Candace King Weir and Amanda F. Weir, Paradigm Capital Management
Bottom-up Stock Picking Back in Fashion?

Candace King Weir and Amanda Weir presented the case for bottom-up stock picking, especially in the small cap universe, believing that in this space:

• Management is more accessible
• Business models are more easily understood
• Companies tend to be domestically based, and have less currency and commodity exposure
• Companies are more nimble, have ability to scale, and can react more quickly to changing events

Part of the Weir’s strategy involves frequent contact with management. They focus on one name at a time, and are agnostic to both sector weights and macro trends. They believe the current market provides unique opportunities for investors, and such markets occur only once every 1 or 2 decades.

One of their current favorites is retailer Wet Seal (WTSLA):

• Cheap clothes with a fashion edge
• $350 million market cap, $150 million in cash
• 575 stores (495 Wet Seal, 80 Arden B)
• Hired New merchandise managers
• Sees expansion opportunities for Arden B

Paul Isaac, CIO Cadogan Management
Investing as a Pari-Mutual Proposition

Isaac, a first-time VIC presenter, is a 40-year industry veteran. Issac presented the long case for Waste Management (WM):

• Largest waste management company in the US
• 273 landfills, 355 transfer stations
• Trading at 15 times trailing earnings, 14.5 times 2010 consensus estimates
• Trades at 6.8 X EV/EBITDA
• Return on Invested Capital: 8.5%
• Free Cash Flow Yield: 8%
• Dividend Yield : 3.7%
• Bought back 17 percent of outstanding shares over the past ten years; new buyback recently announced
• Barriers to new entry in this business due to regulation
• Permitting new sites is difficult
• Could trade up to 8 X EV/EBITDA
• Potential IRR up to 20%
• Rising operating and net profit margins

Jonathan Heller, CFA