AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

Back on January 5, 2021, we published an insight highlighting the proposed break-up of <a href="https://www.smartkarma.com/entities/xpo-logistics-inc" target="_blank" data-smartkarma-citation="entities:12017:1" rel="noopener">Xpo Logistics (XPO US) </a>- SpinTalk: Multiple Envy Propels XPO Logistics' Break-Up Move To Get Its Mojo Back - via the separation of its logistics operations from its transportation business. This corporate event is now just a few days away and will be executed via  the tax-free spin-off of the logistics business GXO Logistics (GXO US) on August 2, 2021, effected through a 1-for-1 distribution of new GXO shares to XPO shareholders. With the separating companies having begun When-Issued trading as of July 22, 2021,  we believe this to be an opportune to review and update our value assessment of the upcoming  event. On a pre-spin basis , our updated assessment values  XPO at $163-$197, not too far from our first stab of $169-$186 made in January. This represents  an increase of 16% to 40% on the prevailing share price of $141.03,  which itself represents an 19% accretion from the $118.92 price printed in our January insight. However, with only one trading left before the separation becomes effective, the focus should be on the post-spin entities when they begin trading regular on Monday. While the XPO share price has reacted well to the break-up strategy, we believe there is still more value to be had in both sides of the spin-off as we lay out our thesis below.

Back on January 5, 2021, we published an insight highlighting the proposed break-up of Xpo Logistics (XPO US) - SpinTalk: Multiple Envy Propels XPO Logistics' Break-Up Move To Get Its Mojo Back - via the separation of its logistics operations from its transportation business. This corporate event is now just a few days away and will be executed via  the tax-free spin-off of the logistics business GXO Logistics (GXO US) on August 2, 2021, effected through a 1-for-1 distribution of new GXO shares to XPO shareholders. With the separating companies having begun When-Issued trading as of July 22, 2021,  we believe this to be an opportune to review and update our value assessment of the upcoming  event. On a pre-spin basis , our updated assessment values  XPO at $163-$197, not too far from our first stab of $169-$186 made in January. This represents  an increase of 16% to 40% on the prevailing share price of $141.03,  which itself represents an 19% accretion from the $118.92 price printed in our January insight. However, with only one trading left before the separation becomes effective, the focus should be on the post-spin entities when they begin trading regular on Monday. While the XPO share price has reacted well to the break-up strategy, we believe there is still more value to be had in both sides of the spin-off as we lay out our thesis below.

SpinTalk: More Value To Be Had In Now Imminent XPO Logistics Break-Up

In years past, <a href="https://www.smartkarma.com/entities/xpo-logistics-inc" target="_blank" data-smartkarma-citation="entities:12017:1" rel="noopener">Xpo Logistics (XPO US)</a> was driven by an aggressive acquisition strategy that fueled its explosive and profitable growth. This helped to turn the company into one of the world's major supply chain logistics providers as well as the 7th best-performing stock of the last decade among the Fortune 500. However, XPO has found the going tougher since late 2018. This one-time darling of investors is looking for that secret sauce to bring win back investor love. To this end, management has is proposing to break up the company into two, one a Logistics company, the other a Transportation company, on a tax-free basis to its shareholders. The market has responded warmly to the plan, but the shares still reflect a  wide valuation gap to purer play peers whether in the logistics segment or in the transportation category. This leaves the prospect of substantial value upside over the next 12 to 18 months, which will be all the greater should XPO at the same time deliver on its goal to deleverage its balance sheet.

 In years past, Xpo Logistics (XPO US) was driven by an aggressive acquisition strategy that fueled its explosive and profitable growth. This helped to turn the company into one of the world's major supply chain logistics providers as well as the 7th best-performing stock of the last decade among the Fortune 500. However, XPO has found the going tougher since late 2018. This one-time darling of investors is looking for that secret sauce to bring win back investor love. To this end, management has is proposing to break up the company into two, one a Logistics company, the other a Transportation company, on a tax-free basis to its shareholders. The market has responded warmly to the plan, but the shares still reflect a  wide valuation gap to purer play peers whether in the logistics segment or in the transportation category. This leaves the prospect of substantial value upside over the next 12 to 18 months, which will be all the greater should XPO at the same time deliver on its goal to deleverage its balance sheet.

