Aston Martin (LSE:AML) — mrkt cap £2.65B; Price £2.68; trailing P/E NA
MORE RESEARCH NEEDED. Aston Martin is one of the most renowned luxury car brands and it is down almost 98% since it IPO’d in 2018. The litany of reasons for this include pulling forward demand with dealer and customer financing and manufacturing mishaps. This would have been the death knoll for most luxury brands but Aston Martin has such a unique history that there is still a possible chance for reviving and growing the brand. Billionaire Lawrence Stroll (known for being an early investor in luxury apparel such as RL and Kors) has taken the reins and has been leading the turnaround over the last couple of years. His strategy to turnaround the firm is narrowing the focus of the company (pushing back EV plans by three years and launching Aston Martin SUV), increased customer engagement through his own F1 team, and replacing management (the CEO of Aston Martin is the previous Ferrari CEO). Aston Martin trades at about 1x sales and still loses money, however if it can reach a unit volume sales that allows them to be profitable without compromising the integrity of the brand, AML can have an extremely long runway. We will continue our research here.
Skywater (NAS:SKYT) — mrkt cap $265mm; Price $5.69; trailing P/E NA
MORE RESEARCH NEEDED. SKYT is a US-based specialized foundry in the semiconductor space. Skywater is aiming to be the foundry of choice for smaller companies looking to design and manufacture custom chips. These chips have smaller TAMs and will not draw competition from other large foundry players such as TSMC whose facilities are built for long volume runs. SKYT offers both their technological services (as a solution) to help design the chip and their manufacturing to clients. The customization of chips is a trend we believe will continue driven by niche applications in the IOT industry. SKYT is also poised to benefit from the CHIPS Act as it is a domestic manufacturer of chips along with having defense exposure for their ‘rad hard’ chips. SKYT is not trading at a lofty multiple and we will be speaking with management to further assess their positioning.
ContextLogic (NAS:WISH) — mrkt cap $107mm; Price $4.5; trailing P/E NA
PASS. Context Logic is an E-commerce platform that connects buyers to merchants that reside mainly in China. Few companies are as emblematic of the recent tech-bubble buying hysteria as WISH. The company IPO’d in December of 2020 and is down 99% since, losing roughly 18 Billion in market value. The company has no debt and is trading at an enterprise value of negative 430 million! They are burning 80-90mm of cash quarterly which gives them about 12 months of runway. The only way to extract value for shareholders is to cease business activity immediately, fire everybody then distribute cash to shareholders. This is exactly what activist investor Cannell Capital is trying to do with their recent activist letter–they have threatened the board and management with legal action if business dissolution is not imminent. If Cannell gets their wish, distributions could represent close to $20 a share versus the current market price of $4.5. We think this could be an interesting play if the cash burn was less than half of what it is currently. However, cash burn is far too great and we are happy to just be observers on this one.