$LMB: Limbach missed the data center boom. Is that the opportunity? | 1 Main Capital
Yet Another Value PodcastShow Notes
Limbach spent three years turning itself from a general contractor into an owner direct services business, and the market loved it right up until this summer. Then organic revenue went down mid single digits, EBITDA fell 30%, guidance came down from $90m to $80m, and the stock lost half its value. Yaron Naymark of 1 Main Capital pitched me this name in June 2023, watched it 6.5x, sold most of it, and is back buying it after a 75% drawdown. His argument is that the EBITDA decline is fixed cost deleverage on a demand air pocket, not a broken business, and that the bigger story is the one Limbach missed. While FIX and EME compounded on data centers, Limbach stayed singularly focused on owner direct work and ended up with effectively zero data center exposure. The CYMCOR acquisition announced alongside Q2 is the first real move to fix that. I push back on the bear case that management knowingly bid a pile of low margin work, on whether owner direct is just general contracting by another name, on whether wage inflation from the data center boom is quietly eating them, and on whether a 2016 de-SPAC ever escapes the gravity of $10 per share. We finish on how Yaron invests around AI without pretending to know who wins: Limbach, IWG, and why he re-initiated KKR. Yaron's first Limbach pitch, June 2023: https://www.youtube.com/watch?v=m7GzW0ahswg This episode is sponsored by Trata: https://www.trata.com/lmb. If you like this podcast, you are going to love Trata. It is two buysiders getting on the phone and talking through a stock they are both interested in, the reasons they want to get long, the reasons they are worried about it. They have a Limbach call from six months ago that holds up really well, and I asked one of its questions on this episode. Chapters: (00:00) Intro (00:56) Sponsor: Trata (01:50) Yaron Naymark, back for round six (03:09) What Limbach is and why he is double dipping (03:40) Enron, a SPAC, and the shift from general contracting to owner direct (06:32) Called a data center winner when management said otherwise (07:48) The air pocket: tariffs, Medicaid cuts, and paused projects (09:29) Why the stock is down 50% when EBITDA is down 30% (12:14) Organic versus headline revenue and the Pioneer Power deal (12:40) Double dipping on a stock you already made money on (16:57) The bear case: low margin bookings and general contracting by another name (22:31) Why FIX and EME ran and Limbach did not (24:42) Wage inflation, technicians, and whether owner direct contracts trap them (27:01) Did management get caught off guard between Q1 and Q2? (30:35) The $50m buyback nobody has touched (31:18) Why M&A beats buying back stock at six times EBITDA (33:55) The math behind a $200 three year price target (35:18) Could Limbach be the seller instead of the buyer? (38:09) Josh Horowitz, insider ownership, and the de-SPAC stigma (40:50) CYMCOR and the data center pull through (42:52) Investing around AI: Limbach, IWG, KKR, and the mega-alts (50:29) Wrap Yaron Naymark / 1 Main Capital: https://www.1maincapital.com Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer
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A bittersweet episode as it's the conclusion of Yet Another Value Podcast. Thank you to everyone who read, watched, listened and engaged all these years. Meeting so many great people has been the highlight of the whole thing, so please stay in touch. And yes, my dog Penny, the MVP who sat at my feet for ~90% of these episodes, gets a farewell cameo.
