FrankVoisin

Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com The following is a reader submission on PhotoMedex (NASDAQ:PHMD). Frank’s Disclosure: No position in any of the securities mentioned. ———————————- IS PHOTOMEDEX POISED FOR A SHORT SQUEEZE? SUMMARY Photomedex (“PHMD”) is a heavily shorted stock which we think is a compelling long, especially considering the possibility of a major short squeeze.  Despite the large short position (25%+ of float, ~20% cost to borrow), PHMD is actually an undervalued (5.1x 2013E Adj EBITDA) , unlevered (20% of its market cap is in net cash), growing (revenue and EBITDA should increase organically in 2013),  high free cash flow company (D&A significantly higher than maintenance capex,  an nol reduces cash taxes and non-recurring items distort LTM results) with a buyback waiting to be used (the company has been restricted from repurchasing stock for many months but the window reopens in May) and a management team which owns ~30% of the company and is incentivized to create shareholder value. BUSINESS DESCRIPTION The current PHMD was formed in December 2011 with the merger of Radiancy (which makes a number of products including the no!no!) with Photomedex (which has a strong proprietary consumer
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at Frankvoisin.com   The following is a reader submission rebutting a recent Seeking Alpha article on Perion Network Ltd (NASDAQ: PERI). Frank’s Disclosure: No position in any of the securities mentioned. *** Last week Vince Martin wrote a Seeking Alpha article on Perion Network (PERI) which seemed to cast a negative view on the company.  We have been following the company for a while and are far more optimistic about its prospects.  It’s unclear if Mr. Martin even bothered to speak with PERI or Google before publishing his widely circulated article, but we have serious concerns about some of his statements which we believe present an incomplete and inaccurate picture of the situation. Importantly, we believe Martin’s article has created an attractive opportunity for investors to buy the stock that has been beaten down by questionable journalism and undue concerns about the Google contract renewal. Below are some of the issues we have with Martin’s article: Martin correctly mentions the risk that GOOG may not renew the contract which expires later this month; however, he never explains some other highly plausible reasons why the renewal process may be taking so long.  Anyone who has been closely
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at Frankvoisin.com A reader emailed me his investment thesis for Ituran (NASDAQ:ITRN). It is quite interesting, so (with his permission) I am sharing it here.  If you have an investment thesis that you would like featured on this site, send it to me here. Frank’s Disclosure: No Position. Author’s disclosure below. *** Ituran: Securing Vehicles and Profits, with a Considerable Free Growth Option Ituran (ITRN) is a leading company in its field, providing tracking and advanced protection services for vehicles and drivers. Ituran specializes in theft prevention and vehicle location, and the provision of information services, navigation and assistance while on the road. Ituran’s system is powered by a unique advanced technology developed originally to locate pilots in difficulty and later adapted for civilian use. Since its founding in 1994, Ituran has developed a strong reputation, and is in fact the leading company globally providing tracking, protection and communication services to vehicles and drivers. Ituran has more than 628,000 customers that it faithfully serves from its service bases in Israel, Argentina, Brazil and the United States. To date, Ituran has successfully prevented or resolved the theft of more
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          Frank Voisin is the author of the popular value focused website Frankly Speaking, found at Frankvoisin.com A quick update on Edgewater Technology (NASDAQ: EDGW) from the author of the original analysis found here. Note that EDGW is up 26.11% since that was published (exactly six months ago today). Leave your thoughts on EDGW below.   Frank’s Disclosure: No position.   ******* Last week EDGW announced the sale of one of its “modules” to Microsoft.  This module will now be built into to MSFT’s offering instead of EDGW having to sell it itself as an add-on offering.  Unfortunately, the news was announced during a holiday week so many investors may not have appreciated the significance of the transaction.  As part of the deal, EDGW receives (i) $3.25 million in cash (which will be largely untaxed due to the big NOL) and (ii) additional cash compensation to provide MSFT with services during the integration of the module in MSFT’s Dynamics AX (its ERP solution for enterprises). The benefits of this transaction are significant: 1)      EDGW receives cash of $3.25 million (mostly today and largely untaxed), which represents ~ 7% of its equity market cap. 2)      Increased opportunities for high margin consulting business
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com Last month I posted Hugh Hendry’s latest investor letter. Hendry is known for his macro insight, and deservedly so, but there was something in there that I thought was useful to micro investors: orporate Japan, along with much of the rest of Asia, is guilty of paying too many redundant quasi-state employees anything at all. It is a ruinous policy, symptomatic of a failure ot face tough decisions, and it is slowly but surely eliminating all of the residual equity value in far too many businesses. … Consider Hitachi. It has a new CEO, one who has committed to improving operational efficiency. That has made the market happy but we do not think the market is concentrating. … Instead let us look at the fact that the firm has 376,000 employees and that what truly moves the needle on margins in these slow moving mega-conglomerates is the ability to reduce headcount. … Using Sony’s recent restructuring cost as a reference, it looks like it would cost Hitachi between $75k and $100k per redundancy. That is an implied liability of $8bn. No one calculating book value for Hitachi
