Sunday Market Prep (#2)

Dear Reader,

First of all, sorry for the confusion last week around GES 0.00%↑ earnings. I had the wrong date. Earnings will be out on June 5th.

Last-week’s follow-ups:

• GES 0.00%↑ earns over $100mm per year in licensing income via long-standing partnerships across a few key product categories such as eyewear, handbags, footwear, watches, and fragrances. This licensing income should provide stability to support the current dividend, especially with most outstanding debt opportunistically financed with 3.75% coupon convertibles (due April 2028).

• I went through WEN 0.00%↑ non-cash revenue and amortization accounting in more detail with ChatGPT. In short, WEN 0.00%↑ does have some non-cash revenue recognition from upfront franchise payments, but they actually have even more goodwill-like (i.e., non-recurring) amortization to add back. I think that GAAP earnings probably understate WEN 0.00%↑ true earnings power by about $20mm, or roughly 10%, which is significant in the wake of a dividend cut and concerns about indebtedness. I added to my position this week.

• ISSC 0.00%↑ Nothing to add here. I trimmed a little bit this week.

• CRI 0.00%↑ Nothing to add here except that I’ve been wondering if I’m greedy to hold out for a sub-$1bb market cap.

Ideas for the week ahead:

• IQV 0.00%↑ trading at an 12% discount to the lowest street target

• CPB 0.00%↑ will be reporting tomorrow morning. No position currently, but I would probably be interested to buy a dip to $32.50 or below.

• $DOCS.L will release earnings on Thursday. For the record, I lean bullish but will probably stay out because the ADR tends to trade with wide spreads.

• ELMD 0.00%↑ This has been a really interesting story. The business is profitable. The technology/medical effort is powerful. The top line keeps growing. I want to learn more about competitive threats, in particular.

• I will be looking for pullbacks to buy B 0.00%↑ and/or BTG 0.00%↑, as I traded out of them last week