In this article, we will take a detailed look at the 7 Stocks Billion Dollar Hedge Fund Voss Capital Is Crazy About.
A fund management company, Voss Capital is based in Houston and was founded in 2011 by Travis Cocke who currently serves as the fund’s General Partner and Chief Investment Officer. He manages Voss’ funds. Interestingly, Voss is an acronym which stands for Value-Oriented Special Situations.
Before launching Voss, Cocke served as a Generalist Research Analyst at Ascendant Advisors LLC. from August 2009 to July 2010. Cocke was also an intern at the Teacher Retirement System of Texas during the summer of 2008.
He obtained a Bachelor of Business Administration in Finance from Texas A&M in 2009.
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In addition to concentrating on value stocks and special situations, as implied by the words that make up Voss’ acronym, the fund manager focuses on fundamentals. Special situations are unusual developments that affect companies. Additionally, Voss seeks to invest in stocks that it believes can double within three years.
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Our Methodology
The following data is gathered from Voss Capital’s investment letter for the first quarter of 2024.
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7. Alta Equipment Group (NYSE:ALTG)
Value of Voss Capital’s 13F Position (6/30/2024): $24 million
An owner of equipment dealerships that both sell and rent equipment, Alta Equipment Group (NYSE:ALTG) also builds warehouses and repairs and provides maintenance for equipment.
In the third quarter, Alta Equipment Group (NYSE:ALTG)’s revenue fell by 3.7% versus the same period a year earlier to $449 million. On a positive note, its product support revenue rose 8% year-over-year, but its new and used equipment sales sank 13.3% YOY. Moreover, it generated an adjusted loss per share of 72 cents, although its adjusted EBITDA did come in at $43.2 million.
CEO Ryan Greenawalt reported that a number of Alta Equipment Group (NYSE:ALTG)’s customers had elected to postpone projects in order to wait for the outcome of the U.S. elections. He expressed optimism that Alta Equipment Group (NYSE:ALTG)’s customers would deploy more capital in 2025.
Analysts, on average, expect Alta Equipment Group (NYSE:ALTG)’s revenue to rise slightly to $1.9 billion in 2025 from $1.87 billion in 20254, and the mean estimate calls for its per-share loss to drop to -24 cents in 2025 from -$1.16 in 2024.
In May, Voss had expected Alta Equipment Group (NYSE:ALTG)’s parts and services revenue sales growth to be “resilient.” That’s because Alta Equipment Group (NYSE:ALTG)’s sales of new equipment had increased at a compound annual growth rate (CAGR) of about 43% since 2019, according to the firm. Additionally, Voss predicted that Alta Equipment Group (NYSE:ALTG) ‘s margins would rise, partly due to more profitable items making up a higher proportion of its sales. According to Voss, Alta Equipment Group (NYSE:ALTG)’s valuation was extremely low.
Alta Equipment Group (NYSE:ALTG)’s shares have sunk 25% since May 24.
6. International Money Express (NASDAQ:IMXI)
Value of Voss Capital’s 13F Position (6/30/2024): $25.5 million
International Money Express (NASDAQ:IMXI) focuses on enabling consumers to send funds from the U.S. to Latin America.
In Q3, International Money Express (NASDAQ:IMXI)’s revenue fell 0.3% versus the same period a year earlier to $172 million, but its net income increased 17% year-over-year to $17.3 million.
Stating that its valuation was failing to reflect its true value, International Money Express (NASDAQ:IMXI) announced that it had hired an advisor to help it “assess strategic initiatives.” The shares currently have a forward price-earnings ratio of just 8.65 times.
Analysts, on average, expect its EPS to climb to $2.40 in 2025 from $2.17 in 2024
Voss believes that International Money Express (NaSDAQ:IMXI) indicated that it would buy back $20 million to $25 million of its shares per quarter. The fund manager believes that these buybacks will enable the firm to “compound EPS at 20%+ for the next few years.”
International Money Express (NaSDAQ:IMXI)’s share price is little changed since May 24.
