The Sohn San Francisco Investment Conference just concluded and featured hedge fund managers sharing their latest investment ideas to benefit charity. The event benefits the Excellence in Investing for Children's Causes Foundation and a portion of the proceeds also go to The Sohn Conference Foundation.
We've already posted up notes from Next Wave Sohn San Francisco which featured emerging managers. Now below are notes from the main event.
Sohn San Francisco 2019 Notes
Kevin Oram, Praesidium Investment Management Company, LLC
Idea: Instructure (INST)
• Hidden value that can be unlocked
• 2 key products:
o Canvas is a leader in education learning software which is ~90% of revenue
o Bridge is corporate learning software
• Canvas is student and educator collaboration software
• Biggest competitor is Blackboard – which has a legacy on premise software and has had trouble transitioning to a cloud model
• Software is a great business but vertical software is even better as it serves a very specific market
• Believe there is a significant margin expansion opportunity from 24% in 2019 to 40%+ by 2022
• Has an opportunity to roll up software in other adjacencies given a lot of fragmentation of players in education software
• Believe it is worth $2.5bn versus current valuation of $1.5bn
• Undervalued due to large losses in Bridge – corporate learning
• Bridge software is good but significant competition in the corporate market with entrenched players
• Bridge has very little synergy with Canvas given different source code and dedicated sales team
• Opportunity to unlock value by divesting from Bridge via sale, shutdown and focus on Canvas
• Engaging actively with management over last several months to present case on value destruction of Bridge
• Dec 3rd – Will have an analyst day to describe company’s new strategy and operating model – could be the catalyst market has been looking for
Gil Simon, SoMa Equity Partners
Idea: Sailpoint (SAIL)
• Believe that there is 100% upside to $35-40 per share
• Best of breed software trading at a reasonable valuation (<3x 2022e="" p="" sales="">• Identity is central to enterprise security but this is difficult because the modern large enterprise is running hundreds of applications
• Identity and access management is the #1 priority within security
• Identity Governance and Administration (IGA): Ensure employees access only what they need to access
• 2 key products: Identity IQ and IdentityNow
• ~1,300 customers
• Extending the lead over legacy competition like IBM and Oracle
• 8,500 customers market opportunity from legacy competitors
• CA and Oracle not likely to focus on this space
• Buying opportunity on missed execution; have recently strengthened the management team
• Expect revenue growth to re-accelerate which should drive a snap back in the share price
Adam Fisher, Commonwealth Asset Management
Idea: China Interest Rate Convergence
• Japanese working population peaked in 1995
• China is a good analog for Japan – working age population peaked in 2015 – projected to fall by 125 million through 2040
• China’s 4 megacities are already as rich as the rest of East Asia
• Ne net: Believes that interest rates in China are coming down and going to zero
Glen Kacher, Light Street Capital
Idea: Talend (TLND)
• $6.5bn data integration market growing >10%
• Most robust platform across on-premise and cloud environments
• $218mm of ARR, growing 29% yoy with mix shift towards cloud
• 87% recurring revenue
• Founded in 2005 and went public in 2016
• Focused on ETL products: Extract, Transform, Load
• Talend is the growth leader in the data integration market
• Hadoop hit a wall but Talend benefits from the cloud database wave
• Revenue model is based on seat based subscription software revenue, seat and consumption based saas revenue, 3) project based revenue
• Cloud mix shift should increase over time
• Believes value could be +86% in the base case
Debbie McCoy, Blackrock
Pitch on theme of sustainable investing and ESG (environmental, social, government)
• Increasing sustainable investing adoption across large money managers
• Built an internal model to evaluate companies rather than using third party ESG scores
o Look at employee happiness as a factor in the model
