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Stocks-in-Depth

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Stocks-in-Depth thoroughly examines the fundamentals of reasonably valued high-quality small and mid-cap growth companies. It is produced by GARP Research, a provider of equity research to institutions including many of the most well-known fund managers for over 20 years. GARP is known for its granular modelling of business lines and in-depth assessment of competition and served markets. Stocks-in-Depth searches for value and growth by researching stocks that may be out of favor, or where a major catalyst to earnings growth is hidden. Our financial models attempt to shed light on trends underneath opaque segment reporting. Stocks in Depth emphasizes balance sheet accounts and profitability margins to determine underlying return on capital, and maintains healthy skepticism regarding pro forma adjustments and undue reliance upon unconventional measures such as EBITDA. We emphasize field visits with managements, industry conferences, non-public competitors and ancillary fields to detect industry dynamics. In our search for the best companies and investment opportunities, we often challenge the consensus view. StocksinDepth forecasts over the long-term, typically over about a three year horizon, and review track records going back for years.

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Stocks-in-Depth thoroughly examines the fundamentals of reasonably valued high-quality small and mid-cap growth companies. It is produced by GARP Research, a provider of equity research to institutions including many of the most well-known fund managers for over 20 years. GARP is known for its granular modelling of business lines and in-depth assessment of competition and served markets. Stocks-in-Depth searches for value and growth by researching stocks that may be out of favor, or where a major catalyst to earnings growth is hidden. Our financial models attempt to shed light on trends underneath opaque segment reporting. Stocks in Depth emphasizes balance sheet accounts and profitability margins to determine underlying return on capital, and maintains healthy skepticism regarding pro forma adjustments and undue reliance upon unconventional measures such as EBITDA. We emphasize field visits with managements, industry conferences, non-public competitors and ancillary fields to detect industry dynamics. In our search for the best companies and investment opportunities, we often challenge the consensus view. StocksinDepth forecasts over the long-term, typically over about a three year horizon, and review track records going back for years.

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Average Ratings
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Cover image of Stocks-in-Depth

Stocks-in-Depth

Updated 6 days ago

Read more

Stocks-in-Depth thoroughly examines the fundamentals of reasonably valued high-quality small and mid-cap growth companies. It is produced by GARP Research, a provider of equity research to institutions including many of the most well-known fund managers for over 20 years. GARP is known for its granular modelling of business lines and in-depth assessment of competition and served markets. Stocks-in-Depth searches for value and growth by researching stocks that may be out of favor, or where a major catalyst to earnings growth is hidden. Our financial models attempt to shed light on trends underneath opaque segment reporting. Stocks in Depth emphasizes balance sheet accounts and profitability margins to determine underlying return on capital, and maintains healthy skepticism regarding pro forma adjustments and undue reliance upon unconventional measures such as EBITDA. We emphasize field visits with managements, industry conferences, non-public competitors and ancillary fields to detect industry dynamics. In our search for the best companies and investment opportunities, we often challenge the consensus view. StocksinDepth forecasts over the long-term, typically over about a three year horizon, and review track records going back for years.

Rank #1: SID 0030 Free Trade Doesn't Work - Part 1

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History is replete with unanticipated events: Pearl Harbor, the dismantling of the Berlin Wall, the 2008 credit meltdown, and now the improbable ascendance of Donald Trump to America’s highest office.  Yet there are many who previse change, but whose ideas are so unorthodox that they are never see the light of day until after the fact.  With this in mind, Stocks-in-Depth introduces a little known economist, Ian Fletcher, and his 2010/2011 book, Free Trade Doesn’t Work: What Should Replace It and Why, in this four-part podcast.  In Part 1, we present the last chapter of his tome, The End of the Free Trade Coalition, an analysis of political cycles going back to 2004 which in fact strongly presaged that Mr. Trump might sweep the electoral college in 2016 on the basis of appealing to workers displaced by nearly two decades of free trade agreements and their consequences.

Jan 01 2017

39mins

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Rank #2: SID 0034 Knowles (KN) - Part 1

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Knowles Corp. has suffered mightily since its spinoff from Dover Corp. in early 2014, mostly from the disastrous acquisition of Sound Solutions.  MEMS penetration of smartphones, currently around 1.7 globally compared to 4 per iPhone, can continue to rise, since this statistic is nearer to one mike per phone outside of Apple.  GARP Research has published a major report on artificial intelligence earlier in 2017, part of which discusses advancements in speech recognition.  Amazon's Echo / Dot makes use of AI, as do new clones of Alexa developed by Chinese companies like iFlytek.  This multi-part podcast discusses many of these fascinating developments, including how the emergence of the internet of things could also positively impact MEMS microphones sales. 

Sep 10 2017

1hr 32mins

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Rank #3: SID 0011 Trimble Navigation - Part 1

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Trimble Navigation's high-margin geospatial business and its precision navigation systems for farm use have slumped as the dollar has pressured commodities markets.  But the company continues to grow in building information modeling (BIM) software and in mobile solutions for truckers and other fleets and work forces.  Management is seeking to improve profitability, and heavy investment in new features make its precision location software more  indispensable.  As technology continues to advance rapidly, will Trimble be a beneficiary of improved hardware and cloud-based data systems, or will its customers retrench?  Can it continue to make acquisitions, or must it focus inward to improve margins?

