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Valens Research

Valens Credit Weekly Insights - 2021 02 17

Valens Credit Research Team highlighted ideas for AXL, TPR, and UAA. They have also provided recent analyses for GHC, while RIG topped the quantitative outlier report for the week.
Underlyings
American Axle & Manufacturing Holdings Inc.

American Axle & Manufacturing Holdings is a supplier to the automotive industry. The company designs, engineers and manufactures driveline and metal forming products. The company's business is organized into Driveline and Metal Forming segments. Driveline products consist primarily of front and rear axles, driveshafts, differential assemblies, clutch modules, balance shaft systems, disconnecting driveline technology, and electric and hybrid driveline products and systems. Metal Forming products consist primarily of axle and transmission shafts, ring and pinion gears, differential gears and assemblies, connecting rods and variable valve timing products.

AutoNation Inc.

AutoNation, through its subsidiaries, is an automotive retailer. The company provides a range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive finance and insurance products, which include vehicle service and other protection products, and the arranging of financing for vehicle purchases through third-party finance sources. The company owns and operates new vehicle franchises from stores located in the United States, in main metropolitan markets in the Sunbelt region. The company has three segments: Domestic, Import, and Premium Luxury.

Avis Budget Group

Avis Budget Group is a provider of mobility solutions through its three brands, Avis, Budget and Zipcar, together with several other brands. The company has two segments: Americas, which provides and licenses the company's brands to third parties for vehicle rentals and ancillary products and services in North America, South America, Central America and the Caribbean, and operates its car sharing business in certain of these markets; and International, which provides and licenses the company's brands to third parties for vehicle rentals and ancillary products and services in Europe, the Middle East, Africa, Asia and Australasia, and operates the company's car sharing business in certain of these markets.

Beazer Homes USA Inc.

Beazer Homes USA is engaged as a homebuilder. The company's homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes. The company purchases land or obtains an option to purchase land, which, in either case, requires certain site improvements prior to home construction. When available in certain markets, the company also buys finished lots that are ready for home construction. The company has investments with land developers, other homebuilders and financial partners to acquire land positions, to manage its risk profile and to utilize its capital base. The company also acts as the general contractor for the construction of its new home communities.

Community Health Systems Inc.

Community Health Systems is a holding company. Through its subsidiaries, the company operates general acute care hospitals and outpatient facilities. The company provides healthcare services through the hospitals that it owns and operates and affiliated businesses in non-urban and selected urban markets. Services provided through the company's hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. The company also provides additional outpatient services at urgent care centers, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

Constellium SE

Constellium N.V. designs and manufactures a range of innovative specialty rolled and extruded aluminum products, serving primarily the aerospace, packaging and automotive end-markets. Co. has a strategic footprint of manufacturing facilities located in the United States, Europe and China. Co.'s product portfolio commands higher margins as compared to less differentiated, more commoditized fabricated aluminum products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution. Co. organizes its business around three operating segments: Aerospace & Transportation, Packaging & Automotive Rolled Products, and Automotive Structures & Industry.

Delta Air Lines

Delta Air Lines provides scheduled air transportation for passengers and cargo. The company serves the Transatlantic, Transpacific and Latin America markets directly on the company and through joint ventures with airline partners. Internationally, the company has hubs and market presence in Amsterdam, London-Heathrow, Mexico City, Paris-Charles de Gaulle and Seoul-Incheon. These arrangements are commercial joint ventures that include joint sales and marketing coordination, co-location of airport facilities and other commercial cooperation arrangements. The company has other businesses arising from its airline operations, including providing maintenance and engineering support for its regional aircraft.

Diebold Inc.

Diebold Nixdorf is engaged in enabling Connected Commerce?. The company automates, digitizes and transforms the way people bank and shop. The company's integrated solutions connect digital and physical channels for consumers. The company's operating structure is focused on its two customer segments consisting of Banking and Retail. The products for banking customers consist of cash recyclers and dispensers, deposit terminals, teller automation and kiosk technologies, as well as physical security solutions. The retail product portfolio includes modular, integrated and mobile point of sale and self-checkout terminals that meet automation and omnichannel requirements of consumers.

Dish Network

DISH Network is a holding company. Through its subsidiaries, the company operates two business segments: Pay-TV and Wireless. The company provides pay-TV services under: the DISH? brand, which consists of, among other things, Federal Communications Commission licenses authorizing the company to use direct broadcast satellite and Fixed Satellite Service spectrum, the company's owned and leased satellites, and certain other assets utilized in the company's operations; and the Sling? brand, which consists of, among other things, live-linear streaming over-the-top Internet-based domestic, international and Latino video programming services. In addition, the company invests to acquire certain wireless spectrum licenses and related assets.

