Spring 2016

Alimentation Couche-Tard is positioned to outperform estimates due to recent acquisitions and favorable market conditions, including the need for over-levered US MLPs to sell assets and low oil prices prompting European oil companies to divest non-core assets. The company has a proven track record of making accretive acquisitions and can grow organically, providing a long runway for further consolidation in a fragmented market.

Charles Schwab is a strong investment due to its robust business model and market position.

Schwab is a high-quality business with a wide moat, capable of growing client assets by at least 7% annually and earnings by over 10% with a 100 basis point increase in the Fed Funds rate. The stock trades at a discount to its historical average, presenting an attractive entry point for long-term investors. The expected total return is approximately 16% CAGR over five years, assuming conservative growth and reinvestment of earnings.

Advance Auto Parts is mentioned as a long position, indicating a positive outlook on the company's performance and potential for growth.

We recommend a long on Advance Auto Parts with a price target of $280, offering 75%+ upside from today’s price of $161. We believe EPS can double to ~$16 over the next four to five years via multiple operational improvements, and at 18x forward EPS, AAP is worth $280 in 2019.

We recommend a long position on Alcoa with a 2018 price target of $16, representing 60% of upside to current valuation and a 19% IRR. The market may misunderstand the quality of Alcoa’s core businesses, and the current valuation allows for the purchase of the upstream business for free.

Alcoa's core franchises are quality businesses generating returns in the low to mid teens, despite the overall company being misjudged due to the poor performance of its aluminum segment. The alumina business is particularly strong, benefiting from resilient pricing and demand from China, which is expected to grow at 5-7% annually. The valuation suggests significant upside potential, with a target price of $15.91 representing approximately 60% upside from the current price of $10.01.

Alliance Data is positioned to benefit from a sustainable competitive advantage through its integrated platform that combines private label credit card services, marketing, and loyalty solutions. The company has demonstrated strong growth and profitability, with a projected upside of 73% to a target price of $370 per share, driven by increasing market share and favorable industry trends towards private label credit cards.

Alliance Data Systems is well-positioned for growth due to its diversified business model, strong management, and strategic capital allocation. The company is targeting 8-10% organic growth and has a fortress balance sheet, making it resilient in a recessionary environment. With a current valuation that does not reflect its profitability compared to peers, there is significant upside potential.

Adam Wyden mentions Fiat as part of his current investment theses, indicating a positive outlook on its business prospects.

Columbia Distributing is the fourth largest beer distributor in the US and has a wide-moat business model, distributing about 60% of the beer in Oregon and Washington. The firm believes that buying private companies like Columbia is a key part of their future investment strategy.

TransDigm has significant pricing power due to regulatory barriers in the aerospace parts industry, allowing it to generate predictable revenue streams despite the erratic nature of individual parts. The company's ability to bundle various parts mitigates risk and enhances profitability, making it a compelling long-term investment.

Moody's is trading at a reasonable valuation with a strong pricing power, expecting to raise prices by 3%-4% annually. With modest leverage and high operating margins, the company is positioned for steady revenue growth, making it an attractive long-term investment with potential for a 13% IRR.

Adam Wyden believes IDT is undervalued, trading below its cash value with significant assets including $200 million in cash and NOLs. He sees potential for the stock to increase further due to the value of its shale assets and the entertainment division, which is not being valued by the market.

The stock was around $10, but there was potentially $50 per share in value due to a Video on Demand asset and a profitable core business. The executive Howard Jonas is seen as capable of monetizing assets effectively, which adds to the investment's appeal.

The company has managed to grow both lines of its business organically and through acquisition, creating significant value in profits and valuation. The investor is excited about its long-term prospects, believing the best is yet to come.

The investor was intrigued by the business and its low valuation, believing that with the right management changes, it could improve dramatically and create value. The company has since seen a new CEO and a better board, leading to significant improvements.

The investor believes that incremental gross margins could be as high as 75% to 90% due to leveraging fixed costs when increasing production. Insights from knowledgeable former executives suggest that margins on cars are in excess of 70%.