Dec 26 2015

1hr 3mins

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Rank #4: SID 0033 Free Trade Doesn't Work - Part 4

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Donald Trump is about to be inaugurated as the 45th president of the United States.  As far as we can tell, every other country in the world advances a self-serving industrial policy, to the detriment of the United States, which embraces free trade.  In this final episode of Stocks-in-Depth’s review of Ian Fletcher’s 2010-2011 book, Free Trade Doesn’t Work, we start by presenting the author’s case that China, Japan, and Europe have emphasized industrial policy over free trade for years.  Fletcher’s solution for the U.S. is a flat tariff, which would eliminate the influence of lobbyists and the inefficiencies of propping up dying industries.  We suspect that Trump's appointment of Peter Navarro to run the National Trade Council might signal that this proposal is on the table.  If the Trump administration considers imposing a flat tariff to balance the trade deficit and stimulate job creation, what would the economic outcome be?  What are the investment implications?  Are there second and third order effects that might be considered?  Might inflation result?  In this conclusion to its 4-part series on free trade and the flat tariff solution, Stocks-in-Depth moderator Bill Baker, CFA examines each of these questions and more in this exciting extension of thought to what Ian Fletcher wrote prophetically in 2010-2011.

Jan 21 2017

55mins

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Rank #5: SID 0014 Entellus Medical

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Entellus Medical came public in January 2015 under the premise that it was the leader in office-based balloon sinus dilation, which was a small but increasingly preferred niche compares to FESS operations performed in hospitals.  The investment research discussed in this podcast examines whether changes in medicare reimbursement may have been a setback that favored hybrid-FESS procedures, and how steroid implants may have temporarily affected what seemed to be an inevitable shift to treating chronic sinusitis in a dentist-like procedure.  We also discuss complications that arise, and the suitability of dealing with these outside of the operating room.  

Jan 30 2016

1hr 44mins

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Rank #6: SID 0026 Generac - Part 1

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Generac has seen its sales and earnings decline for over two years.  Four powerful storms swept across the U.S. in the 2011-2012 period, but ever since then electric power outages have been well below normal.  In Part 1 of our discussion of Generac, we'll cover what businesses this company runs, and what management's strategy is.   We will have to stop and resume the discussion in Part 2, but you will start to see how our granular approach of deconsolidating and estimating sales and earnings within the backwaters of Generac can yield insight into where this company has been, and how it has changed through this difficult period for standby generators and other related engine products.

Oct 04 2016

1hr 13mins

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Rank #7: SID 0028 Generac (GNRC) Part 3

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Generac astutely commandeered the clear leadership position in home standby generators during the late 1990s and after the start of the millennium.  In so doing, it developed an expertise in engines optimized for burning natural gas or propane, such as its 2-cylinder OVHI 1,000 cc displacement engine that can deliver 16 kW of standby power, as well as by making transfer switches and other related technologies.  Moreover, it has structured its supply chain to optimize a position as an “asset light” assembler that can nevertheless exert control over its intellectual property.  But home standby is a niche market, and management has not wanted its growth constrained.  It has used M&A to forge ahead into the commercial & industrial markets, historically the domain of entrenched leaders Cummins Onan and Caterpillar.  It has also become a leader in tower lighting, for which it does not even make engines.  It has also reentered the small-engine portable generator space, and developed a line of power washers.  In this segment, Stocks-in-Depth examines the competitive dynamics affecting Generac in its usual granular and entertaining style, providing cameos of several surprisingly profitable innovators against which Generac must wrestle away market share to succeed.

Dec 13 2016

1hr 22mins

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Rank #8: SID 0029 Generac (GNRC) Part 4

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When we first examined the home standby generator market, we were struck by what seems to be a unanimity of opinion that tremendous secular growth would be driven by homeowners increasingly discovering the benefits of having an automated system to supply electric power in times of outages.  It’s argued that penetration is low, and that loss of power is not only inconvenient, but uneconomic, for food spoils and families must seek alternative shelter.  Yet as we looked into the matter, we saw that there was smart grid technology available for deployment that could sharply reduce truck rolls necessary to restore power after storms have hit.  This could reduce both the number of outages and their average duration.  The Berkeley Lab published an exhaustive grid reliability study in August 2015, which we thought would shed light on the subject, but the report failed to ever mention this possible solution.  In quarterly earnings reviews, Generac management and institutional analysts covering this stock seemed to neither volunteer any information about the smart grid nor would they ask about it.  Is grid technology an existential threat to Generac’s business?  In this last segment of our discussion of Generac, we try to piece together this puzzling avoidance of what one would think is a crucial consideration for Generac shareholders.

