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KNOT: From Branding to Monetization, Raising our FY11 Estimates

September 29th, 2010

We introduced KNOT as a long idea approximately 3-4 months ago based on the following: KNOT still has leading media and ecommerce franchises serving large end-markets. The company has just started to scratch the surface of its market opportunity. We...

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A View From the Frontlines of Housing - Feedback From 500 Residential Real Estate Brokers

September 28th, 2010

A few months ago, we published the first in what will be a series of reports backed by our proprietary survey of residential real estate brokers across the country, "A View from the Frontlines of Housing".  At that time we argued...

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The Catalysts in the For-Profit Education Sector Over the Next 6-8 Weeks - It's Not All About Gainful Employment

September 23rd, 2010

Volatility has always been a hallmark of the publicly traded for-profit education companies.  In the ten+ years we have been following the sector, the number of trading opportunities have been seemingly...

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PAA Research SMid Cap Portfolio Update - At the 1-Year Mark up 15.7%, YTD up 9.5%

September 14th, 2010

Approximately 12-months ago, we introduced the PAA Research SMid Cap Portfolio.  Our objective was to provide our clients with the ability to track a long/short equity portfolio comprised entirely of small and mid cap names....

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THQI: The Waiting Has Been the Hardest Part, Finally Some Catalysts for THQI

August 31st, 2010

THQI's "summer of discontent" appears it could finally be coming to a close.  Since Memorial Day, THQI shares have lost close to 40% in value. THQI shares now trade below book value and appear to discount a scenario in which the company...

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WPO: Barron's Strikes Again, A More Realistic SOTP Analysis, Tail Risk Growing Rapidly

August 23rd, 2010

Barron's columnist Andrew Bary published a follow up piece this weekend to his initial write-up on WPO in which he argued that the stock could be worth as much as $900/share.  You can read the original article here.  Mr. Bary's...

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COCO Runs Itself Into Regulatory "Maelstrom", Expect Full Year Operating Losses for the Next Several Years

August 20th, 2010

Our short thesis on COCO has never been predicated on a change in the regulatory landscape governing the for-profit postsecondary education sector.  While the outcomes of NegReg 2009 and potential legislation by...

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TTC: Large 3Q10 Beat As Expected, Guides Inline, Headwinds Should Start to Emerge in FY11, Still Favor Long BGG/Short...

August 19th, 2010

TTC reported strong 3Q10 result this morning,  you can read the full release here.  On the heels of BGG's blow-out numbers, it should come as no surprise that TTC delivered significant upside to...

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PAA Research SMid Cap Portfolio Update - YTD Up 10.0%

August 17th, 2010

We wanted to provide you with an update on the performance of our SMid Cap portfolio, which we introduced on 9/3/09. You can read more about the parameters for the portfolio, our approach to risk management, and return objectives of the PAA Research SMid Cap...

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We Thought the Repayment Rate Data Would Be Bad, It Was Worse - After "Black Monday" What Will Be the Lingering...

August 16th, 2010

On July 23rd, stocks in the for-profit education sector "ripped" after the release of the Department of Education's initial proposal on "gainful employment".  At that time, many investors thought...

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BGG: Replacement Driven Demand, Monster FCF Highlight Strong 4Q10, Still Favor Long BGG, Short TTC

August 12th, 2010

We recently introduced a pair trade idea: long BGG/short TTC.  Thus far the trade has returned 2.1% compared to a 2.3% gain for the S&P 500.  We still think the pair trade has the potential to generate a total...

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IPSU: Adjusting Earnings to Reflect Slower Production Gains at Port Wentworth

August 9th, 2010

We are adjusting our 4Q10 and FY11 estimates to reflect a slower ramp-up in production at IPSU's Port Wentworth refinery and the feedback we received in our conversation with management.  We recognize that many investors are frustrated by...

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WPO: 2Q10 Earnings Release Is a "Wake Up Call" to Investors, Yields More Questions than Answers

August 6th, 2010

In our preview of WPO's 2Q10 earnings release we asked: "As the Questions Pile Up, Will We Finally Get Some Answers?"  Today's earnings release provided little in the form of clarity on the questions we asked, but it...

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Quick Thoughts on IPSU's 3Q10 Results

August 6th, 2010

IPSU reported its 3Q10 results this morning and issued its 10-Q filing for the quarter. Overall, the company's topline exceeded our expectations, but EPS fell short due to continued efficiency issues at the company's Port Wentworth refinery as well as a few other one-time...

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ARP: Quick Thoughts on ARP's Earnings Results, Our Revised Estimates, ARP's Secular Growth Strategy Starts to Emerge

August 4th, 2010

Obviously this is an earnings call we did not get right. In our preview of the quarter, we argued that ARP was poised to deliver revenue and earnings upside for the second quarter based in large part on...

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WPO: As the Questions Pile Up, Will We Finally Get Some Answers?

August 3rd, 2010

Don Graham and other senior executives of WPO laud themselves for their "Berkshire-like" approach to managing the company.  In the world of WPO managment, the numbers speak for themselves.  While we find this approach refreshing in some respects, we...

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PAA Research SMid Cap Portfolio Update - YTD Up 8.8%

August 2nd, 2010

We wanted to provide you with an update on the performance of our SMid Cap portfolio, which we introduced on 9/3/09. You can read more about the parameters for the portfolio, our approach to risk management, and return objectives of the PAA Research SMid Cap...

