Nextdecade LNG just got all its permits approved yesterday by FERC. It has secured enough SPA deals to finance and build trains 1,2,3 of its Rio Grande LNG facility. POTEN has leaked that a 4 mmbtu and equity deal is in the works with TotalEnergies. FID expected in June and construction work will be done by Bechtel. Ticker $NEXT
WOLF as the play on electrification (EVs, renewable energy, industrial motors, etc.). Silicon Carbide (SiC) will be the material of choice for electrification as Silicon was to digitization. WOLF is the leader in SiC manufacturing (~60% market share) and has 30+ years of experience working with SiC going back to their legacy business in LED. At current levels, I prefer the market leader that is WOLF over COHR.
Stone (STNE) is the 4th largest merchant acquirer in Brazil. The other 3 (Cielo, Rede, and Getnet) are owned by big incumbent banks that used to control ~90% of the acquiring market. Over time, Stone has evolved from an acquirer to a provider of integrated financial services (acquiring, banking, credit, and insurance) as well as software to micro, small, and medium businesses (MSMBs).
Stone has a unique distribution model in the form of Stone Hubs (smaller and leaner version of bank branches). The physical proximity helps Stone build personal relationships with the merchants that are paramount to selling products and services to MSMBs in Brazil. Stone Hubs benefit from economies of scale, which makes it difficult for new competitors to replicate this model.
Acquiring is a commodity business with low switching costs. But, Stone offers Shopify-like software at little to no cost to manage the inventory, orders, and fulfillment across multiple channels (i.e. physical store, online store, marketplaces, social media, etc.) to increase the switching costs. Tightly integrated banking and credit products result in higher switchings cost as well.
Stone currently trades at an enterprise value (EV) of $3B. Stone has a very profitable business model and it’s expected to reach 30%+ net margin at maturity (they had gotten there in the past). If you normalize earnings at 30% net margin for the current annual revenue of $1.8B USD, the earnings will be ~$550M USD. In other words, Stone is currently trading at a normalized P/E of ~5.
Currently 50% growth and > 40% bookings growth. Accelerated user growth for 4 quarters in a row - now over 50 million MAUs.
Most of the revenue from subscriptions and the rest from ads, high margin (73% gross margin - and rising).
Large TAM (international and outside languages). Optionality they are showing right now, by now they already have 3 apps (Language, literacy, Math) and additionally the Duolingo English Test, which is now recognised by 3,800 institutions.
Moat by: Network effect (more users, more data, better algo for memory and learning, also heavily gamified = both evidence-based learning), strong brand (duolingo Owl, #1 in the field), switching costs (progress and streak).
And they are very very disciplined with costs. S&M runs mostly on social media, where duolingo is brilliant (one of the top TikTok accounts), and word of mouth (spent only 14m at the time to reach 25m users). RnD they are also very effective and efficient. Therefore already profitable now. In the long term, EBITDA margins of 35% are targeted.
Founder-led, mission-driven (to develop the best education worldwide and make it universally available), big moat and still at the beginning of their growth.
Worth doing some research into Kooth, listed on the London AIM market (KOO)
They are a global leader in youth digital mental well-being. Over the last 20 years they have developed a tech platform & have gradually expanded its use across the UK’s NHS service, growing ARR to £18.6m at the end of 2022.
The catalyst for a potential 10 bagger is their expansion into the US market. Last month they were name primary vendor to build & operate a digital mental health platform for the state of California as part of their $4.7b investment into youth mental health;
They beat 450 vendors to this contract award which is a very notable achievement for a small cap. Full contract details are due to be announced in Q2 but it’s already been flagged as having a ‘highly material’ impact on ARR from 2024 onwards & will be transformational to the company.
Further, in September 2022 they were awarded a $3m pilot contract by the state of Pennsylvania to roll out the tech to 150k students;
In early 2023 multiple US states have announced similar initiatives to California & Pennsylvania (NY, NC, VA to name three). So the potential market for the sector leader is large (TAM estimated at $1b+ in 2022, however recent announcements have likely doubled that at a minimum).
Fundamentals:
- Current market cap is £95m / $120m, the company has $10m cash & no debt.
- FY22 results showed 21% growth, were P&L breakeven but with a small operating cash inflow
- Gross margins are healthy at around 70%
- 33m shares in issue with insider ownership of ~42%
- Shares have risen 55% since the Californian contract announcement but are only trading 10% above the level it IPO’d in 2020.
- Likely trading at less that 2x FY24 ARR
A ten bagger would require a market cap of £950m / $1.2b, I suspect this could be supported by ARR of £200-300m & operating profit margins of ~20%, readily achievable in 5 years if they continue to execute.
Yes it’s waaaaay under the radar right now which is definitely part of the bull thesis. A feel good investment & a clear need for tech disruption done in the right way.
Oh and another plus for a potential 10 bagger is the CEO has a clear desire to materially grow the business. In an LSE interview 5 months ago he states they are tackling a ‘unicorn sized problem’ when asked about where the business could be in 5 years;
Apr 19, 2023·edited Apr 19, 2023Liked by Overlooked Alpha
$NTPIF. Could be a $0.00, but also easily a >10x with an enforceable legal win on the value of their real estate. Buyer beware/do your own work/think for yourself but plenty of vol and convexity.
Our high-risk, high-reward choices have kind of sucked, to put it bluntly, but I think a couple I'm not quite ready to write off:
VWE might have found a bottom, as we wrote they have several years, and it's the kind of turnaround that's pretty easy for investors to ignore until it starts moving.
ADV has such a thin equity slice (~$400M market cap, ~$2.4B enterprise value) that it can 5x in a flash. Get EBITDA to $600M from $400M in '23 (another turnaround play at this point) and a bit of a multiple expansion and you're there. Slide in the stock of late however would suggest there's some mounting evidence that's unlikely.
Think this week's pick, COHR, has a blue-sky scenario where it does 8x-10x over a decade, something like that. If silicon carbide hits and they can track down Wolfspeed to be the market leader, that's definitely on the table.
Like most TAMs it is impossible to say. There is no such thing as accurate. However there are 92,000 people on the waiting list for kidneys. Multiply 90k x $50k and you get $4.5B. Add the other organs (+20%) and that makes it $5.4B. That’s super rough but it seems like the opportunity is there. I just hope the execution is up to it!
Take a look at SAFE. They dominate the Ground Lease Business and given the coming credit crunch in CRE, SAFE is positioned to strike very attractive deals and to make bank.
$AWE LN - AlphaWave. A great semi IP play with strong management team with proven track record, coupled with a misunderstood story / hit piece. Stock got destroyed on that hit piece while operations have been steadily moving in the right direction, customers adapting the technology and royalty revenues will start kicking in en masse... meanwhile indisers/ management / founders buying more stock.
Check out Transmedics (TMDX) at a $2.3B market cap. These guys are offering TOAAS - Transplanted Organs as a Service. OK, I made up the acronym but that is what they really do. Traditionally a donor organ will be placed on ice prior to implant. As a result about 75% spoil and can’t be used. TMDX has an incubator that doubles the shelf life. But they aren’t selling the device, they are selling the service and creating a logistics network to service high transplant hospitals. They currently service heart, liver, and lung and hope to get approval for kidney in a year. The demand for kidney is 4X the others combined. The Biden administration just announced plans to revamp the current process of procuring organs.
1/3 of kidney transplants are from live donors, and the organs from the deceased last 24-48 hours without the TMDX tech, so I am not sure that the market is as big as for the other organs that spoil more quickly (heart=4 hours)? Kidney transplants take place in small geographical proximity to deceased donor, so I don't think they need to make adjustments to the delivery system?
Excellent point. So much that I don’t know. However, and in spite of that , it still seems like an industry ripe for disruption and demographics are on their side. Thank you for your input!
Yeah, came across this a while ago and dismissed it. But looks like they've had quite a spike in revenue and the stock's doing well too. Will have another look, thanks.
$PM -- a large cap; nicotine unit consumption rises as RRPs take over from combustion; revenue/margin per unit grows due to favorable taxation of RRPs; regular inflation-plus price increases; PM best positioned for RRPs and global mkt shr grows; multiple doubles to consumer staple multiple; plus dividends --> 10-bagger in 10 years (including dividends).
I've written extensively on PM and the tobacco industry broadly. As much as I like the company, mathing out x10 in 10 years seems like quite the stretch
When I look at my list of familiar stocks I don't see many realistic chances of a 10x. Can Adobe hit a 1.7 trillion valuation on the back of creators and AI? Not likely. Same with other large cap names. So I think the best opportunities are going to come from small caps and less well known names. I still like DLHC here due to its history of successful acquisitions and the market cap is only $143 million. But also I tend to lean towards secular trends like electric vehicles, anything related to electrification or sustainability. That's why I do like COHR here as well. Though I need to dig deeper into that space.
definitely has a path to 5x-10x. don't love stock-based comp, don't love 2023 guidance, though.
I think of the stories where the bear case is "this business only works at zero interest rates" (CVNA and UPST come first to mind), I like it the best though. definitely can be a real business, think the question is whether it's a $500M business or a $5B business.
Large demand for sale leaseback capital in cannabis industry. 2-3% annual lease escalators + 10-25% growth from external acquisitions + multiple expansion to a 3-5% dividend yield can lead to returns in excess of 10x over the next decade.
Yes, that is one. IIPR expanded too fast, getting a lot of properties in unlimited license states like California.
But even at IIPR, the situation is not as dire as it seems.
One important difference between the two is that NLCP trades at a significantly lower valuation (due to trading OTC)
IIPR (and NLCP for that matter) have crashed hard from highs, making it easy to claim that the fundamentals are broken. But IIPR has been able to sell off assets at/above cost and should get a recovery on the troubled tenant's assets at rates far higher than the market expects. As of now, NLCP's troubled tenant list is even smaller.
Appreciate it. NLCP trades OTC, has lower liquidity, and thus greater risk I'm just trying to pump the thing on you (joking).
But it's significantly cheaper than IIPR though both names are too cheap in my opinion.
I don't know how you feel about cannabis, but it seems to be a strong long term industry. I think the operators will have to dilute shareholders with expensive secondaries, but that'll only help the landlords.
Nextdecade LNG just got all its permits approved yesterday by FERC. It has secured enough SPA deals to finance and build trains 1,2,3 of its Rio Grande LNG facility. POTEN has leaked that a 4 mmbtu and equity deal is in the works with TotalEnergies. FID expected in June and construction work will be done by Bechtel. Ticker $NEXT
I think it'll be the next $LNG
https://www.msn.com/en-us/news/us/nextdecade-surges-as-ferc-approves-rio-grande-lng-project/ar-AA1a7b7o
WOLF as the play on electrification (EVs, renewable energy, industrial motors, etc.). Silicon Carbide (SiC) will be the material of choice for electrification as Silicon was to digitization. WOLF is the leader in SiC manufacturing (~60% market share) and has 30+ years of experience working with SiC going back to their legacy business in LED. At current levels, I prefer the market leader that is WOLF over COHR.
Stone (STNE) is the 4th largest merchant acquirer in Brazil. The other 3 (Cielo, Rede, and Getnet) are owned by big incumbent banks that used to control ~90% of the acquiring market. Over time, Stone has evolved from an acquirer to a provider of integrated financial services (acquiring, banking, credit, and insurance) as well as software to micro, small, and medium businesses (MSMBs).
Stone has a unique distribution model in the form of Stone Hubs (smaller and leaner version of bank branches). The physical proximity helps Stone build personal relationships with the merchants that are paramount to selling products and services to MSMBs in Brazil. Stone Hubs benefit from economies of scale, which makes it difficult for new competitors to replicate this model.
Acquiring is a commodity business with low switching costs. But, Stone offers Shopify-like software at little to no cost to manage the inventory, orders, and fulfillment across multiple channels (i.e. physical store, online store, marketplaces, social media, etc.) to increase the switching costs. Tightly integrated banking and credit products result in higher switchings cost as well.
