Great comments and notes on VOXX Hweb. Q3 is their strongest quarter, so dangerous to annualize future results solely based on the impressive turnaround that has been going on for a couple of quarters. I'm watching it for a pullback to buy....but kicking myself that I didn't dip my toe in here after last quarter. They were telegraphing a great 2nd half.

Also, Q3 had a very low tax rate, offset by a higher than avg ytd tax rate. Perhaps a catch-up to normalize.

Nice trading, Nelson. PEIX short interest just hit an all-time high....nearly 6MM shares are short.

There is a really great twitter thread on CCRC by a poster named Jeremy Raper:

https://twitter.com/puppyeh1/status/1341734321242005508

I agree with all his points.

Took profits today on STRL. Its up about 11% to 18.50 on very strong volume.

Looks like a technical breakout, but valuations are probably in the range of FV. Could certainly run a bit higher in this frothy market.

Analysts are expecting about 1.88/sh for FY21, which is up from 1.56 in FY20.

Re: MIK. There is also a very high short interest here, so that could make things interesting.

Strong free cash flow during the quarter for MIK which allowed them to pay down approx 150MM in debt and restructure other debt.

TTM EV/adj EBITDA is still below 4.5x, so its equity is cheap even after adjusting for the debt levels. Could/should rise to the $12-13/share level, but can they show growth for next year? The 2nd half comps will be tough, but 1H are easy.

The warts on HPE:

1. Balance sheet. Current Debt > Current assets
2. TTM EV/EBITDA is not as low as I'd like to see it.

I think we could get a pullback into the low 10s, as the HPE earnings calls are sometimes seen as a sell the news moment. Good stock to keep on your watch list and perhaps buy on dips.

HPE (trading around 11) had a good quarter vs estimates. After the bell yesterday, they released their Q4 earnings report. They earned 0.37 (taxed at 6%) which beat the estimates of analysts by 0.03/sh.

More importantly, they guided to a stronger than expected Q1 (0.40 - 0.44) and FY21 (1.60 - 1.78)

Seems pretty cheap below 11, plus they pay a quarterly div of 0.12 (~4.3% yield)

My PT would be around 13.50

Bought some PEIX on the crazy drop down below 6 this AM. I guess the selling was tied to the S-3 filing for the 8.9MM warrants that was declared effective today?

All of these warrants are owned by the same institution that participated in the earlier private placement for 5.1MM shares at 8.42 and pre-funded warrants of 3.8MM at 8.42.

Don't know why any of this would put selling pressure on the stock with the price around 6, since any shorting activity tied to these warrants and shares would have been put on above $9 - 10/share. If I were short, which I'm not, I'd be inclined to cover here!

CIH gets an unsolicited go-private offer from one of its larger shareholders - General Atlantic Singapore (a PE firm). 2.32/share in cash is the offer, which will definitely need to be bumped up to get the largest Chinese shareholder to bite.

https://ir.chinaindexholdings.com/news-releases/news-release-details/china-index-holdings-announces-receipt-non-binding-going-private

My guess is that it will take something north of $3.00/share for this to be finalized.

GNW moves another step closer to its buyout by China Oceanwide with a key Chinese regulator re-approving its deal. Closing should occur sometime next month; investor exhaustion from seemingly endless delays and extensions has left a substantial arb opp here. At 4.65/sh, an investor could earn 16.75% in less than a month.

https://www.marketwatch.com/press-release/genworth-and-oceanwide-announce-ndrc-re-approval-of-transaction-2020-11-30?tesla=y

All of these are cheap on TTM PE basis, but looking at future growth, I'd bet that only APT will show strong y/y growth in FY21. At its current price of 12.25/sh, APT trades at <5x FY21 projected eps of 2.49

If they were to achieve that, it would project to nearly 40% growth over FY20 eps.