5. Genius Sports (NYSE:GENI)
Value of Voss Capital’s 13F Position (6/30/2024): $32.3 million
Genius Sports (NYSE:GENI) provides data and tech products to sports-betting platforms. In Q3, its sales jumped 18% versus the same period a year earlier to $120 million, while its adjusted EBITDA soared 45% year-over-year to $26 million.
Genius Sports (NYSE:GENI) raised its 2024 sales and adjusted EBITDA guidance to $511 million and $86 million, respectively, and now expects those metrics to increase by 24% and 61%, respectively. Genius Sports (NYSE:GENI) also expects to generate positive cash flow in 2024.
Analysts, on average, expect Genius Sports (NYSE:GENI)’s 2025 earnings per share to come in at 6 cents, versus a per-share loss of 10 cents in 2024.
Voss believes that Genius “is well-positioned to continue to benefit from increased sports betting legalization and the growth of in-game betting in the U.S.”
Genius has jumped 68% since May 24.
Choice Equities Capital Management stated the following regarding Genius Sports Limited (NYSE:GENI) in its Q3 2024 investor letter:
“CZR and Genius Sports Limited (NYSE:GENI) – Both Caesars Entertainment, Inc. and Genius Sports Limited operate in and around the entertainment, casino and gaming space. Caesars is a bit more well-known and discussed in brief below. Genius is not as well-known but possesses a bright future as a fast-growing company that has become a critical cog in the sports betting value chain. The company has exclusive data rights deals with many leagues including the English Premier League and the NFL (which owns an equity stake in the company) which afford the company the right to collect, synthesize and share pre-game and in-game data with their casino and sportsbook partners to generate betting lines. A more in-depth memo has been attached for existing investors.”
4. SolarWinds (NYSE:SWI)
Value of Voss Capital’s 13F Position (6/30/2024): $44 million
SolarWinds (NYSE:SWI) provides software that facilitates the management of computer networks. According to Voss, SolarWinds (NYSE:SWI) as of May was transitioning from selling software to providing subscriptions to a hybrid cloud offering and a cloud solution.
Voss noted that SolarWinds (NYSE:SWI)’s margins were very high, while its revenue growth was beginning to accelerate.
In the third quarter, however, SolarWinds (NYSE:SWI)’s sales rose just 6% versus the same period a year earlier to $200 million. However, its adjusted EBITDA did jump 13% year-over-year to $96 million, while its gross margin came in at a very high 89.5%, up from 88.7% in Q3 of 2023.
On Dec. 19, Wedbush Securities initiated coverage of SolarWinds (NYSE:SWI) stock with an Outperform rating and a $19 price target. According to Wedbush, SolarWinds (NYSE:SWI) is well-positioned to benefit from companies’ needs to access their data from multiple environments.
Voss wrote that there a high chance of SolarWinds (NYSE:SWI) receiving a takeover offer “within the next year or so.”
Analysts, on average, expect SolarWinds (NYSE:SWI)’s earnings per share to fall slightly to $1.07 in 2025 from $1.09 in 2024.
The shares have climbed 17% since May 24.
3. Rentokil Initial (NYSE:RTO)
Value of Voss Capital’s 13F Position (6/30/2024): $56.2 million
According to Voss, UK-based Rentokil Initial (NYSE:RTO) “is the global leader in pest control,” as its sales are over 100% higher than those of its largest competitor.
“Pest control is a remarkably high-quality business with largely recurring revenue, high returns on capital employed, and low cyclicality,” Voss reported.
In Q3, Rentokil Initial (NYSE:RTO)’s organic revenue increased 2.6% versus the same period a year earlier. However, the organic sales of its North America business only rose 1.4% YOY. Rentokil Initial (NYSE:RTO) expects its adjusted operating margin for the full year to come in at 15.5%, and it noted that it would take cost-cutting measures going forward.