o Incorporate other unique factors that third party scores don’t take into account
Myron Scholes, Janus Henderson Investors
The Advantages of Time Diversification: Risks from Option Prices that Inform Investment Decisions. Tails are important to investors – if you remove the extreme tail gains, realized return falls to almost zero and take out extreme tail losses, realized return nearly doubles over the very long term
Connor Browne, Thornburg Investment Management
Idea: Alkermes plc
• Biopharma company focused on patient inspired solutions
• A unique focus on hard to treat patients - 2 key drugs for opioids addiction and schizophrenia
• Vivitrol – treatment for opioid misuse disorder; blocks the opioid receptor in the brain
o Competes with methadone and suboxone and aimed on getting you off the drug
• Aristada
o Long acting injectable for schizophrenia
o Strong revenue growth
o Expect market share to grow from 5.8% to 9.9%
• Some optionality in other drugs under development
o Vumerity – novel oral fumerate for the treatment of multiple sclerosis
o ALKS 3831- efficacy of olanzapine (Zyprexa) without the associate weight gain
o ALKS 4230 – novel selective IL-2 fusion protein; more early stage
• Valuation
o 4 different scenarios of value: currently approved drugs, +Vumerity, +3831, +Vumerity and 3831
Mike Wilkins, Kingsford Capital Management (short-only firm)
Idea: Shorts and frauds
• Focused on shorting pump and dump schemes
• Large flows into passive investing creates opportunity
• Russell 2000 inclusion is very rules based and rebalances in May– if you can get to $150million market cap, index will include you with no regard to if it is a legitimate company
• Russell 2000 stock promotions – get into index in May and then get ETFs to buy in June and then dump the stock after
• Several fraudsters have taken advantage of the Russell 2000 fraud including Jason Galanis, Benjamin Wey, Howard Appel
• Class of 2019 potential frauds – gained admission to Russell 2000 in June but have not gone to zero yet
o YCBD – merged with Level Branding to get listed on NYSE
o Pareteum: telecom
o Wrap Technologies: next gen solution for non lethal law enforcement
Mark Yusko, Morgan Creek Capital Management
Macro Idea: Don’t Cry, It’s Me Argentina
• Argentina – very low % of their GDP is equitized versus the US which is very high; bullish on long term prospects for Argentina
• Investors fled Argentina when they should have been buying
• Argentina Stock Picks
o Pampa Energy is top stock pick to play this thesis
o Argentinian banks
o YPF is a double play on Argentinian shale
Carl Kawaja, Capital World Investors
Idea: D. R. Horton (DHI)
• Largest homebuilder by volume in the US with over 55k homes sold in 2018
• Housing market has room for growth
• Best in class operator
• Changing their business model that will make it more valuable
• Limits on credit have driven slower but steady growth in housing
• Home ownership will continue to become more attractive as mortgage rates fall alongside interest rate
• Much better deal to buy versus rent in many of DR Horton’s markets
• Industry leading ROE
• DR Horton wants to be more like NVR
• DHI made a strategic shift to focus on lower priced homes with Express Homes and tilts more to the lower end of the market versus competition
• Trying to transition to a business model that is less capital intensive by using land options
• Asset light model yields much higher NPV and IRR
• Should trade closer to other asset light home builders like NVR
Be sure to also check out notes from Next Wave Sohn San Francisco featuring emerging managers and their ideas.
Thursday, October 17, 2019
Sohn San Francisco Notes 2019: Kacher, Yusko, Kawaja & More
Next Wave Sohn San Francisco Notes 2019: Perkins, Sinantha, Venkatesan, Weldon
We're posting up notes from the Sohn San Francisco Investment Conference which featured hedge fund managers sharing their latest investment ideas to benefit charity. The Next Wave segment featured emerging managers Stephen Perkins (Toronado Capital), Touk Sinantha (AltraVue Capital), Raj Venkatesan (Trinity Alps Capital), and Christopher Weldon (Stamina Capital).
We've also posted up notes from the main event of Sohn San Francisco so be sure to check that out as well.
