved, and

despite positive developments and strong/improving fundamentals for the sulphur products and

electrochmcials businesses, the stock languishes near seven-year lows.

At 6.5x 2019E EBITDA, ~16% FCF yield, and ~11% dividend yield, the shares reflect a high degree of

pessimism, which is unwarranted. Despite a challenging 2017-2018, the company has a long history

of creating value for shareholders. Since the IPO in 2001, total shareholder return has been 11+% per

annum, almost double the S&P/TSX Composite Index over the same period. Reno and Jeff estimate

the company is conservatively worth $16-18 per share, representing roughly 50-100% upside.

ERIC GOMBERG, FOUNDER, DANE CAPITAL MANAGEMENT

NRC Group (US: NRCG) is a recently public environmental services company that trades at a

substantial multiple discount to peers despite a superior growth outlook (20%+ EBITDA growth) over

the next several years (at least through 2020). NRC is largely unknown due to becoming public via

SPAC, but Eric believes strong fundamentals will quickly drive investor awareness. The business has

high barriers to entry, a diverse customer base of over 5,000 customers, and exceptional recurring



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revenue characteristics for non-discretionary spend, making the business largely anti-recessionary

and defensive.

The company has three business units, a standby services segment for potential oil spills or other

potential accidents, with 99% annual customer retention and incremental margins in excess of 75%,

an environmental services unit, with over 3000 customers, for low cost (sub $10,000), non-

discretionary remediation activities, and waste disposal, with EBITDA margins of ~50%. Post 2019, in

which cap-ex will be elevated to complete three new landfills (which will have payback periods of 4-5

quarters), cap-ex will be 3-4%, resulting in tremendous free cash flow (2020 should exceed $60mn

versus a sub-$300mn market cap).

At a current 6.2x 2019 EV/EBITDA, shares trade at over a four-EBITDA turns discount to comps (over

10x), which Eric believes is unsustainably low. Eric note significant insider ownership (JF Lehman, the

“seller” still owns 65% of the company), and think it’s worth mentioning that the SPAC sponsor’s first

transaction (BLBD) is up 90% since completion. Eric believes shares of NRCG have the potential to

double over the next 6-12 months.

STEVE GORELIK, PORTFOLIO MANAGER, FIREBIRD MANAGEMENT

Siauliu Bankas (Lithuania: SAB1L) is the largest locally owned bank in Lithuania. The country is one

of the fastest-growing economies in EU, driven by a successful restructuring following the crisis of

2008-2009. Siauliu Bankas translates local ownership into a competitive advantage through better

customer service and faster lending decisions as compared to foreign competitors. Since the

consolidation of two smaller competitors in 2015, the bank’s loan book grew 28% through the end of

2017, compared to 18% growth for the Lithuanian banking sector.

The bank is highly profitable, generating sustainable ROE of 15+%, but recently traded at 8x P/E and

1x book value due to a perceived share overhang from a recently dissolved shareholder agreement.

Upcoming catalysts include higher dividends from the newly approved dividend policy and potential

M&A as the European Bank for Reconstruction and Development, a 26% shareholder, looks to

monetize its stake in the company. Even without a re-rating, an investment in Siauliu Bankas may

deliver ~25% annually over the intermediate term due to the compounding of capital.

BRIAN GROSSO, PORTFOLIO MANAGER, JBF CAPITAL

Takigami Steel (Japan: 5918) is a micro-cap construction company at a discount to liquidation value,

with improving governance and capital allocation. The core construction business is profitable and the

stock trades at one-third of liquidation value. Most of the assets are non-core and invested in stocks,

bonds, real estate, and cash.

In the last six years, corporate governance in Japan has improved considerably, and there are many

visible improvements at Takigami since the founding family took back control of management in 2010.

The company has raised the dividend and deployed cash for share repurchases, real estate

investments, and a small acquisition — all at good prices.



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While no liquidation or other value-unlocking event like a management buyout has been announced,

the governance improvements are promising. In recent years, numerous other small Japanese

companies have suddenly unlocked shareholder value with little notice. Even if one must wait eight

years, value is accumulating and the expected return approximates 270%, or ~18% annually.

BRIAN HENNESSEY, PORTFOLIO MANAGER, ALPINE WOODS CAPITAL

Thor Industries (US: THO) Thor Industries is the largest manufacturer of recreational vehicles in the

U.S., with 48% market share. Thor will soon be the only truly global player, driven by the acquisition of

German private RV maker Erwyn Hymer, which has the largest share of the European RV market at

29%. Thor has a long history of financial and operational prudence, with a nearly forty-year history of

uninterrupted profitability and 25 consecutive years of positive FCF in a cyclical industry.

As the acquisition (expected to close in January 2019) will leverage the balance sheet (2.4x net debt

to 2018 pro forma EBITDA) at what is feared to be the top of the cycle, Thor’s stock has been cut by

nearly 70% from a peak in January 2018 and recently traded at a pro forma P/E of 7.0x and a price-

to-book value multiple of 0.7x. The acquisition immediately adds at $2.25+ per share to earnings and

is a catalyst as investors do their diligence on the target’s growth trajectory.

A 10x multiple would place the stock at $70+ per share, or ~40% upside. If the downcycle is milder

than feared, which seems plausible as dealer inventories approach tight levels, the upside may be

even greater.

NAVEEN JEEREDDI, CHIEF EXECUTIVE OFFICER, JEEREDDI PARTNERS

Micron Technology (US: MU) is a global manufacturer of dynamic random access memory chips

(DRAMs), flash memories (NANDs), semiconductor components, and other memory modules for the

computer industry. Micron trades at less than 4x LTM earnings and EBIT. The memory industry is a

profitable oligopoly (consisting of three DRAM players and six NAND players) characterized by short

pricing cycles of memory products and strong secular demand trends including cloud computing,

mobile devices, artificial intelligence, gaming platforms, autonomous vehicles, and the internet-of-

things applications. Micron has an ~$40 billion market capitalization with no debt and has been a

public company for many decades. Micron investors, having experienced tremendous cyclical feast-

or-famine swings in the past, possess a reflexive distaste for Micron in down cycles, resulting in a

bargain valuation for the business on multiple metrics.

Micron’s industry supply and demand structure have vastly improved over the last few years. The

industry has consolidated on the supply side with more rational profit-oriented players. Demand has

exploded and diversified with new sustainable long-term secular drivers. Barriers to entry are higher

(and increasing) due to the complexity and capital intensity of the sector. Management is owner-

oriented and has implemented an aggressive accretive share buyback program.



