2 ideas that I have written up elsewhere that you may enjoy.
DM or email me if you would like to learn how to gain access to one or more of these.
I have been experimenting with publishing my ideas on a few other sites, but would like to have one feed to keep everyone updated. That will be here on substack.
I recently published on HYNE, that article is now public if you create a free account on VIC. Though I no longer own HYNE as I have moved onto ideas with a better IRR: https://valueinvestorsclub.com/idea/HOYNE_BANCORP_INC/0448636827
I have also recently written up a longer write-up on GWOX, which I have previously described here as:
”Goodheart-Willcox is a publisher of career, technical, health and physical education textbooks. Over the past decade it has been growing its capital light e-book division very quickly, so that now the business requires minimal capex and consistently throws off cash. In fiscal 2025, it generated $23M in free cash flow. On a market cap of $193M, that is a 12% cash yield. Historically it has distributed 45% of free cash flow as dividends while the rest of the cash builds up on the balance sheet. Occasionally once cash is too high they announce a special dividend (last in 2021) or tender offer (last tender was April 2019 at a 50% premium to the stock price).
This situation reminds me a lot of Disney in the 1980’s when they found a new format to monetize their content library at essentially no extra cost (VHS), and benefited greatly. Here the new format is ebooks. Because all their pre-publishing and content writing costs have already been spent on creating the print textbook, they have very little cost to digitize these. Now they only have to spend a minimal amount to occasionally update their books when they release a new edition. This is a great business model, and the business transformation has been significant. Over the past 5 years revenue compounded at an annual growth rate (CAGR) of 16%, which with operating leverage has meant that free cash flow has grown at a 46% CAGR.
This is a pretty incredible deal. Why is it cheap? Well for one it is very illiquid, no major fund can buy this. Second, the stock price has not moved much in the past few years, and investors today have very short time horizons. Third, on its books is a 69M non-cash deferred revenue liability related to the future performance obligation they have to deliver textbooks to their customers. This isn’t a financial obligation in the traditional sense (not debt-like), so its net cash position is understated. Fourth, it is majority owned by an employee stock ownership plan (ESOP) - many investors do not touch controlled companies. Fifth, it is very hard to get financials for this company. It is the only company I have run into that does not show up in my stock screener (TIKR), nor in Capital IQ. It is totally obscure and illiquid.
What makes this company so interesting to me is that before the last buyback in 2019, there were around 60,000 shares in the ESOP plan, and today there are around 50,000. A tender offer (buyback) appears due. Even if there is no tender and the company maintains a 10% topline growth and its 46% payout ratio, then we are looking at $100M in dividends received over 4 years, and $200M in cash on the balance sheet at that time, plus the value of the ongoing operating business which you are buying today for ~$200M.”
DM or email me at any time if you would like to learn how to gain access to the later idea.