BP is the cheapest stock in the sector with a 15% cash return yield. Trades significantly below its peers. The company is dialing back on investments in renewables to improve shareholder returns. Expected increase in capital returns. Macro tailwinds from China re-opening and soft landing of the US economy. Set to benefit from LNG volume growth as projects come online + big GOM project coming online (Mad Dog). Likely takeover target by $CVX.

A better short than $TSLA. Cyclical business, that sells to cyclical tech companies. A short squeeze has popped these shares +100% in 3 months without any material news. NVDA is crazy expensive at 44x likely peak 2022 EBITDA with deteriorating fundamentals and a speculative holder base. Similar trading pattern with NVDA stock has already been observed in late-2002 when it peak on earnings and equity valuation.

A largely pre-revenue battery tech company that unequivocally admits things are going poorly. Equity is worth a small fraction of today’s trading price. The company is burning cash and does not yet have the necessary capital to reach operational scale. Years behind schedule, massively over budget, and still does not generate any meaningful commercial revenue. Its first plant (Fab 1) is now expected to operate at <0.5%(!) of its initial forecast. Capital raise is required for the second plan. Battery tech is a highly competitive industry and ENVX technology is not unusually novel. Its manufacturing process remains unproven. The founding CEO was just fired and replaced. Odds of a successful turnaround are slim to none.

Hyped-up consulting firm disguised as an “Enterprise AI Platform”. Stock is up 125% YTD following a vague/nonsensical AI-related press release. AI has a hugely unprofitable generic business with promotional management who have a history of pumping the stock. Business has also been performing poorly over the last two quarters with negative sequential QoQ revenue growth. Management guides for even larger operating losses next quarter. ~30 VP+ executives have left the company since 2021.

Supplier of electrical wiring parts for utility-scale solar projects. Has significantly over-shipped end demand in 2022. Priced for perfection. Set to miss 2023 substantially. One innovative, but easily copyable, product drove SHLS's success allowing it to reach 50% market shr in US. Extremely high margins (40%) for a relatively simple unpatentable electrical wiring product. Both market shr and margins can only go down. Since the 2021 IPO, insiders have sold 74% of today’s share count. Oaktree was a pre-IPO holder and sold its entire 51% stake. Management has fully turned over since IPO, including founder and key product innovator Dean Solon, who left in Feb’22

The largest powersports dealership group in US. COVID benefiting retailer of highly discretionary products whose customers are largely dependent on financing their purchases. Overearning and overleveraged - expected to trip financial covenants in 2023. The industry is returning to a normal state where there is plenty of supply. Sales and margins are expected to contract. Customers are pressured by increasing financing costs (monthly payments on powersports unit have doubled or more). With deteriorating financials, RMBL is set to bust Oaktree loan covenants. Oaktree is an experienced distressed for control lender making it more likely that if RMBL were to bust its covenants that the Company would be pushed into bankruptcy.

Shimano - the largest producer of bicycle parts in the world. Significant COVID beneficiary with inflated sales and margins. Japanese investors are incorrectly anchoring on this strong recent performance. Optimistic consensus forecasts show flat revenue for 2023/24 and a continuation of a recent uptrend after that. This bullish narrative is wrong. Shimano’s cycles have been fairly predictable, with past booms resulting in multi-year hangovers. Shimano has already begun reporting normal/above normal inventories in its low-mid-end bikes Higher-end bikes are expected to follow suit.

Value grocery retailer at a premium valuation of 15x 2022 EBITDA and 30x EPS. Incorrectly perceived as an attractive franchisor-type business with a long growth runway. Unrealistic target of +10% unit CAGRs (4,800 total unit potential – i.e. 10x today’s number). Warning signs around unit economics with a significant portion of stores being marginally profitable and supported by the lowered commission split burden. GO will run into supply constraints with further store base expansion as the company already accounts for 30% of close-out CPG inventory. Not a real asset-light franchisor, as GO is responsible for funding the build-out of its store footprint. Strong 2022 SSS were mostly driven by food inflation – this will not be sustainable going forward and investors are likely to be negatively surprised in 2023.

