And we're off…
Canadian value investor and old friend of Wyatt Investment
is the first speaker on Day One of the
Value Investing Congress
. Gottfried has run Rational Investment Group for five years, and
has been a Value Investing Congress regular. His picks at the
conference have averaged an incredible 60% return.
His latest picks are centered around one key theme: finding
small-cap bargains at a time when most large-cap stocks are up.
"Finding needles in a haystack," he calls it.
His first pick?
GLENTEL Inc. (TSX: GLN)
-- $331 million market cap
Glentel is a Canadian-based retailer of wireless products and
services that is the largest multi-carrier retailer in
Canada and Australia, and the second-largest Verizon retailer in
the U.S. Most of its profits come from wireless carrier
payments, not subscriptions.
Here are some other notes about GLENTEL:
- It trades on the Toronto stock exchange at $14.75 to start
- Its market cap is $331 million
- It's VERY cheap - GLENTEL trades at just 7.5 times free
- It pays a generous dividend - a 3.4% yield. Better yet,
that dividend is growing at 20% a year since 2007.
- A recent acquisition of rival
, in December 2012, is only now starting to contribute to the
company's bottom line.
- Other recent acquisitions include
AMT (Australian Operation)-
a solidly profitable wireless carrier.
- Operates wireless kiosks in
Canadian stores. Just established similar deals with Canadian
- AMT is entering countries in Southeast Asia, which should
contribute to future growth.
- Even without future growth, GLENTEL has enough cash on hand
and ongoing free cash flow for debt repayment to help boost the
stock price on their own.
Gottfried's second "needle in a haystack" is
Supremex is Canada's largest envelope manufacturer. With a 60%
market share, it's the only player with a national presence.
Admittedly, it's in a declining industry, but that's offset in
part by aggressive cost-cutting.
Other reasons Gottfried likes Supremex:
- It's DIRT cheap: trading at 3.1 times free cash flow - an
"anomalously low" valuation for a company that's not in
financial distress, Gottfried said.
- A 7.5% dividend yield, despite a payout ratio of just
- It's cheap because it's a small and illiquid stock with
sparse coverage by one sell-side analyst. Supremex also cut its
dividend by 90% a few years ago - a move that has depressed the
stock price ever since (75% below pre-financial crisis
- Supremex is "using prodigious cash flow to drastically
- Cash flow "prodigious" enough that the dividend could
double in the next few years.
- Potential catalyst: the company may sell its two
manufacturing facilities in Toronto and Montreal and lease them
- Insiders with heavy ownership and a desire to optimize
shareholder value quickly.
Gottfried concluded by tying his two investment ideas
together. Both are cheap, both are focused on building the
business in the long run.
While they are different in many ways, GLENTEL and Supremex
are examples of how good investments "come in many shapes and