Notes from Next Wave Sohn San Francisco 2019
Stephen Perkins, Toronado Capital Management
Idea: Blackline (BL)
• Software business models are great but software is not undiscovered anymore
• Blackline (BL) – software company modernizing finance and accounting processes for mid-size enterprises
• Replaces excel with a vast process improvement
• Strong user growth – 19% CAGR in users from 2015- Q2 2019
• SAP relationship will help drive future growth
• Market is large and underpenetrated and little competition
• Strong renewal rates at 97-98% dollar retention over last 5 years
• Founder led with the founder owning ~10% of the company
• Competition is really thin
• Focus on this one part of the enterprise is a competitive advantage
Touk Sinantha, AltraVue Capital – value investing firm
Idea: SIGA Technologies (SIGA)– Specialty Pharma
• Post bankruptcy microcap
• Focused on biodefense and only company with vaccine for Small Pox
• US and Russia continue to keep stock of the virus and possible to recreate the virus synthetically
• Siga was a good business that went bankrupt because of legal fight over acquisition by another company
• Continue to provide Small Pox vaccine to national stockpile
• Stock became orphaned for a number of reasons
• $600mm BARDA contract
• Core value estimated at $7 per share or ~30% upside
• Optionality:
o International sales: ~$4 per share
o TPOXX Label expansion: $2 value
o New products: $0 value
• Sum of the core value and potential upside value = $7+$4+$2= $13 per share
• Risks: BARDA funding risk, Capital allocation risk, new competition, liability risk
Raj Venkatesan, Trinity Alps Capital Partners (long only, global and sector agnostic)
Idea: Afya (Brazil – but trades as an ADR)
• Focused on medical education
• Good reform happening in Brazil that are tailwinds to the business
• Population in Brazil is aging and healthcare spend is growing at low double digits
• Low number of doctors on a per capital basis and applicants/openings for med schools have declined
• 70% of medical education in Brazil is private
• Path to become a doctor and specialist is long (like the US)
• Earnings power of a specialist doctor is very high
• Payback for general physician education is 5 years
• Pure play way to play medicine in Brazil
• Multiple growth levers:
o TAM doubles in 5 years to R$32B
o Roll up strategy
o Regulated brownfield and greenfield growth opps
o Asset light monetization of content - vertical and horizontal
• Value: Think Afya is a double
• Risks: Macro/currency, regulatory framework, Recent IPO/limited history
Christopher Weldon, Stamina Capital ($200mm AUM, 3 years in)
Idea: Adyen long (3 year double)
• Payment processor/merchant acquirer based out of the Netherlands
• Visa is a good case study for Adyen – great operating leverage as revenue and costs are completely unrelated
• Lowest cost operator
• Value: believe it can double in 3 years driven by ~35% revenue, >50% FCF CAGR
• Displacing legacy merchant acquirers given cost advantage: First Data and WorldPays of the world
• Growth levers:
o Customers growing quickly
o Wallet share gains
o New customers
o New services
• Digital payments are a secular share gainer in global transactions
• Very large TAM of $25 trillion card based payments
• Base case: +80% upside; Reward Case: +250%; Risk case: -25%
Click here to also read notes from the main event of Sohn San Francisco.
Thursday, October 10, 2019
Sohn San Francisco Investment Conference: One Week Away
The Sohn San Francisco Investment Conference is just one week away. It features hedge fund managers sharing their latest investment ideas to benefit charity. It benefits the Excellence in Investing for Children's Causes Foundation and a portion of the proceeds also go to The Sohn Conference Foundation. You can get more details about the event here.
Sohn San Francisco 2019 Event Details
When: October 16th, 11:30am to 6pm
Where: Hyatt Regency San Francisco
Schedule: Networking & buffet lunch, 'Next Wave' speakers, main event speakers, finished with a cocktail reception
Sohn San Francisco Speakers List
Main Event
Connor Browne, Thornburg Investment Management
Glen Kacher, Light Street Capital
Carl M. Kawaja, Capital World Investors
Debbie McCoy, Blackrock
Michael McLochlin, Highland Capital Management
Adam Fisher, Commonwealth Asset Management
Kevin Oram, Praesidium Investment Management
Myron Scholes, Janus Henderson Investors
Gil Simon, SoMa Equity Partners
Mike Wilkins, Kingsford Capital
Mark Yusko, Morgan Creek Capital Management
Next Wave Sohn Emerging Manager Speakers
Stephen Perkins, CFA, Toronado Capital Management
Touk Sinantha, CFA, AltraVue Capital
Raj D. Venkatesan, Trinity Alps Capital Partners
Christopher Weldon, Stamina Capital
Click here to register for the conference. This is always a great event so be sure to register before next week!
Wednesday, October 31, 2018
Notes From Sohn San Francisco Investment Conference 2018
The Sohn San Francisco 2018 Investment Conference recently concluded and featured hedge fund managers sharing their ideas in order to benefit the Excellence in Investing for Children's Causes Foundation and its beneficiaries, as well as The Sohn Conference Foundation and pediatric cancer research.