Medical Properties Trust is a highly-levered US healthcare REIT that owns nearly 440 hospital facilities. Company operates a low-quality business (with shady management) that burns cash after dividends and does not earn its cost of capital. 2 of its biggest tenants, comprising over 40% of revenue, are in poor financial and operational health – rent cuts are likely. Without dividend cuts, accessing capital markets, or selling assets MPW will likely face a liquidity crunch in 2024.

Global specialty staffing firm that trades above peers and operates within the cyclical industry. Consensus earnings are too optimistic given the FED’s expectation of higher unemployment. Pandemic-driven surge from the public sector is already runoff. Challenged by a broad-based slowdown in the pace of client hiring, especially among SMBs, a longer sales cycle, and more stringent hiring requirements. Cyclical employment pressures, partially driven by FED policies, are likely to intensify.

Graham's style net-net. A niche asset manager, trading well below its BV comprised of cash + investments. Market ascribes no value to GROW’s $2.9b asset management business. Company is most known for its airline ETF JETS, which accounts for 80% of AUM. JETS has been a wild success and saw AUM increase from $50m in 2020 to $4.5bn in Jun'21. Currently, total GROW AUM sits at $2.3bn and started increasing again recently. Due to a flexible cost base, GROW only needs AUM in the $1.3b-$1.5bn range to break even. At current AUM levels the asset management business is producing $4-6m in annual FCF. GROW is controlled by Frank Holmes with a questionable reputation.

Closed-end fund pivoting its strategies to invest in CLOs while changing the fund manager to Carlyle. Trades at 15% discount to NAV whereas CLO peers with similar fee structures trade at premiums to NAV. As part of this transaction, Carlyle agreed to pay $0.96/share in special dividend, launch tender offer for $25m, and also to acquire the equivalent amount of new issuance from the company. Major shareholders (35%) support this transaction.

COVID beneficiary set to reverse. General Mills is now trading at an elevated valuation on estimates that assume the company returns to its pre-covid margin structure. The company has benefited from strong at-home consumption trends, pricing, and a favorable competitive landscape as private label was supply constrained during covid. Many of these tailwinds are now set to reverse or at least moderate. Valuation multiple has expanded due to better-than-expected earnings over the last year. However, General Mills is unlikely to have a significantly different growth and margin profile going forward relative to pre-covid.

Wallgreens Boots Alliance - trades near all-time lows on virtually every metric. Fundamentals are expected to inflect in the second half of FY23. Company’s YOY EPS trajectory is projected to flip from about -31% in the first half, to 29% in the back-half. This will be driven by lower COVID headwinds, improvements in WBA’s Healthcare business, the timing of reimbursements, and lower COGS. The company has been transitioning under its new CEO into a multi-channel technology-driven healthcare provider and a one-stop shop for all healthcare needs. This is expected to drive longer-term EPS growth in the 13-15% range. Another catalyst is the potential sale of its large UK subsidiary Boots – rumors have been circulating that it might get sold at the right price.

The largest gaming operator in the US with over 50 properties. 50% selloff from Oct'21 highs due to recession fears/risk aversion looks unwarranted as CZS offers a stable 15% FCF yield. Meanwhile, the downside looks protected by CZR’s owned real estate. Most importantly, there is the optionality of FCF expansion through normalization of growth CAPEX, interest expense reduction through debt repayments, and digital business inflection to profitability as it benefits from i-gaming growth.

Market believes that GAP is a classic post-COVID retailer boom-bust story. Unprecedented industry conditions have led GPS to trade near its two-decade low. Multiple pending catalysts – FY’23 guidance, upward revisions, cost-cutting measures progress. Short-term/transitory headwinds have obscured fundamental changes that have led to significant margin improvement. Material optionality created by above-industry ecommerce growth is not well-understood by the Street. The variance from the street view comes from Athleta’s outsized growth, successful rebranding of Banana Republic, shuttering of underperforming stores, and reduced SG&A through non-necessary COVID safety measures.