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BCO: Some Modest Operating Momentum Starting to Emerge, Revising Estimates

July 29th, 2010

BCO reported 2Q10 results this morning. You can read the full earnings release here. Overall, the company delivered both topline and bottomline outperformance for the first time in many quarters. Although management tempered its full year...

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Finally a Bottom in the Reprographics Industry? Channel Checks Suggest So, ARP Positioned for a Solid Q2 Beat

July 28th, 2010

In April, we argued that the reprographics industry was showing signs of imminent revenue stabilization, despite what continued to be weakness in the macro-economic data related to non-residential construction...

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"Repayment Rate" Provision of Gainful Employment Is Not Nearly as "Toothless" as You Might Think

July 23rd, 2010

At long last the details on the Department of Education's proposal for its "gainful employment" were released. You can read an excellent summary of the proposal as well as responses from Senator Harkin, Harris Miller (CCA),...

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ESI: Rapidly Slowing Start Growth, Revenue Miss, and Low Quality Earnings Beat Suggest Growth Strains Are Starting to...

July 22nd, 2010

ESI reported 2Q10 earnings results this morning. Overall we think the precipitous slow down in new student start growth for the summer term should start to raise significant questions about the...

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GCA's Loss of Its Harrah's Contract Throws Stock Into a "Doubt Spiral" - Four Reasons Why We Think the Stock Can Trade...

July 22nd, 2010

GCA shares sold off an astonishing 44.4% yesterday on massive volume (19.2MM shares) following the announcement that the company had received notice from Harrah's that the casino operator would not...

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A View From Privately Held For-Profit Postsecondary Institutions

July 21st, 2010

Even though we are only 24 hours away from the first earnings report of the season from a publicly traded for-profit education provider, investor focus remains firmly on the eventual outcome of the Department of Education's "gainful employment" proposal....

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Considerations Heading Into ESI's 2Q10 Earnings Results - Are ESI Shares Really "Cheap"?

July 20th, 2010

On Thursday, July 22nd ESI will report 2Q10 earnings results and its Summer 2010 enrollment figures.  This quarter's earnings season for the for-profit postsecondary education sector should be unique.  We would not go as far as...

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Closing out BGG and TTC Shorts with 21.2% and 7.3% Gains, Going Long BGG Against Short Position in TTC

July 19th, 2010

Approximately three months ago we introduced two short ideas in the outdoor power equipment space: BGG and TTC.  Since that time shares of BGG have sold off 21.2%, while those of TTC have declined 7.3% compared to a...

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PAA Research SMid Cap Portfolio Update - YTD Up 5.2%

July 18th, 2010

We wanted to provide you with an update on the performance of our SMid Cap portfolio, which we introduced on 9/3/09. You can read more about the parameters for the portfolio, our approach to risk management, and return objectives of the PAA Research SMid Cap...

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The "New Normal" in the US Sugar Market, Dialing in on IPSU's 3Q10, 4Q10 and FY11 Earnings

July 14th, 2010

Almost one year ago, we introduced IPSU as a long investment idea. At that time we argued IPSU shares were poised to witness substantial upside based on the following: The company's Port Wentworth refinery was on the brink of...

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PAA Research SMid Cap Portfolio Update - YTD Up 3.9%

July 1st, 2010

We wanted to provide you with an update on the performance of our SMid Cap portfolio, which we introduced on 9/3/09. As a reminder this is a “mock” portfolio with an initial value of $100 million. We plan to manage the portfolio like a long/short equity hedge...

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AYI: 3Q10 Consensus Revenue Expectations Look Reasonable, Expect EPS Upside in the Form of Continued Gross Margin...

June 29th, 2010

AYI will report 3Q10 results before the market opens tomorrow. We expect the company to deliver inline revenues, but once again top consensus estimates due to better than expected gross margins. ...

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MLHR Misses (Again), Even With Acceleration in Order Activity Consensus For FY11 Needs to Come Down

June 23rd, 2010

MLHR reported 4Q10 earnings after the close.  You can read the full release here.  Overall, the company's revenue and earnings results fell well short of consensus and PAA Research's even more cautious estimates....

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Current Ideas

CTC

SHORT

$101

ATGE

SHORT

$15

AYI

SHORT

$108

HCG.TO

SHORT

$0

RON.TO

SHORT

$9

BIG

SHORT

$28

ESI

SHORT

$0

BGG

PAIR - LONG BGG/SHORT TTC

25%

TTC

PAIR - LONG BGG/SHORT TTC

25%

Z

SHORT

$14.00

NA.TO

SHORT

$22

ING.PA

SHORT

$35

ZU

SHORT

$15

TRLA

SHORT

$20

MCRS

SHORT

$31

APOL

SHORT

$35

OPEN

SHORT

$30

BCO

LONG

$35

WWE

LONG

$25

KNL

PAIR - LONG KNL/SHORT MLHR

25%

XOXO

LONG

$20

CSGP

SHORT

$100

GCA

LONG

$8

IPSU

LONG

$20

MLHR

SHORT

$22

ARC

LONG

$12.50

LOOP

PAIR - LONG CSGP/SHORT LOOP

40%

THQI

LONG

$35

WPO

SHORT

$275

COCO

SHORT

$0

HNI

SIG

RGR