Investing

Hedge Fund Bleichroeder LP Pushes Stake in CompoSecure (CMPO) to ~19% After The Stock Retraces

On Monday afternoon, a Form 4 was filed by credit card manufacturer CompoSecure (US:CMPO), regarding the on market purchase of shares by hedge fund Bleichroeder LP. The transaction was first seen in Fintel’s insider trading tracker on Tuesday evening.

The New York City based investment firm founded by Andrew Gundlach and Michael Kellen purchased 500,000 new shares at $5.50 for a total of $2.75 million.

Bleichroeder’s total holding edged to 2.87 million shares following the transaction and brings their ownership in CompoSecure to around ~19%.

Bleichroeder is currently the largest institutional investor on the share register by ownership size following the transaction.

Surprisingly, the trade price came in at the lowest point in August after shares pulled back more than 20% from the rally following second quarter results.

While there have been several consistent minor accumulation trades in CMPO over the year, the transaction was the largest seen since the fund purchased over 350,000 shares in early May (across several dates).

According to Fintel research, Bleichroeder LP has a total of 96 current positions with a total portfolio value of $484.3 million, according to the latest SEC filings. The top positions held by the fund include; The SPDR Gold Trust (US:GLD), Brunswick Corp (US:BC), Linde (US:LIN), Identiv (US:INVE), and (US:IVAC).

Since listing via a SPAC merger with Roman DBDR Tech Acquisition Corp at the end of 2021, CompoSecure has lost about 40% of its value with shares that had been gradually trending lower until the beginning of August.

Despite the weakening share price, Bleichroeder looks to have made a calculated investment decision as the company is now trading on an undemanding price-to-earnings multiple of about 13x and has just raised its full year earnings guidance which looks to have supported investor sentiment.

The second quarter results released on the 4th of August saw the company generate positive net income of $60.7 million, a significant +280% improvement on the $21.5 million generated in the prior year.

The improvement was significant relative to the $97.2 million in group sales from the second quarter, which grew 55% on the prior year. The sales figure also beat the forecast of ~$86 million from the two sell-side analysts covering the stock.

What sent the stock higher was the upgraded outlook where CompoSecure now expects 2022 group sales between $355-380 million, upgrading from the previous guidance of $336-376 million. While the midpoint of the new guidance was only +3.2% higher, the range narrowed from $40 to $25 million. The upgrade was attributed to strong results from the metal cards product.

CMPO also upgraded their full year profit (adjusted EBITDA) outlook to $110-120 million from $100-110 million.

Post result, Steve Moss from B Riley Securities noted that earnings momentum should continue into the third quarter and will likely be supported by the company’s expansion into international markets. The firm had a ‘buy’ rating and $18 target.

John Todaro from Needham & Co increased his CMPO ‘buy’ rating target price to $15 from $14 after raising 2022 and 2023 estimates following the firm’s continued strength in core metal cards and services. The analyst however lowered Arculus revenue assumptions for the two years given uncertainty in crypto markets.

This article originally appeared on Fintel

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