Jeff Meyers of Cobia Capital is one of the few investors looking at small-cap tech stocks from the value perspective. In this interview with Justine Underhill, Meyers makes his Real Vision debut with a look at a European performance marketing company that appears to be trading at shockingly low valuations. He breaks down the bull case for XLMedia, discusses potential catalysts for price action, and examines a unique short-term arbitrage opportunity in the form of a tender offer. Filmed on August 5, 2019. Watch more Real Vision™ videos:
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A Small Cap Tech Stock Positioned for Growth (w/Jeff Meyers)
Transcript:
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JUSTINE UNDERHILL: Welcome to Real Vision's Trade Ideas. Today, we're sitting down with Jeff Meyers of Cobia Capital. It is great to have you here.
JEFF MEYERS: Thank you.
JUSTINE UNDERHILL: So, this is your first time on Real Vision's Trade Ideas. And we actually found out about you through SumZero, which is a buy side idea generation platform. And you were ranked number one on that site for the ideas that you had posted there. Could you give us a little bit of your background, what you do and your work with SumZero?
JEFF MEYERS: So, I start my own fund in '08 or late '07, I guess. I got seed from my former employer at Siegler Callory, $10 million seed. And launched January '08, obviously a great time to launch a hedge fund. You don't have volatility that year. But the truth is it ended up being a good time to start because at the end of the year, the bargains were ridiculous. There's things trading for cash, below cash. So, we just scooped up lots of companies at the end of the year, beginning with '09 and then '09 to the big rally. And we took advantage of that, had a great year in '09. And since then, I've been managing the fund.
JUSTINE UNDERHILL: And you're mostly looking at stocks that other analysts aren't looking at. So, you don't have huge mutual funds or large funds that are investing in these stocks?
JEFF MEYERS: Exactly. The small cap area is because of size and liquidity, the big mutual funds can invest there. And we also have something a little special, I guess, because we are as I indicated earlier, we're still a value-oriented strategy. So, a lot of guys in technology are not value guys, they're growth guys, momentum guys, et cetera. So, we're looking at different names than they're looking at or we're looking at names earlier than they're looking at them. So, we get a lot of interesting opportunities where we have very few other competitors, I guess, looking at them.
JUSTINE UNDERHILL: So, how do you come up with your ideas?
JEFF MEYERS: So, there's a lot of screening involved, because we're value-oriented, we would probably get 70% of our names through screening, and we have about 65 different screens that we use to parse the universe and try to figure out what's inexpensive, and then we dig into those names, so just the main way.
JUSTINE UNDERHILL: All right, so what trade are you looking at today?
JEFF MEYERS: So, we're looking at a company called XLMedia, ticker's XLM.LN, street in London, probably a cheaper stock you're going to see in a long, long, long time. Stock trades at three times EBITDA. So, basically, enterprise value to EBITDA is about three times. So, the way I think about that is, if you bought the whole company with that valuation, you get paid back in three years. So, it's very inexpensive. EBITDA multiples usually range six to 15 or so. So, the reason is that they've had tough time the last couple years, that I guess explain the business. So, it's called an affiliate marketer.
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