Page 12

CURTIS JENSEN, PORTFOLIO MANAGER, ROBOTTI & COMPANY ADVISORS

Tidewater Midstream & Infrastructure (Canada: TWM), headquartered in Calgary, Alberta, provides

oil and gas midstream services, including gathering, processing, and transportation and NGL

marketing and extraction as well as storage services. The company receives fees under long-term

contracts for its services. Management started the company by opportunistically buying up distressed

assets during the energy downturn of 2015-16.

Commodity prices in Canada remain depressed, owing to a lack of takeaway and egress options such

as those provided by the company. The shares trade at a meaningful discount to any reasonable

assessment of economic value, likely owing to poor sector sentiment and the company’s small size

and perceived quality. Two large projects slated for completion in 2019 should improve the company’s

scale, cash flows, counterparty risk, and asset quality.

Birch Hill Equity, a Toronto-based private equity firm, recently acquired 22% of the shares.

Tidewater’s CEO is paid C$1 per year and has committed to purchasing stock in the open market

every year (he owns more than five million shares).

CHRIS KARLIN, CHIEF INVESTMENT OFFICER, AQUITANIA CAPITAL MANAGEMENT

Diamond Hill Investment Group (US: DHIL) is an institutional asset manager. Using a value

investment philosophy, DHIL manages $22 billion in assets under management across thirteen equity

and credit strategies. DHIL serves individual and institutional clients through mutual funds and

separate accounts. Valuations have fallen sharply for active asset managers over the last two years

despite continued growth at DHIL. At a recent valuation of 5x EV/EBIT, Diamond Hill trades well

below its average EV/EBIT of 9x from 2013-2017 and below an estimated private market value of 10x

EV/EBIT. This discount was exacerbated in a sharp selloff in Q4 2018. While the market capitalization

is $580 million and enterprise value is $357 million, DHIL has no analyst coverage. With a solid

balance sheet and shareholder-friendly management, Chris expects that the valuation discount will

not persist. The company has announced a $50 million share repurchase plan. Chris estimates value

at $230 per share, or nearly 50% above the recent market quotation.

STEVEN KIEL, CHIEF INVESTMENT OFFICER, ARQUITOS CAPITAL MANAGEMENT

Westaim (Canada: WED) is an investment company with two subsidiaries: Houston International

Insurance Group (HIIG), a specialty property and casualty insurance company that is up for sale, and

Arena Group, a growing credit fund. Westaim as a whole currently trades for 20% below book value.

They have a shareholder friendly culture, led by investment veterans originally from the Canadian

investment company, Goodwood. In addition to its two current subsidiaries, Westaim is pursuing

strategic investments in the financial services industry, providing upside optionality. An investment in

Westaim gives you access to good capital allocators at a cheap price with low risk.



Page 13

ASHISH KILA, DIRECTOR, PERFECT GROUP

DCB Bank (India: DCBBANK) operates in a sector in India that is experiencing large value migration.

The company is young and dynamic, with a long runway to compound capital, backed by an

“intelligent fanatic” with a proven track record. Revenue and earnings have grown at a CAGR of 20%

and 35%, respectively, over the past eight years. The company has similar key metrics on business

quality as do industry leaders, a higher growth rate, and is available at less than half the valuation of

comparable companies. The shares recently traded at ~1.6x book value.

SHAWN KRAVETZ, PRESIDENT, ESPLANADE CAPITAL

Century Casinos (US: CNTY) is an owner/operator of casinos. With assets primarily in Canada,

Poland, and Colorado, Century is a world away from Macau and the Las Vegas Strip, but has been

lumped into the global casino morass. It enjoys one of the least leveraged balance sheets in the

industry. Having overcome challenges in 2018, Century is poised to nearly double run-rate EBITDA

by the end of 2019, leading to one of the industry’s lowest EBITDA multiples despite robust organic

growth. Century’s capable veteran management team has been buying stock recently at these levels.

With their core business performing well and their largest property opening in April, Century presents

a catalyst-rich play on the global casino industry.

MIKE KRUGER, MANAGING PARTNER, MPK PARTNERS

Boustead Projects (Singapore: AVM) does the design and project management of Class A industrial

real estate in Southeast Asia for multinational corporations in high-value industries; actual

construction work is outsourced. Since 2010, Boustead has used its balance sheet to build certain

properties, which are then leased to the client. Despite this, net cash is one-fourth of the recent

market cap.

The shares recently traded at less than one-third of NAV. Boustead is not a typical family-owned

Asian real estate stock that languishes at a discount with no catalyst in sight. Founder FF Wong has

delivered a compounded total return to shareholders of 18+% since 2000. Two catalysts are in place:

First, backlog has soared 150+% to all-time highs recently, which should benefit earnings by the June

2019 quarter. Second, Boustead will likely put its owned properties into a REIT (comps at 1.0x NAV of

higher) over the next couple of years.

NATHANIEL LEACH, PORTFOLIO MANAGER, LBW WEALTH MANAGEMENT

Liberty Sirius XM (US: (LSXMA/B/K) is a tracker stock of Liberty Media Corp and one of the entities

managed by John Malone and Greg Maffei. Its main assets consist of a ~71% interest in Sirius XM

Holdings, a ~70% interest in Sirius XM Canada, and ~$1.05 billion of Pandora Media and iHeart

Media bonds.



Page 14

The largest asset, Sirius XM Holdings, announced in September of this year an intention to acquire

the portion of Pandora Media it did not already own by issuing Sirius XM stock. The market did not

react well to the news and Sirius XM’s stock has since dropped ~15%. The shares trade at a ~33%

discount to NAV. Liberty Sirius XM is an attractive vehicle to take advantage of the recent price

weakness and NAV discount and buy Sirius XM at a discount to intrinsic value.

STANLEY LIM, SENIOR RESEARCH ANALYST, DALTON INVESTMENTS

Facebook (US: FB) is the largest social networking company in the world. It owns four of the six

social platforms in the world with more than one billion monthly active users. The company is well-

placed in the growing digital advertising industry. Facebook has faced a series of negative press

regarding security and privacy issues. These issues seem overblown and Facebook continues to

have a strong moat that is growing due to control of users’ digital real estate.

Xiaomi Corporation (Hong Kong: 1810) is a smartphone manufacturer, Internet-of-Things device

distributor, and a software company. It is one of the top smartphone brands in markets like China,

India, Europe, and Indonesia. Xiaomi is one of the fastest-growing global technology companies, with

the IoT segment more than doubling year on year. Xiaomi is a misunderstood company, with

investors focusing too much on the low-margin smartphone business. Stanley believes that Xiaomi

could be the next major electronics brand, rivaling Samsung and Sony.

