Micro Cap Deep Value Play With Lots Of NOLs

Excerpt from the Stanphyl Capital letter to investors for the month of May 2018  discussing their long position in one micro-cap play. Stanphyl was profiled in the second edition of HVS and has had some of the best picks among all the funds we have profiled with 200%+ returns on some pitches. Teaser fror non subs followed by content for full members [caption id="attachment_2058408" align="aligncenter" width="300"] PublicDomainPictures / Pixabay[/caption] We continue to own XXXXXXCXX (ticker: XXXX), a designer and manufacturer of point-to-point microwave systems for telecom companies, which in June announced a restructuring program that the company says will enhance both growth and profitability. However, it will take some time to find out, as after paying an immediate one-time restructuring charge of $X million, the company expects to save the same amount annually but not until FY 2020 which begins in July 2019. In May he company reported a mixed Q3 for FY 2018, with revenue up both sequentially and year-over-year but with several one-time expenses causing a larger GAAP loss than the previous year. However, for FY 2019 (beginning July 2018) the company guided to at least $2XXM of revenue (approximately X% better than 2018) and non-GAAP EBITDA of at least $1X million. Because of its approximately $3XX million of U.S. NOLs, $1X million of U.S. tax credit carryforwards, $2XX million in foreign NOLs and $X million of foreign tax credit carryforwards, he company’s income will be essentially tax-free for many years; thus, GAAP EBITDA less capex is essentially equal to earnings. So if the non-GAAP number will be $1X3 million and we take out $X million in share comp and $X million in capex we get $X million in earnings multiplied by, say, 1X = $XXX million + $X0 million in net cash = $1XX million/X.X5 million shares...

Jacob Wolinsky

Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. - Email: jacob(at)valuewalk.comFD: I do not purchase any equities to avoid conflict of interest and any insider information. I have a few existing holdings from years ago, but mostly mutual funds and some ETFs. I also own 2.5 grams of Gold

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