Greystone Capital Management: Finding Value in Innovative Food Holdings ($IVFH) and NN, Inc. ($NNBR)
Greystone Capital Management, a value-oriented investment firm focusing on small-cap companies, recently disclosed new positions in Innovative Food Holdings ($IVFH) and NN, Inc. ($NNBR) in their first quarter 2024 investor letter. Portfolio manager Adam Wilk and his team believe these two underfollowed companies present compelling investment opportunities due to new leadership implementing operational improvements to drive growth and profitability.
Innovative Food Holdings ($IVFH) is a specialty food distributor that has carved out a profitable niche sourcing high-quality, esoteric products for professional chefs and broadline distributors. Greystone highlights several key aspects of their investment thesis:
- New management team focused on core business: $IVFH’s new CEO, Bill Bennett, is shutting down an unprofitable e-commerce segment to focus on the core specialty distribution business that grew 20% annually from 2015-2020.
- Significant margin expansion potential: By reducing costs and winding down the e-commerce business, $IVFH can double its trough $2.5M EBITDA in the near-term with a mid-term goal of $100M in revenue at a 10% EBITDA margin.
- Strong balance sheet: $IVFH has a $50M market cap with $10-12M in net cash, providing flexibility to invest in growth and pursue M&A in a fragmented industry.
- Attractive valuation: Greystone believes the market is undervaluing $IVFH’s earnings potential, creating an attractive entry point.
NN, Inc. ($NNBR) is a precision parts manufacturer serving the automotive, industrial, electronics, and medical end markets. Despite a history of mismanagement, Greystone sees substantial upside under NN’s new leadership team:
- Experienced CEO with a track record of success: New CEO Harold Bevis has delivered impressive results in his prior roles and is already implementing operational improvements at $NNBR.
- Multiple levers to drive profitability: By addressing unprofitable business lines, improving pricing, and reducing costs, $NNBR can expand margins and generate strong free cash flow even before top-line growth resumes.
- Sticky customer relationships: $NNBR’s technical capabilities and sole-source contracts with blue-chip customers provide a stable revenue base to build upon.
- Aligned incentives: $NNBR’s Board and management are led by two activist shareholders and have compensation tied to delivering strong results.
Greystone Capital Management believes the market is overlooking the potential for $NNBR and $IVFH’s new leadership teams to drive operational enhancements and improve financial performance. As these management teams execute on their strategic plans, Greystone expects the market to re-rate both stocks higher, generating attractive returns for investors.
Click here for the full investor letter.
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