Research Vault

  • All Initiation Reports have the price at initiation and upside potential listed
  • Bias towards small and mid capitalizations; sector agnostic; about 70% U.S. & 30% 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
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(NAS:XMTR) Xometry: The Future Digital Manufacturing Leviathan

Xometry (NAS:XMTR) is the leading disruptor in digital manufacturing, connecting businesses needing custom parts with a global network of manufacturers capable of producing those parts. Their platform reduces high search costs, long lead times, and quoting frictions typically associated with hiring smaller (non-contract) manufacturers. Like most class of ’21 IPOs, Xometry came to market too early and at too high a price, which has contributed to a near 85% sell-off since highs. Sentiment has soured, and the market is being overly punitive regarding Xometry’s business fluctuations and even mischaracterizing its...

    • Initiation Price: $11.33
    • Upside: 60%
    • Current Status: Open

Remitly ::UPDATE:: ADD

We had added to our Remitly position (NAS:RELY). Remitly reported its earnings yesterday after the market closed. Despite posting a solid earnings report, the market responded negatively, sending the stock down as much as 23% in after-hours trading. As I write, RELY is trading at $15.35, marking a new 52-week low. Some analysts have pointed out a slight/tiny revenue miss, but all metrics were within the range management had anticipated. The management team continues to execute on their growth strategy, and the business is scaling as expected. Critics may point to high stock-based

(LSE:CARD) Card Factory: Unwrapping the Potential

Card Factory, a leading UK-based, vertically integrated retailer of greeting cards and a significant seller of celebration essentials and gifts (balloons, party supplies, picture frames, stuffed toys, etc.), has cultivated a strong brand identity by excelling in value, quality, and selection. Despite competitors possibly matching them on two of these dimensions, it's highly unlikely any can surpass Card Factory across all three. Card Factory is in a position to earn high returns on capital for many years to come. Volumes of the greeting card market are set to remain flat or be in slight decline, and the market is viewing Card Factory as a ...

    • Initiation Price: £1.08
    • Upside: 50%
    • Current Status: Open

Doc Martens ::UPDATE:: ADD

One of our core positions, Doc Martens (LSE:DOCS), dropped 34% today before slightly recovering a few percentage points to close down 29% on the day. The market responded to two significant announcements:

1. DOCS issued a trading update forecasting a challenging year ahead for wholesale revenue in FY 2025, continuing the difficulties faced in FY 2024. The market had anticipated better news on the wholesale front. Additionally, the company has experienced single-digit inflation in its cost base, which will not be passed on to consumers in the form of higher prices.

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: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: Open

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..

(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

(NYSE:NRP) Natural Resource Partners: Royalties With Protected Downside

Natural Resource Partners is an MLP that owns the mineral rights to roughly 13mm acres in the Appalachia Basin and Wyoming. Currently, their primary natural resources are thermal and metallurgical coal. Given the low-cost business of collecting royalties with a protected downside, an ownership stake in a low-cost producer of soda ash, and potential upside in carbon capture, we believe NRP is undervalued by at least 30%. Although coal is a dying industry, there are pockets of resilience that should prove durable for the near term, namely metallurgical coal production...

    • Initiation Price: $57.01
    • Upside: 30%
    • Current Status: Open

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 t…

(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

(NAS:AGX) Argan Inc: Powering America

Argan, Inc. is a prominent engineering, procurement, and construction (EPC) company, primarily operating through its subsidiary, Gemma Power Systems, which specializes in designing and constructing natural gas power plants. Clients engage Argan, Inc. to deliver turnkey services, encompassing the entire process from design to procurement and construction of these plants. Currently, natural gas plants account for approximately 43% of the United States' energy production, a significant increase from 30% a decade ago. Despite the growth in natural gas usage, its future in the U.S. remains uncertain due to the rising adoption ...

    • Initiation Price: $70.63
    • Upside: Neutral
    • Current Status: No Position

Rex American ::UPDATE:: CLOSED

We have exited out of Rex American (NYSE:REX). REX is up 50% since our initiation report (here). We stated that there was ~50% upside in the report. R…

    • Current Status: Closed
    • Result: +50%

(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%

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...