British American Tabacco - at only 7.8x fwd earnings and nearing inflection point in terms of growth. At a lower valuation than during the worst of the GFC, and roughly in-line with COVID lows. As the company adds non-combustibles to their mix, margins should continue to move higher. The market is more willing to pay a premium multiple for a tobacco business with a larger % of non-smoking products in the portfolio (as happened with $PM case). Inflation-proof non-cyclical stock with a stable 8% dividend yield. Together with EPS growth of 6-7% per year, BTI can be a 14-15% IRR stock for investors without rerating. That's before any EPS growth from non-combustibles. Bears point out that tobacco names will never trade at historical P/E multiples owing to heavy government regulation and the movement toward ESG investing. But the irony is that regulation only ensures that the supply side of the industry remains tight.

Diversey is a provider of cleaning products and services to institutional customers such as hospitals, hotels, and food and beverage producers. Stock is trading at a 50% discount from its Jan’22 levels due to the compression of margins and a strong USD. Headwinds are expected to turn into tailwinds as margins begin normalizing while the strong dollar seems to have topped. Plus DSEY operates a pretty sticky business and has a scale advantage over its peers usually the #1 or #2 player in most markets.

Transportation and logistics company serving the energy and chemical sectors, primarily onshore. Has momentum in each of its core business segments. Trades under 3x EBITDA. New management is turning the business around. Previously poorly managed for many years and run like a private company under Adams family control. In Nov’22 all 44% of the family’s ownership was cashed out at $36/share. Current management team led by the current CEO was hired in 2018 to turn around operations. Despite the pandemic, since then the company has been meaningfully building adjusted FCF. Recently completed highly accretive acquisitions of Firebird Bulk Carriers and Phoenix Oil for about $40m in cash. Repurchases and acquisitions, the net debt is close to zero.

Controlling family has made it clear they want to sell the company altogether or through individual segments. A major asset sale was done in 2021 and more are expected to come. Dorel designs, manufactures and distributes home and juvenile products. Has been facing ST headwinds negatively affecting its margins mainly due to excess inventory and rising input costs. Headwinds will subside as inventory gets reduced. Expected to be cash flow positive now/very soon and EBITDA positive in 2023. Dorel is a family-owned-operated business with a two-decade history of defensible EBITDA and unlevered FCF generation.

One of the best short opportunities for 2023. Very little risk to the upside - a short you can sleep well at night. Going from a massive pull forward in product sales into a recession year. Earnings multiple is still near the highest it’s ever been relative to S&P500. Apple's service revenues are built on monopolistic behavior that is expected to eventually fade away. Ultimately, what will drive earnings in the foreseeable future are still Product Sales, which are set to contract in the coming years. DOJ/Google lawsuit and EU Digital Market Act might also be significant headwinds into 2024.

The Constellation beer portfolio consists of Modelo, Corona, Pacifico, Victoria, and Funky Buddha. STZ underperformed recently due to concerns around slowing beer revenue growth and FY23/FY24 beer operating margin pressure. While valid, the concerns are more of a transitory short-term issue rather than long-term structural changes. Currently, the company is attractively valued relative to peers, its historical valuation, and its growth rate. Important positive developments include the Sands controlling share class elimination and STZ’s commitment to improved capital allocation.

Leading global manufacturer of hand, power, and outdoor tools that sell under the brand's Craftsman, DeWalt, Stanley, and Black and Decker. 2022 was a very challenging year with overstocked distributors and home centers as well as poor integration of acquisitions done by the prior CEO. Tools EBIT margins went from a pre-COVID 15-16% down to 9% in 2022. Demand and margins are expected to normalize in 2024. With ongoing de-stocking, SWK is expected to release $2.5bn in working capital which they will use to reduce debt and repurchase shares.

Auto dealer Lithia Motors is undervalued due to concerns over short-term earnings and long-term disruption to the industry. Trades at 5xEPS. Market is skeptical about earnings sustainability, which went from $11.60/share in 2020 to $37/share in 2021 and likely $45/share in 2022. Part of this growth was driven by COVID supply chain issues. Earnings are unlikely to revert to 2020 levels due to a 60% higher number of locations as well as new business initiatives (captive finance sub and Driveway online national brand) reaching breakeven. The industry is highly fragmented, and Lithia is in a unique position to grow profitably through acquisitions for the foreseeable future.

