EP118: Value In Strange Places
Stock Ideas From Investment Professionals
Welcome, subscribers!
Third quarter letters have begun to hit our inbox, and we’re excited to share the best of what we’ve found so far.
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This week, we highlight 7 new ideas, including:
A logistics compounder trading for peanuts. One manager sees an overlooked 3PL operator poised to emerge stronger from the freight recession, with a founder-led team, clean balance sheet, and double-digit EBITDA multiple upside once volumes recover.
From hype to value in healthcare. After “growth traps” snapped shut, one European drugmaker and one U.S. fintech are back in value territory, joined by an under-the-radar London trading platform thriving in volatile markets.
The misunderstood cloud giant. A global network powering nearly 20% of the internet, once dismissed as “just a CDN,” is evolving into an all-in-one security and networking platform with enormous runway ahead.
An industrial oddball hiding deep value. A 75% owner-CEO who trades platinum futures on the side has built a cash-rich HVAC roll-up that trades for just 2–3× EBIT, offering hard-asset downside and surprising upside.
A turnaround built on demographics. An activist-driven management shake-up at a senior living operator is unlocking occupancy gains just as the 80+ population booms and new industry supply hits multi-decade lows.
Disclaimer: Nothing here constitutes professional and/or financial advice. You alone assume any risk with the use of any information contained herein. We may own positions in the securities listed. Please do your own due diligence.
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Let’s get to it.
1 Main Capital discussed their investment in Radiant Logistics (RLGT), a microcap 3P logistics provider trading at a steep discount to peers. Built through acquisitions by founder-CEO Bohn Crain, who still owns over 20%, the business combines the scale of a multinational network with the flexibility of an asset-light model. With a pristine balance sheet, disciplined capital allocation, and a robust pipeline of agency roll-ups, the firm is positioned to emerge stronger from the freight downturn and potentially command a much higher multiple as volumes normalize.
Radiant Logistics
RLGT is an underfollowed non-asset based third-party (3PL) multinational logistics company at just 7x trailing and 5x normalized EBITDA, which is a low absolute multiple and a significant discount to larger peers. The company was founded in 2005 by CEO Bohn Crain, who grew it through a series of acquisitions and who still holds a 22% stake.
RLGT provides transportation and value-added services to customers needing to make large shipments. It does so by operating an agency network in the US and Canada, which includes ~30 company-owned and ~70 independent agent (strategic partners) locations that operate exclusively on its behalf. These agencies arrange the shipment of products, materials or equipment when they are larger than those handled by integrated global carriers like FedEx or UPS.
As a 3PL, RLGT relies on its vast network of asset-heavy carrier partners, including truck operators, railroads, airlines and ocean lines. As a complement to its transportation offerings, RLGT provides customers with other value-added services including materials management and distribution, customs brokerage and global trade management services.
This model shields the company from the large fixed-cost and utilization risk faced by traditional carriers during cyclical downturns, providing significant flexibility and allowing it to adapt quickly to volume shifts while avoiding the heavy capital expenditure associated with asset ownership.
Capital allocation is a core differentiator for RLGT. The company acquires agencies (from within its own network) and other greenfield operations at mid-single-digit EBITDA multiples. From 2006 to today, revenues grew 35 times to over $900 million, while the share count rose only ~40% and the balance sheet remained pristine, being net cash as of its most recent quarter and fiscal-year end.
Currently, we are three years into a steep freight recession. RLGT has capitalized on this slowdown by accelerating its pace of acquisitions while reducing its share count. The current pipeline remains robust and management is actively pursuing additional acquisition opportunities, positioning the company to emerge significantly larger and stronger when volumes recover.
As you know, I like to invest in companies that can play offense when others are playing defense. And while I am not expecting RLGT to be sold anytime soon, I could see a larger logistics company buy it for a big multiple at some point over the next decade. In the meantime, the company will continue to generate cash and deploy it intelligently while we wait for earnings power to normalize and shine through.
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