Research Vault

  • All Initiation Reports have the price at initiation and upside potential listed
  • Bias towards small and mid capitalizations; sector agnostic; about 90% U.S. & 10% Foreign names
  • Each "Open" position will be sized between 5%-15% in the Pernas Portfolio
  • All closed positions will have the performance result listed
  • About 40% of Pernas Research's Initiation Reports receive a "neutral" rating. Read about why we publish neutrals here

(LSE:BRBY) Burberry: The Dark Knight

There are only a few luxury brands globally recognized for their enduring appeal: Burberry is one of these select few, having existed for over 168 years. Instances where such brands trade at a significant discount to their intrinsic value are rare. This occurs when the brand has some design mishaps or is undergoing some controversy. Fortunately, luxury heritage brands are very durable and can survive mismanagement. Burberry has been in the midst of a seven-year transformation aimed at elevating the brand and revamping its product offerings. These restructurings started with the previous CEO Marco Gobbetti in 2017..
    • Initiation Price: £13.43
    • Upside: 50%
    • Current Status: No Position

Zumiez ::UPDATE:: CLOSED

We believe Zumiez has made significant missteps in their buyback programs. While the current low stock price mitigates the issue, the absence of public or private acknowledgment of these mistakes by management leads us to anticipate a repeat in the future. We discussed this thoroughly in our activist letter on 7/7/2023 (link here). Before the submission of this open letter to Zumiez board we had previously maintained email and video exchanges with management. Regrettably, after the letter, management ceased all communications with us. In the realm of small-cap...

(NAS:LOCO) El Pollo Loco: The Almost Chipotle Contender

El Pollo Loco, a California-based fast-food chain, initially caught our attention through our special dividend and value screens. The initial setup seemed promising: the valuation looked attractive on an absolute basis, it was a brand we were familiar with, showed growth potential, had diligently reduced substantial debt post-IPO, aligned with certain trends, and the selling pressure from its large private equity owner seemed to be waning. However, deeper research raised doubts, leading us to question the business's sustainability. We underestimated the fierce competition in the fast-food industry, and it wasn't...
    • Initiation Price: $8.39
    • Upside: Neutral
    • Current Status: No Position

Remitly ::Update:: ADD

Despite a revenue beat, the market is hammering the stock (NAS:RELY). Oftentimes, management can present earnings and be in shock when they gaze back at the price action on their screens and this is one of those times. The stock is down ~35% on the day. Growth traders, momentum buyers, and Johnny-come-latelys are washing out. We believe this is a great opportunity to buy an incredibly attractive business after an unjustifiable sell-off. We added a significant amount at around $20 a share and the position is now close to 6% of our portfolio..

(NYSE:REX) Rex American: An Ethanol Producer Poised for Growth

Rex American (‘REX’) is an ethanol producer with about 3% market share in the USA. REX is run by sound operators, having never lost money in the last decade despite volatile commodity cycles. This is in contrast to other publicly traded ethanol producers who have money-losing years frequently. REX is also one of the few ethanol producers that can take advantage of subsidies from the Inflation Reduction Act (‘IRA’), potentially making their earnings power significantly greater in the future. We estimate REX has about 50% upside...
    • Initiation Price: $38.01
    • Upside: 50%
    • Current Status: Closed
    • Result: +50%

Endor ::UPDATE:: CLOSED

We have exited Endor (E2N:MU). It is down about 60% from the time when we initiated our position in February 2023. It detracted from portfolio returns by 350 basis points —making it our worst performer YTD. Endor is a premium DTC sim racing brand. They manufacture an ecosystem of sim racing equipment from pedals to wheels to brakes. It has been the dominant sim racing brand for over a decade. Although they produce hardware, there is significant lock-in with their ecosystem— Endor’s products only work with other Endor products...
    • Current Status: Closed
    • Result: -60%

(NAS:RELY) Remitly: X-Border Digital Remittance Winner

Remitly is poised to become the global leader in cross-border digital remittances. While consistently gaining market share from traditional players like Western Union and MoneyGram, the ongoing shift from cash-to-cash remittances to digital transactions provides a significant tailwind. Although the company is only recently projecting positive cash flows, scale economics for digital remittances are attractive. As their volumes grow, they will continue to renegotiate lower variable costs and spread their fixed costs over a much larger customer base.  Their digital solution, infrastructure, and fraud detection capabilities are...
    • Initiation Price: $25.22
    • Upside: 100%
    • Current Status: Open

(NAS:RELL) Richardson Electronics: A Niche Specialist

Richardson Electronics (‘RELL’) is a distributor that provides engineering solutions through systems integration, prototype design, and manufacturing. It is a distributor that acts as an extension of both a company’s salesforce and engineering force. In the last couple of years, RELL has seen rapid success with its new Green Energy solutions with offerings such as power management for ultracapacitors and electric train batteries. This segment has gone from $10mm to $50mm in the span of 3 years, representing 20% of revenues. The long-term trends of green energy should continue to benefit RELL as the number of...
    • Initiation Price: $12.59
    • Upside: 50%
    • Current Status: Closed
    • Result: +10%

(NYSE:WU) Western Union: Significant Potential or Irrelevant Relic?

Our research into Western Union initially sparked excitement due to its globally recognized brand and recent ~50% decline in stock value due to increased pessimism surrounding its longevity. Our gut feeling was that their sizeable digital offering was overlooked and disruption fears were overblown creating a potential opportunity for long-term oriented investors. Additionally, it seemed likely that actions Western Union had taken to reduce fees due to competition had passed its inflection point. However, upon conducting a thorough analysis, we realized that predicting Western Union's market share over the...
    • Initiation Price: $12.18
    • Upside: Neutral
    • Current Status: No Position

SES imagotag ::UPDATE:: HOLD

SES is up more than 40% since our update to add to the position. We believed there were numerous fallacies in the first report, and it was corroborated by management and auditors. Their responses to the short reports are available on SES imagotag’s IR page. The response of the company was empirical and emphatic. The short seller wrote a second report and we wrote a response to some of the points below. SES imagotag also responded yesterday to the short report in the same manner as the first and it can viewed here...
    • Current Status: Closed
    • Result: +185%