I just looked at SQBG. They had a big gain in the quarter from reversal of bad debt expense:

From their Q3 10Q:

"Operating expenses. Operating expenses decreased $3.5 million for the three months ended September 30, 2020 to $8.7 million compared to $12.2 million for the three months ended September 30, 2019. The period-over-period change was primarily driven by decreases in marketing expense of $1.6 million, legal, consulting and management fees of $0.8 million, travel expense of $0.1 million, reversal of bad debt expense of $4.7 million, depreciation of $0.1 million and an increase in sublease income of $0.4 million. The decreases were offset by increases in compensation expenses of $0.1 million, rent expense of $0.1 million and amortization expense of $4.0 million due to reclassification of the Avia and Ellen Tracy trademarks from indefinite-lived to finite-lived intangible assets. "

If you back that out, in addition to all the other one-timers, they actually lost money in the quarter. (non-GAAP)

Thanks. I'll keep my eye on it. As you mentioned, TPC has a history of overpromising and underdelivering.

Thanks! I'll check it out.

The terms on those warrants are a bit misleading.

The warrant holders exercise and get 1/2 of a common share. Reality is that they only cost the warrant holders $26.5MM if fully exercised. That is the max cash the company could receive.

Company has the option to force a cashless conversion if the stock trades over 24/sh for 30 days.

Sure, and they really only come into play at prices above 11.50/share....which is roughly where the stock stalled on its last run-up, so Mr. Market is definitely keeping track of those LMB warrants.

Anyway, I like the operational improvements that are happening here. They could outweigh the looming potential dilution.

Other construction plays that I think are interesting
WLMS
STRL

Nelson, isn't there a warrant overhang for LMB? (From the Q3 2020 10Q)

At September 30, 2020 and December 31, 2019, the Company had outstanding warrants exercisable for 4,576,799 shares of common stock, consisting of: (i) 4,600,000 warrants issued as part of units in its initial public offering, each of which is
exercisable for one-half of one share of common stock at an exercise price of $11.50 per whole share (“Public Warrants”); (ii) 198,000 warrants, each exercisable for one-half of one share of common stock at an exercise price of $5.75 per half share ($11.50 per whole share) (“Sponsor Warrants”); (iii) 600,000 warrants, each exercisable for one share of common stock at an exercise price of $15.00 per share (“$15 Exercise Price Warrants”); (iv) 631,119 warrants, each exercisable for one share of common stock at an exercise price of $12.50 per share (“Merger Warrants”); and (v) 946,680 warrants, each exercisable for one share of common stock at an exercise price of $11.50 per share (“Additional Merger Warrants”). The Public Warrants, Sponsor Warrants and $15 Exercise Price Warrants were issued under a warrant agreement dated July 15, 2014, between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The Merger Warrants and Additional Merger Warrants were issued to the sellers of LHLLC.

That is a substantial slug of potential dilution with FDS at 8.1MM

CIH (China Index Holdings) reported this AM. They are in the China commercial real estate data analysis/services biz. Stock trades around 1.50. Earned 0.12 (USD) in the Q.

https://finance.yahoo.com/news/china-index-holdings-announces-third-093800671.html

Tighter regulations have impacted their clients, which slowed top line growth (only +8% y/y), but they still have improving margins and cash flow. (From their CC)

They are one of the cheaper stocks I follow, even with the "China discount".
Cash/share (converted to USD) is 0.91/share. 61% of market cap.
TTM EV/EBITDA is 1.1x

Management is still confident in double digit growth for this year.

I think they will earn about 0.45 USD/share, so it trades at 3.3x PE. Don't see why they can't trade at 5x or higher. Company should consider going private. It was a spin off from SFUN, which operates an online real estate site in Beijing.

My two cents on PEIX....it wasn't as good a report as Q2.

Revenues declined sequentially, as did GM and pretax (adjusted for TWO one-time factors). Settlement income is something I view as one-time, so I would exclude it.

Net debt continues to decline, but shares have risen as a result of the financing deal.

Its still very cheap, with my guess at TTM EV / Adjusted EBITDA of roughly 3.1x. I adjust out the litigation settlement income and change in FVs.

Will be listening in the CC.

