Basic Research

Trying to learn about interesting businesses and industries around the world

[Basic Research @BasicResearch2]

@TheNarrenschiff Perhaps getting the Rollins / WD-40 treatment?

If biz stable/resilient enough with minimal competitive/disruption threats, sometimes these stocks just get priced as bond equivalents

Never really understood why but it can persist for surprisingly long time periods

[Basic Research @BasicResearch2]

@BazCap @MadThunderdome $112m in Contract Assets / Unbilled Receivables seems quite large for a hardware supplier. My understanding - this represents money they've spent on a particular project for which they have not yet been able to bill the customer (ie haven't hit certain milestones)

[Basic Research @BasicResearch2]

@BazCap @MadThunderdome Another interesting/surprising one is Array - even though seems like straightforward hardware supplier in solar, it appears to be utilizing percentage-of-completion accounting and the recent outflows are massive

Wonder if they diversified in EPC projects given hardware headwinds

[Basic Research @BasicResearch2]

@stoic_point @JulianKlymochko @SumZero @Biohazard3737 @valwithcatalyst Would love to see the list with cash net of debt. Some of these have material debt.

And would also love to see a 12m fwd view assuming no change in cash burn. Because many are working through that cash rapidly.

[Basic Research @BasicResearch2]

@yesandnotyes I don't know these companies well, but curious if you have any explanations for Kinsale's performance?

[Basic Research @BasicResearch2]

@pricing_power__ @72types I think generous to put ZBI in the same camp given the performance of the spins post shutdown of the ZBI investment operation

[Basic Research @BasicResearch2]

@bluff_capital Poll nailed it for once 👍

[Basic Research @BasicResearch2]

@benbakhshi Have seen this both buying and selling illiquid securities. Feels like there’s just a certain supply at a certain price point and once you exhaust that supply, the price adjusts.

[Basic Research @BasicResearch2]

@CrosscheckC @fundiescapital That's what I expected, but not what I'm seeing so far

[Basic Research @BasicResearch2]

@CrosscheckC @fundiescapital Sounds very smart. Some of the "obvious zeros" can also be managed via put options for smaller funds. Their runway is so short, you don't have to pay too much in time value.

[Basic Research @BasicResearch2]

@marketplunger1 Haha makes sense. I've enjoyed your writeups on the company, mgmt, and red flags. Good stuff 👍

[Basic Research @BasicResearch2]

@marketplunger1 Yes I understand. But that's not really much of a recommendation.

They have a bad biz. They can either sell, spin, or retain. You are against spin?

Wouldn't a spin allow some investors to buy the marketplace whereas today growth investors will steer clear of combined entity?

[Basic Research @BasicResearch2]

@marketplunger1 What would be your recommendation?

If I'm following your question, you are basically saying the AMMO biz is a terrible biz and corporate overhead is elevated.

You would want them to sell AMMO? Or retain?

[Basic Research @BasicResearch2]

@winsteadscap Haha, that would definitely buy them some time. FUV seems like a great wealth transfer mechanism between retail investors and whoever benefits from building uneconomic factories

[Basic Research @BasicResearch2]

@winsteadscap It's crazy to think about how reflexive this is to the downside. If the stock price goes, they are going to have to sell tons of shares. They need to raise $16m/qtr to maintain cash balances. 13% qtrly dilution at today's prices, but imagine if it falls 50% from here? Wild

[Basic Research @BasicResearch2]

@winsteadscap Yeah, it's picking up now. But even with pickup, raised $12.97m via equity issuance in 2Q and FCF was -$16.756. So not keeping pace with FCF burn.

Looks like they did another $9m QTD in 3Q

[Basic Research @BasicResearch2]

@special_cheeese Nice flag - the cashflows did look mighty suspect there...

https://t.co/vYbKFfHBus

[Basic Research @BasicResearch2]

@CAGR_Party You mentioned it but very suspicious cashflows on this one. Outflows relative to P&L in Trade A/R, vendor deposits, inventory, prepaids, customer deposits, and operating leases. Was like $28m outflow in 2021. Many of those stepped up in 1q22, esp AR and Inv