From his talk:
Two long equity ideas that are misunderstood, because they have history or lack thereof. They also have strong tail winds.
WABCO $4.5b supply electrical parts worldwide. They invented anti-lock brakes. They make a lot of car products that are required by law for safety regulations.
Three major trends
1. Auto sector is picking up
2. Tightening safety regulations
3. Growth in China and India
WABCO should have 30-50% upside. WABCO has only been public for 4 years and during crisis because of covenants, the company was forced to cut dividend and suspend buy backs.
They also had legal legacy costs which were paid out already.
60% exposure to Western Germany but half of that is Germany. Overall, the last ten years China has become one of the big players. EM make up 2/3rds of market.
China’s content per vehicle is only 1/10 that of West Europe. China is now mandating anti-lock brakes; this could be huge growth for company. And anti-lock brakes are only a segment of WABCO’s business.
WABCO should be worth $100. 60% cyclical and 40% secular. ROC is more than double industry. WABCO is much more capital efficient than peers, however, it trades at same levels as other competitors. EBITDA growth margins have been much higher over past 5 years than competitors.
WABCO is less cyclical and should trade much higher than cylical
CEO owns $200m of company.
HSN (HSNI) 1.8b market cap. 32% owned by Liberty (John Malone’s company). It gets under-covered by most media analysts for larger players/ There is an opportunity from valuation, re-leveraging, acquisition.
Home Shopping Network has 70%+ of home shopping network. HSN is 30-55 year old women who make over 65K are the biggest buyers. The new online site is growing share with more than a third of sale.
Home Shopping is strong. The company has had 6% CAGR growth since 1994, much higher than other discretionary.
EV/EBITDA is only 5.7x, which is much lower than retail stores, which are much more capital intensive
Removing some sub debt, HSNI is trading at 12x earnings, lower than the average. We also think the company could take on more debt without putting company in danger.
Liberty which owns HSNI also owns QVC. Liberty could merge them.
We see 40% upside and 65-90% upside depending on synergy if there is a merger.
Disclosure: I am long Liberty Media