Brizo Capital's Ben Isaac and I dig into the stuff we've bonded over for years: why the cavalry isn't coming to save value investors, the opportunity set in the UK, how investors can work with boards to improve governance and alignment, and whether relisting to the US actually creates value. We also get into how the analyst role is evolving as AI keeps improving. This episode is sponsored by Trata: https://www.trata.com Trata hosts anonymized calls between two buy-side investors on a stock they're thinking about, then publishes the transcript. If you like this podcast, you're going to like Trata. Chapters: (00:00) Intro and Trata sponsor (01:51) Welcome Ben Isaac (02:04) Columbia, AI and the leg press problem (07:13) Hiring analysts: compliance, Copilot and Claude (10:46) Hallucinations and why AI expands demand for analysts (15:09) Trade shows, scuttlebutt and the student superpower (19:48) Load-bearing facts vs. the CFO's cat (20:35) Corporate governance: the cavalry isn't coming (23:13) Why the UK: global businesses at cheap prices (27:25) Working behind the scenes with UK boards (32:40) The US relisting debate (38:52) What the data says on relistings (40:39) Pushback: sugar high or buy back stock? (42:45) Signal or selection bias? CRH and Trian (45:10) The Walmart of Kenya and cost of equity (50:00) Spread over the local cost of equity: Brazil and the Selic (53:16) Are US markets really well functioning? (56:36) UK take-privates and private equity (1:00:03) South Korea: Japan 2.0? Ben Isaac / Brizo Capital: https://www.brizocapital.com Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer
Starbucks and Chipotle might be the merger with the fewest synergies two companies in the same industry could possibly have: different supply chains, different kitchens, you can't even put them under one roof. The only synergy is one man. Brian Niccol ran Chipotle and now runs Starbucks, so the deal only makes sense if you think he is uniquely talented enough that both brands are worth more under him. I start with a brain teaser on SOLS (Solstice Advanced Materials): management announces a merger investors hate, the stock drops 20%, and then they call it off. Is that a management team willing to listen, or one whose capital allocation you can't trust anymore? From there, state of the markets: the indices are up double digits, yet most of my friends are borderline despondent. Everything outside tech and energy is roughly flat on the year and the Russell 2000 is down about 8% since June 30th. I also revisit the old "the Russell is a broken index because it kicks out its winners" argument, and why that same feature helped it dodge SMCI's collapse and this year's AI peak. Then unexpected competition. FICO pushed pricing and got a regulatory crackdown, IMAX locked up Dune 3 and Disney answered with Infinity Vision, and micro dramas (Quibi, just seven years early) are going after Netflix's screen time. I close on Oura pulling its IPO at a $15 billion valuation, the AI data premium on its wearables, and which businesses get a one-time AI windfall, with home builders like Lennar as my value investor answer. The New York Times piece on micro dramas: https://www.nytimes.com/2026/10/06/magazine/microdramas-tv-shows-hollywood-entertainment.html This episode is sponsored by Trata: https://www.trata.com. Trata takes anonymized calls where two buy-siders talk through a stock they're long or short, the opportunity, the risks and where the street is wrong, and lets you read the transcript. Whenever I start on a new company, my Claude agent's first step is pulling the Trata transcripts that mention it. Chapters: (00:00) What I'm rambling about this month (03:36) Sponsor: Trata (04:41) M&A brain teaser: SOLS calls off its merger (08:48) Starbucks and Chipotle: a merger with zero synergies (11:21) The only synergy is Brian Niccol (12:30) SBUX and CMG since Niccol switched (14:00) State of the markets: indices up, investors despondent (15:55) A bloodbath underneath: everything but tech and energy (17:13) Is the Russell a broken index? (18:45) How the Russell dodged SMCI and the AI peak (20:11) Unexpected competition: FICO's regulatory crackdown (21:00) IMAX vs Disney's Infinity Vision (23:11) Micro dramas, Quibi and the Netflix bear case (27:20) Oura delays its IPO (28:22) Oura's AI data premium (29:04) What else gets more valuable with AI? (30:12) Home builders and a one-time AI windfall (32:01) HYROX and wrapping up Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer
Nicotine pouches might be the best new consumer category in decades: cheap to make, high margin, and sticky once someone gets hooked, the same traits that made Philip Morris a 16.5% a year compounder for close to a century. George Baxter of Saberpoint Capital has owned Turning Point Brands since his fund's first days, and he thinks the market is missing how well TPB is positioned as the third player behind ZYN and Velo, with FRE and the Tucker Carlson backed Alp now almost half of revenue. We get into whether pouch users are really brand loyal or will hop around like energy drink buyers (my straw man, using Haypp and Europe), why C-stores want a third brand on the back bar, how the new PMTA rules shut the door on VC-backed upstarts, and the cost gap from making every can in India and air freighting it here. I push back on the part that worries most people: EBITDA is falling while TPB spends on slotting fees, UFC and influencers, Alp is a 50/50 JV with a celebrity, and the longtime CEO just left with a finance guy stepping in. We finish on valuation, from $35 to $45 a share for the legacy Zig-Zag and Stoker's business to George's path to a $1,000 stock by 2030. This episode is sponsored by Trata. Trata has a lot of TPB transcripts, including two done in the past month, and you can read both for free here: https://www.trata.com/tpbv1 https://www.trata.com/tpbv2 Trata is two buysiders who both know a stock well talking through the risks and opportunities they see, not just trading price targets. When I'm looking at a new company, one of the first things my AI does is go see what people are saying about it on Trata. Chapters: (00:00) Intro: George Baxter and Turning Point Brands (00:29) Sponsor: Trata (01:43) Welcome, and 11 years of following TPB (02:35) TPB's history: Zig-Zag, Stoker's, vapor and Standard General (06:26) The pouch launch: FRE and the Alp JV with Tucker Carlson (07:57) Why nicotine pouches look like the new tobacco (13:00) Brand loyal like cigarettes, or fickle like energy drinks? (18:45) Why US pouch users buy at the C-store, not online (22:57) How many brands can a C-store actually carry? (26:25) ZYN, Velo, and where TPB fits (28:11) Regulatory capture, Velo Plus, and ZYN losing share (32:53) PMTA changes shut the door on the VC-backed brands (36:36) Why C-stores want a third player on the back bar (39:36) Financials: falling EBITDA, TKO deal and slotting fees (41:14) Made in India and air freighted: the $1.40 can (44:11) The PMTA path to US manufacturing and slotting fees rolling off (51:31) Valuation: what the legacy business is worth (53:43) FRE's marketing and the energy drink playbook (55:02) Alp, Tucker Carlson, and building a brand (59:56) Alp JV economics and the celebrity risk (1:04:17) Alp and FRE are the same product (1:05:17) CEO exit, insider ownership and the ATM (1:06:48) Will TPB buy more of Alp? (1:09:17) David Glazek takes over (1:13:43) The 2030 math: a $1,000 stock? (1:16:20) George's bias disclaimer and his book (1:18:25) Wrap George Baxter / Saberpoint Capital Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer
The 10 year has gone from 4.2% at the start of the year to 4.6% in late August to 5.1% today, and the S&P is still basically touching all time highs. Interest rates are financial gravity, but I wonder if gravity works on a lag. Consumers and allocators are slow to move money from stocks to bonds, and corporates termed out a lot of 3.5% debt in 2021 to 2023 that starts rolling in 2028 to 2031. Today's free cash flow is flattered by that spread. Underneath the index there is already real pain in housing, levered small caps and biotech, and my bottom line is the margin of safety in stocks keeps getting skinnier. From there: why merger arb spreads that looked juicy to anyone who came of age in ZIRP are just the time value of money at 5%, and where the crashes and long bear markets went. We have gone from 1929, 1987 and 1972 to 1974 to a nine month GFC, a two month COVID drawdown and a tariff tantrum that lasted weeks. Is that a stronger market, or a more fragile one waiting for one big break? Then a friend's line that every investor is either overconfident or has imposter syndrome. I am firmly in the imposter camp, which is a problem, because almost every great investor I can name reads as overconfident. Survivorship explains a lot of it: we don't see the overconfident coin flippers who zeroed out, and Archegos is the cautionary tale. I close on mentorship, sparked by Ian Cassel's book Stock Picker and his mentor Skip, and why everyone, Buffett included with Ben Graham, eventually outgrows their mentor. Today's post on Muse and the inertia sell off: https://www.yetanothervalueblog.com/p/musings-on-muse-the-inertia-sell My episode with Ian Cassel on Stock Picker: https://www.yetanothervalueblog.com/p/ian-cassel-on-stock-picker-the-book Last month's rates piece: https://www.yetanothervalueblog.com/p/rates-are-screaming-and-stocks-arent This episode is sponsored by Fiscal.ai: https://fiscal.ai/yav. I'm a paying customer and I connect to Fiscal through its API. Two things I use it for: a huge database of fund letters I can pull up on any name I'm researching, and audited financials where every number in the model links back to the source. Use my link for 15% off their AI connector. Chapters: (00:00) What I'm rambling about this month (01:57) Sponsor: Fiscal.ai (03:30) Two stories: Muse and rates (04:24) Interest rates are financial gravity (07:35) Does gravity work on a lag? The coming debt refi wave (09:17) Index highs, pain underneath: housing, small caps, biotech (11:23) Rates and special situations: merger arb isn't free money anymore (14:22) Where did the crashes and long bear markets go? (18:11) Fed put, fragility, and one big break (19:55) Overconfident investors vs imposter syndrome (23:20) Survivorship: Archegos and Situational Awareness (25:32) Mentors: Ian Cassel's Stock Picker and Skip (27:16) Even Buffett outgrew Ben Graham (30:07) Journaling as a way to keep evolving (30:51) Wrapping up Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer