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

META ::UPDATE:: TRIM

We have trimmed META (NAS:META). It is up 175% since our initiation report in March 2022 (report here). We added to our position in November 2022 as a myriad of fears drove META down 50% from initiation (here).

META is a compelling reminder of how inefficient markets can be. In the span of a little over a year, narratives have reversed for META in almost all domains: Contrary to earlier apprehensions, META has weathered the Apple Ad Tracking Transparency storm and now has record engagement and ad revenues; TikTok fears have diminished as the platform has increasingly become a focal point of geopolitical tension;

(LSE:AWE) Alphawave Semi: Surfing the AI Wave?

We believe two factors are driving the AI megatrend: Higher computation and higher networking needs. AI applications demand high bandwidth and low latency, crucial factors for both training and inference workloads.  We believe that AI technology is still in its nascent stages, and are actively seeking companies poised to benefit from this trend. AWE emerged as a compelling prospect, positioned to leverage these evolving networking trends. However, we found evaluating their competitive positioning challenging, especially considering the integration risks associated with their recent acquisitions...

    • Initiation Price: £1.75
    • Upside: Neutral
    • Current Status: No Position

Titan Machinery ::UPDATE:: CLOSED

We have exited out of Titan Machinery (NAS:TITN). It is down about 15% from the time we initiated our position in July 2023 (report here). We stated that TITN had upside potential of 30% and since then, the below factor has influenced our decision to sell. The complexity within their business operations has proven to be more significant than we initially anticipated. We believed that TITN’s operational changes over the last several years, which aimed to increase efficiencies and cashflows, were more sustainable. However, the environment from rapidly...

    • Current Status: Closed
    • Result: -15%

(LSE:DOCS) Dr. Martens: Timeless Appeal

Doc Martens (DOCS) is a UK-based boot brand that has sold off 80% from its overpriced IPO in January, 2021. The brand has experienced a recent revenue decline driven by several short-term operational and inventory mishaps along with general cyclical challenges in the footwear category. The operational and inventory challenges are now fixed, and it is more likely than not that the footwear category will improve within the next 12 to 24 months. The market is attributing this revenue decline as a possible impairment to the Doc Martens brand but we think this couldn’t be further from the truth. DOCS is a strong...

    • Initiation Price: £.93
    • Upside: 60%
    • Current Status: Open

(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%