Bernzott Capital Advisors recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -32.76% (net) for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Bernzott Capital Advisors top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Bernzott Capital Advisors highlighted a few stocks and Cerence Inc. (NASDAQ:CRNC) is one of them. Cerence is the global industry leader in creating unique, moving experiences for the automotive world. Year-to-date, CRNC stock lost 6.2% and on May 13th it had a closing price of $23.58. Its market cap is of $847.8 million. Here is what Bernzott Capital Advisors said:
“Cerence (CRNC): $770 million market cap – Based in Burlington, MA, the company was spun-off from Nuance Communications in October 2019 and is the leading provider of AI-powered virtual assistants and innovations for connected and autonomous vehicles. Customers include all major automobile manufacturers or their tier 1 suppliers worldwide, with ~80% market share for embedded software technology and current win rates that are ~90%. The company’s voice platform has been shipped in over 300 million cars to-date including ~50 million in the last year. Over half of cars shipped worldwide utilize Cerence solutions. CRNC has very high revenue visibility thanks to long-term customer contracts and designed-in technology. Backlog is ~$1.4 billion, compared to 2019 revenue of $300 million, ~50% of that revenue will convert to revenue over the next three years. The company has an excellent ~29% EBITDA margin, higher than the gross margins of most industry suppliers. CRNC has a moat due to strong customer relationships; switching suppliers for a small savings isn’t worth the operational and integration risk to a manufacturer. The company will benefit from secular tailwinds as connected car worldwide vehicle shipments are expected to grow from ~12% to ~50% over the next 5 years. We initiated and then added to the position during the quarter, with the stock trading at an attractive discount to fair value.”
Do you think it is appropriate to buy CRNC stock now?
Disclosure: None. This article is originally published at Insider Monkey.