WWII 044: J. Carlo Cannell of Cannell Capital the King of Small Cap, Investing in a Trump Impacted Market, Legion Files 13D on Chef's Warehouse
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This episode is about the King of Small Cap, J. Carlo Cannell and his firm Cannell Capital. I go through his recent 13F filing and dig for value in small caps.
Main Topic: J. Carlo Cannell of Cannell Capital 13F
J. Carlo Cannell founded Cannell Capital in 1992. Before that he worked at Dakin Securities, an investment bank in San Francisco, CA. He graduated from Princeton with an undergraduate degree. He also attended New College, Oxford, and studied business at Templeton College.
Portfolio Size is around $250mm
1. BioTelemtry, Inc. ($BEAT) - Market Cap of $644M - BioTelemetry, Inc. provides cardiac monitoring, cardiac monitoring device manufacturing, and centralized cardiac core laboratory services. It operates in three segments: Healthcare, Technology, and Research. The Healthcare segment focuses on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm disorders. Selling at 26x forward P/E, 6x P/B, 16x EV / EBITDA. - SELLING
2. Ring Energy, Inc. ($REI) – Market Cap of $630M - Ring Energy, Inc. engages in the acquisition, exploration, development, and production of oil and natural gas in Texas and Kansas, the United States. As of December 31, 2015, the companys proved reserves consisted of approximately 24.4 million barrel of oil equivalent. It also has interests in 18,130 net developed and undeveloped acres in Andrews and Gaines counties, and 19,679 net developed and undeveloped acres in Reeves and Culberson counties, Texas; and 16,674 net acres in Kansas. Ring Energy, Inc. primarily sells its oil and natural gas production to end users, marketers, and other purchasers. Selling at 50x Forward P/E, 2.5x P/B, 61x EV/EBIDTA – SELLING
3. Rightside Group, Ltd. ($NAME) – Market Cap of $161M - Rightside Group, Ltd. provides domain name registration and related value-added services to resellers and domain name registrants in the United States, Ireland, Canada, Australia, and Cayman Islands. Its services enable businesses and consumers to find, establish, and maintain their digital address, the starting point for connecting with their online audience. The company provides domain name registration services under the Name.com brand name; and infrastructure services through its eNom brand. It also develops proprietary tools and services to identify, acquire, monetize, and sell domain names for its own portfolio of names, as well as for customers domain names. The company was incorporated in 2013 and is headquartered in Kirkland, Washington. -10x FPE, 1.2 P/B, 97x EV/EBITDA - ADDING
4. GTT Communications, Inc. ($GTT) – Market Cap of $1.15B - GTT Communications, Inc. provides cloud networking services to multinational enterprises, carriers, and government customers. It offers private, public, and hybrid cloud networking; high bandwidth Internet connectivity, IP transit, broadband, and wireless access services; managed equipment, security, and secure access services; and SIP trunking and enterprise PBX services. The company’s IP network consists of over 250 points of presence. GTT Communications, Inc. markets its products and services through a direct sales force and independent sales channels. Selling for 98x FPE, 8.4x Book, 14x EPV/EBITDA - SELLING
5. EXTERRAN Corp. ($EXTN) – Market Cap $1.09B - Exterran Corporation engages in the compression, production, and processing of various products and services for the oil and natural gas industry worldwide. The company operates through three segments: Contract Operations, Aftermarket Services, and Product Sales. The Contract Operations segment provides contract operations services, including provision of personnel, equipment, tools, materials, and supplies. The Aftermarket Services segment sells parts and components; and provides operation, maintenance, overhaul, and reconfiguration services, as well as integrated infrastructure solutions. The Product Sales segment designs, engineers, manufactures, sells, and installs a range of oil and natural gas production and processing equipment designed to heat, separate, dehydrate, and condition crude oil and natural gas. Its products include line heaters, oil and natural gas separators, glycol dehydration units, condensate stabilizers, dew point control plants, water treatment, mechanical refrigeration, and cryogenic plants and skid-mounted production packages designed for onshore and offshore production facilities. This segment also sells custom-engineered and built-to-specification production and processing equipment, including designing facilities. In addition, it provides engineering, procurement, and manufacturing services related to the manufacture of critical process equipment for refinery and petrochemical facilities, tanks for tank farms and evaporators, and brine heaters for desalination
6. plants. The company was founded in 2007 and is headquartered in Houston, Texas. Selling for 65x FPE, 1.19 P/B, 8x EV/EBITDA. – SELLING
7. Callon Petroleum Company ($CPE)- Market Cap of $3B, - Callon Petroleum Company, an independent oil and natural gas company, acquires, explores for, develops, and produces oil and natural gas properties in the Permian Basin in West Texas. As of December 31, 2015, the company estimated net proved reserves totaled 54.3 million barrel of oil equivalent. Callon Petroleum Company was founded in 1950 and is headquartered in Natchez, Mississippi. Selling for 29x FPE, 2x P/B, 24x EV/EBITDA - SELLING