Notes From Sohn San Francisco Conference 2018
- Mick McGuire (Marcato Capital Management): 2 Long Ideas
- Shashin Shah (Think Investments): Long Radico Khaitan (RDCK-IN)
- Alex Gleser (TPG Public Equity Partners): Long Philips (PHG)
- Jeff Osher (No Street Capital): Short Trupanion (TRUP)
- Glen Kacher (Light Street Capital): Long Farfetch (FTCH)
- Michael McLochlin (Highland Capital Management): Long Marvell Technology (MRVL)
- Gil Simon (SoMa Equity Partners): Long New York Times (NYT)
- Kevin Oram (Praesidium Investment Management): Long Cornerstone OnDemand (CSOD)
- Jeff Shen (BlackRock): On Asian Markets
- Dan Morehead (Pantera Capital): On cryptocurrencies & blockchain
Next Wave Sohn San Francisco Notes: Emerging Managers
- Marcelo Desio (Lucha Capital Management): Long Talend (TLND)
- Vineer Bhansali (LongTail Alpha): Plays for a rising rate environment
- Daniel Kozlowski (Plaisance Capital): Long Pure Cycle (PCYO)
- Franklin Parlamis (Aequim Alternate Investments): ServiceNow (NOW) trade
For other recent investment conference coverage, be sure to also check out notes from Capitalize For Kids Toronto, as well as notes from Invest For Kids Chicago, and also a summary of Great Investors' Best Ideas Dallas.
Mick McGuire Long Corepoint Lodging & Extended Stay America: Sohn San Francisco 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Mick McGuire of Marcato Capital Management who pitched 2 longs: Corepoint Lodging (CPLG) and Extended Stay America (STAY).
Mick McGuire's Sohn San Francisco Presentation: Two Longs
• Corepoint Lodging (CPLG) – lodging REIT spun off from La Quinta
• Spun off from La Quinta recently so a new company in equity markets
• 315 properties REIT with all La Quinta branded properties and operated by Wyndham
• Some classic dynamics of spin-off at play (Less analyst coverage, noisy financials, atypical shareholder base due to spin)
• Earnings were temporarily depressed and should increase as 1) hotels impacted by hurricanes in Texas and Florida will come back online and contribute to earnings; 2) renovations are completed
• Trading at a discount to peers at 8.3x EV/EBITDA vs median of 10.6x
• Other sources of earnings upside are increased oil and gas activity – have more exposure to oil and gas markets
• Trading at a discount based on hard asset value
• Substantial opportunity to improve hotel level profitability
• If margin improvement doesn’t happen, business likely to be sold (Taxable spin purposefully preserved ability to sell immediately)
• 55% upside based on current price, using 11x multiple and 2019 EBITDA of $232m
• Extended Stay America (STAY) – hotel owner/operator with 599 properties and 27 franchisees
• La Quinta part 2 but at the beginning of the story
• Largest single brand hotel owner and operator in North America
• Longer length of stay, less labor and higher margins versus typical lodging operator
• Company knows current structure is sub-optimal and seems motivated to do something, which could unlock value
• Highest margins relative to peers, strong cashflow profile, positive industry fundamentals, discounted valuation
• Re-franchising less profitable units
• Building new hotels with cash flow
• Last of its kind to separate its hard real estate assets from its brand company
• Capital deployment likely to drive shareholder value: stable cash flow from retained hotels, refranchising less profitable hotels, goes into: repurchasing shares, new hotels, growing franchise business which is minimal cost and high returns
• Attractive valuation: Trading at discount to peers. 8x EBITDA versus peers at an average of 10.7x
• Argues co belongs in a larger portfolio
• 134% upside to $38.12 target price based on 2022E Maintenance FCF/Share of $2.29 and 15x multiple
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Michael McLochlin Long Marvell Technology Group: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Michael McLochlin of Highland Capital Management who pitched a long of Marvell Technology Group (MRVL).
