Catalyst in 15 Days
Catalyst in 15 Days
I have been buying stock in a company that has seen their valuation drop substantially.
The company owns real assets that can not be replicated.
Cash flows are generated every year and debt is getting paid down.
Revenues are growing and it appears that they will continue to grow.
Even better, there is a near-term catalyst that could result in a substantial increase in profits over the next fifteen days.
I have been loading up on the stock since they reported Q1 2023 results.
The stock dropped substantially on seemingly little news that wasn’t forecasted by the management team.
This is now one of my favorite ideas in the public markets to date and I am excited to share my research.
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Catalyst in 15 Days
Title 42 was created during the pandemic to essentially grant the government the ability to take emergency action to prevent the spread of COVID-19. The law has been in place for decades but it was first implemented by former President Trump in March 2020 to regulate border crossings.
Under the Trump Administration, Title 42 allowed the government to override immigration law that allowed individuals to seek asylum after they entered the United States illegally. Enacting Title 42 effectively allowed the U.S. government to send individuals right back across the border, no questions asked, all in an attempt to stop the spread of COVID-19.
Border crossings plummeted and businesses that generated cash flows form servicing the border grinded to a halt. That is until now.
In just fifteen days, Title 42 will be lifted for the first time in three years. Should the data complied by the federal government be accurate, the amount of border crossings will be at historic highs. Any company that services border crossings should benefit immensely.
There is one company that comes to mind that will benefit enormously from the removal of Title 42. And it appears the market has no idea the magnitude of their potential earning power as most cost are fixed by nature.
After three years in the works, Title 42 is set to expire on May 11th, 2023. It has been a long awaited policy change that has been voted down a few times over the past few years. The last time Title 42 ruling was expected to get removed was last May when a federal judge in Louisiana blocked the lifting. This resulted in many months of political turmoil and lawsuits across the board.
But it appears now that nothing is standing in the way of Title 42 getting lifted, barring any last-minute federal filing. In fact, politicians across the U.S./Mexico border are getting ready for a resurgence of illegal border crossings like a pandemic is about to hit.
https://twitter.com/RepAndyBiggsAZ/status/1650968714521501698
https://twitter.com/BensmanTodd/status/1651295630646444049
https://twitter.com/GregAbbott_TX/status/1650518789899911168
https://twitter.com/KamVTV/status/1651256485534474242
The direct impact of the increase in number of border crossings will be astonishing. The number of people crossing the border per month is at a historical high and all of the pent-up demand from individuals essentially barred from crossing the border will overwhelm the system.
Check out the historical data on the number of individuals crossing the border per month if you don’t believe me.
Now check out the most recent data for years 2020 through March 2023…
Border crossings increased 278% from 2020 to 2021. And in the first six months of 2023 (2023 month starts in October) they are up 15% over 2021. Even crazier, border crossings in the first six months of 2023 are up a staggering 189% from 2019. If you haven’t realized, there is a full blown crises at the border and if Title 42 is released. The flood gates will open with illegal immigrants storming in.
I have been buying a company that will directly benefit from the release of Title 42. They have spare capacity in their facilities to house illegal immigrants until their status is sorted out. They also have a tech segment with >50% margins that can track illegal immigrants in a humane way (think ankle bracelets) that will immensely benefit should Title 42 be released. Finally, they also have a substantial equity interest in a company that transports illegal immigrants who cross the border.
If Title 42 is lifted, I estimate that there is at least $50-75 million of incremental EBITDA for this company. This is a significant amount of EBITDA and worth somewhere in the range of $500-750 million in equity valuation. As a data point, the current market cap is under $1 billion.
I wrote up this company the other day and will continue to cover it for Grit Alpha Pro members. There are real near-term catalysts and I don’t think anyone wants to touch the equity with a ten-foot pole given ESG issues.
Subscribe today and get access to the research report I wrote up yesterday. Not only do you get access to this research report, but you get access to all of my previous research and membership into our Telegram group with over 450 members. Finally, if you reply to this email after you subscribe to Grit Alpha, I will send you an even longer diligence report on this company and all the assets they own.
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