Portfolio Manager Roger Vogel of Silvercrest Asset Management Group says US Ecology Inc (ECOL) has significant franchise value, and its recent acquisition of EQ – The Environmental Quality Co. should prove to be quite accretive in the next couple of years.
“US Ecology, one of the largest hazardous waste landfill companies in the United States, is a very interesting company. As you might expect, this is a business that has significant barriers to entry. It’s hard to get landfill capacity permits, so there is a lot of franchise value,” Vogel said.
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Vogel says what’s most intriguing about US Ecology is its recent acquisition of competitor EQ – The Environmental Quality Co.
“This [acquisition] greatly enhances US Ecology’s geographic footprint and expands the company’s service offerings,” Vogel said.
“The company has already been a solid performer for us…This is a hard asset to replicate, and we think US Ecology is certainly quite valuable from that standpoint, as well as being a solid company on an operating basis,” Vogel added.
Timothy Taylor, Globalstar, Inc.’s (GSAT) Vice President of Finance, Operations and Strategy, says the company’s research and development efforts are currently twofold. He says one area of focus is the product front and leveraging in-house engineering teams.
“We focus on designing and producing satellite components that are small and inexpensive enough to fit into the smaller devices preferred by our customer base,” Taylor says. “Our teams work on advanced plastics technology, user-interface upgrades and — very important to satellite communications — battery technology.”
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Additionally, Taylor says the R&D team is focused on upgrading the company’s ground infrastructure. He says the current system is about 15 years old, and updates will meaningfully improve the user experience.
“That means that data speeds will be increased by 25 times, and the network protocol will be upgraded to modern technology,” Taylor says. “At the end of the day, this results in much faster transmission speeds, which will significantly improve our competitive position.”
Ted Deinard is the CEO of ARC Group WorldWide Inc’s (ARCW) ARC Wireless, LLC. He says his segment of the business has been acquisitive in the past, and plans to grow in that manner.
“We have made acquisitions and announced several of them,” Deinard says. “And where they make sense, we are certainly going to continue to look at that.”
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In addition, Deinard says ARC Wireless will also grow organically through new product launches. He says the company’s small size makes growth attainable.
“Every new product we come out with brings significant growth. When you start from a smaller base than some of our competitors, like we have at the moment, every new product gives us many new opportunities and many more connections and many opportunities for growth,” Deinard says. “New products, new customers, potentially new partners are all feeding into our growth strategy.”
Managing Director Roger Vogel of Silvercrest Asset Management Group says BancorpSouth, Inc. (BXS), a Mississippi-based regional bank, should continue to see improvements on its expense structure as the CEO emulates his previous successes.
“We purchased BancorpSouth about a year ago, initially on the promise that a new CEO, Dan Rollins, brought to the situation. We knew Dan very well from his previous employer, Prosperity Bank (PB), which is one of the highest-performing banks in the country,” Vogel said.
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Rollins had significant opportunity at BancorpSouth to rationalize the expense base and rejuvenate loan growth, Vogel says, which so far has played out.
“We still believe Dan will continue to work on the expense structure of the bank and probably pursue some acquisitions as well. As a result, we think there is still at least 20% upside,” Vogel said.
Portfolio Manager Roger Vogel of Silvercrest Asset Management Group continues to hold Ross Stores, Inc. (ROST), as he believes the stock is deeply undervalued and expects ROST to grow both its store base and same-store sales.
“When we look at Ross, we think it should be able to continue to grow the store base perhaps in the mid-high single digits over time. Hopefully, Ross will also have some same-store sales growth to enable an earnings CAGR in the low-mid double digits over our forecasted time period, four years from now,” Vogel said.
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With an approximate 12% earnings CAGR and targeting a valuation at the current market multiple, Vogel believes Ross’ stock is deeply undervalued, and as a value investor he is used to the ebbs and flows that may come with investing in retail.
“There will be times, like now, when the retailing environment is not particularly robust, so Ross’ last couple of recently reported quarters have been somewhat mediocre,” Vogel said. “As long as we think the basic model is intact, we believe there will be periods where Ross will show stronger same-store sales growth, and investors will become more excited with the name.”