Michael McLochlin's Sohn San Francisco Presentation: Long Marvell Technology Group (MRVL)
• There’s been a selloff in the semiconductor industry due to concerns of slowing global growth
• End markets matter when it comes to semiconductor investing
• Marvell operates in strong end markets – data centers and communications infrastructure which both benefit from high growth, average margins, average competition and high secular growth
• Starboard got involved and took a large position; majority of board and senior management replaced. Since then YoY revenue went from -15.4% to up 3%, gross margin improved 800 bps
• Cavium Acquisition has improved their product offering
• Four key reasons to own: Potential upside to estimates, Strong management team, Compelling valuation (thinks stock is a double), Multiple call options
• Networking and storage are the two key end markets that Marvell plays in
• Solid State Drives (SSD) will drive the majority of growth
• Adoption of SSD growing in other areas (e.g. desktop, enterprise)
• HDD – data center growth offsets decline in client use
• Networking: Beginning of a multiyear growth phase for 5G and they have more components in 5G technology than 4G
• Margin expansion opportunity: Gross margin has gone up 800bps, going forward – more opportunity for margin expansion
• Management exceeding expectations and are strong capital allocators
• Despite best of breed margin profile, valuation trading at a significant discount to peers
• Some call options in the business like cross selling and product expansion that can drive additional upside
• Risks? Economic downturn, HDDs decline quicker than expected, Cavium underperformance, 5G spending slows down/delayed. Mitigants: secular trends in end markets, data center growth offsets, strong management, faster ramp in 5g spending
• Current price: $16.5 per share, upside to estimates = $5 per share, multiple expansion = $10 per share, giving price target of $31.5 per share.
Note that we also posted up notes on Jeff Smith's presentation (Starboard Value) on long Marvell (MRVL) at a separate conference as well.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Shashin Shah Long Radico Khaitan: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Shashin Shah of Think Investments who pitched a long of Radico Khaitan Ltd (RDCK-IN).
Shashin Shah's Sohn San Francisco Presentation: Long Radico Khaitan
Company
• Long Radico Khaitan Ltd. (RDCK-IN), an Indian spirits company with domestic liquor brands
Thesis
• Indian consumer staples have done really well over the last 15 years; +21% IRR
• Per capita consumption of alcohol of 3L per person in India is much lower than the rest of the world and the world average of 6L per person
• Radico has a 7% market share of the Indian branded liquor market
• Really challenging to sell alcohol in India so barriers to entry favor existing players; in many states – distribution owned by the government
• Magic Moments vodka has very strong 50% market share as the #1 in Vodka in India
• Long runway for growth given vodka consumption (vs. other spirits) is underpenetrated versus other markets
• Expect margin expansion to 20% in ~2+ years versus 17.5% this year (More upside given that industry peers Diageo and Pernod have margins of ~30%)
• More recently have launched premium products that compete with products from Pernod and Diageo and have ability to drive further margin expansion
• Have decreased leverage significantly – expect to be at 0.0x by 2019
• Business is very attractively priced (Attractive valuation – 20x forward earnings, rev growth of ~20%; EBITDA growth of ~40%)
• Management owns 40% of the business and has never sold a share
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Glen Kacher Long Farfetch: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Glen Kacher of Light Street Capital who pitched a long of Farfetch (FTCH).
Glen Kacher's Sohn San Francisco Presentation: Long Farfetch (FTCH)
Company
• Long Farfetch (FTCH), an online personal luxury goods marketplace based in London
• Marketplace model with 1,000 total suppliers: 40% brands, 60% boutiques
Thesis
• Complex supply chains and high end brands do not translate well to Amazon’s scale and price driven business mode
• Compared Neiman Marcus's position in the 1990s as category winner to Farfetch as category winner now in the 2000s
• Also compared similarities to Zozotown in Japan, whose gross profit as a % of GMV increased over time and took EBITDA margins from 25% to 35%
• Personal luxury goods market is large and expected to be $450bn TAM by 2025
• Luxury goods are underpenetrated online versus apparel
• Farfetch runs a lot of the ecommerce websites for large luxury brands (e.g. Shopify for luxury)
• Recent margin decline driven by investment in online sizing technology
• Multiple drivers of success: Increasing TAM (3% to 10%), online penetration (9% to 15%), share of online TAM, take rate increase (from 33% to 38%), and margin expansion (from -19% to 35%)
• Attractive repeat customer spending. Initial purchase: $619 on site, in year 5 same customer spent $2,853 annually
• Believes it is a double over next few years
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Gil Simon Long New York Times: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Gil Simon of SoMa Equity Partners who pitched a long of New York Times (NYT).
