Sahm Adrangi is the managing partner of Kerrisdale Capital Management, a New York-based, fundamentally-oriented investment manager that manages $265 million and focuses on long-term value investments and event-driven special situations. Kerrisdale actively shares its investment ideas with the broader investment community through its own website and third party websites. Sahm Adrangi spoke today at the Capitalize For Kids Conference in Toronto and presented his favorite idea. Below are some (very) informal notes from Adrangi who talks about why he is long in SS and C Technologies Holdings Inc (NASDAQ:SSNC) and Cognizant Technology Solutions Corp (NASDAQ:CTSH).

Also see: Jeff Smith Bullish On Yahoo, Darden, MeadWestvacoJamie Dinan Likes TWC As Merger Arb Idea; TAP As Event Driven IdeaGuy Gottfried Pitches Long Tree Island Steel At Capitalize For Kids and Lee Ainslie Pitches Long Qihoo 360 At Capitalize For Kids, Vanshap Likes Keck Seng, Fleetwood; BHR Capital Long GLNG, Frank Brosens Of Taconic Sees Value In JOSB, MW Saga, Jacob Doft Of Highline Explains The Bullish Case For ICE, Jeff Hales Of Alignvest Capital Bullish On Corby Spirit And Wine and Capitalize For Kids: Aaron Cowen Long BKW, LBTYA; Jody LaNasa Likes FIG, KODK

Sahm Adrangi

Kerrisdale Capital

 

2 Long Ideas

Sahm Adrangi on SS and C Technologies Holdings Inc (NASDAQ:SSNC)

5% FCF yield

Hedge fund administrator and financial software

CAGR of 22% over last 10 years

Very sticky customer base (view it similar to no one will change their auditor)

Revenue retention rate of 90% over last 5 years

 

Sahm Adrangi on Cognizant Technology Solutions Corp (NASDAQ:CTSH)

A high performing IT service business

A weak quarter has caused a very attractive entry price

Top tier IT outsourcer

Based out of India  -labor cost advantage

18% of CIO’s plan to increase their spending with CTSH

Multi-year contracts ensure a steady revenue stream

Largest engagement with Health net shows their value proposition and the potential for ever larger contracts

3.5b contract over 7 years (health net)

Price target $70

Sahm Adrangi Of Kerrisdale Is Bullish On SSNC And CTSH
Source: Flickr

Brian Zied

Mr. Brian Lee Zied is the Founder, Chief Executive Officer, and Portfolio Manager at Charter Bridge Capital Management, L.P. Prior to this, he was a Managing Director, Principal, and Head of Consumer and Retail Stock Investments at Maverick Capital Ltd. Brian Lee Zied’s investment idea Outerwall Inc (NASDAQ:OUTR).

Charter Bridge Capital

L/S Equity Strategy

Focus on consumer

 

The Home Depot, Inc. (NYSE:HD) $125B hardware store

they built a culture, that benefitted consumers

 

Cigarettes: why do people still smoke

smoking is a social decision

the experience of smoking a cigarette –gives a break in there day

 

Netflix, Inc. (NASDAQ:NFLX): why it didn’t kill cable

Consumers just consumed more TV –benefited both

 

IDEA:

Brian Zied on Outerwall Inc (NASDAQ:OUTR)

Redbox

44k kiosks

86% of total revenues with 20% segment operating margins

 

Coinstar

 

18% 5 year revenue CAGR

21% 5 year EBITDA cagr

34% short interest

Trading at 4x 2015 EBITDA

Currently yielding 20% 2014E FCF!!

 

Market’s view: too many options

DVD by mail and redbox will shrink and video on demand and itunes/amazon instant will grow rapidly

 

Redbox grew 25% market share to 34% market share from 2011 to 1H2014

Redbox is half as expensive as the other alternatives

Why people like redbox

Location of kiosk

Convenience

Cost

 

16% of all users surveyed indicated they use both redbox and Video on demand

Consumers use multiple rental services — ie all the products can exist together, and he does not believe any one of them will go to zero

45% of consumers preferred redbox outright over video on demand or other services

 

Redbox customers like the value proposition

Will continue to take market share from DVD by mail and brick and mortar (plenty of % still to take)

Pricing power

New Studio agreements likely to provide more flexibiliuy with similar or better economics

Stable to growing revenues and margins

 

The movie slate available can cause volatility in the earnings