Weekly Snack #26
Weekly Snack #26
Merger arb updates, compounders, multi-baggers, and a near double idea
Welcome to Weekly Snacks! This newsletter is home to a weekly compilation of new investment ideas, Twitter posts/threads, general research, and podcasts to help all investors generate ideas that they may have otherwise not been exposed to.
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Investment Pitches
TL;DR:
I decided to provide an update on the Tapestry (TPR) acquisition of Capri (CPRI). Deal probabilty since I last wrote about it has tumbled to below 48% despite no news coming out and one commission (China’s SAMR) approving the deal. Many have sold off the stock considering the FTC’s and EU’s assault on mergers this year. I outline why the deal still has good odds of being approved and briefly discuss more in-depth anti-trust concerns. Given the last trading price, the upside stands at over 25% with analyst close probability closer to 70%.
TL;DR:
I’ve had
on here before and he came out with another post on his Substack about Hirequest HQI 0.00%↑, a staffing company. Staffing has been a hard business over the last few years as layoffs plague many sectors of the market, however, unemployment still remains low. Jaime believes that the company’s net margins will normalize and given the asset-light frachise model, could be ripe for a huge upside. The franchise model is an interesting one given they go around buying family-owned businesses and franchising them back out or placing in a franchisee of their own. Either way, they collect a 6% royalty. It’s a short, sweet, interesting play that could be an interesting play.
TL;DR:
Another returning author, Sebastian over at
, wrote a post on Cornerstone FS (LON: CSFS), a foreign exchange payments company. Having gone with a new CEO in 2022, he was able to bring the company back to profitability after numerious years of losing money. The company’s primary driver has been from having a higher transaction value per customer, which has nearly increased revenue by 60% in 2 short years. Sebastian’s focus on cash generation from EBITDA makes the invesment compelling when connecting it to managements growth strategy (which is increase sales people to get more clients). He thinks that buying this company at under 10x FCF isn’t such a bad deal.
TL;DR:
The other week, I had
to pitch a unique special situation. This week, I’m having him on here again with his pitch on Yellow Corp (YELLQ), the bankrupt trucking company. The author is highlighting the liquidation value and how it could be a windfall for equity shareholders. While the liquidation proceedings have brought in more assets than originally planned, the company still has plenty of liabilities especially when it comes to pensions. Michael, labels out the assets/liabilities as well as the risks associated with how this could play out for equity investors. Like the title says, this trade could produce a lot of lemonade for investors, or just give them more lemons.
TL;DR:
shared their thoughts on PAR Technology Corporation (PAR), a cloud-based software solutions company for the restaurant and retail industries. Voss believes that the company is worth ~$80/share, nearly double what it’s currently trading for. His target price is based on the companies expanding margins from being disciplined with cost, strategic M&A that’s expanding their addressable market, strong pipeline and bigger wins contributing to their ARR. He brings math to his assumptions and if you were to believe his bull case, the upside is nearly 4x from today’s levels. It’s a long read but a thorough one for anyone who wants a justified long case to be made. An interesting one for those looking for a detailed breakdown.
Tweets of the Week
General Research
Podcasts & Interviews
Appreciate you taking the time to read Weekly Snacks. I hope you have found at least some of these links to be interesting enough to dive into yourself.
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Until next week,
Paul Cerro