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Not every company I own gets “disclosed” through earnings updates and/or in-depth reports. There are a few names that I still prefer to keep to myself and paid subscribers, and the one I’m writing about today is one of them. You can find this company’s in-depth report here, and despite the shares being up 11% since I published it mid-year (vs. a -2% return for the S&P 500), I still deem these to be quite cheap. This is what ultimately led me to make it a top 3 position.
I can tell you what the investment thesis relies on, though. It’s a business that has spent the last 18 months “putting its sh*t together.” The company got rid of everything that was considered non-core, cut costs, upgraded its customers to a new cloud platform and bought back a very significant amount of its shares with the proceeds. It sells mission-critical software and data to an industry that is going through a rough patch. This has made the market look elsewhere, but the reality is that the company continues to grow at a good pace despite the industry-specific headwinds.
Q3 was the quarter in which the clean-up started to show up clearly in the numbers. Revenue came in at the top of guidance (albeit it needs context), margins expanded considerably, and the management team continues to talk about the future with optimism (while backing this optimism up with open market purchases).
In other words (and this is why I have made it a top 3 position), this company seems to be in control of its own destiny. This seems like a very rare thing to say about any company selling into a downcycle, but this is what makes it “special.”
Let’s take a look at the quarter, the investment thesis, and the updated valuation model.