JOE MAGYER, CHIEF INVESTMENT OFFICER, LAKEHOUSE CAPITAL

Facebook (US: FB) may seem to be on the ropes given the bad press it has received. However, the

user base and revenue are growing at very healthy rates. The business also owns three other fast-

growing platforms — Instagram, WhatsApp, and Messenger — that each have more than one billion

monthly active users and are at earlier stages of monetization.

The business is highly cash generative and has more than 9% of its market capitalization in net cash,

affording downside protection and strategic optionality, and the shares are deeply our of favor at

around 37% below recent highs.

RIMMY MALHOTRA, PORTFOLIO MANAGER, NICOYA CAPITAL

Crossroads Systems (US: CRSS) is a post-bankruptcy NOL shell merged with a profitable specialty

finance company traded on the Pink Sheets. Information disclosure and liquidity is limited, but Rimmy

believes the shares could be worth materially more than the recent $7 share price, with downside

protection. Insiders own 77% of the shares and are astute long-term business builders.

Crossroads builds and finances affordable housing focused on the Hispanic market. The homes,

sales and financing processes are tailored to this demographic. Crossroads refurbishes blighted

homes it sells and finances with a traditional 30-year qualifying mortgage.



Page 15

The company finances the homes using funds obtained through U.S. government-sponsored

programs designed to promote home ownership in low- and moderate-income census tracts. Over the

last two decades, Crossroads has originated and profitably held $250 million of mortgages.

JUAN MATIENZO, MANAGING PARTNER, MERCOR INVESTMENT GROUP

Passat (France: PSAT) is a family-controlled French seller of home and beauty products. Sales and

earnings have declined sharply over the last few years, but the business remains profitable. The

shares recently traded at negative enterprise value and a discount to liquidation value.

Nichiwa Sangyo Co. (Japan: 2055) is a manufacturer of feed mixtures. The shares trade at a quarter

of book value and a high-teens FCF yield.

Sanko Co (Japan: 6964) is a maker of precision components. The shares trade at negative enterprise

value and a large discount to liquidation value. The company is profitable and has significant insider

ownership.

MICHAEL MELBY, FOUNDER AND PORTFOLIO MANAGER, GATE CITY CAPITAL MANAGEMENT

Maui Land & Pineapple (US: MLP) owns 23,000+ acres of land on the island of Maui in Hawaii. The

owned acreage includes nearly 21,000 acres of land in and around the world-renowned Kapalua

Resort, home to the Ritz-Carlton Kapalua. Most of the company’s land holdings were purchased in

the early 1900s and continue to be held on the books at cost. Maui Land & Pineapple owns several

fully-entitled parcels of land within the Kapalua Resort.

The company is likely to proceed with development of some of its premier land holdings within the

next year. In addition to the land holdings, MLP also owns several buildings within the Kapalua Resort

and operates a profitable leasing business. It also operates a water utility company and manages a

spa within the Kapalua Resort. These segments generate FCF and provide financial flexibility as the

company prepares to develop its land holdings.

MLP has a market cap of $190 million and no net debt as it utilized proceeds from the sale of non-

core properties to repay $50+ million of debt over the past three years. MLP stock enables the buyer

to purchase Hawaii land at a valuation of just over $8,250 per acre. Mike’s estimates intrinsic value at

roughly $400 million or almost $21 per share, representing 100+% upside.

GARY MISHURIS, CHIEF INVESTMENT OFFICER, SILVER RING VALUE PARTNERS

Arcadis (Netherlands: ARCAD NA) Arcadis offers consulting and engineering design services without

taking on project execution risk. The company is under new management, with the board having

removed the prior CEO and brought in the ex-COO of Fluor, an engineer by training.



Page 16

The business had previously averaged ~10% operating margin, but due to a combination of execution

issues and a decline in oil-related infrastructure demand, the business operates closer to a 7%

margin. Management actions should restore the margin partway to historical levels, aided by low

single-digit organic sales growth.

The stock has a high short interest, with short-sellers claiming the company overstates earnings and

understates debt (recently at ~2.5x net debt to EBITDA). Gary has spoken to some of the short-

sellers, analyzed their assertions, and concluded that the company’s finances are sound.

At less than 10x run-rate depressed earnings and less than 7x Gary’s estimate of normalized mid-

cycle EPS/FCF, the shares trade at less than half of Gary’s base case value estimate, with ~30%

downside to the worst case.

Risks include potential inability to improve margins, Gary’s balance sheet analysis proving incorrect,

and a global recession lowering profitability in the medium term.

SAMIR MOHAMED, COLLABORATIVE VALUE INVESTOR, FAMILY OFFICE

Despegar.com (US: DESP), an Argentina-based, U.S.-listed company, is the largest online travel

agent in Latin America. With its two-sided network of travelers on the one hand and travel suppliers

(airlines, hotels) on the other hand, the company benefits from network effects and is gaining market

share in a fragmented market. Despegar has a broad travel product portfolio with direct booking

capability, giving the company several advantages over travel meta search engines like Trivago or

Kayak.

With revenue of $524 million in 2017 at a 13.6% EBIT margin the company has a long growth runway

to reach scale over the next 6-10 years. Due to macroeconomic challenges in Argentina and

investor’s risk aversion towards Latin America the company’s share price has declined 50+% since

the IPO in September 2017. In a conservative forecast the company would have an EV/EBIT of about

3x in 2025 at the recent share price.

MICHAEL MOROSI, EQUITY PORTFOLIO MANAGER, MAPFRE AM

QAD Inc. (US: CADA)’s value-accretive business model transition continues to gain momentum. The

attractive financial attributes of the new model are increasingly evident in margin expansion and cash

flow generation. Meanwhile, the organization maintains its customer-centric focus to retain existing

customers and acquire new ones.

Michael’s valuation of $950 million has multiple levers for upside, offers a 15-20% margin of safety,

and should increase over time with continued growth in the subscription business.



Page 17

A.J. NORONHA, PARTNER, DESAI CAPITAL MANAGEMENT

Mallinckrodt (US: MNK) meets the key criteria A.J. looks for in an investment: (i) significant discount

to intrinsic value; (ii) strong margins, which demonstrate operational excellence; (iii) strong cash flow

and a low price to cash flow multiple; and (iv) a significant price discount to book value. Risks include

revenue concentration, pricing pressure, and political or legal pressure.