Subprime lender with portfolios skewed towards higher risk borrowers at 1.5xBV. Atlanticus is underwriting for loan losses and in turn, keeps on reporting record earnings. Large write-offs are expected. Cyclical business with low entry barriers. Even with the support of its exponentially growing loan book, the company has seen delinquencies and charge-offs increase rapidly over the last year. However, as management has discretion over loan fair value assessments, the provision for losses has not kept pace with the increasing delinquencies. In face of a deteriorating economic climate, the ratio of provisions to past-due loans stands at the lowest levels historically.

Nintendo today offers a robust 3x upside to reach an intrinsic value estimate of ~$110bn EV. The market is massively mispricing Nintendo’s “App Store Platform,” or third-party software and value-added services business. Nintendo Switch is a thriving distribution channel that has already attracted a large and thriving ecosystem of third-party games. This marks a major strategic shift in how Nintendo views its console business. This shift means that software revenues have inflected in recent years, with 2022 the year they overtake hardware sales for the first time. Consequently, Nintendo is primed for continued massive margin expansion, from already improved ~35% to 50% based on reasonable extrapolations of trends that are already in place.

Aircraft and engine lessor that has gone through a major transformation from a complex “mess” of assets to a pureplay aviation company. On the cusp of seeing substantial growth in its parts & service business and that will translate into a higher multiple. Product and services segment is set to contribute half of the profitability vs 15% currently. Trades materially below peers. Survived major setbacks of Covid and Russia/Ukraine war with a number of aircraft seized or destroyed. Recently spun-out infrastructure assets, which simplified and derisked the FTAI story and improved the balance sheet. 6.3% dividend yield limits the downside.

Extreme value grocery retailer of branded goods with 430 stores mainly in the 5 Western states. Attractive unit economics with 30% IRR. Long growth runway with the potential of 1,500 additional stores in their current markets and 4,500 stores nationally. For comparison, Aldi with a similar business has ~2,000 stores across 37 states mostly in the eastern half of the US. GO plans to keep a ~10% new store opening cadence translating into lucrative re-investment opportunities for several years. The cash flow generation from the existing stores and its healthy balance sheet should be sufficient to fund future store growth.

CROX presents a skewed risk-reward opportunity. Company is undervalued because the market doesn’t believe in management’s long-term guidance of reaching $5b in revenues by 2026. Despite these concerns, management has historically been able to execute well and the risk of the US market slowing down will be overshadowed by increasing global sales. CROCS’s brand perception has also changed from being a temporary fad to becoming a well-known fashion stable, which gives a steady demand base.

Veritiv is mostly a B2B distributor of print and packaging. The company has been benefiting from a temporary tight market due to both supply chain struggles and elevated demand during COVID allowing VRTV to opportunistically increase its pricing. Now, the market wrongly perceives that these elevated margins are sustainable. The cyclical packaging market began to loosen in Q3 2022 and the print market should follow suit. VRTV's stock is expected to be under pressure as margins begin to normalize in 2023.

Retailer and wholesaler of running shoes. One of COVID's high topline growth and expensive multiple IPOs. Recent growth was driven by pandemic-induced trends, fashion shifts, and channel filling. Trends have slowed and the wholesale channel now seems to be fully penetrated. Investors believe this is the next Lululemon, however, ONON's different product mix, reliance on one SKU, and propensity to become associated with fashion all pose significant risks. The company will enter a period of negative earnings revisions as DTC and wholesale channel growth has slowed over the past several quarters and is entering a period of extreme volatility in the retail industry.

Specialty materials business formed as a result of the 2022 merger with significant synergies. Good business with cyclically depressed EBITDA. Should be a ~mid-single-digit revenue grower and approaching high-teen EBITDA margins with low capex intensity (~3% of revenue). Extremely cheap trading 6.6x management’s EBITDA target. Good FCF generator with a 14% 2023 levered FCF yield. Management is expected to divest certain businesses to crystallize value. Insiders purchased nearly $6mm in stock in the past year at an average price of $23.5.

