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Learn more about SumZero research at sumzero.com or contact [email protected] 3 Purpose of Report This report features seventeen, highly-rated pieces of research chosen from a pool of nearly 1,500 reports uploaded to the SumZero community during the 2014 calendar year. The research available within this document does not represent the best-performing ideas published in SumZero in 2014, but rather includes a diverse representation of high-quality thinking and analysis available therein. These are reduced versions of full-length research reports that carry all of the hallmarks of the type of inspired, actionable analysis that we strive to facilitate as an organization. About SumZero SumZero is the world’s largest community of investment professionals working at hedge funds, mutual funds, and private equity funds. With nearly 11,000 pre-screened research professionals collaborating on a fully-transparent platform, SumZero fosters the sharing of many thousands of proprietary investment reports every year and offers several ancillary services in support of that effort. These free services include capital introduction services, buyside career placement services, media placement, and more. SumZero’s membership base is represented by analysts and PMs at nearly all of the world’s largest and most prominent investment funds. We are based in the Soho neighborhood of New York City. Learn more at: sumzero.com. Learn more about SumZero research at sumzero.com or contact [email protected] 4 Table of Contents 1. Ajoy Reddi (Fred Alger Management) Page 6 Short on Let’s Gowex S.A. (GOW:SM), June 24 Gowex, a Spanish technology leader in WiFi connectivity and Smart Cities, is really an accounting fraud and a "pump and dump" scheme. 2. Eiad Asbahi (Prescience Investment Group) Page 10 Long on Hawaiian Holdings Inc (HA:US), February 18 Growth spend has resulted in GAAP financials that understate/obscure HA's economics. It's now at an inflection, with margins to rise & FCF to turn positive. 2016E FCF alone = 35% of mrkt cap. 3. Torin Eastburn (Monte Sol Capital) Page 13 Long on Glentel Inc (GLN:CN), August 5 Good company facing temporary problems. $11 stock worth $17 today and $27 in 2016 based on peer M&A multiple. Insiders own 55%. 20%+ ROE. History of double-digit growth. 13% FCF yld, 5% div. 4. Ian Clark (Dichotomy Capital) Page 16 Short on Transocean Ltd (RIG:US), November 3 As utilization across the ultradeepwater space drops, RIG must lock-in day rates well below current rates or idle rigs. RIG’s over-leveraged balance sheet will not help weather the storm. 5. Amarish Mehta (Tenor Capital Management) Page 19 Long on RF Micro Devices Inc (RFMD:US), April 2 RFMD is a special situations investment that entails a transfomative acquisition with TQNT that could drive 50-90% upside in the stock. to $12-15. The analyst revised his price target on 9/2/14 to $17-$20. 6. Tice Brown (Snyder Brown Capital Management) Page 22 Long on Handy & Harman Ltd (HNH:US), May 1 Handy & Harman is a niche manufacturing conglomerate trading at a 2014E free cash flow yield of 20% majority owned and operated by a proven deep value investor. 7. Bradd Kern (Armored Wolf) Page 25 Long on HC2 Holdings Inc (HCHC:US), March 18 Phil Falcone’s newly purchased entity HC2 (HCHC) has been on a torrid deal making pace, suggesting he is intensely focused on value creation within it. The stock is deeply undervalued. 8. Nick Mazing (Ampera Capital) Page 28 Short on Avon Products Inc (AVP:US), September 23 Avon's never-ending turnaround indicates that the business is structurally challenged: should reprice down to other "melting cubes". FX and overpromises for the next 12 months will hurt. 9. Logan Suriano (Sio Capital Management) Page 31 Long on BioDelivery Sciences International Inc (BDSI:US), May 16 Learn more about SumZero research at sumzero.com or contact [email protected] 5 BDSI is a specialty pharmaceutical company nearing regulatory value inflection points for compelling products in defined markets. 