AvalonBay Communities (AVB), mcap=$24915m

REIT that owns a multi-family portfolio in the US coastal markets.
Cheap relative to private market values, peers, and on an implied cap rate spread.
Market is not putting any value on four potential tailwinds that are supportive of AVB’s rent growth.
AVB’s markets will see muted apartment supply in 2023 which will further decelerate in 2024.
The inventory of existing single-family homes is at record lows and new households will be forced to move into apartments instead of single family homes.
AVB’s apartments are more affordable as they did not experience excessive rent growth.
Rents have only grown at a 2% CAGR since COVID versus ~20% cumulative wage inflation over the past 3 years.

Lancaster Colony (LANC)short, mcap=$5737m

Seller of packaged food to grocery stores and restaurants, looks to be short.
Core retail business faces secular challenges – volume is falling from the shift to healthier foods.
New product introductions and pricing catch-up have masked underlying volume declines.
However, these benefits should abate in the coming quarters.
Company’s 2024 earnings estimates assume margins return to pre-2021 food price spike levels, which is way too bullish.

Target Hospitality (TH), mcap=$1621m

Set to strongly benefit from the lifting of Title 42.
Government may need 60-130% more beds for unaccompanied children, equivalent to several facilities the size of TH’s 2k Pecos facility.
Title 42 has been lifted and this will lead to a flood of refugee encounters, including unaccompanied children.
Government lacks housing capacity for children awaiting immigration processing.
Desperate situation expected to worsen by summer.
TH is currently operating under a 1-year contract, likely to be extended for 10 years.
Recent concerns about no unaccompanied children at TH’s Pecos facility are overblown.
Facility is temporarily warm stacked due to seasonal low volumes.
Government is actively seeking new housing capacity for an anticipated surge later in the year.
TH’s transformation from swing capacity to baseload capacity, and contract extension could see a structural re-rating in TH’s 5x EBITDA multiple.

Geodrill Limited (GEO.TO), mcap=$149m

Drilling company providing sample extraction services for gold miners in Africa and South America.
Trades at 2.4x TTM EV/EBITDA despite highly recurring revenue, and positive FCF while growing both the revenues and earnings at a decent clip.
The low trading multiple should expand as investors realize we are at the beginning of a long cycle of growth for the industry.
The increasing free cash flow allows GEO to continue returning capital to shareholders through dividends and share buybacks.
An attractive target to other drillers due to its long-term relationships with mining companies.
CEO with 39% ownership of GEO said openly that he is open to sale at 5x EBITDA or more.

ThredUp (TDUP), mcap=$241m

One of the largest clothing thrift shops online.
At 0.5x sales trades significantly below industry transactions.
33% market cap and another ~40% is in unique PP&E.
Minimal capex needs going forward and positive EBITDA expected for H2 2023.
Company operates a “Ship it and forget it” model which resonates with a lot of women.
TDUP has already tapped into a very significant source of supply without much effort.
The demand side needs further scaling. 80% of customers are repeat buyers.

M&T Bank (MTB), mcap=$19362m

The bank is oversold on fears caused by the collapse of SVB and other banks.
However, MTB is run by a conservative mgmt team in markets with stickier deposit bases.
That does not make them immune to dumb ideas, but it greatly reduces the risk to shareholders.
MTB has consistently earned mid-teens ROTE.
Pays out a healthy dividend, and uses excess capital to buyback stock.
Last year’s merger with People’s United provides significant scale benefits, which should become evident shortly.

1-800-FLOWERS.COM (FLWS), mcap=$545m

E-commerce platform providing flowers and gifts across several brands.
Everybody and their mother wants to bet against FLWS for the wrong reasons.
Immediate catalyst for the stock to re-rate.
FLWS is oversold as an ill-founded assessment of data from credit card panels points to weak Valentine’s Day sales.
However, primary research shows a very positive picture for company’s performance during the quarter.
The bar is set especially low.
Recent capex and gross margin headwinds are set to shift into meaningful tailwinds over the coming quarters.
Expected to return to pre-Covid margins in the medium term.
Margins and profitability consensus estimates are too low.

Polaris (PII), mcap=$6077m

Manufacturer of snowmobiles.
Huge COVID beneficiary with sales 25% above the previous peak.
The business is already faltering but the decline is masked by dealer channel fill.
This “Channel fill” opportunity has now burned up, creating challenging comparables in the back half of ’23 for volumes and margins.
Dealer inventories now seem to be at 2019 levels, which in itself was a year of oversupply.
A minimum of $600m revenue headwind for 2H23.
Management’s guidance is unachievable.
Earnings quality is low with only 1/3 of 2022 net income converting to FCF.

Stagwell (STGW), mcap=$2732m

Stagwell manages an integrated network of top-tier ad agencies and assets for blue-chip companies.
The unfortunate timing of the secondary offering to PE owners pushed STGW shares down after a solid Q4 print, creating the current opportunity.
High growth, high cash flow generative enterprise with best-of-class management.
57% of revenue and over 50% of EBITDA oriented toward digital transformation.
10-14% 2023E annual revenue growth, ~2x that of traditional advertising companies.
Cheap on an absolute and relative basis with superior growth and margin characteristics.
Trades at 7x fwd. EBITDA, 6x P/E and a 14% FCF yield.
Higher growth-oriented marketing services / ad tech comps trade 10-13x EV / EBITDA.

IWG plc (IWG.L), mcap=$1766m

Global operator of flexible working spaces with 4x the locations of their next-largest competitor.
Currently in the early stages of transferring the majority of the current business into the franchised business.
If successful, would result in the transfer of a significant part of lease liabilities and the cost base onto a third party.
This would leave IWG with a far higher margin royalty stream likely to be valued by the market on a more generous multiple.
The currently large operating lease liability (even if non-recourse and tied to individual properties) is a significant concern among investors.