Tuesday, March 2, 2021

An AIM Small Cap Equity Holding: Blucora, Inc. (BCOR, $17.22): “Tax Away with Blucora” by: Andriy Tykhonov, AIM Student at Marquette University

 Blucora, Inc. (BCOR, $17.22): “Tax Away with Blucora”

By: Andriy Tykhonov, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Blucora, Inc. (NASDAQ:BCOR) provides technology-enabled financial solutions to customers with small businesses, consumers, and tax professionals. The firm operates through two segments, Wealth Management which operates through Avantax that provides tax solutions to professionals in the wealth management industry. Tax Preparations focuses on delivering digital tax solutions to small business owners. Blucora was founded in 1996 and is headquartered in Irving, TX.

• In the 3rd Quarter, Blucora reported that advisory assets increased 23% year-over-year, resulting from the acquisition of HKFS.

• Blucora TaxAct business partnered with TaxDome to improve their client’s experience, which will allow them to access all-in-one solution for tax practices.

• TaxAct launch of TaxAct Xpert Help for the 2021 tax season to provide unlimited, on-demand support from tax professionals.

Key points: Throughout 2020 Blucora, like the rest of the market, has been influenced by the COVID-19 pandemic. The firm has had negative net income throughout 2020 due to extra costs on tax services caused by the tax extension. A similar trend will follow in 2021 since the pandemic is still not under control, which will result in extra costs from BCOR. Throughout the losses, the company has been improving services that they offer and introducing new ones. On January 20th, Blucora introduced a partnership between TaxAct, their Tax Preparations business, and TaxDome. The reason for the partnership was to provide online services to their clients quickly and effectively during these uncertain times. The service allows customers to access their account for all-in-one solutions to manage their tax practices, including practice management, E-signature, customizable website, secure file storage, CRM, client portal, and a mobile app.

With the acquisition of HKFS, Blucora has been growing its advisory assets, which have increased 23% over the last year. Through the acquisition, they have been able to get into a new market and renamed it the Avantax Planning Partners, which offers investment advice. TaxAct on January 25th has also launched an advising service called TaxAct Xpert Help for regular consumers and small businesses. This service provides one-on-one support from professional CPAs and tax experts every single day. With this new introduction, Blucora has an opportunity to grow its regular consumer customer base. With these new introductions to their businesses, BCOR helps consumers, small businesses, and tax professionals achieve their financial goals online through the pandemic.

What has the stock done lately?

Throughout the past month, Blucora's stock price has increased by around 6.96%, from $16.09 to $17.21. The stock has been pretty constant, with a high of $17.70 on February 2nd and a low of $16.08 on January 13th, which shows a difference of 10.07%. The company has been following a similar trend as their comparable index. Due to consumers receiving stimulus checks from the government, there has been an increase in the amount of money invested in the market. Blucora competitors such as H&R Block, Inc. and LPL Financial Holdings Inc. have been outperforming them by 20.54% and 11.10%, respectively. 

Past Year Performance: In the last year, Blucora has decreased in value by 22.34%. The 52-week high was at $22.88 and as low at $8.82, which shows this securities volatility. The reason for a considerable fall in March and April was due to COVID-19, which followed a similar trend to the market. Blucora has underperformed to the Russel 2000, which has grown by around 37.04% in the past year.


Source: FactSet

My Takeaway

In the past three months, Blucora has grown by 42.47% due to them beating their Q3 expectations and introducing new services such as TaxAct Xpert Help. However, in the past month, the stock grew up by 6.96%, showing slower growth than their top competitors mentioned above. BCRO has not broken its 52-week high of $22.88, meaning they still have excellent growth potential. The firm scheduled a Q4 earnings release for February 17th, 2021, showing if TaxAct Xpert Help and the partnership with TaxDome prove to generate revenue. With the 2021 tax season about to begin, Blucora should capitalize on their service and generate extra revenue; therefore, the recommendation is hold.


Source: FactSet

A Small Cap Equity holding: STAAR Surgical Co. (STAA, $124.06): “A Fading Shooting STAAR” by: Adam Webb, AIM Student at Marquette University

 STAAR Surgical Co. (STAA, $124.06): “A Fading Shooting STAAR”

By: Adam Webb, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• STAAR Surgical Co. (STAA, $124.06) engages in the development, manufacture, production, marketing, and sale of implantable lenses for the eye and delivery systems used to deliver the lenses into the eye. It specializes in refractive and cataract solutions. Its products include intraocular lens and implantable collamer lens.

• Broadwood Capital currently owns a 23.6% stake in STAAR and has already shown activism in its recommendation to increase the number of directors on the board.