Leading distributor of pool and outdoor living products. 40% of the company’s revenue is tied to new pool installations, major repairs and remodeling. The company has disproportionately benefited from the surge in COVID-related demand and is over-earning. Lead times on new installations have already contracted from 6 months to 6 weeks. Over the next couple of years, revenue per location set to revert to its pre-COVID trends, meaning a decline by approximately 28%. Gross margins are also set to revert from 32% to to pre-COVID levels of 29% as demand comes under pressure and the inflationary benefit reverses. Analyst EPS estimates are way too high.

Bulls incorrectly assume that Tesla will dominate the end-state auto market. That assumption is just wrong. Sub-$50 *valuation* for Tesla is not just a $TSLAQ fever dream. Two things that happened over the last six months cast doubt on the "dominance" forecast that underpins Tesla's valuation. (1) Order rates have started to collapse and this is negatively impacting Tesla's margins. (2) BYD has already overtaken Tesla as the leading EV car maker - sells almost 2x more cars and is growing faster. and the company has global ambitions. Tesla's auto valuation requires that the industry not be a competitive post-EV transition, but BYD is a fierce competitor now.

ForgeRock is to be acquired by Thoma Bravo at $23.25/share. The market is pricing too high a probability that the transaction will be successful. Regulatory risks seem too large to justify the 87% probability. The short thesis depends on how DOJ defines the sector FORG operates in. If defined narrowly - big risk of the deal getting blocked. If defined more broadly resulting in lower market concentration, the transaction is likely to be allowed.

Beverage can producer with a 30% market share globally and 40% in the US. Primary customers are companies like $BUD and $KO. The stock sold off due to a combination of post-covid oversupply in the beverage can industry, increased aluminum prices, and moderating consumer demand. Operating margins contracted from 13% in 2020 to 10% in 2022. These factors are set to unwind in 2023 setting up the perfect storm for BALL. The supply/demand disbalance is expected to normalize in 2023, while decreases in aluminum prices are expected to bring margins to historical levels.

Provider of point-of-sale software and payment systems to marijuana dispensaries. A secular growth story with revenues doubling YoY. The business would be profitable today if it did not invest in growth. A favorable licensing deal was signed in the summer of 2022 with royalty fees dropping right to EBIT. POSAF is well-positioned to capitalize on industry downturns and acquire bolt-on assets at reasonable valuations. Set to benefit from the continued marihuana legalization across more states.

Industry leader in mission-critical radiation measuring devices and services. 40-60% market share in the markets it participates in. The stock has been beaten down mainly due to quarterly guidance misses from component shortages and some canceled projects due to the Ukraine invasion. SPAC's provenance, poor execution, and its terrible public market performance have led investors to trade it like a low-quality industrial business. MIR’s acyclicality, market position, and margins argue for a better multiple. Expected to revert to normalized earnings after aforementioned temporary pressures ease. The elevated order book indicates positive exposure to secular growth in nuclear power.

Compelling opportunity to short a secularly challenged pandemic beneficiary. Manufacturer of copper tubes and fittings for the plumbing and HVAC end-markets at 35x pre-pandemic earnings. MLI is significantly overearning and faces an imminent deterioration in market structure, a resurgence in competitive imports from East Asia, and cyclically declining demand, amplified by excess distributor inventories. Current EPS is 5x higher compared to pre-pandemic levels. Set to revert to or below pre-pandemic levels by 2024.

Hyve is a small-cap UK-listed owner/organiser of exhibitions and conferences that has been hit hard by COVID - shares fell by 90%. Company has strong FCF conversion, is now repositioned and is inflecting strongly to pre-pandemic levels. Two of its most significant events have outperformed prior editions with revenues up to 40% higher to pre-COVID levels. Strong 2023 bookings and peer commentaries support the thesis of event recovery. The company is expected to return to the 25% pre-COVID operating margins by 2025.

Global specialty chemicals company with leading positions in three attractive specialty chemicals segments (mainly Polyurethanes) with consolidated industry structure and above-average structural demand growth. Trades at just below 5x EBITDA, whereas would be expected to trade at a premium to highly commoditized peers. Has sold the more commoditized businesses for close to 8x EBITDA and used the sale proceeds to deleverage the balance sheet and buy back stock. Given a dramatic improvement in portfolio composition through a multi-year corporate realignment, an unlevered balance sheet, and the extremely dislocated valuation, there is significant optionality around M&A interest in HUN.