A.J. considers the overall risk-reward tradeoff as attractive at recent prices. The stock recently traded

at ~$19 per share, roughly half of the 52-week high of ~$37 per share.

SAMIR PATEL, FOUNDER AND PORTFOLIO MANAGER, ASKELADDEN CAPITAL

Franklin Covey (US: FC) is a leading provider of corporate training content in a highly fragmented

$90+ billion global space. Over the past three years, the company has transitioned from a discrete

one-off sales model to a strategically embedded, recurring-revenue model with 90+% dollar renewal

and 25-30% of new contracts being signed for multi-year periods, providing exceptional resiliency and

a strong base from which to deliver accelerated growth. The company has high gross margins (70%

consolidated, 80+% on content portion of the business), leading to 40+% incremental EBITDA

margins.

With high single to low double-digit revenue growth, the company should deliver teens to twenties

EBITDA growth for an extended period of time, yet the stock trades at ~10x EBITDA and ~1.4x

revenue. A DCF suggests the stock is worth $46 per share, while both transaction and publicly-traded

comparables also suggest a higher valuation.

Long-tenured management has high ownership and likes to use most cash flow to repurchase shares

at attractive prices.

MATTHEW PETERSON, MANAGING PARTNER, PETERSON CAPITAL MANAGEMENT

The Daily Journal Corporation (US: DJCO) is an American publishing and technology company with

hidden assets and off-balance sheet value. With no analysts or investor relations department, few

understand the transformation that has occurred.

While historically a legal newspaper publishing company, today DJCO operates a SaaS business

model providing case management software to courts and government agencies around the U.S. and

the world. Licensed software for many ten-year contracts is currently in the multi-year implementation

stage. Implementation is expensed as provided, while the long-term recurring high-margin revenue is

not yet included on the income statement.

The board includes high-profile names such as Rick Guerin, Peter Kaufman, and Charlie Munger.



Page 18

FERNANDO PINA, FOUNDING PARTNER, LIS CAPITAL

São Carlos Empreendimentos (Brazil: SCAR3) is one of Brazil’s leading commercial property

investment companies, controlled by the same partners as is the private equity firm 3G Capital. São

Carlos, which commenced operations in 1989, owns and operates a premium portfolio of corporate

buildings and convenience centers in Brazil’s two largest cities, São Paulo and Rio de Janeiro.

An investment in São Carlos is a way to partner with a “value investor” in the commercial property

space. São Carlos acquires properties at relatively low valuations, pursues improvements, and then

divests opportunistically, generating value in the process. The business model — rent revenue,

coupled with active management of the properties portfolio — makes São Carlos one of the most

profitable public companies in the Brazilian real estate sector.

At the recent market price, the shares have a margin of safety as they trade at a valuation

approximating the original acquisition price of properties, i.e., significantly below replacement cost or

market value, thereby ascribing no value to the company’s record of value creation. The idea

combines quality (in light of the company’s proven capacity to compound value) and an attractive

price (as the shares can be bought at a discount to NAV).

BRIAN PITKIN, MANAGING MEMBER, URI CAPITAL MANAGEMENT

AIG (US: AIG) is another in a long line of global financial institutions that have fallen far out of favor

with investors. AIG is a well-known global property and casualty insurer, paired with a US-dominated

life and retirement business.

The company has derisked the balance sheet after taking painful reserve charges and implementing

an “adverse development cover” with Berkshire Hathaway. Improving returns on equity, driven by

P&C underwriting profitability, should lead to a higher, more normalized valuation for AIG.

The company fits the pattern of good — sometimes great — businesses operating profitably —

sometimes very profitably — with global scale, but, for differing reasons, have been far out of favor

with investors, allowing Brian to invest at valuations well below book value. AIG recently traded at

8.5x 2019E earnings of $5.11 per share, i.e., a market price of $43 per share, well below adjusted

book value of $56 per share and stated book value of $66 per share.

ANDY PREIKSCHAT, PORTFOLIO MANAGER, EDGEBROOK PARTNERS

XPEL (Canada: DAP-U) pioneered “self-healing” paint protection film for the automotive industry and

is the market leader for this category globally. XPEL grew sales from $10.7 million in 2012 to more

than $100 million in 2018 while maintaining profitability and barely diluting shareholders. The

company is run by “incentivized fanatics” who own 45+% of shares. The company culture is one of

high energy, disciplined ethics, and product innovation. From 2017, when the stock was at $1.54 per

share, with EPS of $0.08, Andy expects the company to grow EPS eight-fold by 2021.



Page 19

PATRICK RETZER, CHIEF INVESTMENT OFFICER, RETZER CAPITAL MANAGEMENT

Franklin Covey (US: FC) is a global company specializing in organizational performance

improvement by providing training and consulting services in seven areas: leadership, execution,

productivity, trust, sales performance, customer loyalty and education. They have consistently created

shareholder value in a tax efficient manner, having bought back $62 million of stock in the past fifteen

quarters and carry almost no net debt. The Company is a high gross margin, high FCF company that

has completed the transition from a traditional sales revenue model to a subscription-based revenue

model.

Pat presented Franklin Covey last year when the stock was $20.45 per share. It subsequently ran up

to $31.20 per share in January after the company reported earnings. FC recently hit $21.45 per share,

providing an opportunity as the company ramps up adjusted EBITDA, deferred revenue, and FCF. On

the most recent earnings call, management reiterated an interest in restarting share buybacks.

School Specialty (US: SCOO) is a leading provider of supplies, furniture, technology products,

supplemental learning products and curriculum solutions to the educational marketplace. SCOO

serves, in some manner, 90+% of school districts and 70+% of schools in the U.S., with 100,000+

SKUs. The 21st Century Safe School value proposition looks to improve student outcomes by

addressing the social, emotional, mental and physical well-being and safety of students on a cohesive

and holistic basis. The Safety & Security and Guardian offerings address the needs of schools in the

face of recent school shootings.

Pat presented SCOO last year when the stock price was $16.65 per share. It subsequently reached a

high of $20.02 per share last June, but plunged after missing on their third quarter earnings. The miss

was based on higher transportation costs, higher than normal employee turnover and the slippage of

some high margin business into 2019. SCOO trades at ~5.5x enterprise value to lowered 2018

EBITDA guidance. With management’s view that 2019 could be the year they expected in 2018, the

stock appears poised for material upside.