• Consensus analyst price target of $87.10, investment thesis price target $47.99 the equity currently trades at 42% higher than its price target and 153% higher than the original price target.

• 42% of current revenues come from China, A market the company estimates could potentially carve out a 25% market share by the end of next year. The company already controls over 20% but future growth past estimate is not probable. 

Key points: 

STAAR has reacted very positively to its new leading stakeholder Broadwood Capital and there 23.6% stake. Broadwood has been keen on creating a relationship with STAAR and has been able to successfully position two new board members. Price reactions to such announcements were very positive with a 14% jump after the announcement of the new board members. 

These outside factors have driven the equity to a price well above its current consensus price target of $87.10 and the investment thesis price target of $47.99. From a discounted cash flow perspective, the current valuation of the company is ultimately ignoring the recent management guidance predicting sales of $161.7MM for FY20 unless surreal growth is expected to influence the company in the years to come.

Revenue growth, however, isn’t likely to occur at these supersonic rates. Currently, 42% of current revenues come from its Chinese domicile. A market where the company has also been able to grow its product lines to 20% of the engrossed market. The management team has communicated in past earnings reports that it is improbable that the company would be able to encapsulate more than 25% of the Chinese market. To find such revenue growth, the company would have to turn to its Japan segment which makes up 17.9% of current revenues. Japan is also an attractive target for growth due to its status as the worlds most elderly country with an average population age of 48.3 years which drives increase demand for refractive and cataract solutions. However, STAAR has been in the market for 22 years and is yet to have effectively penetrate the market deriving only $24,974MM in revenue over past nine months ended.

What has the stock done lately?

STAA is $3 below its all-time high after its recent price explosions. Since it was added to the Small Cap Portfolio at $36.40 in February of 2020 it has amassed an ROI of 241%. Multiples for the company reiterate the extreme price growth with a P/E multiple of 660.9x, EV/EBITDA of 656x, and a PEG of 7.1.

Past Year Performance: 

STAA has seen its price increase 236.11% LTM in comparison to its Russell 2000 benchmark which increased 35.66%. STAAR is looking like it is on the brink of facing headwind as institutional investors have began to decrease positions. The 52 week H-L for STAA is $23.30-$127.70. The top fifteen institutional stakeholders – whom own 62% of shares – have decreased their positions by -296K shares.

Source: FactSet

My Takeaway

Due to a lack of growth opportunities and a market valuation that has been manipulated due to investor activism, it is recommended that the portfolio should follow the institutional stakeholders and realize profits. Selling of this equity would result in an ROI of 241% well above the investment thesis and well above consensus price targets.  


Source: FactSet

 

 

 

 

 

 

 

 

 

A Small Cap Equity holding: Coherus BioSciences, Inc (CHRS, $18.16): “Evolving Products, Changing Model” by: Mitch Kamm, AIM Student at Marquette University

 Coherus BioSciences, Inc (CHRS, $18.16): “Evolving Products, Changing Model”

By: Mitch Kamm, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Coherus BioSciences, Inc. (NASDAQ: CHRS) is a commercial-stage clinical biologics platform company, engaging in the development and commercialization of biosimilar therapeutics and immune-oncology medicines. The company has a market cap of 1.31 billion and is headquartered in RedWood City, CA. 

• In 2019, CHRS launched its first biosimilar product, Udenyca and has already achieved roughly 20% of the pegfilgrastim market, used to fight off infection caused from chemotherapy. Since inception, Udenyca has generated $720 million in revenues for the firm.

• CHRS is currently working on biosimilar versions of ranibizumab and aflibercept, treatments for macular degeneration. CHRS management expects each product to have an addressable market of ~3 billion.  

• The firm’s pipeline also includes a biosimilar to adalimumab (December 2023 rollout) which will treat rheumatologic and gastrointestinal disorders. CHRS is also working on a bevacizumab biosimilar candidate (late 2021 rollout) which will treat lung and kidney cancer.  

• Coherus’ recent $150 million immune-oncology collaboration with Junshi Biosciences’ experimental cancer treatment will drive immense value for the firm. 

Key points: 

Coherus BioSciences, Inc. remains in play due to their robust product pipeline and their recent move into the immune-oncology space. The firm’s focus on cutting-edge analytics, clinical and regulatory expertise and the upmost process and manufacturing quality, sets them apart from their peers. 