Qorvo is a leading smartphone radio frequency semiconductor supplier at trough earnings & multiple. Shipments are set to rebound in 2023 from a China lockdown-driven low. Secular content gains are expected over the next five years from increasing 5G penetration. RF modules are vital for any smartphone and RF content per phone is set to increase with 5G vs. 4G. An oligopolistic industry that requires expertise in niche semi-material manufacturing processes. Dominated by 4 large players - $QRVO, $SWKS, $QCOM, and $AVGO. The market has grouped Qorvo into the broader group of semi-peers, many of which are still over-earning due to COVID pull fwd, so it is applying a below-normal multiple to already depressed forward estimates.

A founder-led company with an incredibly strong history of value creation - every $1 invested in IDT in 2012 is worth over $35 today. Owning IDT today gives investors exposure to three high-growth subsidiaries within IDT, a traditional communications business that is a run rating of around $100mm EBITDA, as well as a large net cash balance sheet and management’s capital allocation prowess. Leverages existing customer relationships to launch new products, services, and business lines. One of the businesses, National Retail Solutions, a point of sale and payments platform with 20k installed terminals and growing at 40%CAGR, is worth more than the entire enterprise value of IDT today. Two straight quarters of meaningful share repurchase for the first time in years is also a positive signal.

Money-transfer business at 11x PE despite high growth, wide-moat, and excellent management team. IMXI has grown at 30% CAGR and has plenty of runways to continue growing revenue DD and EPS >20% by simply continuing to execute its current playbook. Focuses on selected remittance corridors to LatAm, where it is able to offer top customer service/brand. Negative investor sentiment due to bad industry reputation and fears of secular disruption. Digital-only players will not materially impact the growth trajectory of Intermex for the foreseeable future. Global remittance industry continues to grow MSD. US to LatAm remittances are growing ~10% - this is a strong secular tailwind for Intermex, which conducts >90% of its business in the US to LatAm corridors.

Merger arbitrage. TGNA is to be acquired by Standard General at $24/share in cash. 20% spread currently due to the pending regulatory approval. In communication with FCC, the buyer has offered further commitments relating to retransmission consent agreements, staffing levels, and concerns that Standard General would collude with Apollo (AGM) and Cox Media Group. These developments indicate an increased likelihood to meet the regulator's concerns and indicate that a deal is approaching approval. FCC's decision is expected shortly. Downside well-protected at current levels.

Casino resort owner/operator. Extremely attractive investment – very strong downside protection, line-of-sight to >100% upside, and much greater long-term upside. Trades at pre-covid levels, despite repurchasing 22% of shares, selling assets at premium valuations, and having the strongest balance sheet ever. Robustly cash-flowing domestic casino's portfolio covers the current market cap fully. 56% ownership of SEHK:2282 is worth a further $6 at current prices and potentially significantly more given the relaxation of the extreme COVID policies that have gutted Macau’s gambling industry over the last 3 years. BetMGM is set to become one of the 4 primary players in US online gaming and is best positioned amongst those over the long term.

DLO is a payment service provider (PSP) which specializes in cross-border payments in emerging markets. Stock has been negatively affected after Muddy Waters issued a short report. The concerns include (but are not limited to) DLO’s subsidiary account conflicts, take rates, client fund segregation, the exercise of options, and the PrimeiroPay acquisition. Management issued a statement saying the short report has numerous inaccuracies. VIC author agrees with management by going through the short report in great detail and debunking Muddy Waters' concerns.

STLD is a steel producer and recycler in the US. The company has 3 business segments - steel operations (majority of revenue) and two smaller metals recycling and steel fabrication segments, both historically contributing to around 10% of earnings. The latter steel fabrication segment has recently been overearning due to margin expansion caused by increased steel prices and the segment is now estimated to comprise nearly 40% of the company’s 2022 EBITDA. Despite management saying “this time is different”, the author argues that margin normalization for this segment is highly likely which is expected to negatively affect STLD’s share price in the near term.