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com One of the great events in an investor’s life is that day you one of your portfolio companies agrees to sell itself at a hefty premium. Rarely does recognition of a good call come at all once, and you will be forgiven for the initial euphoria (and maybe a bit of gloating). However, as sweet as this time is, you eventually have to face the decision of whether you should hold the position or sell. On one hand, you can lock in your gains immediately and re-deploy that capital elsewhere. But on the other hand, the stock hasn’t traded up exactly to the deal price, and if you hold on you’ll earn another couple points – risk free, right? Not quite. There are significant risks associated with holding out. I’ve detailed situations on this sitewhere holdouts found themselves in the unenviable position of seeing their gains disappear as the deal falls through. However, this is not even the riskiest behaviour; some investors, seeing the spread between the announced deal price and actual stock price, will initiate a new positionin the company as part of a “merger arbitrage” strategy. Unfortunately, many
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com A recurring theme on this site has been the significant risks associated with investing in companies whose revenues are highly concentrated among a small number of customers. I have never written a post directly addressing this subject, but I have received a few emails over the years that lead me to believe I should. These emails suggest that my wholesale avoidance of companies with highly concentrated revenues is misguided, and the argument seems to boil down to this: Fewer customers allows for more focus and better service, which translates into a closer relationship and more stable revenues. These revenues are also lower cost to the company than would otherwise be the case where there would be significant costs associated with finding and onboarding many smaller clients. There are some good points here, and to be clear, I am not suggesting that customer concentration automatically disqualifies a company from being a good value opportunity. Rather, the way I think about customer concentration is that it creates a rebuttable presumption that future revenues are riskier than revenues derived from many smaller sources. There are a number of ways
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com Below is a reader submitted investment idea for Emmis Communications (NASDAQ:EMMS), drawing attention to important events that have occurred subsequent to the end of the most recent financial statements. Submit your investment ideas here and please leave your thoughts about this idea in the comments below. Disclosure: No position (Frank) ****** OVERVIEW On an LTM basis, Emmis Communications Corp. (“EMMS”) appears to be an overvalued, overlevered company.  However, after the quarter ended, the company closed (or is in the process of closing) several transactions that are significantly accretive and massively deleveraging.  Pro forma for these transactions (and an unannounced but inevitable refinancing of debt, including 12.25% and 23.0% debt), EMMS is trading at only 5.9x equity cap/LTM free cash flow.  The valuation drops to 4.8x equity cap/free cash flow if EMMS wins a lawsuit regarding its outstanding preferred stock.   This is a complicated (and somewhat illiquid) situation that for a variety of reasons has not appeared on many investors’ radar screens.  However, insiders believe the stock is undervalued and instituted a 10b5 plan to buy up to 1million shares at prices up to $2.00 per share (up 33% from
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. - Warren Buffett The investment process would be incomplete without a proper understanding of the dynamics of the industry in which a company competes. Though this type of analysis can be aided by quantitative measures, it does not lend itself to the clear structure of spreadsheet modeling, and it has a nebulous nature that often leaves investors wondering if they’ve done it right and covered all the bases. In the 1970s Dr. Michael Porter of Harvard Business School recognized the lack of rigour in then-current analytical frameworks and set out to develop a new, comprehensive framework that would capture both internal and external threats as well as both horizontal and vertical competition. The result has come to be known as a Porter’s Five Forces analysis, as Porter had distilled the key elements into five parts, the analysis of which would allow a person to assess the attractiveness of an industry. Threat of New Entrants: As new entrants begin to
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com Near the beginning of the year, I wrote about Key Technology, Inc (NASDAQ: KTEC), a manufacturer of process automation systems primarily aimed at the food industry. I noted that the the company was trading at a market cap just shy of $71 million, yet the company has $26 million in net cash, is profitable and generated $10.8 million in free cash last year (for an ex-cash yield of 24%!). Since that write-up was published, the company’s share price has fallen another 27%, to lows not seen since the 2009 market trough. The company now (as of late May) trades for just $55 million. Unfortunately, net cash has also declined, and by an even larger percentage (33%) to just $17.5 million. Given the dramatic decline in cash, we turn to the company’s consolidated statement of cash flows, to ensure that there is a good reason (ideally expected to reverse in the near future) for the decline. We see the following as the three biggest uses of cash: Trade Accounts Receivable: $2.351m Customers’ deposits: $1.183m Purchases of PP&E: $1.18m None of these concern me, particularly because PP&E is less (by
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Frank Voisin is the author of the popular value focused website Frankly Speaking, found at http://www.FrankVoisin.com Superior Industries International Inc (NYSE:SUP) is a Van Nuys, California based manufacturer of aluminum road wheels for sale to OEMs. The company’s manufacturing operations are split between the United States and Mexico and consequently the bulk of its sales are to the American automotive manufacturers. Over the last three years, Ford, GM and Chrysler have averaged 34%, 32% and 12% of revenues, respectively. The remaining approximately 22% of sales are split among a number of foreign brands with manufacturing plants in North America. Given the context of the company’s major customers, one might expect SUP to have performed quite poorly over the last five years. While it is true that the company experienced losses in 2008 and 2009, these were largely non-cash and in fact the company generated positive free cash flows in each of the last five years, averaging $35.5 million. The more astonishing fact here is that the company trades for a market capitalization of $446 million, has zero debt and $198 million in cash, for an enterprise value of just $248 million. Thus, average free cash flows of $35.5 million appear quite
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