Udenyca’s success has given management the confidence and plan to execute into different segments, continuing their market disruption. Many of the drugs in their pipeline will compete directly with products already grossing billions of dollars per year. The firm’s commitment to coupling new biosimilar offerings with their new Coherus COMPLETE platform allows them to stick out. The COMPLETE platform is unique in that it provides reimbursement and patient support servicing to support users of Coherus products.

Last month, Coherus inked a deal with Chinese drug maker Junshi Biosciences Co. Ltd. This deal gives Coherus the exclusive rights to Junshi’s anti-PD-1 antibody toripalimab, in the United States and Canada. Monoclonal antibodies that target PD-1 can boost the immune response against cancer cells and better patient outcomes. Coherus also maintains option rights to several earlier-stage cancer drugs as part of the Junshi deal. 

This partnership with Junshi is a clear signal to investors that Coherus is looking to diversify away from biosimilars and into the development of cancer treatments. By entering the lucrative cancer treatment market, management expects to be a disruptor as little competition has led to high treatment costs for patients. Management is confident in their ability to drive value for payers who can ultimately influence which drugs saturate the market. 

What has the stock done lately?

Coherus’ stock performance in the last-month has been rather flat, at 0.94% growth, with price fluctuating between $17.27 and $21.39. Over the last 6 months, CHRS has primarily traded between $16.50 and $21 with decent amounts of volatility. 

Past Year Performance: CHRS stock has returned -16.47% in the last year, with a 52-week range of $10.86 – 23.03, compared to the Russell 2000 posting a 35.66% return. 

My Takeaway

Coherus BioSciences, Inc. is definitely in a unique position as they continue to perform late-stage trials for drugs in their pipeline, while expanding into the immune-oncology space. It will take time to prove if this shift and agreement with Junshi Biosciences allows the firm to become a major disruptor in the cancer treatment space. While growth is definitely possible for Coherus it will be interesting to see how they position themselves against their competition. Due to the relatively flat share price and shifting nature of the business, I recommend a hold of Coherus BioSciences, Inc. (CHRS).


A Small Cap Equity holding: Paycom Software Inc., PAYC, $412.98: “Pandemic Positives” by: Grace Flynn, AIM Student at Marquette University

 Paycom Software Inc., PAYC, $412.98: “Pandemic Positives”

By: Grace Flynn, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Paycom Software Inc. provides cloud-based human capital management software solutions to track employment life cycle, talent acquisition, and time and labor management. It only operates in the United States.

• Paycom grew by 14% from revenue and 17% from new customers from 2019 to 2020 and is now only selling software virtually.

• Margins are expected to incrementally increase due to the new “Better Employee Transaction Interface” (BETI) product payroll delivery feature that is expected to roll into the market in 2021.

• Certain features, like their DDX (Direct Data Exchange) tool and Manager-on-the-Go, had resulted in strong attach rates for new modules with new clients based on Q4 2020 results.

Key points: Paycom Software Inc. provides clients with HR technology to easily be able to track talent acquisition, payroll, time management, and talent management. They only operate in the United States and is headquartered in Oklahoma City, OK. Based on 2020 quarter 4 results, Paycom software grew tremendously and outperformed the market. 

At the end of 2020, Paycom Software Inc. reported $220.9 million in revenue, which indicates a growth of 14% based on 2019 results. This was unexpected as many people did not expect Paycom to outperform the market during Q4 2020. In addition to revenue, Paycom ended 2020 with 31,000 clints, representing a 17% growth rate compared to 2019. Companies management states that this growth can be due to inside sales. They were able to a take a strategic position with inside sales by becoming 100% virtual when it comes to sales. This cut down costs tremendously and increased performance. 

Analysts predict margins to grow after the announcement of their new feature “Better Employee Transaction Interface” (BETI) expected to enter the market in 2021. BETI delivers fully automated payroll functionally. With BETI, employees can now approve their own paycheck and be able to participate in payroll virtually. As banking is moving online, this is a very big step for Paycom and it will be hard for competitors to match that value proposition, according to management in their Q4 2020 Earnings Call.

Their disruptive innovations, like their DDX tool and Manager-on-the-Go, have proven to be successful based on 2020 sales growth and has indicated strong attach rates for new clients. DDX is a comprehensive management analytics tool that gives employers insight to efficiencies through HR technology. Manager-on-the-Go is an app that gives managers easy access to employee features. Management believes that new self-service initiatives drive a greater overall usage of the entire product. 

What has the stock done lately?

Due to new innovative features being available in the market, Paycom Software Inc. stock is up 1.39%. Their 52-week range is from $163.42-$471.08. Paycom has had a 38% surge in its stock price in the last 12 months and is expected to increase their margins further in 2021. Their lowest price was reported on April 3rd, 2020 at $163.42 while their highest for the year was on December 23rd, 2020 at $471.08. 

