BellWether
Yahoo Finance
Filing
Nov. 03, 2020
2020 Q3 Data
Price: $0.60 Shares:52m, Cap: $31m
1.Business
(1) History
The company was found by Robert Sewell in 2009 as Bellwether Investment Management which is a boutique investment management company for high net worth personals. Previous to that he had worked over 15 years in different positions related to investment management. In 2011, Steve Meehan joined the company as chairman who has also a similar experience to Sewell.
7.Links
Yahoo Finance
Filing
Nov. 03, 2020
2020 Q3 Data
Price: $0.60 Shares:52m, Cap: $31m
1.Business
(1) History
The company was found by Robert Sewell in 2009 as Bellwether Investment Management which is a boutique investment management company for high net worth personals. Previous to that he had worked over 15 years in different positions related to investment management. In 2011, Steve Meehan joined the company as chairman who has also a similar experience to Sewell.
In 2013, it IPOed through a reverse merger. Since then it had been able to grow its AUM(Asset Under Management) nicely both organically and through acquisitions.
In 2015, it acquired 35m in AUM by purchasing a book of business for $790k
In 2016, it acquired Index Wealth Management Inc. for $2.1m, which added 126m in AUM.
In 2017, it acquired Crestridge Asset Management Inc. for $1.35m, which added 120m in AUM. It was able to achieve cash positive this year.
In 2018, it acquired Adaptive Asset Management Ltd. for $350k, which added $129m in AUM.
In 2019, it invested 2.9m into Benlark LP to secure 130m AUM that has already been managed by LPC. It also invested 1.1m into another partnership to secure $62m AUM that it has been managed. As a result, it logged around $8.7m addition in intangible assets and logged $4.7m in minority interest.
To date, it is managing around $1.5B in assets.
(2) Major business
It is running several funds and offers boutique investment management for wealthy families and organizations. The management fee is around 1.2% on average.
Funds list: US Stock, Canadian Performance, Canadian Stock pooled funds, Alternative Income pooled fund.
Its cost of goods sold is actually the fees paid to the fund managers which gives it a pretty stable margin of around 20%.
The administration and marketing fees etc are more fixed than the fees paid to fund managers. Thus the more the AUM, the more net profit margin will be expected.
The company is trying to acquire other funds by allowing fund managers to continue their investment while taking care of administrative tasks.
(3) Debt and cash
At the end of Q3 2020, it has around $6.5m in cash, $6.3m in debt with an 8% interest rate. Roughly cash even.
(4) Industry
2. Management
At the end of Q3 2020, it has around $6.5m in cash, $6.3m in debt with an 8% interest rate. Roughly cash even.
(4) Industry
2. Management
Robert Sewell: Over 15 years in investment managing experience mainly for banks.
Stephen Meehan: Similiar experience as Sewell. However, he seems more aggressive about growing business than Sewell. Currently, he is also managing his own investment firm Glen Road Capital Partners.
By the time after IPO in 2013, there are 30m shares outstanding, both Meehan and Sewell hold over 11m shares which are around 37% both.
From 2016 to 2018, mainly in 2018, the company issued around 10m more shares mostly at $0.40/share. In 2019, it issued other 10m shares at $0.40/share. Raised total shares outstanding to 51m by end of 2019. By the time Meehan holds 12m shares and Sewell holds 14m shares. Together they still hold around 51% of the company.
3. Financial data
Notes:
Notes:
1. The minority interest refers to the intangible assets owned by the partnerships it invested in. As the result, the company will over depreciate the intangible assets it supposes to in the income statement but adds them back from the minority interest line. Overall, both should be just removed from the calculation of its real income.
4. Valuation and comments
(1) Currently it has a run rate of around $2m in real income which gives a P/E of 15. Considering the high growth profile in the past, this is actually quite a cheap price.
(1) Currently it has a run rate of around $2m in real income which gives a P/E of 15. Considering the high growth profile in the past, this is actually quite a cheap price.
(2) From 2019 to current, it seems the growth has slowed down. However, I do expect it will resume the growth of AUM in the future.
5. Risk
(1) A stock market crash will inevitably affect the company a lot. Its AUM might shrink by both the devaluation of the portfolio and by its customers pulling out of the stock market.
(1) A stock market crash will inevitably affect the company a lot. Its AUM might shrink by both the devaluation of the portfolio and by its customers pulling out of the stock market.
(2) It is not clear how its relations to the acquired fund. They could discontinue the management contract with the company in the future.
6. Conclusion
Overall, the company is managed quite well and has very high growth potential. The current price is also very reasonable.
Overall, the company is managed quite well and has very high growth potential. The current price is also very reasonable.
7.Links