JIM ROUMELL, PRESIDENT, ROUMELL ASSET MANAGEMENT

Enzo Biochem (US: ENZ) is a debt-free company with a strategically located clinical lab footprint in

the NY/NJ/CT Tri-state area in a consolidating industry. The company has significant IP assets, a

therapeutics business Jim expects to be monetized in H1 2019, significant IP litigation optionality, and

a vertically integrated clinical lab platform with gross margin expectations of 65% versus a current

35% model.

ENZ’s recent enterprise value is roughly 90% of what the company has collected in IP litigation in the

past several years. The company has won settlements and royalty payments of $100 million ($67

million net) in recent years, highlighting its rich IP assets. The company has seven outstanding IP

lawsuits, six of which are financed on a contingency basis with the law firm that has already won ENZ

suits against Illumina, Thermo Fisher Scientific, and Siemens.



Page 20

ENZ possesses multiple ways to win. The stock price has dropped from $10+ per share two years

ago to sub-$3 per share recently because of dramatically reduced reimbursement payments

(Medicare and private pay insurers) for clinical lab services.

While there is near-term pain associated with the reimbursement issue affecting ENZ’s lab business,

the company appears well-positioned to be a winner with its low-cost Ampiprobe lab platform.

Smaller, independent labs are being squeezed particularly hard, and ENZ offers an outsourced

diagnostic solution. At a price of $2.75 per share, ENZ’s market cap is $130 million and EV is $77

million, reflecting $53 million in net cash.

NITIN SACHETI, PORTFOLIO MANAGER, PAPYRUS CAPITAL

Echostar Corporation (US: SATS) is an underfollowed satellite business run by a smart

owner/manager (Charlie Ergen), with three core businesses offering significant upside. The company

owns valuable intellectual property in Ka-band high throughput satellites, which Echostar can build at

one-tenth the cost per bit of other satellites.

While the product has generated internal rates of return in the high-20% range in its first application

(rural consumer broadband), 5G offers many more uses for the satellite IP. The company will likely

launch joint ventures across the world or make an acquisition of a business with worldwide

distribution, in which Echostar will “plug in” its IP and generate significant value.

Nitin believes the company will realize intrinsic value over the next two to three years as 5G standards

take effect.

DANILO SANTIAGO, PORTFOLIO MANAGER, RATIONAL INVESTMENT METHODOLOGY

Thor Industries (US: THO) is the parent company of a collection of RV brands in North America.

Over the past two years, the company produced and sold close to 250,000 RVs in the region. The

most recent acquisition in the U.S. market was Jayco, which significantly increased THO’s market

share in the country. Now Thor has close to 50% of the U.S. market (by units).

The most significant competitor, Forest River, which holds close to 35% of the market, is owned by

Berkshire Hathaway. Warren Buffett’s companies rarely engage in price wars, which means that

Thor’s biggest competitor should behave rationally. Therefore, although the RV industry will always be

a competitive one, the risk of a devastating price war is small.

Thor became more difficult to analyze as the company announced the acquisition of Erwin Heymer

Group, the biggest RV manufacturing company in Europe. After the deal closes at the beginning of

2019, Thor will have 75% of their sales in the U.S. and 25% in Europe. Analyst estimates do not

incorporate an increase in EPS due to the deal.



Page 21

The market has been disappointed with declining sales in the wholesale channel, as retailers need to

adjust their inventories since the North American market appears to have reached a plateau. The risk

is that the decline may spread to the retail channel.

Even when modeling a significant recession in a year or so, the potential cash flow Thor can generate

implies that long-term investors can buy the shares with an implied IRR of 16+% (doubling one’s

capital in 5 ½ years).

DAVE SATHER, PRESIDENT, SATHER FINANCIAL

Brown-Forman (US: BF.B) is an American spirits company that owns several brands, the largest of

which is Jack Daniel’s.

Jack Daniel’s generates roughly 60% of the firm’s cases sold worldwide and has become a foundation

for the growth of both new Jack Daniel’s products, such as Honey and Fire, and other brands owned

by Brown-Forman.

The stock rarely trades at fair value but headwinds involving a 25% tariff on bourbon exports to

Europe and a CEO transition have caused a 20% price decline since May. Given the inelastic

demand of the industry and resilient staying power, the recent drop in price gives investors an

opportunity to buy an extremely durable business at what Dave considers to be fair value.

The firm benefits from cost advantages associated with producing premium products and strong

brand appeal which yields margins higher than competitors who generate revenue nearly 5x that of

Brown-Forman. It’s existing value chain allows for newer brands to piggy back off of Jack Daniel’s in

markets that are estimated to yield 10%+ CAGR’s over the next five years. Much of this growth stems

from increased global demand, taking market share from global competitors, and consumer

preference changes in the U.S. shifting from beer to higher end spirits.

Management has also prioritized returning value to shareholders by both reducing outstanding shares

by 16% and more than doubling its dividend since 2008 and intends on continuing this capital

allocation strategy. These factors have earnings estimated to grow between 10-15% over the next few

years.

ADRIAN SAVILLE, CHIEF EXECUTIVE OFFICER, CANNON ASSET MANAGERS

Combined Motor Holdings (South Africa: CMH) is a holding company in the retail motor market. The

group holds the franchise for the sale of products of automobile brands. CMH also consists of

franchises in the transportation and finance industries with a South African presence. Over the past

ten years, CMH has generated an average return on equity of 22% and has returned 100% of original

investment to shareholders in the form of dividends and buybacks. CMH carries no long-term debt,

has surplus cash on balance sheet, and trades on a trailing P/E multiple of 6.6x, with a dividend yield

of 8.0%. Notwithstanding the sluggish domestic economic conditions, the company represents an

exceptional long-term opportunity and is a top idea for 2019.



Page 22

Sabvest (South Africa: SBV, SVN) is an investment holding company founded by Christopher

Seabrooke in 1987. Sabvest has investments in domestic and offshore assets, the bulk of which are

represented by interests in unlisted industrial groups, including SA Bias Industries, Sunspray Food

Ingredients, Flexo Line Products, Mandarin Holdings, Classic Food Brands, and Mandarin Industries.

Sabvest has generated a return to shareholders of 54x capital over its 30-year history, equivalent to a

return on invested capital of ~22% per annum since 1988. Despite this prodigious long-term result,

Sabvest is generally unknown. The shares have been tightly held and thinly traded for most of

Sabvest’s history. Recently, the company has undergone a capital and shareholder rearrangement

that improves the free float. This liquidity improvement and wider ownership should translate into

near-term benefits for investors, including a narrowing of the discount to net asset value, which Adrian

estimates at ZAR 56 per share, as compared to a market price of ZAR 40 per share.

