Stock Sonar #29 - 10/18/2023

Rex American (NYSE:REX) — mrkt cap 667mm; Price $38.12; trailing P/E 25

STARTER POSITION INITIATED. REX is an ethanol producer with about 3% market share in the US. Unlike other publicly listed competitors, REX has no debt, has 300mm in cash, and has consistently been FCF positive regardless of the ethanol cycle. On top of this, REX is in a unique position to capitalize on IRA carbon credits at its One Earth facility given its geographic location and proximity to appropriate reservoirs. The potential windfall of this would be in the range of $200mm to $700mm, a significant amount compared to REX. Although more work needs to be done to narrow down this range, management has shown themselves to be good operators with prudent capital allocation.

Wise PLC (WISE:LON) — mrkt cap £7.1B; Price £6.96; trailing P/E 63.6

MORE RESEARCH NEEDED. Wise is a global cross-border money transfer company that uses a completely different business model of “matching” which enables it to significantly undercut fees on bank transfers which is the prevailing method for high value transfers. The average price of a transfer using Wise is .64% versus banks which will be 3-4%. Wise also has a large and growing deposit base –the Wise debit card is being used by the savvy traveler as a way to incur cheaper fees when using their debit card. Wise has large runway potential and we believe that it could be only in the second inning. We hope to learn more about the company’s operational nuances in the coming days/weeks.

Patria Investments (NAS:PAX) — mrkt cap 2.0B; Price $13.60; trailing P/E 17.6

MORE RESEARCH NEEDED. PAX is the largest private markets asset manager investing across LatAm. It IPO’d in 2021 with Blackstone as a backer. PAX’s LPs tend to be based in developed markets where it is increasingly being seen as the partner of choice for investments in the LatAm region. We believe that institutions and high net worth individuals will continue to increase alternative exposure and LatAm may be a sound place to invest in the coming years given geopolitical safety, improving governance, and easing monetary policy in the region. All great tailwinds for Patria. More work needs to be done to understand Patria’s institutional capabilities as operators and the investment landscape in LatAm.

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