Stone currently trades at an enterprise value (EV) of $3B. Stone has a very profitable business model and it’s expected to reach 30%+ net margin at maturity (they had gotten there in the past). If you normalize earnings at 30% net margin for the current annual revenue of $1.8B USD, the earnings will be ~$550M USD. In other words, Stone is currently trading at a normalized P/E of ~5.
$DUOL
Currently 50% growth and > 40% bookings growth. Accelerated user growth for 4 quarters in a row - now over 50 million MAUs.
Most of the revenue from subscriptions and the rest from ads, high margin (73% gross margin - and rising).
Large TAM (international and outside languages). Optionality they are showing right now, by now they already have 3 apps (Language, literacy, Math) and additionally the Duolingo English Test, which is now recognised by 3,800 institutions.
Moat by: Network effect (more users, more data, better algo for memory and learning, also heavily gamified = both evidence-based learning), strong brand (duolingo Owl, #1 in the field), switching costs (progress and streak).
And they are very very disciplined with costs. S&M runs mostly on social media, where duolingo is brilliant (one of the top TikTok accounts), and word of mouth (spent only 14m at the time to reach 25m users). RnD they are also very effective and efficient. Therefore already profitable now. In the long term, EBITDA margins of 35% are targeted.
Founder-led, mission-driven (to develop the best education worldwide and make it universally available), big moat and still at the beginning of their growth.
Thanks for that summary, you make a strong case.
Worth doing some research into Kooth, listed on the London AIM market (KOO)
They are a global leader in youth digital mental well-being. Over the last 20 years they have developed a tech platform & have gradually expanded its use across the UK’s NHS service, growing ARR to £18.6m at the end of 2022.
The catalyst for a potential 10 bagger is their expansion into the US market. Last month they were name primary vendor to build & operate a digital mental health platform for the state of California as part of their $4.7b investment into youth mental health;
https://www.dhcs.ca.gov/formsandpubs/publications/oc/Documents/2023/23-13-CYBHI-3-15-23.pdf
They beat 450 vendors to this contract award which is a very notable achievement for a small cap. Full contract details are due to be announced in Q2 but it’s already been flagged as having a ‘highly material’ impact on ARR from 2024 onwards & will be transformational to the company.
Further, in September 2022 they were awarded a $3m pilot contract by the state of Pennsylvania to roll out the tech to 150k students;
https://www.koothplc.com/article/pennsylvania-general-assembly-announces-usd3m-mental-health-pilot
Early feedback is extremely positive;
https://eu.goerie.com/story/opinion/columns/2023/04/06/web-based-program-students-mental-health-care-kaufer-bizzarro-representatives-pennsylvania-budget/70075596007/
In early 2023 multiple US states have announced similar initiatives to California & Pennsylvania (NY, NC, VA to name three). So the potential market for the sector leader is large (TAM estimated at $1b+ in 2022, however recent announcements have likely doubled that at a minimum).
Fundamentals:
- Current market cap is £95m / $120m, the company has $10m cash & no debt.
- FY22 results showed 21% growth, were P&L breakeven but with a small operating cash inflow
- Gross margins are healthy at around 70%
- 33m shares in issue with insider ownership of ~42%
- Shares have risen 55% since the Californian contract announcement but are only trading 10% above the level it IPO’d in 2020.
- Likely trading at less that 2x FY24 ARR
A ten bagger would require a market cap of £950m / $1.2b, I suspect this could be supported by ARR of £200-300m & operating profit margins of ~20%, readily achievable in 5 years if they continue to execute.
Check it out;
https://investors.kooth.com/documents/?amp
Thanks for posting, would never have come across this company otherwise. Looks really interesting and tackling an important and worthy cause.
Yes it’s waaaaay under the radar right now which is definitely part of the bull thesis. A feel good investment & a clear need for tech disruption done in the right way.
Oh and another plus for a potential 10 bagger is the CEO has a clear desire to materially grow the business. In an LSE interview 5 months ago he states they are tackling a ‘unicorn sized problem’ when asked about where the business could be in 5 years;
https://m.youtube.com/watch?v=BJxOQOaijNs
$NTPIF. Could be a $0.00, but also easily a >10x with an enforceable legal win on the value of their real estate. Buyer beware/do your own work/think for yourself but plenty of vol and convexity.