Richard Vanden Boogard, Associate at Jacobson & Schmitt Advisors, says Enterprise Products Partners L.P. (EPD) is focused on generating returns on its investments and is a strong play on the U.S. energy theme.
“What we like about Enterprise is that they’re pretty laser-focused on generating returns when they invest, number one. Number two, they seem, from our vantage point, that they are very focused on the people they have inside the company and their employees, and they recognize that their employees are very important to the success of the firm,” Vanden Boogard said.
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Vanden Boogard says Enterprise Products has grown significantly over the years, and as the U.S. position in energy solidifies, EPD is in a strong position to keep generating returns.
“Because they have long-term contracts and tend to have a — it’s hard to say a guaranteed rate of return, but a much more known rate of return when they invest, that markets will reward them for investing heavily. We think there’s a long runway for Enterprise as this infrastructure, this energy infrastructure in the United States is built out,” Vanden Boogard said.
Associate Richard Vanden Boogard of Jacobson & Schmitt Advisors says Amphenol Corporation (APH) plays to the proliferation of electronics theme that his firm is eyeing, and also has other characteristics he looks for in an investment.
“Amphenol is a connector company that delivers electrical connectors and interconnects. So that plays to one of the things that we like, and they have a very entrepreneurial culture,” Vanden Boogard said. “They have shown that over time they do a wonderful job of buying companies, and you can’t say integrating them, that would be the wrong word, but letting their people manage those businesses well.”
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Mr. Vanden Boogard adds that not only is Amphenol Corporation shareholder friendly, it is a low-risk company.
“They are also in a good spot where we think is a great place to participate in the proliferation of electronics seemingly everywhere, in a way that doesn’t really require we make a big bet on some sort of technology. The obsolescence risk for something like Amphenol is quite low, because it’s simply connectors,” Vanden Boogard said.
Portfolio Manager Sonu Kalra of Fidelity Investments characterizes Comcast Corporation (CMCSA) as a blue-chip company. Comcast holds a dominant position in core cable markets, he says, and is the leading provider of high-speed Internet.
“The key here is their broadband business. If I were to take a survey of consumers and ask them what’s the one utility you can’t live without, most people would end up saying ‘Internet’ these days,” Kalra said.
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Comcast Corporation’s recent acquisition activity should also position the company well for the future, Kalra says.
“They’re in the process of acquiring Time Warner Cable (TWC), which would consolidate the market even further. So I think there is a lot of room for them to grow out,” Kalra said.
Sonu Kalra, Portfolio Manager at Fidelity Investments, says Tesla Motors Inc (TSLA) has been a top contributor toward performance over the past year, and that his firm was able to identify it early as a blue-chip company.
“This was a company we became familiar with from its IPO. I’m not a car enthusiast at all, but I had the opportunity to drive one of their roadster models as part of their road show; you can call it due diligence. It was a life-changing experience, or as one of my colleagues puts it, an ‘iPhone experience.’ We all remember the first time we used an iPhone,” Kalra said.
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Kalra says the key differentiator was Tesla’s ability to commercialize its battery technology into a luxury car.
“While other auto OEMs were targeting their electric vehicles at the mass market, they were coming in at price points that were more appropriate for luxury car market — Tesla was going to market targeting the luxury market with a luxury car and thus priced appropriately.” Kalra said.
“We became convinced that not only would they be able to commercialize the Model S but also be very successful by only taking a small amount of market share of the overall luxury car market,” Kalra added.
Portfolio Manager Sonu Kalra of Fidelity Investments says Keurig Green Mountain Inc (GMCR) has been a large contributor to his firm’s portfolio over the past year, as the firm generated a differentiated view of the stock from other investors.
“This was a very controversial stock a couple of years ago, and once again our research capabilities enabled us to have a differentiated view,” Kalra said. “Our research and our consumer survey work showed that consumers really valued the variety that Green Mountain had to offer.”
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Game changers for Keurig Green Mountain included the extension of their partnership with Starbucks Corporation (SBUX), and its recent deal with The Coca-Cola Company (KO), Kalra says.
“Coke actually took a stake in the company to help Keurig launch its cold beverage product…This is expected to launch late next year, and there should be a tremendous amount of opportunity here as the cold beverage category is multiples larger in size versus the hot beverage category,” Kalra said.
