Portfolio Blog Posts

From time to time, the Investment Adviser blogs about investment ideas and stocks that may be in Twinleaf client account portfolios. Certain of the posts below have appeared on investor web sites.

YUME: The stock is oversold; the company itself is misunderstood and overlooked in a complex and chaotic industry
June 16, 2014

YUME: Misunderstood and overlooked . . .

Dear Mr. Granath:

I write on behalf of our investment management clients who collectively own 502,055 shares of Crown Media (CRWN) stock.  It has been nearly two years since my letter of September 25, 2012 urging you and your fellow members of our Company’s Board of Directors to maximize the value of our Company by selling it to a strategic buyer capable of bringing scale, operating efficiencies and elevating the two Hallmark channels to full potential while rewarding shareholders in the process. 

Very Difficult to Outperform in Large Caps Says Insider Monkey
April 3, 2014

Interesting piece today on hedge fund site Insider Monkey, which states "Our research in general has shown that hedge funds or any other investor group can't generate enough outperformance to justify their high fees when it comes to large-cap stocks." 

Investing Across the Video Spectrum
April 3, 2014

The trend toward next-generation video delivery, consumption, navigation and audience analytics is the single most interesting space in our entire TMT and consumer stock universe. We believe that there are significant investment opportunities at the intersection of increased consumption of IP video, enabling video content to connected devices, navigating massive amounts of content and delivering highly-targeted advertising that is chasing the consumer online and to the mobile device.  


This article was posted to SumZero, a digital community for portfolio managers, on December 16, 2013.  CALL shares were trading at $12.29.

“Shares of MagicJack (CALL) are deeply undervalued due to an enduring but outdated short thesis. Shares trade at just 3x 2014 EBITDA, management is forecasting double digit revenue growth and the short interest is enormous at 30% of shares outstanding.”

MagicJack is an obscure VoIP telecom company that may finally be emerging from the firm grip of short sellers after a minus-40% stock price performance year-to-date in 2013. After reversing a six-month down trend with a 9% gain on Friday 12/13, the stock trades at $12.29 per share, giving the company a market cap of $220 million and an enterprise value of $173 million, reflecting balance sheet cash of $47 million.  Figures include the effects of recent stock repurchase and issuance transactions with MagicJack’s controversial founder and former CEO. 

September 10, 2013

Note: this post was submitted to SumZero's Value Investing Challenge in early August.  It was not a winner but CRWN shares, a large Twinleaf client position, are +26% in the past month.

CRWN owns and operates Hallmark Channel and Hallmark Movie Channel, family-oriented domestic pay TV networks that deliver a mix of original and acquired programming to household universes of 87 million and 50 million, respectively. The business is solid but unspectacular, with forecasted mid-single digit revenue increases and modest margin expansion leading to projected EBITDA increases of 8% in 2013 and 7% in 2014.

August 14, 2013

Q:  What’s the enterprise value of this audio processing technology company with the following financial profile?
Balance sheet cash of $129 million and no debt
Q2 2013 annualized revenue of $180 million, +30% over Q2 2012
Q2 2013 annualized pre-tax income of $22 million, +19% over Q2 2012

August 11, 2013

Shares of Marchex (MCHX), one of our top client holdings, rose 17% last week as the company reported Q2 results that showed its core mobile advertising business gaining traction. Adding new customers and distribution partners during the quarter, MCHX delivered 23% top line growth, though only 5% EBITDA growth due to increased investment in product development and engineering talent.  

June 26, 2013

Nine months after our detailed letter to the board of directors of Crown Media Holdings (CRWN) urging them to immediately pursue a sale of the company, a regulatory filing from 90.3%-controlling shareholder Hallmark Cards, Inc. this week sparked furious buying of the stock. 

June 12, 2013

On Friday, June 7 TIVO announced a settlement of protracted patent infringement litigation with Arris/Google (Motorola), Cisco and Time Warner Cable that will pay TIVO a lump sum of $490 million or about $3.50 per TIVO share. Market expectations (as well as our own) were clearly too high, as TIVO shares fell 17% on Friday to around $11. Shares had run up the previous day on rumors out of east Texas, the litigation venue, that a settlement had been reached.  We were expecting a settlement or jury award much closer to $1 billion based on the number of alleged infringing set-top boxes and previous settlements with Dish, AT&T and Verizon.

