Investment management company Mittleman Brothers Investment Management released its “Global Value Equity Fund” second quarter 2022 investor letter. A copy of the same can be downloaded here. The fund declined 17.6% in the second quarter compared to a 7.9% decline in the MSCI ACW Net Total Return Index. Only Heritage-Crystal Clean, the fund’s new addition, contributed positively to the fund’s performance. For more information on the fund’s top picks in 2022, please check its top five holdings.
In the letter, Mittleman Brothers discussed stocks like Heritage-Crystal Clean, Inc (NASDAQ:HCCI). Headquartered in Elgin, Illinois Heritage-Crystal Clean, Inc (NASDAQ:HCCI) is a waste treatment and disposal company that operates through Environmental Services and Oil Business. The stock of Heritage-Crystal Clean, Inc (NASDAQ:HCCI) closed at $34.97 per share on August 11, 2022. One-month return of Heritage-Crystal Clean, Inc (NASDAQ:HCCI) rose to 24.36% and its shares gained 21.97% of their value over the last 52 weeks. Heritage-Crystal Clean, Inc (NASDAQ:HCCI) has a market capitalization of $845.249 million.
Here is what Mittleman Brothers specifically said about Heritage-Crystal Clean, Inc (NASDAQ:HCCI):
“MIM did purchase a couple of new holdings on sale after the protracted sell-off. MIM bought a 2.5% weighting in a leading environmental services company that Chris Mittleman has admired for many years, Heritage-Crystal Clean, Inc (NASDAQ:HCCI), at an average cost of $26.77 in the waning days of June, with ~49% upside to MIM’s estimate of fair value at $40. As at 1 August the shares are $34, up recently on a stronger than expected quarterly report announced on 27 July, and a large insider buy of 150,000 shares on that same day at $27.00 ($4.05M), bringing CEO Brian Recatto’s total shares directly held to 820,505 ($28M).
MIM’s estimate of fair value for HCCI of $40 is based on a $901M EV = 8.6x EBITDAaL (est. for CY2022) of $105M (17.5% margin on $600M sales) = 18x FCF est. of $50M. Closest competitor, Clean Harbors / Safety-Kleen (CLH $90) trades at 8.5x EBITDA (est. 2022) and 18x FCF (CLH has roughly same EBITDA margin as HCCI, despite being 8x larger).
Below a description of the company from the most recent 10-Q:
Heritage-Crystal Clean, Inc., a Delaware corporation and its subsidiaries (collectively the “Company”), provide parts cleaning, hazardous and non-hazardous containerized waste, used oil collection, wastewater vacuum, antifreeze recycling and field services primarily to small and mid-sized industrial and vehicle maintenance customers. The Company owns and operates a used oil re-refinery where it re-refines used oils and sells high quality base oil for use in the manufacture of finished lubricants as well as other rerefinery products. The Company also has multiple locations where it dehydrates used oil. The oil processed at these locations is primarily sold as recycled fuel oil. The Company also operates multiple non-hazardous waste processing facilities as well as antifreeze recycling facilities at which it produces virgin-quality antifreeze. The Company’s locations are in the United States and Ontario, Canada. The Company conducts its primary business operations through Heritage-Crystal Clean, LLC, its wholly owned subsidiary, and all intercompany balances have been eliminated in consolidation…” (Click here to read more)
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Heritage-Crystal Clean, Inc (NASDAQ:HCCI) is not on the list of 30 Most Popular Stocks Among Hedge Funds. As per our database, Heritage-Crystal Clean, Inc (NASDAQ:HCCI) was held by 15 hedge fund portfolios at the end of the first quarter, which was 14 in the previous quarter.
We discussed Heritage-Crystal Clean, Inc (NASDAQ:HCCI) in another article and shared Cannell Capital’s list of best stock picks. You can check our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other prominent investors.
Disclosure: None. This article is originally published at Insider Monkey.
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