Telkom (South Africa: TKG) is a leading information and communications technology services

provider in South Africa, offering fixed-line, mobile, data, and information technology services. The

company trades on 10.5x earnings with a 5.6% dividend yield, displaying utility-like attributes in terms

of performance with a return on assets of 9.2% per annum and return on equity of 11.7% per annum.

Telkom’s underlying property portfolio has a market value of ZAR 24 billion, equal to three-quarters of

Telkom’s market cap of ZAR 32 billion. Adrian expects this portfolio to be separately listed,

representing a recognition of capital for shareholders.

ADAM J. SCHWARTZ, CHIEF INVESTMENT OFFICER, BLACK BEAR VALUE PARTNER

Short Credit ETFs: Investors have unrealistic expectations of their credit ETF holdings. Bond

illiquidity underlies an assumption of daily ETF liquidity.

Asset-liability mismatches can lead to painful endings. These structures were not created for illiquid

bonds in the event of a large selloff. It is hard to predict how things play out if the market makers lose

confidence in the liquidity of the underlying bonds. Indexing illiquid junk bonds or near-junk investment

grade bonds with limited legal protections is asking for trouble if the waters start to get rocky.

The “high yield” bonds have a current ~6% annual yield with a loss-adjusted yield closer to ~3-4% and

possibly 0-2%. When high-yield prices inevitably decline and there is a need for liquidity, those

structures may fall apart. The same argument largely holds true with investment-grade ETFs. One-

half of the holdings are BBB, barely above junk status. The payoff could be asymmetric and provides

a unique way to profit outside the norms of typical long investing.

KEITH SMITH, FUND MANAGER, BONHOEFFER FUND

A common characteristic among the following firms is recurring revenue, with a large addressable

market and and a modest valuation. These firms also have disciplined and repeatable underwriting

processes to weed out the best opportunities in each of their opportunity sets and have historically

generated above average returns on capital.



Page 23

STORE Capital (US: STOR) is an internally managed triple net-lease real estate investment trust, or

REIT. STORE is one of the largest and fastest growing net-lease REITs and owns a large, well-

diversified portfolio that consists of investments in 2,206 property locations, substantially all of which

are profit centers, in 49 states. The addressable market for STORE is large as STORE only has a 2%

market share and is one of the larger triple-net lessors in the business.

STORE has increased book value and dividends per share by 13% per year and AFFO per share by

7% per year over the past five years. The management team has great underwriting with credit losses

at 0.2% of the portfolio per year since inception (2014). The firm focuses on profitable unit economics

associated with leases which reduces the risk of these leases. The focus is also on growing segments

of the real estate market including services, experiential retail and mission critical manufacturing in

growing regions of the country. The average remaining lease term is fourteen years.

The common shares recently traded at an adjusted funds from operations multiple of 16x and

dividend yield of 4.4%. The trailing gross cap rate interest margin is 5.5%. STORE is modestly

levered with a debt/equity ratio of 0.8x and has an investment grade credit rating. While the multiple is

not cheap for the average real estate equity, it is for a secure, stable and growing cash flow stream

with the opportunity to re-invest cash flows at high rates of return, currently ~12%.

In June 2017, Berkshire Hathaway took a 9.8% stake in STORE, close to the maximum an entity can

hold of a REIT (10%), which is another testament to its underwriting process. The price paid by

Berkshire when adjusted for the lack of marketability of the stock of 10% is 14x adjusted funds from

operations.

TPG Specialty Finance (US: TSLX) is a business development company. The BDC provides senior

secured loans (first-lien, second-lien, and unitranche), mezzanine debt, non-control structured equity,

and common equity with a focus on co-investments for organic growth, acquisitions, market or

product expansion, restructuring initiatives, recapitalizations, and refinancing. The BDC lends to in

business services, software and technology, healthcare, energy, consumer and retail, manufacturing,

industrials, royalty related businesses, education, and specialty finance.

At this point in the credit cycle, 94% of TPG Specialty’s loans are first-lien collateralized loans. The

management team’s background is primarily from a specialty finance lender purchased by Wells

Fargo in the late 1990s called Foothill Capital so team has bank level of underwriting experience. The

team has great underwriting with credit losses at 0.5% of the portfolio per year since inception (2014).

TPG Specialty has increased book value and dividends per share by 10% per year and had an

average return on equity of 12% over the past five years.

The shares recently traded at an earnings multiple of 8.9x, and dividend yield of 9.6%. The trailing net

interest margin (including all fees) is 11%. TPG Specialty is modestly levered with a debt/equity ratio

of 0.8x and has an investment grade credit rating. Recently, BDCs have had an option to increase

leverage and TPG is pursuing this and is increasing the target leverage levels and corresponding

return in equity by 20%.

Ashtead Group (UK: AHT) rents a range of construction and industrial equipment. It offers equipment

for use in lifting, powering, generation, moving, digging, compacting, drilling, supporting, scrubbing,

pumping, directing, heating, and ventilating works. Ashtead is the second-largest U.S. equipment

rental firm through its Sunbelt Rental subsidiary. Although equipment leasing is tied to the cyclical



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construction market, given Ashtead’s higher operating margins (due to geographic clustering) and

Ashtead’s product and geographic diversification, the historic cyclicality of returns should be

dampened. Ashtead has only an 8% market share in the U.S. rental equipment market and is one of

the larger U.S. rental equipment lessors in the business.

Ashtead has increased book value and dividend per share by 52% per year and net income per share

by 47% per year over the past five years. This growth has been achieved by a combination of organic

growth via consolidation, Greenfield site openings, increased product offerings and share buybacks.

Ashtead is modestly levered with a debt/equity ratio of 1.1x, a debt-to-EBITDA ratio of 1.7x, and has

an investment grade credit rating. Ashtead has a large runway to invest at rates of returns of return in

the upper teens (group returns on capital have been above 15% since 2013).

The shares recently traded at an earnings multiple of 7x, EV/EBITDA of 6x, and a dividend yield of

2%. Of the publicly traded equipment leasing firms (such as United Rentals, HERC Cramo &

Ramirent), Ashtead has the highest return on equity (30%) and the lowest leverage.

SEAN STANNARD-STOCKTON, CHIEF INVESTMENT OFFICER, ENSEMBLE CAPITAL MANAGEMENT

Sensata Technologies (US: ST) provides sensors to essentially all of the world’s automakers to

make cars safer, more fuel-efficient, and less damaging to the environment.

