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Snowball Research Blog

Eight insightful letters sent by Roumell Asset Management

I’ve compiled the list of “interesting” excerpts from his letters. Also, the complete letters can be found in the “exhibits” section. The purpose of reading this? Readers can use it for “idea generation” and to improve their research skills.

Competitive Advantage: Small and Micro cap series #1

If I were to choose one topic that makes a profound impact on way I look at stocks, it would be “Competitive Advantage”. In this series, you will be presented with a list of a few companies which show “signs” of competitive advantage.

Clean Harbors: Market share, regulation, switching cost

Market share: The company services approximately 65% of North America’s commercial hazardous incineration volume and 24% of North America’s hazardous landfill volume. High switching cost: Many customers desire to audit disposal facilities prior to their qualification as approved sites and to limit the number of facilities to which their hazardous wastes are shipped in order to reduce their potential liability under…

Huntington Ingalls Industries, Inc.: Barriers to entry

The company is the only one currently capable of building, refuelling and defueling the US Navy’s nuclear-powered aircraft carriers. The company is the only builder of large deck amphibious assault and expeditionary warfare ships for the US Navy. The company is the sole supplier of NSCs for the US Coast Guard. The company is one of only two companies currently designing and building…

Huntsman Corporation: Huge market share, oligopoly, patent

Huge market share: Highest market share in major products: Polyetheramines (85%), Ethyleneamines (40%). Oligopoly: The company is one of three North American producers of PO. PO is an intermediate chemical used mainly to produce a wide range of polyols and PG. Customization: In specialty markets, there are few competitors for many of the company’s products due to the considerable customization of product formulations…

Sensata Technologies Holding NV: Switching cost

The automotive and HVOR sensor markets are characterized by high switching costs and barriers to entry, benefiting incumbent market leaders. Sensor application-specific products require close engineering collaboration between the sensor supplier and the OEM or the Tier 1 supplier. OEMs and Tier 1 suppliers make significant investments in selecting, integrating, and testing sensors as part of their product development. Switching to a …

Westinghouse Air Brake Technologies Corp.: Huge market share, patent rich and significant aftermarket revenue

The company holds an approximate 50% market share in North America for its primary braking-related equipment. Dating back to 1869 and George Westinghouse’s invention of the air brake, the company is an established leader in the development and manufacture of pneumatic braking equipment for freight and passenger transit vehicles. Huge aftermarket sale: The company’s substantial installed base of products with end users..

KAR Auction Services, Inc.: Huge market share in oligopoly market with huge barrier to entry

Market share: ADESA, the company’s whole car auction services business, is the second largest provider of used vehicle auction services in North America. Oligopoly: As per company estimates, Manheim, a subsidiary of Cox Enterprises, and ADESA together represent approximately 70% of the North American whole car auction market. The company estimates that ADESA represents approximately 24% of the North American whole car …

TransDigm Group, Incorporated: Proprietary products, significant aftermarket sales with little competition and barriers to entry

Proprietary products: As per company estimates, about 90% of net sales are generated by proprietary products. The company does not compete for non-proprietary “build to print” business because it frequently offers lower margins than proprietary products. Sole source provider: Nearly 80% of total sales are generated from products for which the company is the sole source provider. Significant aftermarket revenue for which …

St. Jude Medical, Inc.: Market position, Oligopoly, Barriers to entry

The company claims (10-K, 2015) that it holds the number one market position inthe vascular closure device market. Vascular closure devices are used to close femoral and radial artery puncture sites following percutaneous coronary interventions (PCIs), diagnostic procedures and certain peripheral procedures. Oligopoly: The company is one of three principal manufacturers of neurostimulation devices. Neurostimulation therapies and structural heart defect devices have higher barriers…

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