California Resources Corporation (NYSE:CRC) — mrkt cap $3.1B; Price $34.42; EV/EBITDA 3.8
PASS. California Resources Corporation is an independent oil and natural gas company with operations concentrated in California, primarily in the San Joaquin Basin. Its reserves are in long-term decline and are expected to last approximately 10 years at current production levels. Although CRC generates substantial cash flow, its capital allocation strategy, dominated by aggressive share repurchases, undermines long-term value. For businesses with depleting asset bases, dividends are typically a more appropriate use of capital than buybacks. A company with terminally declining assets that repurchases all its shares still ends up at zero. We wrote about the pitfalls of share repurchases in greater detail here.
Mayville Engineering (NAS:MEC) — mrkt cap $255mm; Price $12.46; EV/EBITDA 6.2
PASS. Mayville Engineering Company is a leading U.S.-based, value-added manufacturing partner specializing in metal fabrication and aftermarket services for the automotive and agricultural sectors. MEC produces a range of precision components such as chassis and exhaust parts, and is recognized as the largest metal fabricator in the US with approximately 12% market share. MEC primarily serves OEM customers and maintains strong operational discipline with a track record of consistent profitability. However, MEC is significantly exposed to cyclical end markets, namely automotive and agriculture, which are currently under even more pressure due to a challenging tariff environment. Following a recent leadership transition, MEC has begun pivoting toward an M&A driven strategy aimed at diversifying its customer base and reducing dependence on its core industries. While MEC is well managed, the near-term macro headwinds and strategic transition lead us to pass.
Silvaco (NAS:SVCO) — mrkt cap $132mm; Price $4.58; EV/EBITDA NA
PASS. Silvaco specializes in technology computer-aided design (TCAD) and electronic design automation (EDA) software for the global semiconductor and photonics industries. Its tools support chip designers in modeling and optimizing advanced semiconductor devices. While the EDA market is dominated by Synopsys and Cadence, TCAD may experience renewed relevance as sub-5nm processes demand more precise physics-based simulations. Following discussions with management, we believe industry demand for TCAD is real, though Silvaco’s ability to capture this opportunity remains uncertain given its relatively narrow product suite. The company is working to expand and bundle its offerings to better compete, but we are remaining on the sidelines until there is clearer evidence of execution.