Gil Simon's Sohn San Francisco Presentation: Long New York Times (NYT)
• Conventional views: news is a commodity, consumers won't pay for news, advertising only way to scale
• SoMa's view: consumers aware of 'fake news,' will pay up for trustworthy, differentiated content, most info still free but quality journalism worth paying for, direct subscription model better aligns publishers with consumers. Analogous to music industry streaming shift
• At the very early innings of the evolution of the new business
• Company with legacy, credibility and scale and has been around 170 years
• Believes internet will go from headwind to tailwind for high quality journalism
• 2011 – implemented their first paywall (with 20 stories a month for free)
• Shifting business model to creating journalism worth paying for
• Broadening content to deep research, more multimedia content (The Daily by NYT is one of the top podcasts in the country
• Very few publishers have crossed the chasm to monetizing print newspaper content – only FT, WSJ, Washington Post, and the New York Times
• Recently tighter paywall to 5 free articles per month driving conversion to paid subs
• 70%+ subs are digital subs
• 80% of print subs have a digital login
• See more revenue going towards subscription
• Opportunity for margin expansion from ~12% today to 20% by 2022
• Can’t be viewed as a legacy print media company; Underestimating future earnings leverage based on fixed costs of the newsroom
• Believes that it is a double to $40-$50 in 2 years
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Jeff Osher Short Trupanion: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Jeff Osher of No Street Capital who pitched short Trupanion (TRUP).
Jeff Osher's Sohn San Francisco Presentation: Short Trupanion (TRUP)
Company
• Short Trupanion (TRUP), a pet health insurance company
• An insurance company that is looking for a SAAS-like multiple by using software nomenclature and getting coverage by software analysts
Thesis
• Believes that TRUP is an insurance company masquerading as a subscription software business by using software nomenclature and getting coverage by software analysts
• Gross margins of 17% are nowhere near SAAS companies
• Looks more like standard insurance company with policyholders than a subscription company with subscribers. Company drivers are net premiums earned and losses incurred just like other insurance companies
• Company pays potentially illegal commissions through “rewards program” for veternarians based on referrals/sales and may be under regulatory investigation (although nothing disclosed) - Offering paid trips to vets and money to money to hospitals for policy activations = commissions
• Believe they could have an adverse selection problem as they are distributing/selling primarily through vet hospitals and healthy pets do not visit the vet hospitals
• Believes they are in an Inevitable Rate spiral which will result in a death spiral - Premiums have to be increased to offset higher claims and thus healthier pets unlikely to be signed up
• Valuation: Trades at a 9x P/B – way higher than best in class insurance peers like Progressive which trades at 3.6x P/B; Believes intrinsic value is $7.05-10.60 representing 65% to 77% downside
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Alex Gleser Long Philips: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Alex Gleser of TPG Public Equity Partners who pitched a long of Philips (PHG).
Alex Gleser's Sohn San Francisco Presentation: Long Philips (PHG)
• Portfolio has transformed dramatically with spin off of lower margin lighting business and sale of TV/electronics businesses (Went from a diversified conglomerate to a healthcare and personal care company but market still not viewing the company with the right lens)
• Attractive secular growth ( End markets growth at 7%, have #1 or #2 share in their major categories)
• Significant margin improvement opportunity (Diagnostic imaging is primarily where their margins lag and ability to increase their margin here; See 600 bps of margin improvement potential across the segments of the company; Management contemplating 100bps/year of expansion from 2017-2020)
• Management has delivered hitting organic growth targets of 4-6% and 100 bps margin expansion over the last year
• Attractive valuation: Trading at 9.2x EV/EBITDA - lower than peers
• Some optionality in other part of the business
• Strong balance sheet provides a nice margin of safety
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Kevin Oram Long Cornerstone OnDemand: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Kevin Oram of Praesidium Investment Management who pitched a long of Cornerstone OnDemand (CSOD).
Kevin Oram's Sohn San Francisco Presentation: Cornerstone OnDemand (CSOD)
• Leading vendor of talent management software
• Operational changes as a result of private equity involvement ($300 million from Silver Lake in 11/17) at Cornerstone will lead to a meaningful inflection in cash flow growth while also positioning the company for a potential sale to a strategic acquirer
• Leading position in the talent management space
• Cornerstone has salesforce efficiency levels well below industry peers, almost 50% lower
• Constructive engagement with management to drive changes in composition of board and management
• 95% renewal rates, should generate strong recurring revenue and cashflow; more than 3,300 customers with 37 million users
• Positioned to be acquired by a strategic but have not been acquired yet because strategics don’t want to do the work to transform the business
• $90/share potential value versus ~$48 share price today
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Jeff Shen on Asian Markets: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Jeff Shen of BlackRock who talked about the Asian market.