Expedia Group

Expedia Group is an online travel company. The company's portfolio of brands includes: Expedia.com?, an online travel brand; Hotels.com?, a global lodging company operating websites with its Hotels.com? Rewards loyalty program; Vrbo?, a global online marketplace with a focus on providing lodging options for families; Egencia?, a corporate travel management company; Hotwire?, an online travel website providing spontaneous travel through its Hot Rate? deals; trivago?, an online hotel metasearch platform; and SilverRail Technologies, Inc., provider of a global rail retail and distribution platform connecting rail carriers and suppliers to both online and offline travel distributors.

Gap Inc.

The Gap is an apparel retail company. The company provides apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, and Hill City brands. The company has stores in the U.S., Canada, the U.K., France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico, and has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, and Banana Republic stores throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate stores that sell apparel and related products under the company's brand names.

General Mills Inc.

General Mills manufactures and markets branded consumer foods. The company's segments are: North America Retail, which provides cereals, refrigerated yogurt, soup, meal kits, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and organic products, among others; Convenience Stores and Foodservice, which provides snacks, yogurt, frozen meals and frozen dough products, and baking mixes, among others; Europe and Australia, which includes retail and foodservice businesses in the Europe and Australia region; Asia and Latin America, which consists of retail and foodservice businesses in the Asia and South America regions; and Pets, which includes pet food products.

General Motors

General Motors designs, builds and sells trucks, crossovers, cars and automobile parts. The company also provides automotive financing services through its subsidiary, General Motors Financial Company, Inc. (GM Financial). GM Financial provides retail loan and lease lending across the credit spectrum. GM Financial provides commercial lending products to dealers including new and used vehicle inventory floorplan financing and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.

Graham Holdings

Graham Holdings is an education and media company, whose operations include educational services; television broadcasting; online, print and local TV news; home health and hospice care; and manufacturing. The company's subsidiary, Kaplan, Inc. provides educational services, both domestically and outside the United States. The company's media operations comprise of the ownership and operation of television broadcasting, plus Slate and Foreign Policy magazines; Megaphone, a provider of podcast technology for publishers and advertisers; and Pinna, an ad-free audio streaming service for children. The company also owns, among others, home health and hospice providers, industrial companies, and automotive dealerships.

HCA Healthcare Inc

HCA Healthcare is a holding company. Through its subsidiaries, partnerships and joint ventures, the company owns and operates hospitals and related health care entities. Most of the company's general, acute care hospitals provide medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic services and emergency services. The general, acute care hospitals also provide outpatient services such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology and physical therapy. The company's psychiatric hospitals provide therapeutic programs including child, adolescent and adult psychiatric care, adolescent and adult alcohol and drug abuse treatment and counseling.

L Brands

L Brands is a holding company. Through its subsidiaries, the company is a specialty retailer of women's intimate and other apparel, personal care, beauty and home fragrance products. The company sells its merchandise through company-owned specialty retail stores in the U.S., Canada, the U.K., Ireland and Greater China, and through its websites and other channels. The company's other international operations are primarily through franchise, license and wholesale partners. The company has three reportable segments: Victoria's Secret, Bath & Body Works and Victoria's Secret and Bath & Body Works International. The company operates the following retail brands: Victoria's Secret, PINK and Bath & Body Works.

Mattel Inc.

Mattel is a global children's entertainment company that engages in the design and production of toys and consumer products. The company's portfolio of owned and licensed brands and products are organized into the following categories: Dolls, which include brands such as Barbie, American Girl, Enchantimals, and Polly Pocket; Infant, Toddler, and Preschool, which include brands such as Fisher-Price and Thomas & Friends, Power Wheels, Fireman Sam, and Shimmer and Shine (Nickelodeon); Vehicles, which include brands such as Hot Wheels, Matchbox, CARS (Disney Pixar), and Jurassic World (NBCUniversal); Action Figures, Building Sets, and Games, which include brands such as MEGA, UNO and WWE.

MGM Resorts International

MGM Resorts International is a holding company. Through its subsidiaries, the company owns and operates casino, hotel, and entertainment resorts across the United States and in Macau. The company's segments include: Las Vegas Strip Resorts, which consists of casino resorts such as Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, New York-New York, Excalibur, and Park MGM; Regional Operations, which consists of casino resorts such as MGM Grand Detroit, Beau Rivage, Gold Strike Tunica, Borgata, MGM National Harbor, MGM Springfield, Empire City, and MGM Northfield Park; and MGM China, which owns and operates casino resorts and the related gaming subconcession and land concessions.

