Warren Buffett has said that even today, he could earn 50% or more a year just by investing in small caps. So, with this statement in mind, ValueWalk set up the Hidden Value Stocks newsletter.
Hidden Value Stocks is a quarterly publication which profiles two hedge funds in each issue. Each of the hedge funds has a value slant and seeks to invest along similar lines as Buffett did when he set up his partnership.
Warren Buffett Stock Gains 50% In Six Months
One of the funds we profiled a few months ago was GrizzlyRock Capital. The value-focused firm picked Vishay Precision Group as one of its focus stocks for the magazine. At the time of publication, the stock was trading at $17.45 (June 15, 2017) and today it is trading at $26.35 for a total gain of 51% in just six months.
Here’s what GrizzlyRock had to say at the time of the interview:
Vishay Precision Group is significantly undervalued as the Company currently trades for 7.5x trailing EBITDA. This compares to numerous private market transactions which have been consummated at more than 12x EBITDA. Given VPG’s leading market position within its respective niches and status as one of the largest independent sensor assets left on the market, we believe VPG would receive a premium multiple in a sale.
Moreover, we believe EBITDA should grow from $26 million in 2016 to roughly $32 million in 2017 driven by a combination of top-line growth as certain end markets which VPG serves (such as steel) normalize. VPG’s bloated corporate overhead currently totals more than $25 million and represents a significant cost-cutting opportunity to drive EBITDA and importantly cash flow growth. Our due diligence suggests that VPG can remove $5 million to $10 million in costs, or ~20% to 40% uplift in EBITDA.
Grizzly’s price target was $24 or 9.5x the 2017 EBITDA estimate at the time, a forecast which now looks conservative, something the team highlighted at the time “we believe our assumptions are conservative with very little underlying revenue growth or margin expansion assumed.”
Vishay is just one of the 26 stocks Hidden Value Stocks has profiled since it launched at the beginning of last year. On average these ideas have returned 28% over a one-year holding period– this is not a backtest, these are real ideas owned by actual funds.
Each newsletter subscriber not only receives a detailed investment thesis on each idea, but we also provide direct access to the funds profiled as well as their quarterly updates.
Check out the teaser issue below, and if you’re interested in signing up to Hidden Value Stocks click here.