Groove Update – MARK, INUV & CVSL
A quick update on three of our focus stocks, Remark Media, Inuvo and CVSL.
A Groove participant attended the LD Micro conference presentations for two of our focus stocks this week (Remark Media and Inuvo) and also had one on one meetings with executives of each.
For Remark the meeting was with CEO Kai-Shing Tao and CFO Doug Osrow. We were very encouraged by the tone and sense that this is a company with many potential catalysts over the next 12 months including –
1) Vegas.com – the opportunity to grow Vegas.com is tremendous, as the company’s ticketing and lodging businesses have been regional leaders in traffic, but lagging on converting those lookers to bookers. With some tweaks to the booking system that was being used to incorporate some of the “closing” features of a booking.com, expedia or other competitors there appears to be significant upside by simply improving the close rate. Additionally, there are numerous opportunities for partnerships and cross promotions with many other companies that want to gain as much as exposure as possible in the Vegas market, with the recently announced Lyft partnerhips being a prime example. Vegas.com is a very large business $60m+ in annual net revenue, but in many ways it had been a family run company and there are many areas where small improvements could yield big top and bottom line results.
2) Sharecare – the likelhood that the 5.2% stake in Sharecare will be monetized in 2016 is very strong. While they could not speak to the possibility of an IPO by Sharecare (due to Mr. Tao’s being on the Sharecare BOD), they did indicate that they believe that Remark will see some type of liquidity event in 2016 that allows Remark shareholders to monetize at least part of the enormous increase in Sharecare’s value that has occurred over the last few years.
3) Kan Kan has the potential to transform the company. We did not get to dive into this as much as I would have liked due to my schedule to meet with another company, but I got the sense that this represents the greatest potential Alpha from among the three being discussed here. Already live in Asia, this will be expanding significantly over the months ahead and the company apparently has gained access to social networks in Asia whose data flowing through the KanKan system will create tremendous value for advertisers.
We maintian a very positive outlook for Remark shares and will likely be aggressive buyers again when we get a chance to review a full quarter’s filings where the Vegas.com assets are included for the full Q. If the numbers fall where the historical results would suggest, Remark will be undervalued in the current $4.50 trading range.
Inuvo – we were able to attend Inuvo’s presentation as well as spend some one on one time with Inuvo CFO Wally Ruiz. We note that there appeared to be a bigger following for Inuvo this year and Mr. Ruiz’s schedule was booked with one on one meetings with interested investors. Our biggest takeaways from the presentation and conversations were –
1) Sitelinks – Inuvo’s recently launched sitelinks service seems to be catching on and the company’s salesforce is in the early stages of pushing it out to potential customers with good results thus far. We did not get a sense for the potential bottom line impact, but note that the quarter ending in three weeks will be the first full quarter since sitelinks was launched and also that Q4 is usually a seasonally strong quarter for Inuvo.
2) Acquisitions – Mr. Ruiz mentioned the acquisition earlier this year of some websites that were previously part of the company’s Partner Network. As Inuvo serves the ads that generate the revenue for the thousands of websites in the Partner Network, Inuvo has an enviable vantage point from which to view the performance and gauge the true potential for these sites. With the company’s now debt free balance sheet and liquid acquisition currency, the opportunity is there for more deals and we would not be surprised to see Inuvo accelerating its growth in 2016 with additional acquisitions.
3) New Address – Inuvo’s move to the technology park in Little Rock is stirring new excitement with existing staff and they believe this move will allow Inuvo a stronger ability to attract and retain top technology employees.
Overall, we were given a very favorable impression of how things are progressing with Inuvo and also got the sense that more investors are beginning to show more interest in the Inuvo story. While we have not been aggressive buyers north of $3, we view the intermittent pullbacks as good buying opportunities to add to your long term holdings.
CVSL – Over the course of the last week we have been digging deeper into the situation we mentioned the previous Friday about the very large naked short position. We have uncovered much more there than we could provide in a brief update like this one and we also are waiting to confirm a few specifics with the company in a call today. We should be able to provide the full update tomorrow.
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