Awrighty, that time of the year again, and as usual, I am attempting to race against time and race against the fat, jolly guy. As Santa puts together his list of whose been naughty and whose been nice, I have been thinking more of this past year, and the sectors that have been naughty and nice to me. My two strongest sectors in 2021 have been technology and shipping (transportation). However, with technology, my ability to dig out the value of a technology idea has been more on whether the respective company can keep up with the growth expectations.So, the 2022 list1. ZIM Integrated Shipping Services (ZIM)As mentioned in other threads, container shipping has a very tiered structure. And layered on top of that are alliances. For the major routes, the Top 15 container companies have a stranglehold on most of the business directly (owned vessels) or indirectly (leasing vessels from second and third tier container companies). And amongst these Top 15 companies, sits ZIM with a slightly different approach. ZIM follows an asset-light model, and leases most of the vessels in its fleet. ZIM is also the only Top 10 member that trades on US exchanges. I think ZIM management realize the medium term drawback of a leased fleet (less flexibility on fleet renewal rates) and have actually acquired vessels the second half of the year.Caution: Don't hold this in a retirement account - hefty Israeli withholding.ZIM did change their dividend model to a quarterly payout2. Asia Pacific Wire & Cable (APWC)At the start of 2021, APWC hit my radar because it was one of the those old fashion value ideas - a net-net. The first half of 2021 (or so), APWC even fell into the tighter definition of net-net working capital i.e. Cash + 0.75*Accounts Receivable + 0.5*Inventory - Total Liabilities > market cap. I think currently APWC only meet the quick net-net definitionCurrent Assets - (Current + Long-term Liabilities) > market capIssues: Tiny market cap, reporting frequency, Taiwan-based3. Golden Ocean (GOGL)When I was considering this pick, shares were trading under $8/sh. Based on what GOGL had booked Q4-to-date, GOGL should provide a decent Q4 2021 payout. After that, one quarter at a time. The dry bulk vessel deliveries are light in 2022, so little pressure on the supply side. GOGL sold two modern (< 15 yo) vessels during Q4 2021, and management suggested that with the right conditions, GOGL could prune its fleet further. Among 81 owned vessels, only 6 vessels were delivered in 2010-or-earlier. Trimming the fleet would thus likely be due to GOGL management being wary of an individual vessel's future earning potential. In that sense, pruning the fleet is a way to extract value on individual assets. For 2022, the company has a strategy to deal with Q1 (typically, the weakest quarter of an annual cycle)4. Innovate Corp (VATE)Repeat idea. Company was formerly HC2 Corp (HCHC) and has sold business segments to focus on three areasa. Infrastructure (Construction and steel fabricator)b, Broadcastingc. Health-related portfolio (Pansend)One can listen to this pitch by two portfolio managers (Andrew Walker and Nitin Sacheti) dissecting VATE. Very decent background data on the remaining businesseshttps://seekingalpha.com/article/4462411-breaking-down-innov...Mr Sacheti ends up with a value of around $29/sh. They back out Holdco debt ($5/sh) and end up @ $24/sh. Just a major gap with current share price (under $4) I know trusts related to Mr Glazer (VATE board chair) have been buying up shares gradually. Seems to me there are a lot more uncertainties and what if's to realize the full valuation in just a couple of years. Personally, I struggle valuing the broadcasting segment. I do feel the other two segments are currently undervalued. 5. C3.ai, Inc (AI)As noted in the beginning, in many cases, assessing a technology company is typically on its growth prospects. So the AI pick is more a growth pick than a value pick. Figured it was a beaten down technology idea that has the financial resources to continue to grow the business
So the AI pick is more a growth pick than a value pick. Figured it was a beaten down technology idea that has the financial resources to continue to grow the business We need to see whether revenue growth will meet the estimates :) But they do have cash to survive. I have one April $20 put sold, just to keep track.If they deliver on the growth probably the stock is going to go up. What makes you think they can deliver the growth?
@ Kingran, You ask, What makes you think they can deliver the growth? I'm not guaranteeing the revenue growth. I'm just suggesting that with AI's existing financial resources, the company has less distractions and, indirectly, with the additional resources, the ability to keep going if their schedule or plans slip slightly.
Fair enough. Siebel brought his team from Siebel days :), So the team knows how to build enterprise applications. The real challenge is ERP markets are pretty saturated, and it is going to be difficult for them to break in. They have cash, strong management, pretty good board.I am worried about their SGA, from 50% of sales to now it is over 100% of sales. Yet the revenue growth is not that great. I hope they are not going to burn through all that cash, instead focus on balanced growth. If you are going to have SGA over 100% of revenue then you should be growing north of 70%, 80%.
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