ALJJ Update

I initiated a small position in ALJ Regional Holdings earlier this year. I was hoping to add more when the stock drifted below $3, but was not able to build out the position to its desired size.

I thought ALJJ was worth at least $3.60, and quite possibly $5-$7.

Then a few weeks ago, I read Dave Waters’ (Alluvial Capital) letter to partners. I have tremendous respect for him as an investor and writer.

He made ALJJ his largest position. Some key takeways from his assessment:

  • accounting obfuscates FCF (amortization of intangibles); true cash flow > reported earnings
  • using numbers, not terribly different from the ones I used, he came up with a valuation of $4.70, somewhere between my bear and base cases
  • the jockey, Jess Ravich, provides upside optionality

I have been waiting patiently for the price to dip back closer to $3 to increase my position.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s