Some Interesting Ideas for 2025

Sharing some businesses that have very attractive 3-5 year outlooks

I’m going to try to write more blog posts this year, something that has been difficult for me to maintain given the time spent writing quarterly letters, portfolio management responsibilities and travel (oh…and two young kids at home). My aim is to be better about sharing ideas, research and things I find interesting.

I did a fairly lengthy Twitter thread recently sharing some interesting ideas for 2025, and wanted to turn it into a blog post and maybe expand a bit more on some of the businesses. I own a few of these for clients of Greystone Capital, so there’s a bit of talking my book. The others are just interesting and I’d love it if anyone had further insights or wanted to engage more about any of the companies below.

This is not investment advice, DYODD and please see the disclaimer at the end of this post.

Natural Resource Partners (NRP)

I shared a long writeup on NRP as an appendix to my Q4 2024 letter, and I will do a separate post on NRP in the coming days, likely with some video. The TL;DR is that the risk/reward here is incredibly favorable. With another year of debt paydown in 2025, cash flow to unitholders will increase significantly in the coming 12-24 months, amounting to between a 15-20% yield. Even if met coal prices maintain their current levels (likely difficult given severe supply/demand imbalance), you do very well owning the units above $100. If the units re-rate to their historical distribution yield, they will double.

Bel Fuse (BELFB)

Bel Fuse has come a long way during the past three years, yet is the Rodney Dangerfield of my holdings. It gets no respect. Despite still not firing on all cylinders (their Magnetics segment remains in the doldrums), they have finally reached peer gross and EBITDA margins after a tumultuous few years. Despite this, shares trade at nearly half of peer valuations, even AFTER their home-run acquisition of Enercon Technologies. Pro forma for the deal, I have Bel doing something around $150mm in 2026 EBITDA. At peer multiples, Bel stock doubles. It’s likely they don’t get a peer multiple without some more growth, but I wouldn’t rule out additional M&A, and once debt is paid down, share repurchases will resume. I’m surprised management isn’t being given more credit lately. I think capital allocation has been excellent during the past year, which included implementing the company’s first ever buyback for 5% of shares outstanding, and executing the Enercon deal. I like the potential upside over 2-3 years.

For Christmas, I was gifted Larry Goldstein’s Santa Monica Partners letters, and in the early parts of the book, in his 1983 letter, he talks about purchasing shares of Bel Fuse for $6.50/share. Compounding at 7% per year for 40 years isn’t something to write home about, but there is some staying power here!

Innovative Food Holdings (IVFH)

Innovative Foods - soon to be Harvest Holdings - was a big winner for Greystone during 2024, but plenty of upside remains. If management can reach their target of $100mm in revenues and 10% EBITDA margins (no longer looking farfetched), at peer multiples IVFH has 50% upside. However, management’s willingness to acquire small specialty food distributors and plug them into IVFH’s platform is something I did not anticipate happening this early. While the dollar amounts are small so far, there is a very long runway for M&A, and a great management team/board to execute on it. Inorganic and organic growth combined, on a much more favorable cost structure, means earnings are heading higher over time. I could see another double within 2-3 years.

Franklin Covey (FC)

Although not our largest position, Franklin Covey has one of the widest disparities between price and value in the portfolio today. I continue to believe that intrinsic value is approaching $100/share. I briefly wrote about FC in my Q4 letter, talking about how they are being punished for doing the right thing. Buying shares between $30-37 represents excellent value as businesses with FC’s fundamentals and growth runway do not trade at single digit multiples of EBITDA. There is execution risk, but if management gets anywhere close to $75mm in 2027E EBITDA, shares could triple from here. Keep in mind, FC found religion with share repurchases, so they could retire another 15% of the business during the next three years.

Xponential Fitness (XPOF)

I think investors will have a chance to buy XPOF shares lower than today’s price of $16, as the road ahead will likely not be without stumbles. There are a few problems with being the subject of a well circulated short report (assuming the claims aren’t thesis breaking). One, plenty of investors will pass after reading the headlines. Two, you’re subject to future headline risk as business hiccups, normal over the course of a few years, will likely be sold off harder than most businesses as short term investors will flee at any signs of bad news. I haven’t worked through the ins and outs the short report, but spending some time on XPOF reveals a very high quality business that appears to be mispriced. I’d argue that most of the concerns in the short report were centered around former CEO Anthony Geisler, who is now gone. New management seems high quality, and the future of this business is likely very different than the past. XPOF trades at a low single digit multiple of EBITDA for 2025 and 2026, compared to franchise peers in the mid-teens range. The business is certainly not falling apart. Their three core franchise businesses, Club Pilates, Pure Barre and StretchLab have nearly 1,000 new units in the pipeline, and Club Pilates, responsible for 50% of system wide sales, is growing SSS mid-teens. That’s incredibly impressive.