Past Year Performance: Paycom Software Inc. had a growth rate of 14.2% when compared to 2019 revenues and sales. The year -over-year increase was driven by new client additions. Gross Profit increased 14.5% from the past years at $188.9 million. In addition, EBITDA increased 7.2% from 2019 at $84.2 million. Paycom Software Inc. outperformed the market at the end of Q4 2020 indicating an opportunity for growth and innovation. It is expected to keep increasing in 2021. 

Source: FactSet

My Takeaway

In the past year, Paycom has innovated in order to grow at 14.2%, which is only expected to increase. Their recent innovations BETI, DDX, and Manager-on-the-Go give Paycom a feature and opportunity for growth beyond the benchmark as well as maintaining strong attach rates. Based on their past 2020 performance, they were able to overcome the pandemic. Management states that they had a slow sale growth from the pandemic around April but were able to combat lost sales by turning 100% virtual. This increased customer engagement and sales numbers for the end of 2020. Based on this growth rate and opportunity for 2021 growth, I would recommend we hold this stock to gain positive returns on it.  


Source: FactSet


A Small Cap Equity holding: Conagra Brands, Inc. (CAG, $34.78): “No Cons to Conagra, Only Pros” by: Michael Ribaudo, AIM Student at Marquette University

  Conagra Brands, Inc. (CAG, $34.78): “No Cons to Conagra, Only Pros”

By: Michael Ribaudo, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary:

• Conagra Brands, Inc. (NYSE: CAG) participates in the manufacture and sale of processed and packaged foods for supermarkets and restaurants. They operate primarily in the United States, while a portion of their revenue is generated from Europe and Asia.

• CAG offers products under the brand names: Birds Eye, Marie Callender’s, Banquet, Slim Jim, Healthy Choice, Reddi-wip, and many more.

• CAG has made strategic acquisitions. Most notably acquiring Pinnacle Foods which boosted CAG in the shelf-stable frozen foods sector.

• The acquisition of Pinnacle Foods is on-track of achieving cost synergies of $305 million per year.

• The frozen food industry is expected to grow to $312.3 billion representing a 5.0% CAGR from 2020-2025.

Key points:

Conagra acquired Pinnacle Foods in October of 2018. The company is still well on track of achieving $305 million per year in cost synergies related to this acquisition. This acquisition placed Conagra in a great strategic position to meet the highly competitive industry. The acquisition grew FY2020 net sales in the following segments by: Grocery & Snacks ($406.3 million), Refrigerated & Frozen ($567.6 million), International (46.0 million), and Foodservice (57.7 million).

The COVID-19 pandemic has not affected Conagra’s ability to create profits. The Foodservice segment has seen reduced demand as away-from-home food outlets being shut down. The company expects this to remain the same until away-from-home food outlets begin to open and stabilize. Over the 26 week period of FY2021 net sales have increased 14% in the Grocery & Snack segment, 12% in the Refrigerated & Frozen segment, 7% in the International segment, and decreased (23)% in the Foodservice segment. 

Conagra consistently reevaluates their brands and if they are not producing the sales increases expected, they tend to divest their underperforming brands. Recently, CAG has been shifting away from selling peanut butter under private label names. Their recent divestiture has been under the brand name Peter Pan peanut butter. Conagra is selling Peter Pan peanut butter to Post Holdings for $102 million and it is expected to be completed in Q3 FY2021. This makes Conagra 

Conagra is also becoming highly innovative with their products. By creating new products to fit niche markets. With the introduction of plant based Gardein soups, avocado oil popcorn, and Healthy Choice Grain-Free Power Bowls, Conagra is expanding at a rapid rate to meet health conscious consumer demand.

What has the stock done lately?

The stock over the past year has seen a slight increase. Since last year at this time it has increased roughly 7.9%. This is a relatively good sign because it has rebounded from its 52 week low which occurred in mid-March of $22.83 which is ~52% lower from its current share price. CAG pays a 3.16% dividend.

Past Year Performance: CAG has increased ~7.9% in the past year. Net income for FY2020 was at an all time high of $840 million. That is a 23.5% increase from FY2019. Revenue also increased 15.4% in FY2020 from FY2019. In Q2 FY2021 CAG net income grew by 45.5% while their sales grew by 6.2% from Q1 FY2021. The company is increasing profit margins and continuously growing. The 52 week range of CAG is $22.83- $39.34. Their earnings have been growing for the past two fiscal quarters and in Q2 FY2021 their diluted EPS was $0.77.

