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Feb 7

Two Catalysts at IDT

While I think IDT is cheap when evaluated on its mature business lines, I’m not a big fan of investing in a company simply because its cheap. You can end up sitting on a stock waiting indefinitely and often your patience runs out before something happens. So there needs to be a catalyst.

In the case of IDT, I see a couple of catalysts. First, I think they are reaching an inflection point where the declining calling card business is overcome by the growing cardless long-distance (Boss Revolution) business. And second, probably the biggest reason for me to have bought the company is that I think they have a hidden gem in a little subsidiary called Fabrix. While I am going to talk about Boss first, it is Fabrix that I believe that holds the real potential. Read more

Feb 5

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Valuing Tricon Capital’s Asset under Management Biz

As I’ve tweeted about, early in the new year I took a position in Tricon Capital (TCN.to) after being introduced to the company by a friend in early December. It took me until January to become comfortable with the name and until now to write about it. I’m slow.

I have found Tricon complicated to analyze; they have both an asset management business with a number of separate investment vehicles in addition to an on-balance sheet housing portfolio (which is my primary focus). They are also opaque; like most Asset under Management (AUM) companies the details about the investments held within the vehicles is scattered and incomplete.

The part of Tricon that I am most interested in is its home purchase business. Tricon has been buying properties across the US since Q2. Their purchases have been concentrated in Sacramento, Bay Area, Southern California, Phoenix, Charlotte, and SE Florida. They are looking to expand into LA county (where they recently signed a contract with a management company that would look for an purchase homes in the area), and potentially Orlando. Read more

Feb 2

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The Free Cash flow of IDT (Updated)

I’ve been building a position in IDT Corporation (IDT) over the last month. The more time I spend looking at the company, the more compelled I am to hold a substantial position in the stock.

I was putting it all together today and I was really struck by the free cash flow when I put it together in the table below.

Note that I have updated this table from the original post to distinguish the total reported cash flow from operations versus the cash flow from continuing operations. In my estimate of cash flow from continuing operations I tried to eliminate all one time items that impacted cash. The free cash flow estimate is based on the continuing cash flow from operations:

In addition to the above cash generation, cash and cash equivalents on the balance sheet work out to about $7 per share. If you account for restricted cash (which given the nature of the restricted cash on the balance sheet I am admittedly not sure you should) then cash is over $8 per share.

The only significant debt on the balance sheet is the “notes payable” item, which is $29 million (or a little over $1 per share), and relates to mortgages on two buildings the company operates in. The other significant liabilities are accrued expenses and deferred revenues.

The current share price has been fluctuating in the $10 range.

I’ve been looking into the businesses that IDT operates and will post on that in the near future.