10. Parsa Kiai (Steamboat Capital Partners) Page 34 Long on Westjet Airlines Ltd (WJA:CN), June 17 Exceptionally well-run, well-capitalized and cost-advantaged airline trading at material discount to intrinsic value. 11. Steven Kiel (Arquitos Capital Management) Page 37 Long on ALJ Regional Holdings Inc (ALJJ:US), February 22 ALJ is a unique holding company that recently acquired a subsidiary where they can deploy their considerable NOLs. They recently released results from their first relatively clean quarter. 12. Steven Gorelik (Firebird Management) Page 40 Long on Blackhawk Network Holdings Inc (HAWKB:US), June 13 Underpriced Safeway Spin-Off operating in disciplined duopoly, growing at 20% per year with negative working capital. 13. Tao Long (Connective Capital) Page 43 Long on Peregrine Semiconductor Inc (PSMI:US), June 16 PSMI is ridiculously undervalued. Stock has 50% upside based on non-core business alone. Upcoming catalysts offer additional high-impact upside. 14. Sean Brown (Ancient Art, LP) Page 46 Short on Nimble Storage Inc (NMBL:US), January 27 NMBL is a small-enterprise storage-box hardware company with unsustainable margins that is losing money today, trades at 30x revs; very challenged to grow into its near-$4b valuation. 15. Krum Dukin (Ampera Capital) Page 50 Long on Take-Two Interactive Software Inc (TTWO:US), January 6 TTWO trades at a discount to peers despite hugely successful GTA V release, improved intellectual property and a massive cash balance. 16. Maneesh Nath (Arcstone Capital) Page 54 Long on on RS Software India Ltd (RSST:IN), January 23 We expect revenues to grow at over 20% CAGR over the next 5 years. The company generates $67M of revenues & can be bought for $30M. It holds cash of $7.9 M & has 0 debt. 17. Jackie Hua (Zhisheng Capital) Page 58 Long on on Amicus Therapeutics Inc (FOLD:US) June 24 A rare disease developer expected to receive positive clinical outcome and bring new product to a billion dollar market soon, deeply undervalued from misunderstanding of product potential. Learn more about SumZero research at sumzero.com or contact [email protected] 6 Short on Let's Gowex S.A (GOW:SM) Elevator Pitch: Gowex, a Spanish technology leader in WiFi connectivity and Smart Cities, is really an accounting fraud and a "pump and dump" scheme. Disclaimer: The author of this idea did not disclose an active position in this security at the time of posting, but may trade in and out of this position without informing the SumZero community. Author: Ajoy Reddi Age: 40 Title: Vice President Current Firm: Fred Alger Management Location: New York, NY Prior Experience: Allianz Global Investors, Credit Suisse Securities, Franklin Templeton Investments, William Blair & Co. Undergrad: Johns Hopkins University Graduate: University of Chicago (Booth) Certifications: N/A I first got to know Let's Gowex on July 19, 2013, Recommendation Details when the CEO, Jenaro Garcia, came to New York on a sell-side arranged roadshow. Let's Gowex Asset Class: Common Equity purports to be a global provider of free WiFi Sector: Communications hotspots on behalf of municipalities and transit Country: Spain authorities worldwide. Their business model is to Currency: Euro provide city residents free WiFi through an ad- Situation: Other supported model; essentially a user will access Timeframe: 1-2 Years their WiFi by viewing a free advertisement that Catalyst(s): N/A they sell to ad agencies who represent various Date of Recommendation: 6/23/14 brand customers. The company claims that there Price at Recommendation: 20.00 is a positive network effect created by their Target Price: 0.00 hotspots in that the more users who access the Current Status: CLOSED web through their hotspots the more ability they Date of Close: 7/31/14 have to monetize the user data that is generated. Closed Price: 0.00 The company has ambitious plans to sell Realized Return: 100.0% advanced services such as We2, which they claim Expected Return: N/A to be a "social-WiFi service" that will "to boost the Benchmark: iShares MSCI Europe Small-Cap interaction between people, businesses and the ETF city itself." The company currently has set up WiFi Return vs.