SumZero recently released its top stocks for 2017 report. It contains the ideas of the 5 winners and 10 runners up of the SumZero Top Stocks for 2017 Challenge, an investment research competition held in partnership with the Sohn Conference Foundation and Canalyst. You can download the report directly from their website (link is here).
The report includes a number of interesting ideas, including Dan Rasmussen’s pitch for Asia Cement China Holdings Corp. His firm, Verdad Capital, is focused on achieving private equity returns in the public markets. They use quantitative tools to find public equities with characteristics of the best performing private equity deals: small, cheap and with indebted capital structures. According to their research, investing in “leveraged small value stocks in the public markets would have had an average annual return of 25.1% from 1965-2013,” significantly outperforming private equity.
Asia Cement is a dominant regional producer of cement in China. While overcapacity in China’s cement industry has seen a collapse in prices, Asia Cement has managed to stay cash flow positive. Investing in Asia Cement is basically a leveraged bet on a recovery in cement prices, but increasing industry consolidation also means that the company could be an attractive M&A target. His firm sees ~73% upside from the current price of ~HKD 1.90 per share.