Thanks for chipping in Chris. Is there anywhere we can find out more about this situation?
So I mostly rely on SEC filings/press releases and other primary docs and there is only intermittent press (eg https://www.mingtiandi.com/real-estate/finance/shenzhens-kaisa-loses-147m-nam-tai-lawsuit) but in short: bad guys = Kaisa. good guys = Oasis and IsZo. crazy problem = legitimate board not able to control company in part over the chop (https://www.bloomberg.com/opinion/articles/2022-08-25/hedge-funds-can-be-taken-hostage-by-china-s-ancient-business-practice-the-chop). Real estate value a multiple of the market cap. All sorts of random China risk but legally this is rock solid. Just a matter of it staying afloat as it goes through a lengthy and zany process.
Excellent, thanks.
$NAUT
$ORGN
key thesis :
massive TAM
Long bull of Biotech era..
100% plant based plastic. Interesting. Thanks for posting.
Our high-risk, high-reward choices have kind of sucked, to put it bluntly, but I think a couple I'm not quite ready to write off:
VWE might have found a bottom, as we wrote they have several years, and it's the kind of turnaround that's pretty easy for investors to ignore until it starts moving.
ADV has such a thin equity slice (~$400M market cap, ~$2.4B enterprise value) that it can 5x in a flash. Get EBITDA to $600M from $400M in '23 (another turnaround play at this point) and a bit of a multiple expansion and you're there. Slide in the stock of late however would suggest there's some mounting evidence that's unlikely.
Think this week's pick, COHR, has a blue-sky scenario where it does 8x-10x over a decade, something like that. If silicon carbide hits and they can track down Wolfspeed to be the market leader, that's definitely on the table.
Like most TAMs it is impossible to say. There is no such thing as accurate. However there are 92,000 people on the waiting list for kidneys. Multiply 90k x $50k and you get $4.5B. Add the other organs (+20%) and that makes it $5.4B. That’s super rough but it seems like the opportunity is there. I just hope the execution is up to it!
These are all fantastic ideas, keep them coming!
Take a look at SAFE. They dominate the Ground Lease Business and given the coming credit crunch in CRE, SAFE is positioned to strike very attractive deals and to make bank.
$AWE LN - AlphaWave. A great semi IP play with strong management team with proven track record, coupled with a misunderstood story / hit piece. Stock got destroyed on that hit piece while operations have been steadily moving in the right direction, customers adapting the technology and royalty revenues will start kicking in en masse... meanwhile indisers/ management / founders buying more stock.
Looks interesting. Do you have a link to the hit piece? And how do you find the insider purchases?
Check out Transmedics (TMDX) at a $2.3B market cap. These guys are offering TOAAS - Transplanted Organs as a Service. OK, I made up the acronym but that is what they really do. Traditionally a donor organ will be placed on ice prior to implant. As a result about 75% spoil and can’t be used. TMDX has an incubator that doubles the shelf life. But they aren’t selling the device, they are selling the service and creating a logistics network to service high transplant hospitals. They currently service heart, liver, and lung and hope to get approval for kidney in a year. The demand for kidney is 4X the others combined. The Biden administration just announced plans to revamp the current process of procuring organs.
https://rollcall.com/2023/03/22/biden-administration-plans-overhaul-of-organ-transplant-system/
1/3 of kidney transplants are from live donors, and the organs from the deceased last 24-48 hours without the TMDX tech, so I am not sure that the market is as big as for the other organs that spoil more quickly (heart=4 hours)? Kidney transplants take place in small geographical proximity to deceased donor, so I don't think they need to make adjustments to the delivery system?
Excellent point. So much that I don’t know. However, and in spite of that , it still seems like an industry ripe for disruption and demographics are on their side. Thank you for your input!
Yeah, came across this a while ago and dismissed it. But looks like they've had quite a spike in revenue and the stock's doing well too. Will have another look, thanks.