While global auto sales will likely grow at a low single-digit rate over the long term, the amount of

sensor content per car is growing at a mid-to-high single digit rate, and Sean expects this to continue

for a long time. Importantly, Sensata is well positioned to thrive as the world moves towards

electrification with their content per electric vehicle higher than their content per gas powered vehicle.

The company’s business model is highly cash generative and the management team are effective

capital allocators, deploying FCF using opportunistic stock buy backs and acquiring complementary

sensor businesses that generate strong returns for shareholders.

SAURABH SUD, PORTFOLIO MANAGER, T. ROWE PRICE

Paratek Pharmaceuticals (US: PRTK) (convertible debt and equity) is a misunderstood biopharma

company focused on the development and commercialization of antibiotics. Paratek’s lead product

candidate, omadacycline, is a novel tetracycline-derived, broad-spectrum antibiotic that received FDA

approval in October 2018, for both oral tablet and intravenous formulations for use against ABSSSI

(acute skin and skin structure infection) and CABP (community-acquired bacterial pneumonia).

Capital has been receding from the antibiotic sector for years, and we are at a point where resistance

is moving faster than our ability to provide new antibiotics.

Paratek’s debt is likely covered 3-4x based on its asset valuation. The convertible debt recently

yielded 10.7% (PRTK 4.75% 2024s), offering an asymmetric payoff as the company embarks on its

commercialization journey.



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With the product approval risk behind us, the market underestimates a credible management’s

incentives and potential asset conversion events that mitigate downside for the convertible debt. In an

upside scenario, the stock also is likely worth 2-4x but we will need the earning power of a profitable

operation to confirm the potential asset valuation via good capital allocation during the

commercialization phase.

JEFF SUTTON, FOUNDER AND PRESIDENT, VALUETREE INVESTMENTS

Murphy USA (US: MUSA) operates 1,461 gas stations and convenience stores, primarily across the

Southeastern and Midwestern U.S. The company has historically partnered with Walmart for 1,160

locations, which are often located in Walmart parking lots. In recent years, Murphy has diversified

operations away from its dependence on Walmart by opening 301 standalone convenience stores.

These standalone stores offer higher profit margins due to retail merchandise sales, as opposed to

earning a small margin almost entirely from gasoline sales at other locations.

The company’s newest initiative (announced in early 2016) to “raze and rebuild” many of its existing

Walmart locations offers upside potential. Murphy recently traded at $74 per share, a trailing P/E of

~15x, EV/EBITDA of ~8x, and price to cash flow of ~7x. Valuing the company at peer multiples of

~20x earnings, ~10x EBITDA, and ~10x cash flow suggests that Murphy could be worth $105 per

share. According to Jeff’s analysis, applying the potential results of the “raze and rebuild” program to

recent valuation multiples suggests a value of $107 per share. Combining the potential impact of the

initiative with higher peer multiples would imply a stock price of $148 per share.

Murphy owns the majority of its real estate locations. Analyzing the possibility of a sale-leaseback

transaction suggests the company could be worth $135 per share. Jeff estimates that the company

generates $268 million in normalized maintenance FCF. Applying a 7% FCF yield indicates that

Murphy may have intrinsic value of $119 per share, or as high as $159 per share if the “raze and

rebuild” program is successfully implemented company-wide.

CHRIS SWASBROOK, MANAGING DIRECTOR, ELEVATION CAPITAL MANAGEMENT

Through successive rounds of M&A, Molson Coors (US: TAP) has become one of the largest

brewers in the world. However in recent years, beer consumption (especially non-craft beer) is in

decline in developed countries. This coupled with Molson Coors’ higher leverage (to fund the USD12B

MillerCoors transaction) are the main reasons why Molson Coors is one of the worst performing

publicly listed global brewers recently, and is currently trading near/below book value — with a 10+%

FCF yield.

Elevation Capital believes the following factors will see the stock re-rate in 2019/2020:

1. A continuation of the deleveraging to achieve a Debt / EBITDA ratio of 3.75x;

2. Increase in quarterly dividends by +40% to +70% from current levels;



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3. Introduction of its first non-alcoholic cannabis-infused beverages for the Canadian market;

4. Early delivery on its cost saving targets of $700M for the 2017-2019 period; and,

5. A share repurchase program reinstated.

Elevation Capital believes the stock will re-rate to at least 12x EV/EBITDA, which implies a price of

USD92.20 per share, which offers upside potential of +44% from recent levels — based on Molson

Coors share price of US$64.10 at at 23 November 2018.

In a takeover scenario, Elevation Capital believes the stock is worth 14x EV/EBITDA, which implies a

price of USD115.33, offering an upside potential of +80% — based on Molson Coors share price of

US$64.10 at at 23 November 2018.

MATTHEW SWEENEY, FOUNDER AND MANAGING PARTNER, LAUGHING WATER CAPITAL

EZCorp (US: EZPW) is the second-largest publicly traded pawn store chain. At a time of macro

uncertainty and rising recession fears, pawn is arguably one of the best businesses to consider due to

its defensive nature. For example, EZPW grew same store pawn service charges +17%, +9%, +16%

from 2008-2010.

Additionally, even absent a weakening economy, organic growth in 2019 is essentially guaranteed

through the rolling off of one time items, as well as operational improvements and full year impact of

acquisitions made in 2018.

Further upside exists in the form of continued acquisitions: at a recent investor day, management

indicated they expect to grow Latin American store count by 22-44% over the next nine months.

Given a recession-proof business with significant growth on tap, one might expect a premium

multiple, yet we estimate that on an absolute basis EZPW trades below NAV and at multiples not

seen since the 2009 crisis. On a relative basis, EZPW trades at a more than 50% discount to a public

peer. To be fair, the company deserves a discount due to a controlling shareholder and the risk of

potential dilution through convertible bonds, but recent improvements to corporate governance are

promising, and the convertible bonds are well out of the money at recent prices, which justify

significant upside for EZPW. Importantly, this upside should grow if the economy weakens.

WILLIAM THOMSON, MANAGING PARTNER, MASSIF CAPITAL

Kazatomprom (UK: KAP) is the largest uranium producer in the world (~23% of global primary supply

in 2018) and the lowest-cost producer in the industry. The firm operates or has an equity interest in

nine of the eleven lowest-cost mines in the world. Due to the firm’s complex structure, which includes

ten asset-level partnerships with equity interests of 30-65%, significant balance sheet value is

obscured by IFRS equity method accounting rules for JVs.