8. Sientra, Inc. ($SIEN) – Market Cap of $160m, - Sientra, Inc., a medical aesthetics company, develops and sells medical aesthetics products to plastic surgeons in the United States. The company offers silicone gel breast implants for use in breast augmentation and breast reconstruction procedures; and breast tissue expanders. It also provides body contouring and other implants, including gluteal, pectoral, calf, facial and nasal implants, and nasal stents; silicone elastomer oval carving blocks to treat congenital and other deformities caused by trauma or tumor removal; scar management products under the Medgel brand; saline-filled breast implant sizers to identify the correct style and size of implants; and non-breast tissue expanders for expanding tissue and skin surface area for burn care and other reconstructive use. The company was formerly known as Juliet Medical, Inc. and changed its name to Sientra, Inc. April 2007. Sientra, Inc. was incorporated in 2003 and is headquartered in Santa Barbara, California. FPE of -4x, 1.7 P/B, -1.82 EV/EBITDA NO CHANGE
9. Points International Ltd. ($ PCOM)- Market Cap of $113M, - Points International Ltd. provides e-commerce and technology services to loyalty program operators in the United States, Europe, Canada, and internationally. It provides various white label or private branded ecommerce services, including online sale of loyalty currency direct to program members in order for the members to top-up their accounts to reach a redemption threshold or as a gift for friends and family members; and the online transfer of pre-existing loyalty currency from one member into another members account, primarily a family member or friend, as another means of enabling that other member to accumulate sufficient miles or points to reach a redemption threshold. It also operates Points Loyalty Wallet, a set of platform capabilities accessible through application program interfaces that enable loyalty programs, merchants, and other businesses to embed balance tracking and loyalty commerce transactions into their product offerings and allow users to track, manage, and access multiple loyalty rewards programs. In addition, the company operates PointsHound.com that allows loyalty program members to earn loyalty points for staying in their favorite hotels and also to earn bonus rewards in the form of airline miles; and Points Travel, an e-commerce platform that helps loyalty programs enhance their revenues from hotel sales. The company was incorporated in 1999 and is headquartered in Toronto, Canada. Selling for 19x FPE, 2.5x P/B., 8x EV/EBIDTA. SELLING A BIT
10. Carbonite, Inc. ($CARB) – Market Cap of $474M, FPE of 25x, 328x P/B, 51x EV/EBITDA - Carbonite, Inc., together with its subsidiaries, provides cloud and hybrid business continuity solutions to small and medium sized businesses, and individuals in the United States. Its solutions include Carbonite Personal, which offers annual plans that comprise cloud backup for one computer at three service levels, including Personal Basic, Personal Plus, and Personal Prime; and Carbonite Pro that automatically backs up files to the cloud and includes various devices through annual plans at Pro Basic, Pro Prime, and Pro Advanced Bundle service levels. The company also offers Carbonite Server Backup, a hybrid server backup solution that provides annual plans at Server Essentials, Server Advanced, and Server Pro Bundle service levels for protecting a range of physical and virtual servers and providing management capabilities, such as scheduling, retention, bandwidth and compression settings, and detaile2d monitoring and reporting via a personalized server dashboard. In addition, its MailStore solution provides MailStore Server, MailStore Provider Edition, and MailStore Home market solutions to meet the specific email archiving needs. Further, the company offers server software designed primarily for cloud backup. It encrypts files using a secure key before the files leave the customers computer and transmit the encrypted files over the Internet to one of its data centers, as well as on its servers to guard against unauthorized access. The company offers its solutions through distributors, resellers, and retailers. Carbonite, Inc. was founded in 2005 and is headquartered in Boston, Massachusetts. FPE of 25x, 328x P/B, 51x EV/EBITDA . SELLING
Build A Bear Workshops hit 5% holding as reported last week.
I would love the market to go down 1 or 2% forever” – During a Q&A session at the 2010 Value Investing Congress in Pasadena, CA.
Ask JB: What Should We Do About This Market Volatility?
JB Says: Markets don’t usually like surprises and you saw a big one in Trump’s election to president, and a lot of small surprises like the immigration ban and that is sure to increase volatility in general. Keep in mind that volatility is our friend in the long run as it often creates bargains in the market. Anytime you sense fear is rising, dust off your buy list and make sure you have a good handle on what price to pay.
JB Says: What you are talking about is feeling fear. Emotions and investing make poor bed fellows. What you are really talking about is market timing. You want to get out when you are fearful and back in when you are comfortable. Market timing is a fallacy – it only makes sense in fantasy, but reality shows that market timing is ultimately impossible. However, if you are uncomfortable with your current level of investment, you can always sell a bit, 10 or 20%.
If you are really struggling with emotions, it may make sense to get a professional involved and talk to a registered investment advisor.
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