Redknee Solutions (RKN-T)

Had been Short on this for a little over a year. Has now covered, meaning it is probably at the bottom. This is a management team that he has always liked. Did a massive acquisition. This was followed by a huge run up, and got way overdone. In the meantime the business they had acquired was in decline and they had to do some restructuring. Thinks they are mostly that now and have turned the corner. He likes the name here. Has a small position, but wants to see how the next quarter or 2 play out.

Had quite a drop in the last couple of years. This is a company that made a large acquisition and has not delivered on predicted synergies. Disappointed a lot of people over the last couple of years. Avoid it until they show better execution.

Bought a big division from Nokia. The concern was why Nokia was selling this. Margins were not that good last quarter. Three times in a row margins were not that good in that division. They need to improve those. He would rather wait for this to turn before buying them.

He has been short for a while. He thought they would have integration problems when they bought a company 8 times their size, which was shrinking. It is getting to levels where he is considering covering his shorts.

He sold. Good management, but a very volatile stock that can swing on a quarterly results.

Continues to be very bullish on this. Raised a little money in the last while, and this was followed by the tech sector getting hit because of a general pullback. Fundamentals have not changed, but in fact they have improved. Have signed additional contracts. They have extremely sticky customers. The shoring up of the balance sheet gives them additional ability to bid for more business with their existing customer base, as well as new business. Trading at an extremely cheap multiple.

This company bought the Nokia-Siemans systems business, 5X the size of their previous business. Got it for a good price, but it has been bumpy in converting customers. He is Short this company, but it is starting to get to a level where he might think about buying it back.

Market cap of about $590 million, and is in the top quarter of his database. Acquired a huge business from Nokia (NOK-N), and have been able to turn that around, and start to make some decent money. There is huge optimism that this will be very successful. They are still going through some teething times, but overall he thinks they are doing quite well with it. ROE is reasonable at 12%. Earnings growth is okay. Sales have been up 33% in the last quarter when they reported in April. The coming quarter is expected to have a 45% earnings growth, and then slows down the quarter after that to 15%.

It had a huge run up after their acquisition, but then the margins weren’t what investors thought. Now things are on track and things look better for the next 12 months. Balance sheet is in good shape. Won some new contracts in recently.

An interesting business. They saw a number of great contracts being signed. We haven’t seen the numbers from them yet. When they came out with them, the costs were higher than expected. Management thinks you will see the numbers over the next few quarters. He thinks it will recover. He sold previously, but may consider again in the future.

Made an acquisition that really transformed the company about a year ago. His issue is that it was up so much on the back of the acquisition and is marketed now as a software service play, but the businesses they bought are more services than software and has been shrinking and is in decline. Last quarter was quite a bit below analysts’ expectations. He is Short this and will consider exiting this position around $4.

An excellent buying opportunity at these levels. Company recently raised equity at $5.85 to shore up its balance sheet to show its customers that it is an extremely sound financial situation to assist them with their growth plans. Most of its customers are large telcos, utilities and railways and their product allows their customers to segment their customer base so they pay for every little thing. Trades at less than 1.5X EBITDA to sales.

You really have to know the story behind this to be in love with it. Chart shows a long base in 2011-2012 followed by a breakout in late 2012 with a 3 wave advance in 2013. He does not like this one under $6, so be very careful. When you buy in after a spike, you have to be convinced that the story supports what you are going to do.

Seeing a lot of positive aspects to the business. Software solutions to telecom carriers. They are a mission critical part of telecom businesses. They have new technologies to hit their customers with. You will see lots of catalysts as wins are announced.

He is looking at it. Just did an acquisition and it looks like 2014 will be a good year. He is not quite ready to endorse it but likes what is happening there.