I’m most interested in them because:
1. They are a first mover
2. Nice TAM
3. Currently the only company with FDA approval
4. They are riding on a wave of demographics with diabetes as a tailwind
Disclosure: 3.1% position
What would you say is the TAM here?
FLGT. Genetics business. Made a ton of money in COVID then collapsed. But still doign $600m+ sales and has products needed to grow
$PM -- a large cap; nicotine unit consumption rises as RRPs take over from combustion; revenue/margin per unit grows due to favorable taxation of RRPs; regular inflation-plus price increases; PM best positioned for RRPs and global mkt shr grows; multiple doubles to consumer staple multiple; plus dividends --> 10-bagger in 10 years (including dividends).
I've written extensively on PM and the tobacco industry broadly. As much as I like the company, mathing out x10 in 10 years seems like quite the stretch
Yes, was going to say - Devin has written some great stuff on PM.
ENVX ...
will disrupt the entire battery space from wearables to EV... They are already selling samples to Samsung and I bet some other biggies in the mix...
Last mgmt team screwed up royally but this new mgmt team is seasoned with impressive pedigree
We know they have the batteries now they have to scale
Could be 100x if they execute
Thanks, we'll take a look at this one. I believe Marc Cohodes is bullish as well?
very bullish...today ENVX raised funds for building new fab in malaysia for $150mm to scale up fast...
https://ir.enovix.com/news-releases/news-release-details/enovix-announces-pricing-1500-million-offering-300-convertible
what most don't know is both Tj Rodgers and a senior partner at Kliner Perkins bot $10mm each
When I look at my list of familiar stocks I don't see many realistic chances of a 10x. Can Adobe hit a 1.7 trillion valuation on the back of creators and AI? Not likely. Same with other large cap names. So I think the best opportunities are going to come from small caps and less well known names. I still like DLHC here due to its history of successful acquisitions and the market cap is only $143 million. But also I tend to lean towards secular trends like electric vehicles, anything related to electrification or sustainability. That's why I do like COHR here as well. Though I need to dig deeper into that space.
$PGY
Fintech left for dead about to inflect profitably. 10x would get it back to SPAC pricing so not demanding. Insiders have been buying.
definitely has a path to 5x-10x. don't love stock-based comp, don't love 2023 guidance, though.
I think of the stories where the bear case is "this business only works at zero interest rates" (CVNA and UPST come first to mind), I like it the best though. definitely can be a real business, think the question is whether it's a $500M business or a $5B business.
Interesting choice. Vince wrote a thread on this a while back. I'm sure he's got some more thoughts on PGY: https://twitter.com/OverlookedAlpha/status/1617481528514076674
$NLCP
12+% dividend yield cannabis REIT
Large demand for sale leaseback capital in cannabis industry. 2-3% annual lease escalators + 10-25% growth from external acquisitions + multiple expansion to a 3-5% dividend yield can lead to returns in excess of 10x over the next decade.
Thanks for posting. Will check it out!
Close comparable to $IIPR but $NLCP has greater focus on limited license states
from a distance the bear case for IIPR always made sense to me - is NLCP better because limited license states mean fewer, weaker lessors?
Yes, that is one. IIPR expanded too fast, getting a lot of properties in unlimited license states like California.
But even at IIPR, the situation is not as dire as it seems.
One important difference between the two is that NLCP trades at a significantly lower valuation (due to trading OTC)
IIPR (and NLCP for that matter) have crashed hard from highs, making it easy to claim that the fundamentals are broken. But IIPR has been able to sell off assets at/above cost and should get a recovery on the troubled tenant's assets at rates far higher than the market expects. As of now, NLCP's troubled tenant list is even smaller.
very cool I'll have to do some work on both those names
Appreciate it. NLCP trades OTC, has lower liquidity, and thus greater risk I'm just trying to pump the thing on you (joking).
But it's significantly cheaper than IIPR though both names are too cheap in my opinion.
I don't know how you feel about cannabis, but it seems to be a strong long term industry. I think the operators will have to dilute shareholders with expensive secondaries, but that'll only help the landlords.