FLGT had a huge beat in its Q. Its a covid-19 test company, and one of the better ones.

trading at 35.7 bid, non-gaap eps of 2.09 in the quarter.

Guided higher for Q4.

I've traded this one several times and back in again in the 35s. It is volatile, so be careful with your entries.

PEIX I just initiated a position in the 5.60 - 5.80 range

APT will still have one big tailwind for future revenues for its sold-out high margin respiratory N-95 masks: hospitals and other federal/state agencies will need to fully restock their supplies even after covid goes away as a real fear.

That is not factored in to the current price of 12.80 for APT. (I put some limit orders in after it crashed below 11 but missed them.)

APT also has a ton of cash on their balance sheet, no debt and a stock repurchase in place.

Revenues could be flat for FY21 but margins could potential rise, keeping earnings growth in place for another year at least.

R59, I also bought ENVA today in the low 17s. They indicated on the call that they are steadily moving back to a more normal loan operation, with originations steadily rising into Q4. As their older loans roll off the books, they will be replacing them with newer loans and higher loss provisions that need to be booked up front. Also, they are increasing their marketing dollars, which have been way down from normal levels for the past two quarters.

Also, I'd point out that they acquired OnDeck and closed on the deal after the Q3 was over. There will be some additional shares issued in the deal, so the new FDS is about 36MM. There was also this little nugget of info in the CC:

"Before I wrap up, let me provide a quick update on the OnDeck business. Similar to Enova's performance OnDeck experienced a steady upward trend in origination through the quarter along with improving credit quality and solid profitability. Total originations for the quarter were $148 million up from $66 million during the second quarter. The total gross consolidated loans and finance receivables at September 30, totaled $666 million. OnDeck's annualized quarterly net charge-off rate for the third quarter was 23% and the 15 day plus delinquency rate improved to 27% at September 30 compared to 40% at June 30. Improving credit quality and lower G&A expenses drove an increase in OnDeck adjusted net income to $30 million for the third quarter.

That would have added roughly 0.83/share to an already stellar quarter. (30MM/36MM fds) That should continue to add value going forward, and they indicated that they expect the ONDK deal to be approx 40% accretive on a non-GAAP basis.

I would point out that this is a space that is heavily regulated and could be under serious pressure from a Congress run by Democrats.

One of the safer plays in this sector IMHO is OMF, which I also added to today on the back of their earnings report. Its not as cheap as ENVA, but its loans don't carry the same high interest rates.

Re: BGFV. Management needs to deploy its "active" stock buyback program soon:

Mark Smith

Okay. And I think the last one for me just kind of big picture, the balance sheet looks fantastic here with strong net cash position. You raised the dividend. Can you talk about other uses of cash as you go forward potentially putting more investment into unit growth? Or anywhere else where you plan on use of cash?

Barry Emerson

Yes Mark. Well first and foremost we're still in the heat of a pandemic. And so, we just think it's so critical for us to maintain a strong balance sheet. So that is something that is certainly a priority for us and we'll continue that on the forefront.

From an investing in the -- we have a number of there's four legs on the stool right and we've really been active in all of them in terms of in terms of well certainly we paid down the debt which is a big plus. We've been investing in the business the dividend. And we also have an active stock buyback program. We have an authorization of $15.3 million.
------------------------------------

At prices of $7 or less, they could repurchase 10% of FDS. Plus, there is a huge short interest, so lots of firepower to potentially push this higher.

The biggest hurdle is that FY21 eps will very likely be down vs FY20.....so it could be dead money, or as Hweb says, a good trader.

Just to add to the parade of value metrics for BGFV

I calculate a rough TTM EV/EBITDA < 2x @ 7.50/sh (waiting for the 10Q)

Yup, its cheap

You can see why the chartists are getting excited about BGFV. The chart shows a beautiful cup and handle formation. Could make another charge at the 10 level soon, but the pivot point was likely in the high 8s. I expect a choppy afternoon....

