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:: ADD

We added to META as a myriad of fears from regulation to TikTok to Zuckerberg having gone AWOL has reached an all-time high. Here is what the market thinks of Zuckerberg’s capital allocation (keeping in mind Zuckerberg has a phenomenal track record with monetizing the core business to purchasing Instagram and WhatsApp). The core business earns about 32B (using about 15B for maintenance capex). Between RL and growth capex, META is spending roughly 27B.  Using a conservative 10x multiple on 2022 EBIT, one arrives at $320B. META currently trades at…

(NYSE:CXW) CoreCivic: A Deep Dive into the Private Prison Business

Core Civic (CXW) is the largest private prison company in the USA. CXW owns roughly 70k beds and primarily provides and/or manages facilities for ICE and USMS detainees, and state prisoners. This is not an article on the ethical merits of private prisons, but one on the fundamentals of the private prison business. Before delving into Core Civic, a primer on the USA jail system is helpful. There are three types of correction or incarceration facilities: federal, state, and local jails. Correctional facilities are concrete and steel structures that typically…

    • Initiation Price: $8.94
    • Upside: Neutral
    • Current Status: No Position

(NAS:PTON) Peloton: The Fitness Appliance

Peloton is one of the more polarizing companies we have come across. The two investing camps are of the opinion that PTON is either: a) a $2k coat rack or b) the best thing since sliced bread and will make all gyms obsolete. We find polarization to be a signal into the potential strength of a brand, it is not hate//love but indifference that kills a brand. Other polarizing brands are Tesla, Apple, etc. If nothing else it contributes to share of mind. The fitness industry has seen a myriad…

    • Initiation Price: $9.58
    • Upside: 130%
    • Current Status: Closed
    • Result: +60%

(NAS:META) Facebook: The Next Verse

FB has almost half the planet in aggregate on its platforms (Facebook, Instagram, and WhatsApp). Although FB has compounded negative goodwill with endless scandals relating to privacy and manipulation of elections, and Zuckerberg is probably one of the more disliked people on the planet, we think FB is trading at bargain levels given the quality of the business. Q1 2022 earnings has shaken investors’ confidence due to low growth, and fear over ATT and TikTok. Can FB overcome short-term problems and continue to leverage its platform? There are primarily three factors to address with FB...
    • Initiation Price: $190.29
    • Upside: 50%
    • Current Status: Open

Centrus Energy ::UPDATE:: CLOSED

We exited LEU for a gain of 350%. Given the Russia-Ukraine war and the resulting sanctions, there is a risk LEU is restricted from obtaining separative work units (SWUs ) from Russia. This would effectively demolish its business. Given this uncertainty, we have exited the position. INVESTMENT DISCLAIMERS & INVESTMENT RISKSPast performance is not necessarily indicative of future results. All investments carry significant risk, and it’s important to note that we are not in the business of providing investment advice. All investment decisions of an individual remain the specific responsibility…

    • Current Status: Closed
    • Result: +350%

Delta Apparel ::UPDATE:: CLOSED

We closed DLA for a gain of 5%. Relative to other positions, DLA is more illiquid and not as well positioned in an inflationary environment. DLA sells a commodity and with its heavy manufacturing footprint in a sustained inflationary environment, its margins would deteriorate significantly. Even if it can pass increased operating expenses onto the customer, its maintenance capital expenditures would go up considerably. Coupled with management’s recent caginess about its Direct to Garment (DTG) segment – which we believed was the primary value driver in DLA – and reluctance…

    • Current Status: Closed
    • Result: +5%

Whole Earth Brands ::UPDATE:: CLOSED

We closed out FREE at a loss of 30%. Although its licorice business is as dominant as ever, we have lost conviction in management’s ability to roll up brands. One-time expenses continue to exist (it has been almost 18 months since the acquisitions of Swerve and Wholesome brands) under the label “supply chain reinvention” accounting for $8mm in 2021 with other miscellaneous expenses accounting for another $8mm. For a company generating around $40mm in EBIT, these are not small expenses. These expenses are likely an artifact of the legacy brands…

    • Current Status: Closed
    • Result: -30%

Franklin Covey ::UPDATE:: CLOSED

We closed out FC for a gain of 120%. FC is trading slightly above fair value and given the need to raise cash, we have decided to exit. The fundamentals of the business are still intact and their B2B software offerings will continue to do well.   INVESTMENT DISCLAIMERS & INVESTMENT RISKSPast performance is not necessarily indicative of future results. All investments carry significant risk, and it’s important to note that we are not in the business of providing investment advice. All investment decisions of an individual remain the specific…

    • Current Status: Closed
    • Result: +120%

Paysign ::UPDATE:: CLOSED

Paysign (PAYS) was our most disappointing pick in 2021 with a 31% drawdown from our cost basis. We believed PAYS was undervalued as the share price had gotten hammered due to the deluge of stimulus along with COVID inhibiting donors from giving plasma. However the long-term fundamentals were still intact, plasma demand along with plasma centers was still growing even though supply had slowed. PAYS is a payment processor for the prepaid cards plasma donors get. It acts as a toll booth on the money donors receive/spend; the less money that…

    • Current Status: Closed
    • Result: -31%

(NAS:SMED) Sharps Compliance: An Operator In The Medical Waste Industry

Sharps Compliance (NYSE:SMED) collects and disposes of medical waste; this includes everything from unused medication to used syringes. SMED has received tailwinds from COVID as the vaccines have effectively doubled their medical waste from its two biggest clients, Rite Aid and CVS. We believe SMED is an interesting and simple candidate to research as part of our dive into the waste industry as there are only two medical waste players- Stericycle and SMED. This duopoly is dominated by Stericycle, the 1000 lb gorilla which has revenues 20x greater than that…

    • Initiation Price: $6.85
    • Upside: Neutral
    • Current Status: No Position