Investments

We are long shares of Webster Financial (WBS). Our full 44-page report is available here.

We also issued a letter to the company this morning encouraging management and the board of directors to explore strategic options to highlight the value of HSA Bank, including a potential spin-off of the asset.

Additionally, we will host in-person meetings on March 5th and 6th in New York to discuss our views with interested investors. Please contact myself and Theresa Callahan at tcallahan@kerrisdalecap.com if you would be interested in attending these meetings…

Our 42-page report explaining our long thesis for JGWPT Holdings (JGW) is available here.

We are long shares of JGWPT Holdings (NYSE:JGW), which, via its J.G. Wentworth and Peachtree brands, is the number-one player in an attractive consumer-finance market niche. JGW provides liquidity to personal-injury plaintiffs, lottery winners, and others who are entitled to long-term payment streams but have near-term financial needs. Despite its 60-70% market share, attractive organic growth rate, and ability to compound capital through acquisitions and platform expansion, JGW trades at a consensus P/E ratio of 7x, an EV/EBITDA multiple of 8x, and at nearly half of our estimate of intrinsic value…

Our 35-page report explaining our long thesis for Lindsay Corp. (LNN) is available here.

We are long shares of Lindsay Corporation (NYSE:LNN), a global irrigation business headquartered in Omaha, Nebraska. Lindsay owns a world-renowned brand name (Zimmatic), sells into an under-penetrated market and benefits from the secular trends of increasing global food scarcity and rising protein consumption. Given this long-term growth opportunity, a robust capital efficiency profile (ROIC of 25%+), and the stock trading at 13.7x net-cash P/E on trough FY 2014E earnings, we believe shares trade at a 50% discount to our conservative estimate of intrinsic value…

Our 19-page report explaining our long thesis for Prime Office REIT-AG (PMO.DE) is available here.

Summary 
Prime Office REIT-AG (PMO.DE or “Prime”) is an undervalued German REIT with several near-term catalysts that could unlock its true intrinsic value. With a current share price of just €2.98, Prime Office trades at a high 55.1% discount to book value (“NAV” or “net asset value”) and a 22.4% discount to gross asset value (“GAV”), more than double that of comparable German commercial real estate companies. Prime Office is a busted IPO from June 2011 that owns twelve multi-story office properties in Tier-1 German cities including Munich, Stuttgart, and Frankfurt. These hard-to-replicate, well-equipped buildings house high credit quality tenants like Medtronic, Daimler-Benz, and Deutsche Telekom…

We believe that AMERCO (“UHAL” or the “Company”) is highly undervalued. We are long the stock.

Our 30-page report explaining our long thesis for UHAL is available here.

AMERCO is an underfollowed holding company that owns one of America’s most ubiquitous businesses: U-Haul, the nation’s dominant do-it-yourself (“DIY”) moving company. For over 60 years, numerous well-financed competitors have tried, and failed, to encroach on U-Haul’s ever-growing lead in the DIY moving equipment rental market. Today, U-Haul controls its market niche, with more than 8x as many hubs as its nearest competitor, and is growing revenue and profit at a steady clip while gaining market share…

• Accounts managed by Kerrisdale currently own shares of Urbana Corp. (URB.A and URB on the Toronto Stock Exchange), a closed-end fund with holdings in securities exchanges and financial services companies.
• Urbana is trading at a 30% discount to its Net Asset Value of $2.06. The fund owns three main assets: (1) shares of CBOE, which account for 27% of the portfolio, (2) shares of NYSE Euronext, which account for 40% of the portfolio and (3) shares in the privately held Bombay Stock Exchange, which account for 15% of the portfolio. The rest of the fund’s holdings are comprised of a variety of smaller public and privately held securities exchanges, as well as several public and private financial services companies.
• Owning the company’s portfolio at a 30% discount strikes us as a reasonably attractive proposition. The fund’s investment manager, Tom Caldwell, is an experienced veteran in the exchange space, as well as the broader financial services industry. We hope that he does not make any foolish future investment decisions. The company has been repurchasing shares, which seems to be the best use of capital given the stock’s current discount to NAV…

• Accounts managed by Kerrisdale currently own shares of Aéropostale Inc. (ARO on NYSE), a teen retailer with stores in the United States, Canada and Puerto Rico.
• ARO has historically been a well-managed retailer experiencing strong growth, above-average margins, and high returns on capital. While the company is operating at peak margins, has a maturing store base and faces tough prior year comparisons, the stock’s current valuation is nevertheless too cheap. ARO trades at 4.1x EV/EBITDA and 10x P/E. Its valuation seems too low.
• In addition, in the event of a double-dip recession, ARO is better positioned than most other teen retailers, given its low-price status within the teen fashion segment…

• Accounts managed by Kerrisdale currently own shares of Interval Leisure (IILG on Nasdaq), which runs one of the two global timeshare exchanges.
• While we like various aspects of the business and continue to be holders of the stock, the declining customer count concerns us and we’re watching it closely to see if it stabilizes.

In this post, we’re going to write about Interval Leisure Group, Inc. (IILG on Nasdaq), one of the two global timeshare exchange operators. We own shares in Interval and have for over a year. There’s numerous things we like about IILG – it operates in a duopoly, has high free cash flow margins and returns on capital, is valued at a high free cash flow yield, and the company has unique barriers to entry that protect it from competitive threats. That said, IILG is…

• Accounts managed by Kerrisdale currently own shares of PriceSmart Inc. (PSMT on Nasdaq), which runs Costco-style warehouse clubs in Central America
• PSMT is a well-managed, steadily growing company in a region (Central America) and industry (warehouse clubs) with promising long-term growth prospects. Capital allocation has been intelligent since the 2003/2004 restructuring and operational execution has been top-notch
• While not especially cheap, the valuation is low enough to warrant a place in our portfolio. The company trades at similar valuation multiples as its peers, but is posting materially higher growth / margin metrics…

• Accounts managed by Kerrisdale currently own shares of CPEX Pharmaceuticals, Inc. (CPEX on Nasdaq), a biotech company that has recently suspended its R&D efforts and is exploring a sale of itself.
• Typically, our posts focus on the investment thesis behind a given investment. While we own CPEX and think it presents an attractive risk-reward opportunity, this post will only briefly touch on our investment thesis. We’ll spend more of this post discussing the activist campaign undertaken by Richard Rofe of Arcadia Capital Advisers, because it provides an interesting case study of how activists can add shareholder value for small biotechs with multiple disparate drug businesses…

• Accounts managed by Kerrisdale currently own shares of Coventree Inc. (COF/H CN), a former Canadian packager of non-bank asset-backed commercial paper currently in the process of liquidation
• Coventree has a market cap of $57m at the current share price of $3.79, compared to a net asset value of $85m. The Company is in litigation with the Ontario Securities Commission, but based on our view of its potential loss liability, the timeline of the litigation, and the timing of potential distributions to shareholders, we think Coventree is an attractive investment opportunity…