Activist Investor Takes Major Stake in The Joint Corporation - Is a Shakeup on the Horizon?
Happy Monday everyone.
There was a lot of insider buying over the past week. An activist investor continued to build a stake in a company that has collapsed from $100 per share to only $14 per share. An income oriented hedge fund bought some preferred stock with a 10% yield. A CEO purchased $3 million worth of a natural gas company that is printing cash flows. And a director bought almost $1 million worth of a furniture company that has fallen from $80 to $26.
For those of you who missed it, we recently published a new research report on a company whose share price has collapsed. Michael Burry has loaded up on the stock and the management team is rapidly cutting costs and selling assets. If the thesis plays out it is a multi-bagger. Check out our research report.
Now before we get into the insiders who were purchasing stock over the past week, first a word from today’s sponsor…
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Insider Buying Edition
There was a lot of insider buying last week. My favorite is Bandera Partners continuing to buy The Joint Corporation. My least favorite is all of the buys from the biotech world.
As a note, I removed a lot of the smaller insider trades as to not clump of the newsletter. If anyone wants access to the full list of insider trades from last week reply to this email and I will send you the entire list.
The most interesting name on this list is The Joint Corporation (JYNT). The stock has fallen from over $100 per share down to $14 per share. It was a high flying microcap growth investor stock for sometime and is looking more like a value stock now. Bandera Partners added to their position by purchasing 29,064 shares at $13.53. Bandera owns more than 10% of the company and is a well known activist investor. The portfolio manager of Bandera, Jeff Graham, wrote the popular book, Dear Chairman, and is a friend of Warren Buffett. It will be interesting to see what Jeff Graham plans to do with JYNT. This will be a good one to keep an eye on. In the past I have stayed away from JYNT because they never really generated free cash flow. It might be good to take a second look here with the stock at a multi-year low and an activist investor involved.
Another interesting buy was the $2.8 million purchase from the CEO of Highpeak Energy Inc. (HPK), Jack Hightower. Hightower is a serial oil and gas entrepreneur with an expertise of building up oil and gas assets and selling them to larger companies for a large premium. Highpeak is an enigma of itself in an industry that is focused on returning cash flow to investors via dividends and repurchases. The company is rapidly expanding BOE/D in a volatile oil and gas environment. The CEO seems quite confident in the prospects and has put his money where his mouth is by continuing to build his own position in the company. If you are interested in oil and gas companies in growth mode Highpeak Energy might be a good one to look at.
An interesting buy on the list is Eagle Point Credit Management purchasing $340,586 worth of Acres Commercial Realty Corp. (ACR) 8.625% Preferred issue and the 7.875% Preferred issue. The equity is trading at 0.17 price to book and is highly levered with a market cap of $76 million and an enterprise value of $2.0 billion. The stock collapsed during 2020 from $36 per share down to $9.00 and hasn’t really recovered. Both issues of the preferred stock have a dividend yield of 10%. Investors should note the corporation is barely covering the preferred payment on a quarterly basis. The equity looks distressed and if there is any sign of a turnaround you are locking in a double digit yield.
A director of Lovesac (LOVE) bought $846,640 worth of the beaten down furniture manufacturer. The stock is down 60% in the past year, along with the rest of the furniture market. There is high short interest and the market cap is only $400 million which could make for an interesting short squeeze candidate. Valuation multiples look a bit stretched and there is a decent amount of debt on the balance sheet. It might be beneficial to take a look at the entire industry and find the most undervalued name here.
The last interesting one on the list is Redfin Corporation (RDFN), the company that provides the online website and app for real estate data and listings. The stock has collapsed 85% over the past year and is priced as if the equity could go bankrupt. The short interest is 18% and there is a bunch of debt and the company is not profitable. That being said, a director buying $30,000 worth of shares (albeit small buy) is pretty interesting. I might spend sometime reading through recent Redfin transcripts to figure out what is going on. If costs are getting cut and the team is guiding to a profitable year, it might be worth a flyer.
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