APT positives:

1. We should get an update soon on the capacity expansion efforts. This will effectively double their sales capacity in N95 masks which carry their best GMs AND strongest demand. Bodes well for strong results well into FY21.

2. Increase in capacity comes too late for Q3, but could provide a boost in Q4 and definitely for next FY.

3. Balance sheet very strong. Large cash balance ($1.80/sh); debt free.

4. Business outlook was/is excellent as per Q2 earnings PR; strong quarter (Q3) is expected. Easy comp.

5. Q2 eps was 0.46/sh. Great quarter, AND it could have been better! The company was constrained by a few supply chain issues that appear to have been resolved.

6. $7MM stock buyback in place (new $5MM authorization added to existing $2MM; 3.5% reduction in FDS at current prices)

7. Covid-19 vaccine still is months away, plus the general population won't be fully vaccinated for a long time because of shortages, fear, etc. Companies and govt agencies will need to both stock up and restock for a few years more.

So, you are buying APT at around 7x the one analyst est for FY20 eps. I think they will do slightly better. His guess for FY21 is 2.66/sh, which if you give a 7x multiple for that, means that FV is closer to 18.20/sh. Not a home run, but that is also before possible other returns of capital to shareholders. Its also a very conservative valuation that assumes we get some return to normalcy by FY22.

Nelson, I'm with you on VRA. I love it below 7. Dirt cheap on EV/Adj EBITDA basis.

SA author who has been red-hot this year just put out an article on VRA:
https://seekingalpha.com/article/4378803-vera-bradley-is-buy-7

I also like GIII, but was buying it in the 13s In the high 14s now.

I see that there was shelf filing for LUVU declared effective a few weeks ago. 2.45MM shares can now be sold (low basis options ranging from 0.0125 - 0.03/sh).

I doubt they would be selling now, but it will probably cap the upside here.

NE Journal of Medicine makes a pretty powerful statement on the upcoming election:

On Wednesday, alongside its usual peer-reviewed scientific studies and analysis, the journal published a blistering editorial taking President Trump and his administration to task over their handling of the coronavirus pandemic. The respected journal broke the nonpartisan position it has held since 1812 with an editorial titled, “Dying in a Leadership Vacuum,” which urged voters to oust Trump over his administration’s failures.

“Our leaders have largely claimed immunity for their actions,” said the piece, which was signed by 34 of the journal’s editors. “But this election gives us the power to render judgment.”

https://www.nejm.org/doi/full/10.1056/NEJMe2029812

"“Our current leaders have undercut trust in science and in government, causing damage that will certainly outlast them,” they wrote. “Instead of relying on expertise, the administration has turned to uninformed 'opinion leaders’ and charlatans who obscure the truth and facilitate the promulgation of outright lies.”

If anyone can short SKYS, I would do it now. The company is being taken private at 6.00/share, but it trades at 9.60. I've already tendered my shares, sadly, so can't take advantage of the gift! Also, ML can't find any shares for me to short.

Its likely trading higher on its extremely low float, that its in the solar industry and the chart looks good. However, it will not be trading very soon:

https://www.marketwatch.com/press-release/sky-solar-holdings-ltd-announces-striking-out-of-winding-up-petition-2020-10-07-10184240?tesla=y

LAD reminds me of HIBB and DICK vs BGFV.

Would love to get an 18x valuation on GPI! I don't think it will get there, but I'd be happy with a 10-12x multiple.

Cars are seen to be in demand:
1. Alternative to public transportation (Covid fears)
2. Bounceback from horrific Q1. Q2 was much better than expected for the industry; Q3 appears to be following that positive sequential trend.
3. Scale matters, very fragmented industry, public cos are growing via cheap acquisitions. Lots of targets available.