Source: FactSet

My Takeaway

Since being added to the AIM program at $36.03 per share with a price target of $49.64 we are currently down ~3.6%. Although we are down on this position I see upside to this stock. The strategic acquisitions taking place, along with further development of innovative foods keep Conagra interesting. Their large market share of diversified products, and divestiture of lower margin product lines or brands lead me to believe that holding this equity as part of the AIM Small Cap portfolio is the best option. 


Source: FactSet




A Small Cap holding: Ameresco, Inc. Class A (AMRC, 69.01): “Clean, Green, Earnings Machine” by: By: Jacob Kello, AIM Student at Marquette University

 Ameresco, Inc. Class A (AMRC, 69.01): “Clean, Green, Earnings Machine”

By: Jacob Kello, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary

-       Ameresco, Inc. Class A (AMRC, 69.01) is an innovative company that engages in the provision of energy services and solutions for businesses and organizations throughout North America and Europe.

-       AMRC’s energy service lines of business include energy efficiency solutions, infrastructure upgrades, asset sustainability, and most other renewable energy solutions. The U.S. and Canada segments of the company offer energy efficiency products and services such as design, engineering, and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure.

-       Costs to produce photovoltaic solar energy have rapidly been declining year over year, and since 2017, the cost to produce photovoltaic solar energy has decreased 37% causing industry margins to gradually decrease. These costs are continuously declining.

-       The company holds a 16.7% growth rate and has a 228.83% increase in its per share value over 52 weeks.

 

KEY POINTS

The cost to produce solar power, and more specifically, utility-scale solar power, has decreased rapidly and dramatically over the past few years. In fact, over the past eight years, the price of solar power has dropped 84%, and costs are continuing to decrease. The International Energy Agency has recently stated that solar power is now the “cheapest electricity in history,” meaning that photovoltaic solar energy is cheaper than both natural gas and fossil fuel energy. As of August 2019, the United States consumed more renewable energy than coal, showing that the demand exists for a newer, greener power source as consumers are growing more concerned about their respective carbon footprints and about climate change overall. While natural gas is still viewed by most as a clean energy source, it still does not address the problem of being more expensive than photovoltaic solar, making photovoltaic solar an in-demand product for both businesses and consumers, as evidenced by 2019 data stating that both residential and commercial consumption of renewables increased nearly 6%, a rate which is expected to increase even more by the end of 2021 due to the Biden administration’s highly anticipated Green Bills.

Enter Ameresco, Inc., which receives over 94% of its revenues from the United States, one of the fastest growing solar markets in the world alongside China and India. The United States recently rejoined the Paris Climate Accord due to the Biden administration making the fight against climate change one of its top priorities. AMRC is currently expanding its operations and revenue streams in the United States, which is, again, a country increasing their demand for renewables.

The company has a highly sustainable and profitable business model, which expands earnings at a faster rate than revenue by growing their higher margin recurring lines of business. The very nature of AMRC’s business model is profitable at this point in the company’s history due to the residual nature of their revenue streams. The company’s revenue has steadily increased YoY, and its EBITDA will continue to grow at a faster rate than its topline due to the company’s ability to hold residual customers in turn dropping expenses. 


What has the stock done lately?

Despite the COVID-19 pandemic, AMRC saw steady growth in 2020 that has continued on into 2021. The company took  on new high volume projects throughout 2020 and continues to do so in 2021 as evidenced by its recent deals with Wells Fargo to install PV solar generation assets at nearly 100 Wells Fargo properties. The stock is performing well above the S&P 500 benchmark, and just in the past three months has seen 60.75% growth of its per share price. As of today, February 9th, AMRC reached its highest per share price in its history and will continue to grow because of strong residuals supporting the company’s topline while shrinking expenses as they relate to common size. With an increasing clientele base and supporting macroeconomic factors, Ameresco is a clean, green, earnings machine.

 

Past Year Performance 

AMRC has increased by 28.6% YTD and over a 52-week period has increased by 228.83%. The 52-week high-low for AMRC is 13.38 – 69.73. The top institutional stakeholders for the company have been increasing their positions in the company over the past year and will hold these positions as the price of the stock continues to stay on an upward trend.

 

My Takeaway

AMRC has strong growth potential in upcoming years due to the macroeconomic drivers coming from the Biden administration, and also due to increased solar demand out of India and China where the company plans and expects to grow their market share in upcoming years. With a LT growth rate of 16.7% we can expect to see this company continuing to increase its per share price. Because of all of these factors, AMRC should remain in the AIM Small Cap Domestic Fund.