Winter 2016

Dexcom Inc. is facing significant challenges in its market position and competitive landscape, which could lead to a decline in its stock price. The company's growth may not sustain at the current levels due to increasing competition and pricing pressures.

Quest Diagnostics is expected to struggle due to regulatory pressures and a challenging reimbursement environment, which could negatively impact its profitability and stock performance.

XPO Logistics is well-positioned for growth due to its strong logistics network and increasing demand for supply chain solutions, making it a compelling long-term investment opportunity.

An investor mentioned owning Apple, highlighting the importance of understanding the price movement and the risks involved in holding a stock that can decline significantly before potentially rising.

The investor discussed owning Micron, noting that despite its significant price drop from $36 to $15, they had previously seen potential in the stock due to a reduction in competition in the memory chip market.

YPF was mentioned as an oil company that had seen a decline in its stock price from $27 to $15, indicating a potential opportunity for recovery.

The investor discussed buying calls on SunEdison, believing the market was mispricing the options and that the stock had potential if it did not go bankrupt, as it could represent a long-term investment opportunity.

The investor mentioned buying calls on Bank of America when the stock was trading at $4, which later increased significantly, demonstrating a successful options strategy.

Star Gas Partners is a heating oil distributor that has consistently generated quality returns on capital despite being in a mature and declining industry. The company has been effectively managed by Yorktown Energy Partners, which has allocated capital well into acquisitions and share repurchases, leading to a strong operational performance.

Famous Dave's was shorted due to excessive market optimism and a struggling brand with a history of declining operating income. Despite the involvement of activist investors and share repurchases, the valuation became too high relative to the company's performance, prompting a short position.

Quest Diagnostics is facing significant downward pressure on revenue due to competition from LabCorp and rising cost pressures that undermine its cost savings initiatives. The company's reliance on acquisitions to maintain revenue levels has resulted in overstated free cash flow and a declining return on net operating assets. The valuation suggests a target price of $35 per share, indicating substantial downside from the current price.

XPO Logistics is a strong buy with a target price of $48 per share, representing approximately 115% upside. The company benefits from a phenomenal CEO, a performance-driven culture, and significant growth opportunities in a fragmented logistics market. XPO's cash-generative core business and attractive valuations further support this bullish outlook.

Jonathan Salinas mentions DHX Media as a current idea, indicating a positive outlook on the company's potential for growth and value.

Jonathan Salinas discusses Sequential Brands Group as a current idea, suggesting that he sees value in the company's brand portfolio and growth opportunities.

The newsletter mentions Famous Dave's as a current idea, implying that there may be potential for recovery or growth in the restaurant's performance.

Star Gas Partners is mentioned as a current idea, indicating a belief in the company's stability and potential for income generation.

Starwood Hotels was up for sale with a break-up value estimated between $90 and $105. Despite the stock initially dropping to the $60s after the announcement, it rebounded to $75, indicating potential value in the acquisition process.

Hyatt was one of the potential buyers for Starwood Hotels, which suggests it could benefit from the acquisition and potentially see an increase in value as the deal progresses.

Marriott announced a deal to acquire Starwood Hotels at $70, which is lower than the expected break-up value, indicating a potential opportunity for investors if the market reacts positively to the acquisition.

Mylan attempted to acquire Perrigo, presenting a significant potential profit opportunity if the deal had gone through, as it offered a $20 premium over the current stock price.

Perrigo's shareholders rejected Mylan's acquisition offer, which resulted in a significant loss for investors who were betting on the deal going through, highlighting the risks involved in merger arbitrage.

Vantage Drilling owns the newest deep water fleet in the country, with seven of the hundred deep water drilling platforms globally. The bonds are currently undervalued at around $30, while the drilling platforms are worth significantly more, suggesting a potential for substantial returns if oil prices recover.

We own Google now and have since 2011, indicating our belief in its long-term value and growth potential.

We looked at Costco during the crisis but passed, which I regret as it was one of the extremely good businesses we wanted to buy.

We bought Hilltop Holdings at a huge discount to cash during the crisis, viewing it as a very low-risk investment with a lot of upside.

We bought into Peerless Systems at a very big discount to cash and joined the board to push for returning capital to shareholders.

We bought Popeyes, which we had been closely following, as it was in the early stages of a turnaround.

We still hold Tandy Leather, one of our top five holdings, which we owned since 2009.

Constellation Software is praised for its clear and honest reporting to shareholders, which includes a consistent presentation of financial performance and a transparent discussion of results. This approach is seen as exemplary in the investment community.

General Growth Properties is a regional mall REIT with a diversified portfolio and high occupancy rates, which remained stable even during the financial crisis. The complexity of its corporate structure and the quality of its properties create an opportunity for recovery and value realization, especially in a distressed investing context.

DHX Media is a compelling investment due to its structural advantages as a Canadian entity, benefiting from government subsidies that cover a significant portion of content production costs. The company's focus on producing high-quality children's content positions it well in a niche market, allowing it to take less risk while capitalizing on dedicated media funds.

DHX Media is positioned well in the over-the-top video distribution landscape, focusing on kids' content which is crucial as 30% of SVOD viewing is kids' content. The company has a clean business model, high organic growth potential, and optionality for acquisition, trading at a lower valuation multiple compared to Lions Gate despite having higher growth. The relaunch of Teletubbies and a strong library of content further enhance its value proposition.

Martha Stewart Living has a strong licensing business that is high margin and capital light, which is attractive despite the challenges faced by its publishing segment. The recent restructuring under Dan Dienst, who has a background in turning around struggling businesses, presents a potential for improved performance and profitability.

SQBG recently acquired Martha Stewart Living Omnimedia, which has a profitable licensing business that is underfollowed and undervalued. The company has opportunities to expand its licensing deals and international presence, and on a pro forma basis, it could earn $0.80-$1 per share, making it an attractive buy at under $8.

Dexcom is overvalued due to market misconceptions about the competitive dynamics in the continuous glucose monitoring (CGM) industry and the actual patient benefits of its products. The company faces increasing competition and pricing pressure, leading to an aggressive valuation that does not reflect the true market potential.

Dexcom is facing significant challenges due to increasing competition from integrated devices that combine continuous glucose monitoring (CGM) technology with insulin pump therapy. The company's revenue growth is under pressure as customer acquisition costs rise and the market is not valuing the business based on earnings or cash flow, but rather on market opportunity. With the potential for pricing pressure and a saturated market, the stock is expected to decline.

Quest Diagnostics is expected to face secular pressures due to commoditization of services, unfavorable regulations, and increased buyer bargaining power, leading to persistent pricing and volume pressure. The company has been unable to offset cost inflation through its cost savings program and has relied on acquisitions to mask declining profits. A DCF analysis suggests a target price of $35 per share, indicating significant downside from current levels.

XPO Logistics is positioned for significant growth following its recent acquisitions of Norbert Dentressangle and Con-way, which are expected to enhance its market position and operational efficiency. The company is entering an integration phase that will likely lead to improved free cash flow and return on invested capital, justifying a target price of $48 based on a DCF and sum-of-the-parts analysis.