Jeff Shen's Sohn San Francisco Presentation: Asian Market
Co-CIO, Systematic Active Equity at BlackRock. Talked about China capital markets more generally. China is second largest equity market in the world (after US). It is very liquid but a lot more retail investors versus more developed equity markets. ~85% of trading volume comes from retail investors.
China equity markets are opening up to a broader investor base given MSCI decision to include Chinese companies.
Uses machine learning and big data to generate conclusions about the Asian market. Big data + big market = big alpha.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Dan Morehead on Cryptocurrency & Blockchain: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Dan Morehead of Pantera Capital who talked about cryptocurrency and blockchain.
Dan Morehead's Sohn San Francisco Presentation: Cryptocurrency & Blockchain
Bullish on crypto-currencies and blockchain technology. Believes that blockchain is going to do to finance what VOIP did to telephone monopolies. It’s not only about blockchain and payments but decentralized applications will disrupt many different industries.
Discussed newer stable coins, which are low volatility cryptocurrencies (pegged to USD or similar) that are important for the use of applications requiring consistent and stable value exchange.
Recommends buying a basket of currencies – some will be losers and some will be winners- but asymmetric upside will help the winners outperform the losers.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Marcelo Desio Long Talend: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Marcelo Desio of Lucha Capital Management who pitched a long of Talend (TLND).
Marcelo Desio's Sohn San Francisco Presentation: Long Talend (TLND)
Company
• Pitched long Talend (TLND) which helps companies integrate and manage data from disparate sources and across a wide variety of environment
• Leading platform that is in the perfect spot to help companies manage data explosion
Thesis
• Believes that data explosion becoming a major problem for companies as historical on-premise solutions for data management no longer workable
• Strong secular trends showing increase in data creation (10 fold rise in data by 2025), 3x growth rate of data experts by 2020, $205Bn spend in public cloud in 2020
• Large addressable market = $23Bn
• Gross Margins: 79-82% long term target
• Operating Margins: 20-22% target
• Strong recurring revenue, over 2000 customers
• Disruptive pricing model by charging on a user basis versus legacy models of charging by data volume
• New enterprise GTM model leveraging free products and trials, 3M downloads, 500k+ online community and outbound marketing = qualified leads
• High quality board and management
• Price target = $105, 70% upside from current price of $58 (Based on 6.5x EV/revenue on CY21 revenue estimate)
• Takeout acquisition candidate at a much higher potential multiple based on comps
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Daniel Kozlowski Long Pure Cycle: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Daniel Kozlowski of Plaisance Capital who pitched a long of Pure Cycle (PCYO).
Daniel Kozlowski's 's Sohn San Francisco Presentation: Long Pure Cycle (PCYO)
Company
• Pitched long Pure Cycle (PCYO), which is an asset-rich, vertically integrated, emerging water utility located in the Denver, CO metro area
• 3 components of the business: 25k acre feet of water, 930 acre zoned master plan community and also selling water for hydraulic fracking and oil and gas royalties
Thesis
• Believes that there is tremendous underlying value in the company’s three businesses/assets that is not recognized by the market given that the company is underfollowed and underappreciated (and not represented in ETFs)
• Value of 25k-acre feet of water = ~$1.6Bn+ based on water connection fees and service fees
• Residential land value = ~$420mm+. Net cash of $20m
• Water for oil and gas fracking = free call option; currently selling water for $100k-200k per well
• Market Cap = $219M versus a total un-discounted value of $2.0Bn+
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Franklin Parlamis on ServiceNow: Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Franklin Parlamis of Aequim Alternate Investments who pitched a ServiceNow (NOW) trade.
Franklin Parlamis's Sohn San Francisco Presentation: ServiceNow (NOW)
Presentation called “Volatility Exposure without the burn”. Talked about ServiceNow (NOW) long converts and short stock as a way to play the volatility trade. Focused on in-the-money converts versus in-the-money LEAPs. Said it's cheap because big funds are selling to small arbs.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Vineer Bhansali's Presentation at Sohn San Francisco Conference 2018
We're posting up notes from the Sohn San Francisco 2018 investment conference. Next up is Vineer Bhansali of LongTail Alpha who gave a presentation on investment ideas in a rising rate environment.