(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: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%

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%

(NYSE:TITN) Titan Machinery: A Giant Amongst Dealerships

Titan Machinery ("TITN") is the leading dealer of CNH Industrial equipment ("CNHI"), boasting a network of approximately 120 dealerships spanning the globe. CNHI is the second largest agricultural original equipment manufacturer (OEM) worldwide, ranking behind industry giant John Deere. Titan Machinery operates its dealerships predominantly within the United States, offering a comprehensive range of CNHI equipment complemented by dedicated parts and service provisions. These dealerships function on a semi-exclusive basis with CNHI equipment. TITN has undergone significant operational changes over the...

    • Initiation Price: $29.50
    • Upside: 30% /
    • Current Status: Closed
    • Result: -15%

SES Imagotag ::UPDATE:: ADD

There was a short report issued on SES imagotag on June 22nd, causing the share price to plummet 60%. We think this presents a good buying opportunity and are long SES imagotag. For background, SES imagotag has both Deloitte and KPMG auditing their books over the last 6 years (France requires that public companies are jointly audited). This is not to say that makes SES infallible, but we think it’s relevant as companies with misleading financial statements/fraudulent generally are audited by no-name firms coupled with frequent auditor changes...

    • Current Status: Closed
    • Result: +185%

(NAS:ZUMZ) Zumiez: Old School Retail

Zumiez is a lifestyle retailer that has sold off 70% from 2021 highs due to recessionary fears surrounding discretionary companies and small caps. Despite facing several short-term macro and micro challenges, such as recessionary pressures and competition aggressively discounting bloated inventories, Zumiez has a proven track record of surviving and thriving through business cycles. They achieve this by selling exclusive apparel that customers want, managing inventory effectively, employing minimal to no leverage, and negotiating intelligent leases. The company has successfully executed these strategies for over 40...

    • Initiation Price: $16.07
    • Upside: 70%
    • Current Status: Closed
    • Result: +11%

Peloton ::UPDATE:: CLOSED

We have closed our PTON position, realizing a 60% gain. While the PTON brand remains strong, the momentum behind the much-needed cost-cutting measures appears to be slowing. Our original investment thesis was based on the belief that the new CEO, Barry McCarthy, would execute prudent cost discipline and right-sizing initiatives, which would enable PTON to survive and ultimately grow. This view was reinforced by several judicious divestments and headcount reductions that helped instill confidence in the financial viability of the company. Within approximately one year, the total costs declined from...

    • Current Status: Closed
    • Result: +60%

SES Imagotag ::UPDATE:: TRIM

SES Imagotag was up 62% in 2022. We have trimmed SES Imagotag as the margin of safety has decreased and the percentage it constitutes of our portfolio…

    • Current Status: Closed
    • Result: +185%

American Outdoor ::UPDATE:: CLOSED

American Outdoors was our largest detractor in 2022 being down 50% YTD. To recap some of the factors when we took a position in January 2021: CEO had…

    • Current Status: Closed
    • Result: -50%

(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 rac…

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

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 separativ…

    • 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…

    • 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…

    • 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 fundamenta…

    • 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 ha…

    • Current Status: Closed
    • Result: -31%

Iteris ::UPDATE:: CLOSED

We have closed out ITI for a loss of 14%. The thesis for ITI was that due to their business footprint with thousands of government transportation offices across the country, they would directly benefit from the upcoming infrastructure bill. Our estimates turned out to be too optimistic about the size of the infrastructure bill and the subsequent uplift in demand that would result. Forecasting regulation is always an opaque exercise. In the taxonomy of investing errors, ITI would fall under "overpaying".

    • Current Status: Closed
    • Result: -14%

Channel Advisor ::UPDATE:: CLOSED

We sold ECOM for a gain of 22%. Our thesis was that channel managers would continue to be prevalent for retailers and DTC brands as it was in their in…

    • Current Status: Closed
    • Result: +22%

(NAS:FREE) Whole Earth: A Sweet Company To Buy

Whole Earth (NASDAQ:FREE) is a consumer package company with multiple market-leading brands trading at around 10x 2021 earnings. Given its dominance i…

    • Initiation Price: $11.47
    • Upside: 50%
    • Current Status: Closed
    • Result: -30%
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