May 23, 2013

The news on Wednesday 5/22 that our 7th-largest client holding, Multiband Corp. (MBND), would be acquired at a significant premium was welcome news. MBND was perhaps our least favorite portfolio name and, truth be told, we had begun selling a few shares just in the past week to fund what we thought to be superior investment ideas.  We had been modestly underwater on the position; the takeout price of $3.25 per share brings our MBND investment well into profitability.  And we think the likelihood of a superior bid emerging over the next 45 days is not zero; we think it’s more like 30%, especially given that MBND is believed to have rejected a $4.50 takeover bid a few years ago.  So given that the all-cash buyout offer on the table is definitive (e.g., not conditional on financing) and the stock is trading at a 3-4 cents below the takeout price (which represents a 4%-5% annualized gain assuming a September closing), holding MBND shares now represents a free option on a higher bid.

April 4, 2013

The Second Circuit Court of Appeals affirmation this week in favor of Aereo in its copyright infringement battle with a group of 17 television broadcasters received considerable media, investor and industry attention. The ruling affirms an earlier District Court decision and is a setback for the plaintiffs, which sought an injunction that would have effectively put Aereo out of business. In a press release following the court’s decision, a triumphant Aereo announced plans to expand its service beyond New York to 22 new markets. The legal wrangling is not over, though the rulings would seem to make the plaintiff group of broadcasters an underdog when the case gets to trial. 

March 25, 2013

Company Description
  • Owns and operates 23 “polished casual” restaurants, mostly in upscale mall locations in attractive Sunbelt markets. 
  • Menu focus is modern American with fresh ingredients and an emphasis on sushi. 
  • High-margin bar business represents 30%+ of revenue. 
  • No new store openings since late 2010 as management has focused on improving operations and financial performance. 
  • Two new units planned for late 2013, in Boise and an undisclosed Texas location, probably Dallas or Austin. Further unit expansion expected in 2014 and 2015 as management believes that KONA has 100-unit potential in the USA. 

Core Investment Theme: Advanced Television
December 17, 2012

Because we’ve viewed it as a misunderstood category at a key inflection point, a core Twinleaf investment theme in 2012 has been advanced television. And while we’ve been disappointed with the performance of one of our smaller positions in the space, Envivio (ENVI), we’ve been rewarded with significant gains at two of our largest portfolio companies, SeaChange (SEAC +35%) and TiVo (TIVO +30%), as investors have only recently come to better appreciate the industry dynamics and the individual appeal of SEAC and TIVO.

Marchex (MCHX): Proposes Spin-Off Of Non-Core Assets, Shares Remain Undervalued

November 9, 2012

This piece was posted on Seeking Alpha, an idea-sharing web site for investors.

On Thursday, November 1 Marchex (MCHX) announced that it planned to place its non-core assets into a new company called Archeo and spin it off to shareholders in 2013. On the same day, Marchex released third quarter operating results that showed the company's core call-based advertising business generated revenue of $29 million and adjusted EBITDA of $3.6 million, its best quarterly performance in more than a year.

For the first time, management provided some much-needed transparency to the non-core portfolio, which consists primarily of more than 200,000 web domain names.

Crown Media (CRWN): Letter to Board of Directors

October 3, 2012

Twinleaf Management LLC (“Twinleaf”) is an investment advisor to client accounts that own approximately 212,000 shares of Crown Media (“CRWN” or “the Company”) common stock. While CRWN shares have risen in recent months, multi-year shareholder returns are abysmal. Twinleaf has closely analyzed the Company and the pay TV industry and we believe that there is no scenario over the next several years in which CRWN management and the board can deliver a return to shareholders superior to what we believe a sale of the Company would realize today. Accordingly, we urge the board to pursue a sale of the Company now.

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Marchex (MCHX):  Misunderstood and Undervalued
September 21, 2012

This piece was posted on SumZero, an idea-sharing website for portfolio managers.

Marchex is a Seattle-based digital marketing agency with a core business focused on mobile call advertising. Marchex's value proposition to clients is that its proprietary technology drives inbound mobile phone calls to businesses on a pay-per-call basis and its accompanying analytics enables precise data collection and analysis. The call advertising business remains relatively undeveloped despite the obvious benefits to businesses that an incoming phone call delivers.