Vineer Bhansali's Sohn San Francisco Presentation
Economic risk globally begins rising, political/geo-political risk
continues to increase. Earnings and momentum strong but being adjusted
lower. Correlations across strategies at all time highs.
Talked about ideas to invest in a rising interest rate and yield environment. Winners in a steepening yield curve environment include banks and financials, small caps with low financial leverage, quality, Two year Treasuries. Generally likes to be long volatility, especially in interest rates.
Losers in a steepening yield curve environment include bond proxies, tech, anyone with excessive financial leverage, low quality and any long duration asset.
Be sure to check out the rest of the Sohn San Francisco 2018 presentations.
Friday, October 12, 2018
Sohn San Francisco Investment Conference: Final Speakers & Registration
The Sohn San Francisco Investment Conference is only a few weeks away on October 29th. It will feature top investment managers sharing investment ideas in order to support the Excellence in Investing for Children's Causes Foundation and its beneficiaries.
The conference supports organizations improving educational opportunities for under-served youth and a portion of the proceeds also benefits The Sohn Conference Foundation and their research on pediatric cancer.
If you're on the west coast, this is the investment conference to attend. You can get more information about the conference here: https://excellencesf.org/
Sohn San Francisco Speakers List
- Mick McGuire, Marcato Capital Management
- Alex Gleser, TPG Public Equity Partners
- Glen Kacher, Light Street Capital
- Andrew Parmentier, Highland Capital
- Shashin Shah, Think Investments
- Dan Morehead, Pantera Capital
- Kevin Oram, Praesidium Investment Management
- Jeff Osher, No Street Capital
- Jeff Shen, Ph.D., BlackRock
- Gil Simon, SoMa Equity Partners
- Mayor London N. Breed, Mayor of San Francisco
You can hear all the investment pitches from these managers by registering for the conference here.
Next Wave Sohn Speakers
- Vineer Bhansali, Ph.D., Long Tail Alpha
- Marcelo Desio, Lucha Capital Management
- Daniel Kozlowski, Plaisance Capital
- Franklin Parlamis, Aequim Alternative Investments
Event Details
When: October 29th, 2018
Where: Hyatt Regency, San Francisco
Schedule:
11:30am to 12:30pm - Networking and Buffet Lunch
12:30pm to 2:00pm - Next Wave Sohn: Emerging Managers
2:30pm to 6pm - Sohn Conference Main Event
6:00 pm to 7:30pm - Cocktail Reception
The conference is only a few weeks away, so act quickly before it's too late. Click here to register for the event.
Thursday, September 21, 2017
8th Annual Sohn San Francisco Investment Conference
The 8th annual Sohn San Francisco Investment Conference is just around the corner on October 4th. The event will feature top investment managers sharing their latest ideas to benefit charities. The event is presented by the Excellence in Investing for Children's Causes Foundation, which has raised more than $1.2 million to support education and pediatric cancer care.
This is the premier Bay Area investor event, so if you're in the area or nearby, don't miss it. You can register for the conference by clicking here.
Conference Details
When: October 4th, 2017
Where: Hyatt Regency San Francisco
Sohn San Francisco Speakers List
- Mark Okada, Highland Capital Management
- Mick McGuire, Marcato Capital Management
- Carl Kawaja, Capital Group
- Christopher Lord, Criterion Capital
- Oleg Nodelman, EcoR1 Capital Fund
- Jeff Shen, BlackRock
- Nancy Davis, Quadratic Capital
- Glen Kacher, Light Street Capital
- Dan Morehead, Pantera Capital
- David Crane, Govern for California
Next Wave Sohn Speakers
Additionally, a group of emerging managers will share their ideas as a prelude to the main event. Here's the list:
- Vineer Bhanshali, LongTail Alpha
- Marcelo Desio, Lucha Capital
- Gil Simon, SoMa Equity
- Seth Wunder, black-And-white Capital
The event's proceeds benefit Bay Area organizations that are focused on improving educational opportunities and life outcomes for underserved youth. Additionally, a portion benefits the Sohn Conference Foundation with its efforts to treat and cure pediatric cancer.
For more information on the event and to register, please visit http://www.sohnsf.org/