Auto dealership GPI guides to a blowout quarter; not sure how sustainable this is?

https://www.marketwatch.com/press-release/group-1-automotive-reports-preliminary-third-quarter-2020-results-new-share-repurchase-authorization-and-intention-to-reinstate-dividend-2020-10-06?tesla=y

I am currently long GPI, CRMT and ABG

R59, I added to ETM and CURO as well. Some insiders/directors were buying in these two also, as per Form 4s filed today:

CURO

https://www.sec.gov/Archives/edgar/data/1372704/000120919120014620/xslF345X03/doc4.xml

ETM:

https://www.sec.gov/Archives/edgar/data/1067837/000106783720000009/xslF345X03/edgar.xml
https://www.sec.gov/Archives/edgar/data/1067837/000106783720000010/xslF345X03/edgar.xml

Also bought some VIAC.

I should also point out on ENVA is that their GAAP earnings showed a loss in Q4 and a big drop in GAAP profits and eps from FY18 to FY19.

That was largely due to this one-time cost from discontinued operations:

Fourth quarter 2019 and full year 2019 results and comparable periods are presented on a continuing operations basis and exclude the results of discontinued operations in the U.K. unless otherwise noted. Enova exited the U.K. market in Q4 2019. The company recorded a one-time after-tax charge of $74 million, including one-time cash charges of $53 million to support cessation of U.K. lending activities.


There are many investors that swear by GAAP and will not use adjusted numbers. As of now, ENVA has a trailing PE of 21x, which makes it look expensive.

I still think that this is fear driven by potential regulatory changes, but companies in this sector have become used to finding ways around changes at the state level. I would be surprised if we had any changes at the Federal level due to Republican control of the Senate; plus Alabama is a very conservative state and not likely to change its regulations so drastically as to drive these companies out of business.

RN and Nelson, the only thing I can find on subprime lenders is that it appears that Alabama is introducing legislation that could impact their ability to charge certain fees and interest rates:

https://www.alreporter.com/2020/02/03/orr-wants-more-sanders-warren-style-regulations/

This came out today; this was not discussed on the ENVA call at all.

CURO is probably down in sympathy with ENVA. The bear case for ENVA would have to be:

1. They missed their Q4 and FY19 guidance.
2. The CEO just sold about 25,000 shares post earnings.
3. Regulations will always be a concern; the sector is hated; low PEs will persist in perpetuity.
4. Its gapped and then crapped after earnings before, so why is this time any different?

I think this is short-sighted and an overreaction. Hopefully the company will continue to buy back tons of shares in the 22s again.

CURO has slightly more regulatory headwinds from California than ENVA, but their PE already discounts a lot of bad news.

Sskillz, here are some more banks for you to look at/research:

TBBK
USMT

Strong economic underpinnings for the typical customer for ENVA, CURO, ELVT, RM (subprime lenders):

https://www.nytimes.com/2020/01/03/upshot/minimum-wage-boost-bottom-earners.html

"These days, wages in the United States are doing something extraordinary: They’re growing faster at the bottom than at the top. In fact, recent growth for workers with low wages has outpaced that for high-wage workers by the widest margin in at least 20 years.

Long ENVA and CURO

I don't think book value has hurt their ability to finance their operations. They both do pay a high rate of interest, certainly compared to CPSS:

ENVA: Weighted average interest rates on long-term debt were i 8.74% and i 9.80% during the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019 and 2018 and December 31, 2018, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreements.

CURO: In August 2018, the Company issued $690.0 million of 8.25% Senior Secured Notes which mature on September 1, 2025 ("8.25% Senior Secured Notes"). Interest on the notes is payable semiannually, in arrears, on March 1 and September 1. In connection with the 8.25% Senior Secured Notes, the balance of capitalized financing costs of $12.1 million, net of amortization, is included in the Condensed Consolidated Balance Sheets as a component of "Debt." These costs are amortized over the term of the 8.25% Senior Secured Notes as a component of interest expense.
The proceeds of this issuance were used (i) to redeem the outstanding 12.00% Senior Secured Notes of CFTC

CPSS: Has outstanding debt of around $2B at interest rates ranging from 3-6%

CPSS is not growing sales or earnings at present, and their margins and ROEs are substantially below those of CURO and ENVA. Which of these companies would you rather own?