Finance of America (NYS:FOA) — mrkt cap $178mm; Price $18.00; P/B .57
STARTER POSITION INITIATED. The AAG acquisition in 2022 significantly boosted FOA’s retail and marketing capabilities, making it the dominant player in reverse mortgages (~37% share). The reverse mortgage industry is much better regulated today and stands to benefit from demographic tailwinds, as 10,000 baby boomers retire daily with $14T in home equity available. While the stock saw a negative AH reaction yesterday due to a slight earnings miss, the company still grew reverse mortgage originations by 19% YoY ($1.9B in 2024) despite a difficult and volatile rate environment. With falling rates expected, demand for reverse mortgages should increase. With a P/B of 0.57, FOA trades at a discount despite positive adjusted net income, cost reductions, and product innovation. Regulatory complexity keeps away smaller players and reputation risk keeps away larger players. While FOA is sensitive to higher rates and home values, we think the upside is significant and worth the risk. This was originally put on our watchlist from Twitter user @SFarringtonBKC.
Cellebrite (NAS:CLBT) — mrkt cap $3.7B; Price $17.15; EV/EBITDA 47
PASS. Cellebrite is an Israeli digital intelligence company specializing in data extraction, analysis, and forensic tools for law enforcement, intelligence agencies, and private organizations. It is best known for its Universal Forensic Extraction Device, which can unlock and retrieve data from mobile devices, playing a crucial role in criminal investigations. More importantly, Cellebrite synthesizes insights and analysis from the unstructured data it extracts. Cellebrite boasts a 120% revenue retention rate and has compounded revenue at over a 20% CAGR for the past several years. All of the top 20 police organizations in the U.S. are customers, and the company serves over 7,000 customers globally. While its industry position remains strong, the stock is currently trading at nearly 10x revenue—a valuation we consider too lofty. We will look to initiate a position on a pullback.
Lectra (PA:LSS) — mrkt cap €1.03B; Price €26.5; EV/EBITDA 12
MORE RESEARCH NEEDED. Lectra is a French technology company specializing in software and cutting machines for the fashion, automotive, and furniture industries. It provides CAD and manufacturing systems to optimize fabric and leather cutting, helping businesses improve efficiency and reduce waste. Its machines can create dresses or cut airbags out of thousands of different fabrics. Although Lectra has leading market shares, its share prices have stalled over the last several years due to a slowdown in luxury and automotive spending. It has recently begun a more acquisitive strategy after organically growing for the last two decades. Further analysis is needed to assess the returns on these investments and the progress of their integration.