Wyden owns options in Ferrari and anticipates that EBIT margins could rise from the high teens to around 40% due to high incremental gross margins. He believes that Ferrari can significantly improve its gross margins, which would positively impact EBIT.

Fiat has a strong parts business and solid brands like Alfa Romeo, Maserati, Jeep, and Ram. The company is experiencing EBITDA growth and has cash building up as a result of the end of an investment cycle, presenting an upside to a consolidation scenario, all while being valued at a low 1x 2018 earnings.

Marc Cohodes mentioned Canandaigua Wine, which is now part of Constellation Brands, indicating a positive view on the company based on past investment success.

Marc Cohodes believes that any company whose management is overly focused on short sellers is likely to be a poor investment. He highlights Outerwall's management's behavior as a red flag, indicating that they are not concentrating on running the business effectively.

Cohodes describes World Acceptance as an awful business that exploits financially unsophisticated individuals. He expresses strong disapproval of its management and business practices, indicating it is a company he would consider shorting.

Nu Skin operates in a multi-level marketing structure that is inherently dangerous, especially when the business model relies on recruiting rather than product sales. The management is viewed as incompetent, and the company's products are not in demand, particularly in markets like China where consumers have limited disposable income. This raises concerns about the sustainability of the business.

Home Capital Group is an incredible short opportunity due to its admission of $2 billion in mortgage fraud and lack of proper controls and reserves. The company's financials are misrepresented, and it is expected to face significant problems if the housing market cools. The CEO's history of questionable practices further supports the thesis that the company is on the brink of collapse.

Signet Jewelers is a poor investment due to its reliance on subprime lending and extended warranties, which are unnecessary for jewelry. The company is compared to failed retail roll-ups and is seen as a hedge fund hotel name that is misrepresented by analysts who do not understand the accounting complexities of subprime lending.

Home Capital Group is heavily exposed to subprime lending in Canada, particularly with a significant amount of fraudulently underwritten mortgages. The Canadian consumer is highly leveraged, and any downturn in housing prices could lead to severe losses for the company.

Valeant Pharmaceuticals is viewed as a potential zero by some investors due to its aggressive financial engineering and reliance on acquisitions. The company has a high likelihood of facing bankruptcy, similar to past experiences with other heavily leveraged firms.

Concordia Healthcare is overleveraged and has been mismanaged by executives with a questionable track record. The company has overpaid for acquisitions and is struggling to meet financial expectations, making it a risky investment.

Alimentation Couche-Tard is a high-quality business that is misunderstood by the market, particularly its convenience store segment which generates stable and high free cash flow. The company is well-positioned to consolidate a highly fragmented market and has a proven track record of making accretive acquisitions. With a target price of CAD83/USD65, representing a potential 44% upside, it is an attractive opportunity for investors.

Marc Cohodes believes that Tempur Sealy is a poor investment due to its sales-driven model, which has recently missed revenue targets. The company is highly leveraged and has been involved in buybacks that he views as detrimental. He expects the stock could decline significantly from its current levels, making it a strong short candidate.

Marc Cohodes identifies Intertain as a short opportunity due to its over-leveraged position and management issues, including the CEO being on leave for an insider trading investigation. He believes the company's attempts to sell itself after aggressive acquisitions will not end well, making it a risky investment.

Amaya is another short candidate for Marc Cohodes, who points out its high leverage and questionable management practices. He suggests that the company's capital structure is problematic and that it is likely to face significant challenges moving forward, especially given the current state of its leadership.

The c-store consolidation story resembles that of drugstores in the 90s, where chains began to dominate over smaller stores. Alimentation Couche-Tard currently has a market share similar to CVS in 1995, and given CVS's growth to a 20% market share with an 18% CAGR since then, there is a strong rationale to believe ATD can achieve similar success.

Alcoa is set to spin off its value-added business, Arconic, which has significant margin expansion potential. The Engineered Products & Solutions division within Arconic is currently operating at EBITDA margins that are 10% lower than those of its peers, and this gap is expected to close over time, driving growth for Alcoa.