Analysts, on average, expect its earnings per share to climb to 86 cents in 2025 from 82 cents this year,
Calling the valuation of Rentokil Initial (NYSE:RTO) stock attractive, Voss reported that the shares had been punished because the company was having difficulty integrating U.S.-based Terminix which it had acquired in October 2022. Voss predicted that Rentokil Initial (NYSE:RTO) would rebound once it overcome these difficulties and its growth accelerates. The fund manager estimated that the shares could surge about 100% in 18 months.
Rentokil Initial (NYSE:RTO) has dropped 5% since May 24.
Broyhill Asset Management stated the following regarding Rentokil Initial plc (NYSE:RTO) in its Q3 2024 investor letter:
“Rentokil Initial plc (NYSE:RTO) is a UK-based pest control company that grew its US presence by acquiring Terminix in 2022. The industry is largely fragmented and has the tailwind of a warming environment, expanding the seasons and geographies where pests thrive. Trading at a steep discount to its nearest peer, Rollins, we see plenty of room for upside as activist investor Nelson Peltz holds management accountable during the Terminix integration.”
2. PAR Technology (NYSE:PAR)
Value of Voss Capital’s 13F Position (6/30/2024): $71.4 million
PAR Technology (NYSE:PAR) markets cloud-based hardware and software products to restaurants and retailers. Among its offerings are an e-commerce platform and a point-of-sale product.
In the 12 months that ended in September 2024, its revenue came in at $454 million, versus $304.5 million in the 12 months that ended in September 2023. However, in Q3, its net loss rose to $20.7 million versus a net loss of $19.2 million in the same period of 2023. But its top line did jump 41% year-over-year last quarter to $96.8 million, while its organic annual recurring revenue rose about 25% year-over-year. Also noteworthy is that its adjusted EBITDA rose to $2.4 million in Q3 versus an adjusted EBITDA loss of $6.56 million in Q3 of 2023.
Analysts, on average, expect PAR Technology (NYSE:PAR) to generate earnings per share of 16 cents in 2025, versus a per share loss of 77 cents this year.
Voss predicted that PAR Technology (NYSE:PAR) would benefit from very strong demand for technology by restaurants. Moreover, Voss predicted that PAR Technology (NYSE:PAR) would become profitable, pleasing the market. Other catalysts for PAR Technology (NYSE:PAR), according to Voss, include an acceleration of its ARR growth and its Investor Day which it had planned to hold in the Fall.
Since May 24, PAR Technology (NYSE:PAR) has jumped 57%.
Greenhaven Road Capital stated the following regarding PAR Technology Corporation (NYSE:PAR) in its Q3 2024 investor letter:
“PAR Technology Corporation (NYSE:PAR) – We have owned restaurant technology provider PAR for approximately five years and began buying when the share price was in the $20s. Major accomplishments over the past five years include: 1) Improving the POS (point-of-sale) code base to improve stability, which laid the foundation for growth. 2) Executing five acquisitions that expanded the addressable market, product lines, and provided scale 3) Winning Burger King and Wendy’s as customers. These Tier 1 wins have led to the biggest RFP pipeline in the company’s history. 4) Divestiture of government business to become more of a “pure play” enterprise software company. 5) Growing the ARR/Share from $1.04 to $5.30 (as of June 30, 2024) with line of sight to >$8. 6) Inflecting to profitability (while not yet reported, I think it happened in Q3 of this year). This is a vertical market software company with accelerating growth and inflecting to profitability. The markets are bigger, the products are better, the customers are larger, and team is deeper. The future is far brighter than when we invested 5 years ago.”
1. Basket of U.S. Homebuilders
Voss believes that the supply of single-family housing in the U.S. is excessively low, and it reports that homebuilders’ leverage is at record lows. Moreover, it pointed out that most of the large publicly trade homebuilders are taking measures to keep their spending low.
The asset manage predicted that its basket would climb “at least 50..over the next 18 months.”
Since May 24, the iShares U.S. Home Construction ETF (ITB) is little changed.
While we acknowledge the potential of homebuilders, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than homebuilders but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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