Stagwell (NAS:STGW) — mrkt cap $3.06B; Price $7.51; trailing P/E 17
MORE RESEARCH NEEDED. STGW is a marketing group that helps clients with marketing, developing customer insights, and content creation. Out of the $120B spent in advertising and marketing services, roughly 50% of market share is controlled by the top four players, with STGW generating about $2B in revenues.. STGW’s aim is to be the in-house digital marketing and advertising software choice used by blue chip companies. It’s strategy to do so is to be an all-in-one provider of marketing and advertising services. Along with growing offerings organically, STGW has also been acquiring companies to bolster solutions, acquiring about 8 companies in 2022. More work needs to be done in examining the competitive landscape, but given the tailwinds of the industry and the competency of management, STGW has the potential to be a long term compounder.
Mitek (NAS:MITK) — mrkt cap $493mm; Price $11.04; trailing P/E 166
PASS. Mitek is a major player in check image processing, boasting an impressive 80% market share despite the decline in check usage due to the rise of cards and ACH payments. Their profitable performance in this segment fuels their investments in identification verification, paving the way for future growth. The prolonged USAA lawsuit remains a concern, but after dragging on for over a decade, we believe its impact on Mitek is limited. However, a more immediate issue is Mitek’s failure to file its 10-K report within the allowed 90-day timeframe set by the SEC. This puts them at risk of being delisted from the Nasdaq. Furthermore, management holds only a small amount of company stock, which has been diluted due to acquisitions. Mitek serves as a prime example of a great business that is currently uninvestable due to a lack of shareholder alignment. Let’s hope for an activist investor to step in and create that much-needed alignment for shareholders.
Broadwind (NAS:BWEN) — mrkt cap $80mm; Price $3.81; trailing P/E 26
STARTER POSITION INITIATED. Despite its minuscule size, BWEN has manufactured almost ten percent of wind turbines in the USA since 2008. It has performed poorly in recent years due to low-cost overseas competitors, however the winds are changing. Tariffs along with the Inflation Reduction Act (‘IRA’) have structurally benefited BWEN profitability. Section 45x of the IRA grants tax credits for the domestic manufacturing of certain components of solar and wind energy. Furthermore, these credits are eligible for direct payment from Treasury and the right to the credit can be sold for cash to third parties. It sunsets in 2030. Coupled with almost 300mm of NOLs, BWEN is an asymmetric bet on renewable energy in the USA. We have initiated a small weighing in the name and will be speaking with management later next week.