Taking a Private Equity Approach to Small-Cap Investing:  SEAC, JMBA and CRWN
July 12, 2012

Our client portfolios contain three examples of a core tenet of our investment philosophy: taking a private equity approach to public market investing. We actively seek undervalued companies that have a savvy dominant shareholder that usually plays a positive strategic and governance role at the portfolio company and is unlikely (often unable) to exit its investment until the company is sold. Often the large shareholder’s original investment was structured as preferred equity or convertible debt that recapitalized the company at a time of distress. Or the large shareholder is an activist fund highly motivated to realize a solid return. Either way, provided the company is recovering from the circumstances that attracted the rescue financing in the first place, we try to align ourselves as closely as possible in terms of entry price and wait for the M&A event that will often (though not always) allow the large investor to exit.

TiVo (TIVO):  For a Higher Stock Price, Simplify the Story and Return Cash to Shareholders
June 28, 2012

TiVo (TIVO) is one of the most enigmatic, misunderstood and complex investment stories across the entire technology/media/telecom universe.  Part of the turn-off for investors is that it’s impossible to evaluate TiVo on a conventional basis. Its stock price has lost about 30% of its value over the past 90 days despite improving operating trends and a very significant contract win announced on June 25. The likely explanation for this disconnect is that investors have grown weary of the long sales cycle and slow rollout of its licensed product as well as the ongoing development costs and litigation expenses that have contributed greatly to the company’s continued unprofitability. To me, the recent selling pressure looks like a big investor or two simply ran out of patience with TiVo. For investors with a minimum one-year horizon, I believe TiVo offers a compelling opportunity here around $8 per share.

June 11, 2012

Over the past five weeks, the share price of AMC Networks (AMCX) has drifted down by about 15% and dropped its market capitalization below $3 billion, which brings it into my investment consideration universe for the first time since January. Spun out of Cablevision (CVC) one year ago at around $36 per share, until recently AMCX shares had performed well, reaching $46 in March.  And for good reason: AMCX has been a high-margin, cash-flow generating growth machine and AMC, in particular, has developed into a top tier network thanks to several highly acclaimed original series that have driven viewership and solid cash flow gains.

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May 29, 2012

The chronically weak stock market performance of Live Nation (LYV) is one of the more puzzling stories in the media/entertainment investment universe.  Seven years after spinning out of Clear Channel as a concert promotion and venue management leader and two and a half years after the merger with Ticketmaster created a live entertainment powerhouse, LYV shares continue to underperform.  Even despite a recent uptick partially attributable to news that LYV’s largest shareholder, Liberty Media (LMCA) had increased its stake to 26%, LYV shares are down 15% over the past year, well behind the S & P 500’s flattish return that includes dividends. LYV’s five-year performance is downright dreadful at minus 53%.

May 23, 2012

On Sunday May 20, 2012, AMC Entertainment, a privately-held chain of 346 movie theaters announced that it was being acquired by Wanda Group, a Chinese conglomerate, for $2.6 billion.  The deal comes just two weeks after CVC quietly indicated on its Q1 earnings call that it would explore strategic alternatives for its 47-theater, 243-screen chain, Clearview Cinemas.

May 20, 2012

On Friday May 18, while the media and many stock market participants were endlessly fascinated by the Facebook IPO (which displaced the immediately prior obsession with the JP Morgan trading loss), I took the opportunity to buy shares for client accounts of an all-but-forgotten company called Envivio (ENVI) that had a much less celebrated IPO just three weeks ago.  Like FB, ENVI experienced a disappointing first day of trading on April 25.  But unlike FB’s underwriters, led by Morgan Stanley, which stoutly supported the stock on the first day to prevent an embarrassing breach of the issue price, ENVI’s underwriters, led by Goldman Sachs, apparently declined to support the ENVI stock in the aftermarket.  ENVI’s IPO came at $9 per share, down from the stated range on its S-1 filing of $10-$12 and has only briefly traded above the issue price in the ensuing three weeks.  It closed down 5% on its first day and after 18 trading days as a public company, ENVI closed today at $7.71 per share.  Down 14% in three weeks is not exactly the trading performance that the company, its pre-IPO investors, its post-IPO investors or Goldman wanted.

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