Despite our ongoing focus on the identification of profitable ideas for our clients' short book, Antrim continues to believe that opportunities exist on the long side in certain special situations and otherwise unique opportunities. We maintain coverage of two long ideas - DESP, which is a deeply undervalued and misunderstood, high quality, emerging market e-Commerce business, and MIK, which is an e-Commerce resistant (though not immune) specialty retailer that is currently benefitting from a coronavirus related improvement in the Arts & Crafts category, and putting investors through a "short squeeze." Since we initiated coverage on these names earlier this summer, both have been in the news. You can find our thoughts on these developments using the link below:
Since coming public in 2017, Despegar shares have been under near constant pressure due to a variety of exogenous shocks and macroeconomic factors outside of the company’s control. Lackluster GDP growth in Latin America has pressured demand, dramatic currency devaluations have destroyed customer purchasing power and hampered translation of Despegar’s results into U.S. Dollars. Sharply increased interbank lending rates have restricted profitability, and the coronavirus pandemic has resulted in government-imposed lockdown and the restriction of non-essential travel. For these reasons, DESP has been summarily ignored by the market, and presently offers investors who can tolerate elevated volatility the opportunity to purchase an extremely high ROIC business with local currency bookings growth in excess of 20%, negative working capital, and a fragmented base of local competitors and suppliers, all at a bargain basement valuation.