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HealthSouth Corporation (Ticker: HLS) operates post-acute rehabilitation centers across the country, with locations more focused in the southern U.S. Their business model is quite simple, they provide physical rehabilitation services based either in their facilities or at an individual’s home. As of December 31, 2014 they acquired Encompass, which broadens their care base to both home health and hospice. Home health provides assistance for individuals at home who require aid in their daily lives, while hospice care is for individuals with terminal diagnoses. HealthSouth’s business model is extremely dependent on their employees, and as a result they have limited economies of scale. Margins are also pretty standard, as Medicare only gives a ‘market basket’ price increase and HealthSouth itself gives their employees an equivalent increase in salary. The business model is extremely dependent on the quality of people they have interacting with and treating patients. HealthSouth unde...

  Digi International is a small player in in the internet-of-things and connectivity space. With a market cap of just over $300 million they struggle to compete and innovate with the larger, more well funded companies such as HP. While their core business has been stagnant, they have positioned themselves to launch into an underserved and growing market through 3 small acquisitions. Over the past two years and as recently as January 2017, Digi has acquired Bluenica, Freshtemps and Smart Temps. Combined with Digi’s hardware manufacturing and cloud based platforms, their ‘Digi Cold’ suite of products allows restaurants, pharmacies, grocery stores and food services to remotely and automatically monitor the temperature of their cold storage. The current food safety procedure requires the aforementioned industries to physically check the temperature of their fridge or food, record it by hand on a piece of paper and then upload it to a spreadsheet or similar form of data stor...

The risks section of a company’s 10-k is normally thought of as a mundane, unchanging part of the filing, at least to me. I have found it rare that they bring up an issue that was otherwise not common sense. Recently I have began to approach the risks section in a different way, especially in companies that are going through significant changes. The new approach involves analyzing both the current and previous 10-k for changes in the risks outlined by the company; especially additions of new risks. This methodology was first brought to me attention while listening to The Investor’s Podcast. A quantitative momentum investor spoke of algorithms, which scan through annual reports looking specifically for changes in the risks section. The idea is that if there is an addition to the risk section it is because the lawyers told management that there is a new potential issue that they need to cover themselves on. I recently applied this methodology to the Rubicon Project (ticker: RUBI...

Over the past several years, new entrants into the craft beer market have hit established breweries hard. Boston Beer company (SAM) experienced a decrease in revenue of 6% from 2015 to 2016 while the latest data from the Brewers Association states that the market has historically been growing in the mid-teens. In their craft beer category specifically, they saw a 6% decrease in volume of barrels shipped. Craft breweries have been popping up all over the country giving consumers an almost overwhelming amount of choice and variety when it comes to drink selection. In 2012 there were 2,456 craft breweries across the U.S. The number nearly doubled to 4,269 in 2015 (the most recent data). Boston Beer has been unable to capture the growth of this market because their market share has been eroded quicker than industry growth. The trend seems undeniably unfavorable, however there may be reason to weather the storm. In their latest quarterly report management put forward uncertainty to...