SpinTalk: Multiple Envy Propels XPO Logistics' Break-Up Move To Get Its Mojo Back

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The rotation out of stay-at-home/COVID-19 beneficiary stocks and into reopening/economically sensitive stocks that we highlighted last week has continued, leading us to make several upgrades and one downgrade (see first bullet below). This broadening-out of participation and several other bullish developments highlighted below tells us the bulls have the upper hand. In today’s report we highlight attractive Groups and stocks within Discretionary, Transportation, and Manufacturing: CD-05 Auto Parts Retailers, TR-05 Large-Cap Air Freight &amp; Logistics, TR-12 Large-Cap Trucking, and MF-31 Building Products and Fixtures.

The rotation out of stay-at-home/COVID-19 beneficiary stocks and into reopening/economically sensitive stocks that we highlighted last week has continued, leading us to make several upgrades and one downgrade (see first bullet below). This broadening-out of participation and several other bullish developments highlighted below tells us the bulls have the upper hand. In today’s report we highlight attractive Groups and stocks within Discretionary, Transportation, and Manufacturing: CD-05 Auto Parts Retailers, TR-05 Large-Cap Air Freight &amp; Logistics, TR-12 Large-Cap Trucking, and MF-31 Building Products and Fixtures.

U.S. Equity Strategy: Healthy Sector Rotations Continue

Recent market developments are encouraging and have improved the overall health of the market, which has also incrementally improved our outlook. At the same time, there is still more to be desired before we can have confidence in the prospect of a broad market rally. In today’s report we highlight attractive Groups and stocks within Technology and Transportation: Semiconductor Equip., Large/Mid-Cap and Small-Cap, Electronic Equipment Components, and Trucking Large-Cap.

Recent market developments are encouraging and have improved the overall health of the market, which has also incrementally improved our outlook. At the same time, there is still more to be desired before we can have confidence in the prospect of a broad market rally. In today’s report we highlight attractive Groups and stocks within Technology and Transportation: Semiconductor Equip., Large/Mid-Cap and Small-Cap, Electronic Equipment Components, and Trucking Large-Cap.

U.S. Equity Strategy: Markets on the Mend, Still Not at Full Health

As the major averages break topside their respective 50-day M.A.s - a positive in its own right - we are encouraged by the shift away from growth &amp; defensives toward the down-and-out laggards in the value arena. It is too early to tell for certain if these are anything more than short-term countertrend moves, but for now the moves we are seeing give us reason for optimism -- something that was running very low just one week ago. In today’s report we highlight attractive Groups and stocks within Consumer Discretionary, Manufacturing, and Transportation: Homebuilding, Small-Cap, Auto Parts, Large-Cap, Trucking, Large-Cap, and Trucking, Small-Cap.

As the major averages break topside their respective 50-day M.A.s - a positive in its own right - we are encouraged by the shift away from growth &amp; defensives toward the down-and-out laggards in the value arena. It is too early to tell for certain if these are anything more than short-term countertrend moves, but for now the moves we are seeing give us reason for optimism -- something that was running very low just one week ago. In today’s report we highlight attractive Groups and stocks within Consumer Discretionary, Manufacturing, and Transportation: Homebuilding, Small-Cap, Auto Parts, Large-Cap, Trucking, Large-Cap, and Trucking, Small-Cap.

U.S. Equity Strategy: Value Closes the Gap on Growth

United States

Old Dominion Freight Line, Inc. is an inter-regional and multi-regional motor carrier.  The Company primarily transports less-than-truckload shipments of general commodities, such as consumer goods, textiles, and capital goods.  Old Dominion serves regional markets throughout the United States.

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Old Dominion Freight Line (ODFL US)

SpinTalk: More Value To Be Had In Now Imminent XPO Logistics Break-Up

XPO may have got its mojo back since first announcing the possible break-up of the company in early 2020, but with the break-up now imminent, we...

Robert Sassoon

SpinTalk: Multiple Envy Propels XPO Logistics' Break-Up Move To Get Its Mojo Back

XPO Logistic's move to break itself up into two separate companies promises to pay handsome returns to investors over the next 12 to 18 months

Robert Sassoon

U.S. Equity Strategy: Healthy Sector Rotations Continue

The rotation out of stay-at-home/COVID-19 beneficiary stocks and into reopening/economically sensitive stocks that we highlighted last week has...

Vermilion Research

U.S. Equity Strategy: Markets on the Mend, Still Not at Full Health

Recent market developments are encouraging and have improved the overall health of the market, which has also incrementally improved our outlook....

Vermilion Research

U.S. Equity Strategy: Value Closes the Gap on Growth

As the major averages break topside their respective 50-day M.A.s - a positive in its own right - we are encouraged by the shift away from growth...

Vermilion Research

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