Maran Capital, a Denver-based value-driven investment management firm led by Dan Roller, sees a good value in shares of Clarus Corp (NASDAQ: CLAR). Roller, founder and chief investment officer of Maran Capital, is bullish on Clarus, which is engaged in designing and manufacturing of active outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing and other outdoor recreation activities. Let’s take a look at Roller’s comments about the company that he made in Maran Capital’s Q2 investor letter.
Clarus is trading for $8/sh and change, and I think there is a path to $35/sh over the next five years. If I’m wrong on some elements of the thesis, I still think we will preserve and indeed compound capital in this position, though perhaps at a rate lower than the mid-30%s. I think there is limited risk of permanent capital loss due to its cheap valuation, its strong, growing brand, the excellent secular backdrop, a clean balance sheet, an aligned management team, and recent share buybacks/Dutch Tenders. (Of course, all investments entail risk; please see important disclosures on page six.)
Earlier this week, I spent two days at the Outdoor Retailer trade show. I met with Clarus’ CEO, CFO, chairman, several key designers (from both the apparel and footwear categories), as well as the global head of sales and other leaders in the sales and marketing organization. I also met with numerous competitors, suppliers, and customers (retailers/distributors).
While vigilant not to let increased knowledge and depth of research lead to over-confidence, I was encouraged by my findings and maintain high conviction in this position.
Additionally, over the course of the past few months, Clarus was engaged in a Dutch Tender for its own shares. They repurchased 417k shares (1.4% of the shares outstanding; 1.9% of the float) at a price of $8/sh. They also announced that they expect to initiate a dividend this quarter, which will yield slightly over 1%. I’m happy to own a large position in this company at prices at which its chairman (and 25%+ owner) sees good value in the shares.
For the second quarter of 2018, Clarus Corp (NASDAQ:CLAR) reported sales of $45.9 million, up compared to $30.7 million in the same year-ago quarter. Net loss improved $0.8 million or a loss of $0.03 per share, compared to a loss of $3.7 million, or $0.12 per share, in the year-ago quarter. Adjusted net income rose significantly to $2.6 million, or $0.09 per share, compared to adjusted net loss of $3.4 million, or $0.11 per share, in the second quarter of 2017.
Clarus shares are up 33.55% since the beginning of this year. Over the past three months, the share price has moved up 42.76% while the stock has gained 56.82% over the past 12 months. CLAR has a consensus average target price of $11.38 and a consensus average recommendation of ‘OVERWEIGHT, according to analysts polled by FactSet. On Wednesday, the stock was closed at $10.35.
Meanwhile, CLAR isn’t a very popular stock among hedge funds covered by Insider Monkey. As of the end of the fourth quarter of 2017, there were 10 funds in our database holding CLAR in their portfolios.