I haven’t been able to update the blog regularly. In the last couple of weeks, I’ve bought some new positions.
Reed Resources
This is a small mining company in Australia with a very compelling risk/reward opportunity. The company has 3 main assets: gold, lithium, and vanadium. Any one of these three assets could make this investment a multi-bagger. The lithium assets are the most interesting and should make the biggest short-term impact on the company’s valuation. The gold assets were minuscule until a few week ago. Although a recent acquisition of a gold mine makes the gold assets worth multiples to the company’s current valuation. Finally the vanadium assets could have huge upside, although it will require a much longer time to realize the value.
I think any of these 3 core assets will make the company worth multiples to today’s valuation. Management has skin in the game and have shown to make smart decisions (the recent gold mine acquisition is a great example).
Some research reports:
– Hallgarten & Company (focused on the lithium assets)
– Shaw research (on the vanadium assets)
– Recent company presentation (detailed discussion on the recent gold mine acquisition)
– A SumZero write-up on the company (requires login)
– Other research reports on the company
Radisys (RSYS)
I recently acquired a small position in Radisys. About six weeks ago, the company announced that they won’t hit the Q4 revenue guidance. The stock took a hit and allowed me to buy an initial position.
The company has a market cap of $203M, cash of $133M and debt of $50M. The company has a legacy product that is declining in revenue and a new product that has strong growth ahead. The company should easily do $20-25M in FCF in 2011, creating a huge discount at current valuation.
A few months ago we posted David Nierenberg’s, of D3 Funds, letter to the board. Since the letter, the board has approved a share repurchase plan.
MAM Software (MAMS)
This is a micro-cap software company with a huge moat. The company provides an e-commerce solution and business management system for auto aftermarket. The company has been a turnaround story for years. The last few quarters, the company has started to show the strong cash flow generation with high ROIC. The company should be able to make around $6M of FCF annually, compared to the current EV of $22M.
– A SumZero write-up on this company (shouldn’t require login)
Also, in the last few days I’ve been adding to my HNR position. There has bee a big pullback in the HNR shares in January, down almost 12%. I don’t believe anything has fundamentally changed with the company in the last month. The results from the Indonesia drilling will still take a few weeks. I see the pullback has a great opportunity to buy a company with a low-risk of a loss and huge upside within the next 6 months.