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, MeadWestvaco, Jamie Dinan Likes TWC As Merger Arb Idea; TAP As Event Driven Idea, Guy 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
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
