At least the recently promoted CEO isn't stupid: she bought 4.3K shares at $11.63 in March 2021 then turned around and dumped 24.2K shares 10 months later at $7.36 and another 37.7K shares at $5.53 two months after that.
Mike, thanks as always for delivering relevant commentary in an entertaining wrapper.
I'm not real big on insider selling or buying as a signal, which is why I tucked the director buy into a footnote in the piece. That said, I think the sales earlier this year get to the core risk, which I highlighted a bit through the quote from the GS analyst: is there something management sees which they're not (yet) telling us?
Are the contracts getting priced down, meaning 2023 EBITDA margins go to ~10% from 13%? Does everything go in-house? Is sampling never going to recover?
it's also a bit weird that ADV announced a $100M buyback in November, bought back $12.6M before year end - and has done no repos this year (as of Aug. 8, anyway).
I'm aware of the dangers in arguing that a leveraged de-SPAC is pricing that risk in. But I do think to some extent it is. We shall see.
You may be right; and the waterfall decline from $4 to $2 on no news looks like most of my biotechs over the last 18 months. And you're definitely right to be buying risk vs. quality (unless things get materially worse, which almost everyone thinks they will, but no one really knows, so maybe there's at least a trade here). Unfortunately I don't know ADV, and the debt situation adds risk and complexity.
But there are so many simple businesses on sale with better balance sheets.
Check out SGU for example. It's an asset-light business with essentially zero capex.
Arguably it's a melting ice cube (due to customer churn, global warming, and an eventual abandonment of carbon based energy). But it does offer a mid-teens FCF yield (I deduct acquisitions, which are necessary to offset customer churn, and also adjust for YoY changes in working capital, which even out over time, to compute an adjusted FCF metric), a mid-teens shareholder yield, and a 7.5% distribution yield. And they've put that FCF to good use in making acquisitions, paying distributions, and buying back units, shrinking the unit count by 40% over the last 10 years and by 26% over just the last 3 years.
But wait, there's more! Not only do they make a guaranteed 7.5% after-tax return in perpetuity when repurchasing units, but the FCF yield increases "exponentially" as the number of units outstanding declines. I'm shocked that no PE firm has figured this out.
I looked closely at SGU a few years ago, will try and do so again in this very different environment. But it's obviously a very different story.
that said, ADV is (mostly) a simple business, between sampling, merchandising, and headquarter sales. I think the bull case is that it's actually a pretty good business.
to be sure, given the lack of history on the public markets and in this kind of environment, the strength of the business is getting tested, and maybe they fail. But the upside here comes from the market dismissing the business in a way that maybe it shouldn't.
At least the recently promoted CEO isn't stupid: she bought 4.3K shares at $11.63 in March 2021 then turned around and dumped 24.2K shares 10 months later at $7.36 and another 37.7K shares at $5.53 two months after that.
Mike, thanks as always for delivering relevant commentary in an entertaining wrapper.
I'm not real big on insider selling or buying as a signal, which is why I tucked the director buy into a footnote in the piece. That said, I think the sales earlier this year get to the core risk, which I highlighted a bit through the quote from the GS analyst: is there something management sees which they're not (yet) telling us?
Are the contracts getting priced down, meaning 2023 EBITDA margins go to ~10% from 13%? Does everything go in-house? Is sampling never going to recover?
it's also a bit weird that ADV announced a $100M buyback in November, bought back $12.6M before year end - and has done no repos this year (as of Aug. 8, anyway).
I'm aware of the dangers in arguing that a leveraged de-SPAC is pricing that risk in. But I do think to some extent it is. We shall see.
You may be right; and the waterfall decline from $4 to $2 on no news looks like most of my biotechs over the last 18 months. And you're definitely right to be buying risk vs. quality (unless things get materially worse, which almost everyone thinks they will, but no one really knows, so maybe there's at least a trade here). Unfortunately I don't know ADV, and the debt situation adds risk and complexity.
But there are so many simple businesses on sale with better balance sheets.
Check out SGU for example. It's an asset-light business with essentially zero capex.
Arguably it's a melting ice cube (due to customer churn, global warming, and an eventual abandonment of carbon based energy). But it does offer a mid-teens FCF yield (I deduct acquisitions, which are necessary to offset customer churn, and also adjust for YoY changes in working capital, which even out over time, to compute an adjusted FCF metric), a mid-teens shareholder yield, and a 7.5% distribution yield. And they've put that FCF to good use in making acquisitions, paying distributions, and buying back units, shrinking the unit count by 40% over the last 10 years and by 26% over just the last 3 years.
But wait, there's more! Not only do they make a guaranteed 7.5% after-tax return in perpetuity when repurchasing units, but the FCF yield increases "exponentially" as the number of units outstanding declines. I'm shocked that no PE firm has figured this out.
I looked closely at SGU a few years ago, will try and do so again in this very different environment. But it's obviously a very different story.
that said, ADV is (mostly) a simple business, between sampling, merchandising, and headquarter sales. I think the bull case is that it's actually a pretty good business.
to be sure, given the lack of history on the public markets and in this kind of environment, the strength of the business is getting tested, and maybe they fail. But the upside here comes from the market dismissing the business in a way that maybe it shouldn't.