CODI is an interesting small Business Development Company BDC. They describe their approach as follows:
- Acquires controlling interests in profitable small to middle market businesses in attractive niche industries;
- Works with the management of those companies to pursue growth opportunities, provide strategic support and increase cash flow in the intermediate to long term;
- Provides investors an opportunity to participate in the ownership and growth of businesses that traditionally have been owned and managed by private equity firms, wealthy individuals or families or large corporations;
- Enables our shareholders to participate in the operating cash flows of our companies through the receipt of regular distributions; and
- Offers sellers of middle market businesses transaction financing certainty and an efficient and streamlined due diligence process.
The profile for an attractive acquisition candidate is as follows:
An ideal acquisition candidate for Compass Diversified Holdings has the following characteristics:
Is an established, US based company
Maintains a significant market share in a defensible industry niche (i.e., has a "reason to exist")
Has a solid and proven management team with meaningful incentives
How low technological and/or product obsolescence risk
Maintains a diversified customer and supplier base
4 analysts currently follow the company with an average target price of 19.30 and rating of buy.
The stock is a slow grower with a projected secular growth rate of around 11%.
The current C15 pe is 14x which is well below the S&P average for this company with an above average yield and growth rate.
One of the portfolio companies recently achieved an IPO. Consequently the CODI stake is being liquidated, albeit at a very nice profit. Having a smaller investment portfolio caused some modest concern about growth and future dividend coverage. This drove a small pull back in this overwise very stable stock price. On Aug 7th they announced an accretive acquisition of Clean Earth Holdings. Press release here
SInce this announcement, the stock has been steadily rallying and has now rallied above the 100 day MA and is fast approaching the 200 day. A rally above this level and a golden cross which appears probable could easily take the stock back to the 52 week high around $20, resulting in a 10% move to add to the company yield.
Zachs write up: investing is always a very popular strategy, and for good reason. After all, who doesn’t want to find stocks that have low PEs, solid outlooks, and decent dividends?
Fortunately for investors looking for this combination, we have identified a strong candidate which may be an impressive value; Compass Diversified Holdings (CODI).
Compass Diversified Holdings in Focus CODI may be an interesting play thanks to its forward PE of 10.7, its P/S ratio of 0.9, and its decent dividend yield of 8.8%. These factors suggest that Compass Diversified Holdings is a pretty good value pick, as investors have to pay a relatively low level for each dollar of earnings, and that CODI has decent revenue metrics to back up its earnings.
But before you think that Compass Diversified Holdings is just a pure value play, it is important to note that it has been seeing solid activity on the earnings estimate front as well. For current year earnings, the consensus has gone up by 4.8% in the past 30 days, thanks to 2 upward revisions in the past one month compared to no downward revision.
This estimate strength is actually enough to push CODI to a Zacks Rank #2 (Buy), suggesting it is poised to outperform. So really, Compass Diversified Holdings is looking great from a number of angles thanks to its PE below 20, a P/S ratio below one, and a strong Zacks Rank, meaning that this company could be a great choice for value investors at this time.
CODI continues to operate under the radar and very effectively Compass Diversified Holdings Announces Sale of CamelBak Products, LLC Mon July 27, 2015 9:00 AM|PR Newswire | About: CODI WESTPORT, Conn., July 27, 2015 /PRNewswire/ -- Compass Diversified Holdings (CODI) ("CODI" or the "Company"), an owner of leading middle market businesses, announced today that it has entered into a definitive agreement to sell its majority owned subsidiary, CamelBak Products, LLC ("CamelBak"), to Vista Outdoor Inc. ("Vista Outdoor"). The sale price for CamelBak will be based on a total enterprise value of $412.5 million and will be subject to a customary working capital adjustment. The divestiture is expected to close within the next month, subject to customary closing conditions.
After the allocation of the sales price to non-controlling equityholders and the payment of transaction expenses, CODI expects to receive between $355 million and $375 million of total proceeds from the sale at closing. This amount is in respect of the Company's outstanding loans to CamelBak (including accrued interest) and its equity interests in CamelBak, which was acquired by CODI on August 24, 2011. The proceeds will be used to repay all outstanding debt under the Company's revolving credit facility, with the balance increasing cash on the Company's balance sheet. The Company anticipates recording a gain on the sale of CamelBak ranging between $140 million and $160 million during the quarter ended September 30, 2015.
Commenting on the transaction, Alan Offenberg, CEO of Compass Diversified Holdings, stated, "Over the past four years, we have enjoyed working closely with CamelBak's management team, led by its CEO, Sally McCoy, and are proud of our accomplishments together. CODI's strategic investments enabled CamelBak to increase consumer penetration levels, build cash flows and generate greater organic growth. CamelBak has established itself as the global leader in personal hydration products, and we wish the company and Vista Outdoor continued success."
Sally McCoy, President and CEO of CamelBak, stated, "On behalf of CamelBak, I would like to thank CODI for being an outstanding partner. CODI's support of our people and culture was a key ingredient to successfully building our business and brand. In addition, CODI recognized the strong demand for our innovative, world class personal hydration products, and through our successful partnership CamelBak's business achieved new heights. We appreciate CODI's support and guidance while ensuring that CamelBak's future outlook and positive momentum are secure with Vista Outdoor."
Mr. Offenberg added, "As a result of this opportunistic sale, we continue to unlock significant value for shareholders and will have realized gains of over $480 million since our IPO, complementing our ongoing success acquiring and growing attractive businesses with a reason to exist. Going forward, we are well-positioned to draw upon our solid balance sheet and financial flexibility to reinvest in the long-term growth of our current subsidiaries and capitalize on additional platform and add-on acquisition opportunities while providing shareholders with consistent cash distributions."
Additional information on the acquisition will be available on the Company's current report on Form 8-K that will be filed with the Securities and Exchange Commission.
About Compass Diversified Holdings CODI owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market.
CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.
Our ten majority-owned subsidiaries are engaged in the following lines of business:
The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits); The design and manufacture of promotionally priced upholstered furniture (American Furniture Manufacturing); The design and manufacture of medical therapeutic support surfaces and other wound treatment devices (Anodyne Medical Device, also doing business and known as Tridien Medical); The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies); The design and manufacture of personal hydration products for outdoor, recreation and military use (CamelBak Products); Environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings (Clean Earth); The design and marketing of wearable baby carriers, strollers and related products (Ergobaby); The design and manufacture of premium home and gun safes (Liberty Safe); The manufacture and marketing of branded, hemp-based food products (Manitoba Harvest); and The manufacture and marketing of portable food warming fuel and creative table lighting solutions for the foodservice industry (SternoCandleLamp). In addition, we own approximately 41% of the common stock of Fox Factory Holding Corp. ("FOX (FOX-RETIRED)", Nasdaq: FOXF), a former subsidiary business that completed its initial public offering in August 2013. FOX designs and manufactures high-performance suspension products primarily for mountain bikes, side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles.
$CODI chart still looks solid right in the middle of the upward trend channel. Surprised that they haven't had a correction given their 8.5% yield though with a 11x fwd PE they are not particularly expensive relative to the market. Growth is down due to their sale of $FOXN which remains a significant equity holding on balance sheet. The dividend payout is not particularly useful to track for the next few quarters as they have excess cash from the sale that mgmt has stated they are committed to utilizing to maintain (not grow) the payout.
Under: Been on the sidelines for a bit holding (building) cash. Now that "BIGLEY" has rolled out the tax plan its time to jump in.
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