If the only thing weighing on XPOF are past concerns, particularly surrounding a CEO who has departed, the stock could be a coiled spring after a few good quarters. Trading at 6x NTM EBITDA, with growth and debt paydown, cash could gush from here. Also $160mm NOLs. If XPOF has actually righted the ship, and they get close to a peer multiple, shares could 2-3x.

Gogo, Inc. (GOGO)

I’ve spent some time on Gogo and came away thinking this is an incredibly high quality business. Gogo stock has been inflicted by two main concerns. First, management’s failure to launch / rollout 5G capabilities. Consistently pushing back the launch date has cost them some credibility. Second, competitive concerns surrounding SpaceX’s Starlink low earth orbit (LEO) connectivity solutions, which could potentially displace Gogo’s strong market share in business aviation. Gogo’s failure to launch their competitive LEO product, Galileo, in partnership with OneWeb has caused the stock to selloff after each Starlink press release. As it stands today, I believe a huge part of the thesis rests on the company’s ability to roll out 5G capabilities and compete within LEO in a timely manner. However, the core business aviation segment is an incredible business.

Gogo has greater than 90% market share in business aviation due to distribution advantages and the only air-to-ground (ATG) network in commercial existence. Gogo has systems installed in over 7,000 planes, supported by unique spectrum assets own by the company. It took a few hundred million to buildout Gogo’s telecom network, and years of building relationships with distributors, whereby Gogo now has their systems installed on >70% of OEM new jet shipments. Existing jets can also be retrofitted to newer / different Gogo hardware as 5G rolls out. The business jet market is growing double digits, and is less than 30% penetrated with reliable in-flight connectivity. As a monopoly, Business Aviation generates EBITDA margins in excess of 40% and ROICs in excess of 30%.

While I prioritize earnings growth, there is at least one catalyst in place for value realization prior to growth / execution, one of which consists of news that 5G (along with LEO capabilities) services are ready to launch. Expect this announcement in the back half of 2025.

As it becomes clear that Gogo will remain the market leader in business aviation, a highly durable and recurring revenue base with extremely low churn should be worth at least 15x free cash flow. At that multiple, on 2025 numbers, shares would double. With further jet penetration and debt paydown, a 15x 2028E FCF reflects intrinsic value of around $30/share.

Mattr Corp. (MATR.TO)

This is one of the more interesting setups I’ve come across recently as there are a lot of moving parts, but plenty of value, highlighted by recent developments. Mattr is a niche industrial business that has four different segments with little overlap, including fuel and water storage tanks, heat shrink tubing, spoolable pipe for oil and gas applications and a heavy duty wire and cable business. Mattr has undergone a transformation since 2021, divesting non-core assets to focus on better businesses within the portfolio. This makes the business and end markets difficult to due diligence. In addition, Mattr is still viewed as a pipeline services businesses (stemming from a recently sold segment that made up the majority of revenues) as opposed to a wire and cable or connection technology business. I think these elements contribute to the low valuation. I’d recommend a name change and GICS reclassification.

Mattr has a headline cheap multiple of 5x EBITDA, but is aiming for margins to almost double by 2030 on the back of 10% organic top line growth. If they reach this target, Mattr could generate close to $350mm in EBITDA, putting the valuation at sub-3.0x. The market is not believing these targets, and of course there is execution risk, but if successful, leading up to 2030, shares could re-rate significantly. Management does believe, however, as they are repurchasing 1% of shares per month, and there has been some insider buying as recently as December ‘24.

The moving parts I mentioned consist of the company overhauling nearly their entire manufacturing base to, and within the US, to achieve both cost and production efficiencies along with expanded capacity. They are trying to do this while not losing any business with current customers, and believe this transition will be up and running by H2 2025. Mattr spent $100mm in capex during the past few years to aid in this transition, after which modest capital investments are needed to organically grow each business. Revenue growing and margins going up while capex comes down is a good combination.

Interestingly, Mattr recently purchased Amercable, a premier provider of custom engineered cable based in the US. The purchase price was $280mm USD putting the valuation at 5.0x EBITDA. Amercable will be 40% accretive to earnings on day one, while providing a boost to Mattr’s top line. Unless Amercable is over-earning, the deal looks like a home-run, and is clearly not priced in to Mattr’s current valuation.

