Thursday, September 16, 2021
Wednesday, September 15, 2021
The Second Set of Fall 2021 Marquette AIM Program Student Equity Pitches/Q&A for Friday, September 17th
AIM Class of 2022 Student Equity Presentations on Friday, September 17th
Tuesday, September 14, 2021
A Small Cap Equity holding: Carriage Services, Inc. (CSV, $46.71): “Until Death Do Us Part” By: Maddy Aubry, AIM Student at Marquette University
By: Maddy Aubry, 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.
• Carriage Services, Inc. (NYSE:CSV) provides funeral and cemetery products and services across the United States. The funeral segment offers services to families related to the consultation, removal, and preparation of remains, sale of caskets, and the use of visitation, remembrance, and transportation. The cemetery segment provides interment rights and merchandise including makers and outer burial containers.
• Management is looking forward to new capital allocation opportunities related to acquisitions in 2021.
• CSV is seeing record breaking earnings.
• The outlook for the funeral and cemetery industry will result in exciting things to come for CSV related to the rising popularity of cremation.
• CSV is expected to outperform key competitors over the next 3 years.
Key points: After focusing on paying down debt in 2020 and into the beginning of 2021, management is excited to announce that they are now able to focus on new, more structured capital allocation framework and opportunities. Specifically, they are looking forward to future acquisitions after completing a detailed review and refresh of their strategic acquisition model that has been inspired by their most recent acquisitions.
Over the last two years, CSV has seen much transformation that has been strongly reflected in their earnings. During that time, EBITDA has increased by nearly 70%, and, over the past twelve months, EPS has increased by 116%. More specifically, CSV has seen record breaking earnings so far this year. For the first half of 2021, CSV’s total revenue and EPS increased 19.3% and 83.5% respectively.
The funeral and cemetery industry, including CSV, is focusing its efforts on new sales techniques and skillsets that will generate success in the future. With the cremation option becoming more popular, funeral directors can have meaningful conversations with families and offer unique service options. With the addition of these personalized celebrations of life, it offers opportunity to add value and continue to grow. Management states that they are excited to gage perspective from younger funeral directors and arrangers in terms of their mindset related to the possibilities that come with cremation options, and they believe the upside is tremendous.
Key competitors of Carriage Services Inc include Service Corporation International (SCI) and Park Lawn Corporation (PLC). Over the next three years, CSV is expected to be the fastest growing, with the highest margin, while trading at the lowest valuation. Specifically, CSV’s three-year EPS is expected to grow by over 100% whereas SCI’s and PLC’s are expected to grow by about 40% and 70% respectively.
What has the stock done lately?
After seeing a slight decline in June and the start of a bounce back in July, CSV showed strong returns in the month of August. CSV priced at its lowest in the first few days of July with a price of about $34.58 but has recently reached a price high of $48.20 with a 1 month return of 26.21% and a month to date return of 1.04%.
Past Year Performance: CSV has increased by 110.88% in value over the last twelve months, and they are still performing strong to date. About 12 months ago, CSV was aligned with the benchmark and seeing inconsistent activity. Over the past 11 months, CSV has followed similar trends of the benchmark, but they have consistently been outperforming.
Overall, Carriage Services, Inc has been positively affected by the pandemic over the past year. While we are all hoping the pandemic is in its final stages, it seems that CSV will continue to provide strong returns for the remainder of the year and into next. With the equity reaching 52-week highs and year to date returns nearing 50%, this seems to be a holding to hang on to for a while longer.
An International Equity holding: VipShop Holdings Ltd. (VIPS, $15.67): “Not So ‘VIP’ Anymore” By: Justin Nguyen, AIM Student at Marquette University
By: Justin Nguyen, AIM Student at Marquette University
• VipShop Holdings Ltd. (NYSE:VIPS) is a Chinese online retail platform that specializes in discount sales of products from domestic and international partners. The company product offerings include apparel for men, women, and children, accessories, electronic, and other lifestyle products.
• VIPS recorded a second quarter earnings miss and provided a modest estimate YoY growth of 5-10% in Q3.
• The company is under pressure of the Chinese government’s new regulations upon tech companies.
• President Xi Jinping’s “common prosperity” idea presses tech tycoons to distribute wealth.
• VIPS announced a share repurchase program in March 30, 2021 of $500 million. As of June 30, 2021, $301 million worth of ADRs have been repurchased yet share is still down almost 70% from the all-time high in March.
Key points: VipShop Holdings Limited was pitched and added to the AIM International Fund in April of 2021. Since then, the company announced its Q2 earnings with $4.6B in revenue and $227.8M in operating income, reflecting increases of 22.8% and 18.6% YoY in respective order. However, the company provided a disappointing revenue guidance on Q3 that only estimates growth of 5-10%. This historically low figure was alarming as VIPS is expected to benefit from the shift towards e-commerce due to the pandemic.
Additionally, tech and consumer discretionary companies like VIPS are under pressure from the Chinese government. Rules regarding unfair competition were addressed by the State Administration for Market Regulation, some of which include the ban of fake reviews, mishandling of consumers’ data, and abuse of market power practiced by these firms. Further, China also imposed a ban on internet companies that could pose data security threat from listing overseas, an action that implies more tightening control over tech companies that would challenge VIPS’s growth.
In broader views, Beijing has been signaling their intent to emphasize on manufacturing as the core of the economy rather than the consumer discretionary industry. This is demonstrated through the fact that many manufacturing firms, such as semiconductor companies, are still strongly supported amidst regulations squeeze experienced by the tech industry. The government is also restricting access to videogames, media, and other entertainment platforms. Recently, President Xi Jinping emphasized “common prosperity” as a theme for China’s growth in the future, implying the support for tech companies like VIPS will no longer be as strong as it was in the past.
What has the stock done lately?
VIPS was pitched and added into the AIM fund at a price target of $34.04. The company announced its shares repurchased program of $500M in March of 2021 when share price hit a record-high. As of June 30, 2021, $301M of ADR has been repurchased yet the company’s valuation still fell 70% since March. This signals a really negative view from investors regarding the Chinese investment landscape for tech companies like VIPS.
Past Year Performance: VIPS has decreased 8.36% in value in the past year and 44.65% YTD. The company may experience a slight upward trend short-term due to share repurchase effort but reaching the all-time high in March seems unrealistic.
Estimations indicating slow growth in addition to negative perspectives from the Chinese government are reasons why this stock should be sold from the AIM International fund. The actions implemented by China do not seem to be temporary as demonstrated through their “common prosperity” theme and emphasis on manufacturing. Thus, the investment thesis pitched may no longer hold, which indicates a sell.