FIZZ

Publicly traded companies mentioned herein: The Coca-Cola Company (KO), National Beverage Corp (FIZZ), Nielsen Holdings plc (NLSN), Pepsico Inc (PEP)

Highlights

National Beverage Corp (FIZZ) has seen its shares decline following the release of a research note by Glaucus Research Group, a California-based short seller. The stock had traded as high as the low $60s in July (2016) based on the strength of its LaCroix seltzer brand; however, the stock backed off to the $50s and then the presenter said the publication of the short thesis (9/27/16) drove shares to a low of $39. The presenter is presently long FIZZ, and said he originally bought stock in the mid-$40s and added to the position when it traded down on the Glaucus note. The main points in the short thesis relate to questionable accounting methods and the ownership structure, and it was even suggested that FIZZ’s founder and CEO Nick Caporella has manipulated earnings results. However, the presenter has reviewed the company’s accounting and disagrees with much of the short thesis. In particular, Glaucus largely ignores LaCroix’s positioning in the market and potential future earnings power (sales jumped from $65 million in 2010 to $226 million in 2015). Plus, with over $100 million in cash on the balance sheet and no debt to speak of the risk/ reward appears to be favorable. In his opinion, the stock could trade up to $70+ in 12 months (26x $2.70 of EPS in FY 2018) from ~$50.