Pro forma for Amercable, and at 5% top line growth for the next three years, Mattr can likely reach around $1.5B revenues. At 18.5% EBITDA margins, that's $277mm EBITDA, and maybe $200mm or more FCF depending on interest/capex/taxes etc. On a sub-$1B market cap. At 8.5x EBITDA, Mattr would be worth CAD $34, up from CAD $12 today. This doesn’t factor in higher margins, higher growth or continued buybacks.

Simply Better Brands (SBBCF)

I’m really interested in one segment of this business, which is Trubar, the fast growing, plant based protein bar that customers seem to love. There are plenty of other aspects I don’t like, including a few other segments of the business that likely have zero value (why not just sell them and focus on Trubar?), and there’s been a lot of dilution. It’s likely the dilution will be minimized now as there is some cash plus a credit line of $10mm that the company can use for working capital.

Trubar revenues have been lumpier than I would like to see as well, with consistent quarterly growth yet to hit the PnL. However, with a target of 1,500 distribution points planned by year end (when they report Q4 results), customer ordering patterns could become more consistent. If distribution grows, revenue growth rates will likely maintain 100% or more, which is impressive. I’m always interested in products like this, including bars, beverages etc. that seem to gain fast customer acceptance / appeal. Trubar is killing it on Amazon, going from a standing start of $50k monthly sales to over $650k within a few months (likely higher today), and watching it’s product ranking skyrocket. In April of 2024, Trubar ranked as the #53 Sports Nutrition Protein Bar, in November they were at #16, and today they sit at #11.

There are some other interesting pieces here as well. First, the prior SBBCF CEO allocated valuable marketing dollars to SBBCF’s other segments, starving Trubar of capital and investment. This has changed. Second, the Board is unusually strong for a company of this size. Board members Paul Norman and Richard Kellam worked for Kellogg and Mars for decades, and Norman was responsible for overseeing the RXBar acquisition in 2017. Management of SBBC has talked openly about wanting to sell the company and/or the Trubar brand.

Looking at past ‘bar’ transactions (KIND, Clif, RX and a few others) and using the low-end of revenue multiples is illustrative of value here. If Trubar can reach $100mm in sales in the next 12 months, at a 3.5x revenue multiple, Trubar would be worth 3x the market cap of SBBCF.

Comparisons to Celsius are ridiculous, but Trubar has a chance to be something special.

Kits Eyewear (KITS)

Admittedly I have not done a ton of work on KITS, but I’m a big fan of management teams on their ‘second act’ and KITS certainly fits the bill.

Founder and CEO Roger Hardy founded Coastal Contacts in 2000 grew the company into the world’s largest online eyewear retailer which he then sold to Essilor in 2014 for CAD $430 million. KITS was founded in 2019 and applies all the learnings from Coastal along with Roger’s post-Coastal ventures toward becoming the premier destination for low-cost online eyewear. Management (Roger and his co-founders) own 73% of shares outstanding.

Kits is growing like a weed post COVID, and is now the fastest-growing optical company to achieve a $150 million revenue run rate, from a standing start. Kits has grown at an average of 26% for the past 8 quarters, with the company just pre-announcing Q4 results where they grew 44% YoY (glasses revenue grew 60% YoY) and posted record adjusted EBITDA.

Importantly, KITS started by selling contacts and with the aim being to grow sales of glasses into a higher percentage of the mix. As the mix shifts, revenue growth should increase meaningfully. Importantly, KITS is entirely funded by cash flow and as mentioned has positive adjusted EBITDA.

KITS boasts over 1 million customers and is constantly introducing new products, including a Kit+ subscription, a $50/year subscription with $100 off your first purchase and savings of 40% on lens upgrades. I like this idea for many reasons as it incentivizes customers to shop exclusively with KITS but also to spend more over time. Interestingly, repeat customers make up 65% of KITS revenue, with most customer cohorts spending greater than 100% of their first purchase within 36 months. Despite all of this, KITS represents less than 1% of the optical industry TAM.

Management is aiming for $250mm in revenues within 2-3 years, and $500mm in sales within five years after that. With this level of scale, EBITDA margins could reach double digits or mid-teens, making today’s market value of sub-$300mm look very cheap.

Wishing everyone a happy and healthy 2025!

Adam Wilk is the Founder and Portfolio Manager of Greystone Capital Management LLC, a small cap focused investment firm.

Adam can be reached at adam@greystonevalue.com

Disclaimer: Adam Wilk and clients of Greystone Capital Management own shares of NRP, BELFB, IVFH, FC, and SBBCF. The purpose of this post is for informational and educational purposes only and should not be construed as a recommendation to purchase or sell any security. Do your own due diligence and seek counsel from a registered investment advisor before trading in any security mentioned.