The DJIA had a good week, relative to everything else. The LD Micro Index, Nasdaq, and Russell 2000 were pummeled, all suffering >2% drops.
Dear Patrons,
I hope that everyone is safe, well, and productive.
This week, we had the great fortune of being in San Diego, home of the Padres.
While San Diego may be one of the most beautiful cities in the world, it has not been a good place to be a sports fan over the past three decades.
Let me take that back. It has been down right melancholic.
With the Washington Capitals securing a Stanley Cup back in June, San Diego has the sad distinction of not having a sports title since 1963.
It certainly did not help when the Chargers left the city, because they were playing to an empty stadium in Los Angeles last year.
We met with five fantastic companies, had dinner with one of the shrewdest private guys in the space, and also met with the next generation of investors.
A lot of speculation has been made about a company that several “hawk-eyed” attendees noticed at the Invitational this year. For those of you who requested private meetings but did not show up, you missed out on absolutely nothing interesting.
Lahiji Fishing Services (private) is headquartered out of Del Mar, home of the legendary skateboarder Tony Hawk, and Desi Arnaz, who moved to the city after his divorce with Lucille Ball and lived there until his death.
L.F.S. is a unique name that will offset the loss of West Marine (WMAR) last year to private equity firm, Monomoy Capital. This aquatic entity will be making landfall in December, and the presentation will be given by a man that does not need an introduction. For full disclosure, it is not me.
Even with my risk tolerance, I’m staying the hell away from current management.
Please pray for those that are dealing with the wildfires in our state. The entire city of Redding has been destroyed by a fire vortex because of the winds. It is serious, and the impact is going to be severe.
Sincerely,
Chris Lahiji
Impact.
Highlighting Anomalies Amongst the Biggest Gainers & Volume Leaders.
by Christian Galatti (Phase 4 Research)
1. The Importance of Valuation for Bridgepoint Education (
Bridgepoint has been under pressure, not only because it missed the last two quarters; it also operates in the for-profit education space. It has been almost a decade since the stimulus offered easy money for their growth. Without it there has been a steady downward path, until this quarter. A space that has bankruptcies gets valued differently, and BPI owns the University of the Rockies.
University of the Rockies is a graduate school of the social and behavioral sciences. An advanced institution, University of the Rockies shapes professionals to be tomorrow’s thought leaders. Small by design, University of the Rockies is an intimate learning environment for professionals who are passionate about commanding excellence. University of the Rockies offers unique and highly specialized programs, access to industry experts, clinical programs for practical experience on campus, and research and publishing opportunities.
BPI went up 64% for the week, and it’s still under 1x Sales due to the stigma. With $190M in cash (& restricted cash, Q2) and no long term debt, EV stands at $140M or about .3x EV/S (@ at 335M market cap.) With an earnings beat the stock reacted immediately to the deep value proposition. Rather than being EPS driven, BPI is now enterprise value driven. Sometimes valuation matters.
2. Dover Downs Merges with Twin River Holdings (
July 22, 2018: Dover Downs Gaming & Entertainment, Inc. (NYSE:
The merger contemplates that Dover Downs stockholders will exchange their Dover Downs stock for Twin River common shares representing 7.225% of the equity in the combined company at closing. (SEC Link.)
Dover Downs rose 45% for the week because Twin River Worldwide Holdings engineered a great way to go public. With peers like PNK, PENN, and BYD, trading at near 20x earnings, the new Dover Downs should do the same. Placing the private Twin River stock price at approximately $130 (20 x $6.50 EPS.) One can see that the Market tried immediately to figure out the equity arbitrage.
At .0225 DDE per Twin River it looks like the 45% move was dead on. The calculation comes out to exactly where the stock closed on Friday…$2.92. The market is an amazing calculator, an open artificial intelligence that’s crowdsourced to find the truth. Which in our world is called price discovery.
See slides for more merger details (link to SEC document)
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PCM ($PCMI) rose on Q2 results – Raises Gross Margin and Non-GAAP Earnings Guidance
RMS Medical ($REPR) Pre-Announces Strong Quarterly Sales Growth and Change in Leadership
JAKKS Pacific ($JAKK) Reports Second Quarter 2018 Financial Results – net loss of $18.6m
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