Activism | Management | Price Crash | Audit
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Leading companies like CapitalIQ, Bloomberg & Factset offer database with plenty of screening tools for buy-side fund managers.
So, where do we fit in?
We run screens and build a database of US-listed companies that pass stringent qualitative criteria, which are either ignored or buried with other ideas.
1. Management Change Qualitative Research
Past performance of a newly appointed CEO is evaluated every time a company experiences “CEO Change”.
"Serial seller" of companies
When a CEO who is a serial “seller of companies” is appointed, it is a potential sign that the company could be up for sale.
Uncover turnaround CEOs
Every year hundreds of new CEOs are appointed. CEOs who have A+ track record get hidden along with others. Our job is to uncover such CEOs.
CEOs with questionable track record
We highlight new CEOs who have a track record of shareholder value destruction.
"CEO Change" due to temporary problem
In some cases, “situation” at the time of appointment of a new CEO is interesting, especially when a company is undergoing temporary airplane turbulence.
"CEO Change" due to activist pressure
A situation where a company experiences CEO change due to activist pressure is interesting to review.
Stellar performance during tenure with Dollar Thrifty Automotive Group:
- He served as CEO of Dollar Thrifty Automotive Group, Inc. from 2008 to 2012.
- Sale of company: In 2012, he sold the company to Hertz Global Holdings, Inc. for $2.3 billion.
- Turnaround: The company’s share price increased from a few cents in October 2008 to $87.4 per share in 2012. In 2011, Dollar Thrifty reported the best year in the company’s history, with $303.2 million in Corporate Adjusted EBITDA, compared to a $2.3 million loss in 2008. In 2011, the company generated best high net income in its history…..
Sample reports
- We are concerned by the track record of new CEO of Valmie Resources
- Blackstone appoints its representative who has solid track record in footwear industry as new CEO of CROCS
- H Partners installs a turnaround executive as CEO in Tempur Sealy International
- American Assets Trust appoints Rady, who grew a start-up financial firm to a multi-billion dollar company, as new CEO
*We focus only on companies within $50 mm to $2 billion market capitalization.
2. Shareholder Activism
In addition to summarizing activist situations, we highlight key situations.
Activists joining committee which explores strategic alternatives
Some companies agree to put the “activist representatives” in a committee which oversees “strategic alternatives”. This clause in a settlement agreement increases the odds of such outcome.
Valuation insight provided by activists
Many activist investors pour in tons of research and express their opinions about the valuation of a company in their filing. Typically, this information is not available in public domain. We have a dedicated page which tracks and monitors such information.
Significant portfolio in activist portfolio
When an established activist initiates activism in a company that accounts for significant portion of the fund’s portfolio, it increases the odds of success.
Daily summary + Activist profile + Activist campaign
We summarize all significant activist filings on a daily basis.
Multiple screenings
We have multiple screens to help members uncover hidden ideas.
- On April 11, 2016, the company entered into a cooperation agreement with Engaged Capital and pursuant to it, the company increased the size of the Board by one member and appointed one candidate of Engaged Capital to the Board. The company also agreed to appoint two additional independent Directors to the Board to be submitted by Engaged Capital. It also agreed that no later than May 1, 2016, the Board shall retain a nationally recognized law firm to advise the Board in connection with its evaluation of strategic and financial alternatives to maximize stockholder value.
- In September 2016, Apollo Global Management completed the acquisition of the company.
Sample reports
- Outerwall was sold to Apollo Global Management Affiliates after persistent effort by Engaged Capital
- AdCare Health Systems Inc.: Valuation insight from 13D filers
*We focus on all cap [US traded companies]
3. Audit Analytics
We monitor and highlight significant audit reports.
Accounting restatement due to internal fraud
We track restatements and highlight companies that restate their financial statements due to internal fraud. Internal fraud or investigation poses “headline risk” and also gives an opportunity for investors to buy a good company at a steep discount, if the problem is “temporary” and “fixable”.
Investigations
We track SEC, DOJ and audit committee investigations on a daily basis.
Filing of delayed filing after several quarters
We compile delayed filings of 10-K and 10-Q. If the filings are delayed by more than a month, it could be a sign of “material” problem.
Multiple screenings
We have multiple screens to help members uncover hidden ideas.
Expected launch month (Audit Analytics): June 2017
Mission
Our objective is to deliver “hard to find information” to our members, which will give them a “competitive edge” and reduce “search cost” of finding mispriced securities.
Contact
raghu@snowballresearch.com
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