market folly

We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Guy Gottfried of Rational Investment Group who presented 2 long ideas: Holloway Lodging Corp (HLC) and Perpetual Energy (PMT).


Guy Gottfried's Value Investing Congress Presentation

Long: Holloway Lodging Corp (HLC) – all references in CAD  

• $5/share, $100mm mkt cap, 3% yield. Gottfried suggested this at VIC in Omaha 
• Stock collapsed following a dividend suspension and dilutive debt recap. Gottfried thinks investors   are still feeling burned by the name. It’s also small, holds no conference calls and is only covered by   one sell-side firm 
• Substantial insider ownership and widespread buying (9.5% of shares since May) 
• Holloway is cheap on a standalone basis (8.4x P/FCF) but has since undergone a transformational   acquisition by acquiring Royal Host and doubling its size in the process. Thinks it’s priced at 5x FCF   without assuming any cost synergies 
• Hidden assets / low-hanging fruit: under-earning hotels, renovations, redevelopments, franchise   rights


Long: Perpetual Energy (PMT)

• Oil and gas company with $300mm mkt cap, $664mm EV 
• Extremely cheap, management has substantial ownership and record of good capital allocation, and   upcoming catalysts will highlight valuation discount and eliminate doubts about balance sheet 
• Opportunity exists because it is smaller than peers, is mistakenly perceived as being overleveraged   and has hidden assets in non-producing wells 
• Controlled by Riddell family. Gottfried has followed this family into several deals 
• For many E&Ps, equity offerings come as second nature. These tend to be done at non-accretive   prices. Gottfried likes that PMT didn’t issue equity when the stock tanked during natural gas   downturn. Instead they sold assets to pay down debt


Be sure to check out the rest of the Value Investing Congress presentations here.