Company Y – Carpe Diem

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When the markets crash and you have a plan, you will make a lot of money. Below is my plan; if you wish to explore this idea with the group I’m putting together, email me – accredited investors only.


Company Y is a services company that has failed to generate meaningful sales traction in the market beyond two major customers. Currently, it is trading at less than 0.7x tangible asset value; however, if you include the value of the Company’s NOLs and patents, there is $75MM or more that can be made by tendering for the entire company. This window of opportunity will not last.



It’s nice being back. Now it’s time to seize the day.

A Confluence of Events

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A confluence of events means ideas from Buyside Notes are going to be few and far between over the next six weeks:

  1. I’m off to visit Company X (note here) which continues to provide a compelling risk-adjusted opportunity. If you are interested in learning more, email me and I’ll happily share my thoughts when I get back.
  2. I’m getting married here.
  3. We’re honeymooning here:


Lucky I am.

Lightstream (LTS) – When The Market Freaks Out, Rejoice

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Lightstream (which I’ve covered in-depth here and here) reported results last week (here). Included in those results was a downward revision to 2014 production volume, from 44k boe / d to 42k boe / d. The market did not take too kindly to the Company’s lower forecast, sending the stock down 10%.

But the market isn’t paying attention to the right things. And investors that know better should rejoice because acquiring ownership in LTS just became a lot cheaper. It’s a mantra that needs to be hung on every investor’s wall:

When the market freaks out and you know better, rejoice.

To the informed investors of Lightstream, this is what matters:

What’s interesting – and a point the market has clearly ignored – is that funds flow (operating cash flow after interest expense) is still expected to meet guidance. I repeat: there was no change to projected cash flow.

Rightside Group (NAME) – A Quote And A Chart

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A quote and a chart, presented without comment.

With the two million total registration mark approaching for all new gTLDs, uptake for this program has been exceedingly strong overall. Most of our gTLDs have met or beat expectations to date. Internet users are voting with their wallets and their clicks, acclimating to a world in which specific, relevant domains support the development of meaningful online identities.

– Paul Stahura, Donuts co-founder and CEO (source)

gTLD Growth


Rayonier Advanced Materials (RYAM) – The Miss That Should Surprise No One

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Rayonier Advanced Materials (RYAM) is a fantastic business. I first wrote it up here just prior to its spinoff from RYN. But I also laid out the case that 2014 was going to turn into a disappointment for RYAM. To quote myself:

I think RYAM will miss on production volumes in 2014 and end the year at 500k tons of specialty and 125k tons of commodity cellulose.

I believe that investors expecting 2014 to be on par with management’s guidance are going to be disappointed.

Turns out I wasn’t far off. On this morning’s call, Management confirmed that full year volumes should come in near my estimates (625k tons total; 25% of that would be commodity, 75% specialty) and EBITDA should be closer to $265MM (from their initial guidance just north of $300MM).

This was a miss. But it was a miss that should’ve surprised no one.

But the market is full of crazy people and it’s fully of lazy people, and the stock sold off rather dramatically after the news hit (down over 10% today).

To those investors that are neither crazy nor lazy, this dislocation may turn into a fantastic buying opportunity. To quote myself once again:

But where others see disappointment, I see opportunity. To understand why, you have to look through the next 12 – 24 months. You see, RYAM has already executed their large capital program. They already spent $385MM to transition their remaining commodity cellulose capacity to specialty; those costs are sunk. And when the market soaks up the existing excess capacity, RYAM shareholders will be the biggest beneficiaries of future specialty cellulose inflation. RYAM’s position reminds me of a quote from Warren Buffett:

In an inflationary world, a toll bridge would be a great thing to own because you’ve laid out the capital costs. You built it in old dollars, and you don’t have to keep replacing it.

If RYAM gets into the mid-20s, you will have the rare opportunity of owning a truly great business at 5x core future EBITDA earnings power.

Even the crazy and lazy should find that compelling.