Eric Green, CFA, is the Senior Managing Partner, Director of Research and Senior Portfolio Manager at Penn Capital Management Company, Inc. Mr. Green began his career at Penn Capital in July 1997. As Director of Research, Mr. Green is responsible for guiding the firm’s day-to-day research process. He also serves as the Portfolio Manager for Penn Capital’s small-cap and midcap equity strategies and chairs Penn Capital’s equity strategy committee. In this exclusive interview with the Wall Street Transcript, Eric Green describes the unique investing methodology of the Penn Capital Management Company.
“The philosophy stems from the coverage of the entire capital structure. All our analysts are required to have an opinion on the value of the stocks, bonds, converts, preferreds and bank loans for all the companies that we follow. We believe being experts in understanding the balance sheet and cash flow statement and the debt capital markets gives us a competitive advantage in picking the best stocks.”
Using the Penn Capital stock picking philosophy has resulted in some big winners.
“The industry fundamentals for the gaming suppliers have improved dramatically over the last year. With Caesars (NASDAQ:CZR) coming out of bankruptcy, they’re now replacing their slot machines much faster than they did in the past. This is leading to their competitors also replacing their slot machines. Despite the fact Scientific Games’ (NASDAQ:SGMS) stock has done very well, we still believe there is a lot of value left in the company and believe the stock can move considerably over the next 12 to 18 months.”
“The catalyst for Scientific Games is that they have an interactive division that offers social gaming and continues to grow very rapidly; however, the valuation of that is not reflected in the existing price of the stock. They’ve also, with the improvement that they’re seeing in their different businesses and some of the recent acquisitions that they’ve made, will be able to reduce the debt on their balance sheet faster than many expect. We expect there will be a transference of the value of the debt to the equity and that the multiple should improve as the fundamentals become more apparent to the market.”
To read the entire interview and discover more stocks recommended by Eric Green, read the entire interview at the Wall Street Transcript.
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