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At Uranium spot prices and a 10% discount rate, the mines the firm operates or has an interest in

trade at a 22% discount to intrinsic value. This valuation ignores industry tailwinds, the firm’s

dominant position within the industry and a dividend of up to 75% of FCF going forward.

A more realistic valuation may be $22-24 per share, suggesting the firm trades at a discount to

intrinsic value of 38-43%. Kazatomprom is one of a handful of well-established publicly traded

uranium firms that have a combination of producing assets, FCF, and a solid balance sheet. Most

firms in the industry are either pre-production or exploration firms, creating a situation in which there is

not only a potential supply crunch in uranium in the future but also limited supply of investable assets.

ELLIOT TURNER, MANAGING DIRECTOR, RGA INVESTMENT ADVISORS

PayPal Holdings (US: PYPL) and Roku (US: ROKU) both benefit from improving unit economics

and large, growing total addressable markets. Each company benefits from an open-ecosystem that

favors customer choice and smooth user experience.

PayPal suffers from an over-emphasis on take rate and too little appreciation for the virtuous cycle

flowing around increasing user engagement. Improving unit economics at PayPal will drive higher out-

year margins supporting a DCF-driven price target upwards of $120 per share.

Since Roku’s IPO, too many analysts have viewed the company as a hardware company and have

failed to appreciate the business model evolution to an advertising platform. At a price around 3x

2020 platform sales and 2020 expected growth upwards of 40% y/y with a long runway of operating

leverage, the company offers investors rapid growth at a reasonable price.

RUDI VAN NIEKERK, FOUNDER AND PRINCIPAL MANAGER, DESERT LION CAPITAL

Cartrack (South Africa: CTK) is a leading global provider of telematics solutions delivered as

Software-as-a-Service with best-in-industry returns on capital, strong growth trajectory operating in a

large and growing addressable market, and high insider ownership — trading at a below-average

valuation.

The company is listed in South Africa on the Johannesburg Stock Exchange, which is fairly inefficient

in price discovery outside the universe of the largest stocks.

Cartrack has a footprint in 24 countries and with 850,000+ subscribers it is positioned as a top ten

global player. The company has been investing aggressively in R&D and capacity for growth ahead of

the curve and is about to break through and capitalize on economies of scale in many markets.

Excellent financial characteristics: 93% annuity/recurring revenue with earnings clarity, 34% ROCE,

44% ROE, 100+% cash conversion.



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JEAN PIERRE VERSTER, PORTFOLIO MANAGER, FAIRTREE CAPITAL

Salmar (Norway: SALM) is one of the largest and most efficient producers of farmed salmon, with an

equity market quotation of $6+ billion. The company is integrated across the salmon value chain, from

broodstock, roe and smolt production to value added product processing and sales. The salmon

fishing industry has attractive structural supply/demand characteristics.

As a low-cost producer with scale, Salmar is well-positioned to continue generating EBITDA margins

of 30+%, maintain net profit margins of 20+%, and to deliver sustainable ROE of 30+%. Salmar

shares have doubled over the past year and are up 55% annually over the past five years, raising the

question whether the recent price includes a margin of safety.

Jean Pierre believes Salmar shares could be worth 50% more within four years, with additional upside

from new offshore fish farming initiatives. Salmar is an example of the principle that the most

expensive mistake in investing may be selling too soon, or thinking it is too late to buy a great

company compounding intrinsic value at an above-average rate.

AMIT WADHWANEY, PORTFOLIO MANAGER, MOERUS CAPITAL MANAGEMENT

Tidewater (US: TDW) is one of the largest provider of offshore supply vehicles (“OSV”) and marine

support services to the offshore energy exploration, development and production industry. The

company’s OSVs tow and anchor-handle mobile drilling rigs and equipment, transport supplies and

personnel and provide support to pipe laying and other offshore construction activities. Revenues

relates directly to offshore activity in the exploration and production of hydrocarbons, notably oil.

Following the collapse in oil prices in 2014 and the resurgence of lower-cost, unconventional sources

of oil (notably shale), there was a significant drop-off in the higher-cost offshore exploration activity,

with the resulting collapse in demand for OSVs and other support services plunging most companies

in this industry into various degrees of distress.

Tidewater emerged from bankruptcy with much of the previous debt converted to equity (or warrants),

resulting in a greatly improved balance sheet, with the assets marked down to the recent depressed

valuations in the market.

At recent prices, Tidewater trades at a discount of at least 30-40% to a depressed book value that

reflects write-downs of asset values on the order of 70+%. This situation is unlikely to persist in the

long run as the company’s more financially leveraged competitors withdraw vessels from the market

and/or consolidation among industry participants diminishes the number of viable competitors,

improving the supply-demand balance and pricing dynamics in the market for Tidewater’s services.



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MARK WALKER, MANAGING PARTNER, TOLLYMORE INVESTMENT PARTNERS

ITE Group (UK: ITE) is a UK-listed global exhibitions organizer. The investment merits can be

summarized as “a very good, very cheap business”. ITE is a capital-light, founder-led business

providing high-utility and enduring B2B services. A long track record of delivering ~30% returns on

capital has been facilitated by a network effects-based defensible moat. The business model is

characterized by double-digit revenue growth, high top-line visibility, strong cash conversion of

earnings, and an appropriate capital structure. Non-fundamental selling pressures have contributed to

a de-rating of the stock to a 19% FCF yield, leaving the business trading at a fraction if its private

business value.

ADAM ZUERCHER, CHIEF INVESTMENT OFFICER, HIXON ZUERCHER CAPITAL MANAGEMENT

Walt Disney (US: DIS) is the world leader at the box office, their parks have no equals, and they are

building an empire through mergers and acquisitions. The business is doing well and experiencing

strong growth, while being fundamentally sound. Adam believes the best is yet to come.

Disney’s new family-oriented streaming service, Disney+, along with ESPN+ and the company’s

majority stake in Hulu should provide growth for many years. The addition and growth of this new

segment of the business should justify higher multiples for stock, which in combination with growth in

other segments, makes Disney Adam’s best idea for 2019 and beyond.

The above summaries cover selected conference sessions only. Access all sessions at

https://moiglobal.com/i/

https://moiglobal.com/i/

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Selected Session Highlights from Best Ideas 2019 · Annual investment conference, fully online, hosted by MOI Global, January 10-12, 2019 Page 3 of less than 0.6x net debt to cash