Dec 25 2016

44mins

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Rank #9: SID 0012 Trimble Navigation - Part 2

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Three players are preeminent in the field of precision navigation: Trimble, Hexagon, and Topcon.  Is the competitive dynamic stabilizing?  How are managements dealing with slower revenue growth, and does this mean that end markets are much more penetrated than before?  How rapidly can adoption of building information management (BIM) take place?  What are the implications for profitability going forward?

Jan 09 2016

1hr 18mins

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Rank #10: SID 0027 Generac - Part 2

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For at least a decade, Generac's strategy has been to leverage off of its clear leadership in the home standby generator market to establish market share in portable generators, power washers, and commercial & industrial standby electricity generation markets. How successful has it been? How profitable can these adjacencies be? What other companies have done well? What has happened to the poorer performers in the marketplace?

Nov 07 2016

1hr 3mins

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Rank #11: SID 0013 Plantronics

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Institutional investors have heard the story that unified communications is under-penetrated, and that soon most businesses will want to buy Plantronics' headsets that incorporate software compatible with Microsoft's Skype for Business cloud-based platform for office workers.  Why has penetration stalled at a fraction of where consultants thought it would have been already?  This stock research podcast provides equity analysis of Plantronics, and discusses why the penetration rate of unified communications might leap higher at some point in the next few years.  The competitive position of Plantronics and GN Store Nord / GN Netcom is explored fully.  There are high barriers to entry, for there are over 3 million lines of encrypted code in headsets.  These two players are duopolistic competitors, and they are both intensely focused upon returning cash to shareholders rather than destroying shareholder wealth.

Jan 22 2016

1hr 28mins

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Rank #12: SID 0032 Free Trade Doesn't Work - Part 3

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Institutional investment strategists follow economic and market data closely, and tend to weave together a narrative that explains the current trend.  Presently the US dollar is rising, like it has two times before in the last few decades.  In this podcast, we sample the perspective of Brown Brothers Harriman currency strategist Marc Chandler, whom we believe mistakenly thinks the rising dollar is proof that the U.S. trade deficit is benign.  In Part 3 of our series, Free Trade Doesn’t Work,” Stocks-in-Depth pulls apart the numerous assumptions behind Chandler’s thesis, except one: the powerful effect of interest rate differentials on the current momentum of the dollar.  Chandler will most likely be right in the short term, and he’s likely to try to make the opposite call when intervention stops the dollar’s path, as was the case in previous bull markets.  But he is wary of the rise of what he dubs “populism-nationalism,” in Europe and America, for it might put the stake into the heart of free trade.  For Chandler, it is a myth that the gigantic trade deficit, which has opened up since the early 1970s when the dollar was severed from its gold backing, means that the dollar is overvalued or that free trade is a failed policy.  To us, that’s a straw man, for currency pairs will always ebb and flow to the rhythms of the global credit cycle and capital’s desire to cross borders for investment purposes.  If the theoretical case for free trade has been falling apart since nearly the beginning of the millennium as economist Ian Fletcher contends, then further dollar strength would only ratchet up the pressure that is boiling under the surface in the form of populist-nationalist movements.

Jan 14 2017

41mins

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Rank #13: SID 0031 Free Trade Doesn't Work - Part 2

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The historical record shows that countries that rise to economic greatness did so through a strong industrial policy, which incorporates tariffs and non-trade barriers.  Moreover, at their apex these powers tended to adopt free trade, some vainly thinking that in doing so they might change the world for the better, but nevertheless be able to kick away the ladder upon which others might follow to industrial might.  In Part 2 of this special edition of Stocks-in-Depth, we review what economist Ian Fletcher calls the “forgotten history” of trade, and show how it contradicts the premises of classical economist David Ricardo’s theories of comparative advantage.  We also devote much of this podcast to presenting the many flawed assumptions behind Ricardian economic theory, as illustrated by the realities of the emergence on the world scene of great economic powers: England, the United States, Japan, and China.

Jan 07 2017

1hr 14mins

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Rank #14: SID 0025 Central Garden & Pet - Part 3

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Central Garden & Pet contains numerous distinct businesses within its two namesake segments.  In part 3 of this podcast, we spend nearly two hours breaking down the pieces within these segments, and provide granularity so you can appreciate how various rivals compete in each niche.  Along the way, we explode the myth that dog food market, in which Central doesn't have much of a presence, has unappetizing growth and profitability.  "Big dog food" is also the principal actor in the treat sector, but still Central has innovated and enjoyed success in treats and inedibles.  In Garden, we devote much time to describe controls and grass seed.  Part 3 also devotes much of its discussion to special ingredients, which mostly pertain to the flea and tick area.

Jul 02 2016

1hr 50mins

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Rank #15: SID 0024 Central Garden & Pet (CENT) - Part 2

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In Part 2 of the Central Garden & Pet podcast, we continue to review the operations of the company beginning with portions of the Pet segment, mainly Aquatics, Flea & Tick products, calming products, equine, and the professional and special ingredients businesses.  We discuss the Garden segment, especially controls.  Given some of the pieces of the Garden segment seem to have good profit margins, we explore why the other portions of this segment have thin margins, and what actions incoming CEO George Roeth might take to improve the situation.

Jun 02 2016

1hr 11mins

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