Netflix Inc.

Netflix is engaged in subscription streaming entertainment service including TV series, documentaries and feature films across a variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, without commercials. Additionally, several members in the United States subscribe to the company's DVD-by-mail service. The company improves its streaming content with a focus on a programming mix of content. The company's members can download a selection of titles for offline viewing. The company operates its business as a global operating segment.

Ryder System Inc.

Ryder System is engaged in transportation and supply chain management solutions. The company's segments include: Fleet Management Solutions, which provides full service leasing and leasing with maintenance options, commercial rental, contract or transactional maintenance services, and fleet support services such as vehicle administration and fuel service; Supply Chain Solutions, which provides logistics management services, including distribution management, transportation management and other services; and Dedicated Transportation Solutions, which combines equipment, maintenance, drivers, administrative services and additional services to provide a dedicated transportation solution.

Tapestry

Tapestry is a lifestyle company. The company's primary product offerings, manufactured by third-party suppliers, include women's and men's bags, small leather goods, footwear, ready-to-wear including outerwear, watches, weekend and travel accessories, scarves, eyewear, fragrance, jewelry and other lifestyle products. The company has three reportable segments: Coach, which includes sales of Coach brand products to customers through Coach operated stores; Kate Spade, which includes sales primarily of Kate Spade New York brand products to customers through Kate Spade operated stores; and Stuart Weitzman, which includes sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores.

Transocean Ltd.

Under Armour Class A

Under Armour is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. The company provides HEATGEAR?, which is designed to be worn in warm to hot temperatures under equipment or as a single layer; and COLDGEAR?, which is designed to wick moisture from the body while circulating body heat from hot spots to help maintain core body temperature. The company's footwear products include running, basketball, cleated sports, slides, training, and outdoor. The company provides digital fitness subscriptions, along with digital advertising through its MapMyFitness, MyFitnessPal and Endomondo applications.

Unisys Corp.

Unisys is an information technology company. The company's Services segment provides cloud and infrastructure services, application services and business process outsourcing services. In cloud and infrastructure services, the company assists clients to apply cloud and as-a-service delivery models. In application services, the company develops and manages applications for select industries and provides data analytics. In business process outsourcing services, the company assumes management of processes and functions for clients in target industries. The company's Technology segment designs and develops software and provides hardware and other related products including Unisys ClearPath Forward? and Unisys Stealth?.

United States Steel Corp.

United States Steel is a steel producer of flat-rolled and tubular products with production operations in the United States and Europe. The company is also engaged in railroad services and real estate operations. The company's segments are: North American Flat-Rolled, which produces slabs, strip mill plates, sheets and tin mill products; U. S. Steel Europe, which produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe, as well as heating radiators and refractory ceramic materials; and Tubular Products, which produces and sells electric resistance welded steel casing and tubing (known as oil country tubular goods), and standard and line pipe and mechanical tubing.

Universal Health Services Inc. Cl B

Universal Health Services owns and operates, through its subsidiaries, acute care hospitals and outpatient facilities and behavioral health care facilities. The company owns and/or operates inpatient facilities and outpatient and other facilities located in several states including, Washington, D.C., the United Kingdom, and Puerto Rico. Services provided by the company's hospitals include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. The company's reportable operating segments consist of acute care hospital services and behavioral health care services.

Varex Imaging

Varex Imaging is a designer and manufacturer of X-ray imaging components. In its Medical business segment, the company designs, manufactures, sells and services X-ray imaging components for use in a range of radiographic or fluoroscopic imaging applications including computed tomography, mammography, oncology, cardiac, surgery, dental, and computer-aided detection. In its Industrial business segment, the company designs, manufactures, sells and services X-ray imaging products for use in several markets, including security applications, such as cargo screening at ports and borders and baggage screening at airports, and nondestructive testing and inspection applications used in several other markets.

Warrior Met Coal

Warrior Met Coal is a holding company. Through its subsidiaries, the company is a producer and exporter of met coal. The company sells its coal product to steel producers in Europe and South America. The company's mining operations consist of two underground met coal mines in Southern Appalachia's coal seam (Mines No. 7 and No. 4) and other surface met and thermal coal mines. The company's natural gas operations remove and sell natural gas from the coal seams owned or leased by the company and others as a byproduct of coal production. The company's degasification operations improve mining operations and safety by reducing natural gas levels in its mines. The company also owns mineral rights for recoverable reserves at its Blue Creek Energy Mine.

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Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.

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