Turning Point Brands Inc (TPB): Here’s Why Maran Capital Loves It

Maran Capital, an investment management firm led by Dan Roller, has a bullish viewpoint on Turning Point Brands Inc (NYSE:TPB). The investor believes that the company’s share price would move up in the coming year. Roller, who is founder and chief investment officer of Maran Capital, noted in the Q4 investor letter (you can download a copy here) that his 2020 price target range for Turning Point Brands’ stock is $30-40 per share, while shares are currently trading at around $20.44. In this article, we’re going to discuss Turning Point Brands – a provider of other tobacco products in the United States – and will take a look at Rolle’s comments about the company.

So, here is what Roller said about Turning Point Brands in the letter:

Sometimes smaller-cap and less liquid stocks behave in unexpected ways (which is part of their appeal to me – one seller wanting to exit a position can trump fundamentals in the short term, creating opportunities). This seemed to be the case with TPB following its 3Q earnings release. I believed the results, including the initiation of a dividend, were positive. Despite this, the stock sold off in the days following the release of results, to a low of ~$15.50/sh (perhaps one seller just wanted out). Regardless of the cause of the weakness, I took advantage, and added to the position during this period. Again, this is somewhat illiquid, so any subsequent strength into year-end could easily be attributed to “one buyer wanting to get in.” Short-term aberrations in either direction aside, I believe that TPB increased in value over the course of 2017, and is likely to continue to compound at acceptable rates over the long term. As a reminder, my 2020 price target range is $30-40/sh.

Turning Point Brands

Website Screenshot/Turning Point Brands

Louisville, Kentucky-based Turning Point Brands Inc (NYSE:TPB) is a top player in the other tobacco products industry. The $392.65-million market cap company operates three smokeless products, smoking products and NewGen products. Its brands include Zig-Zag, Beech-Nut, Stoker’s, Trophy, and VaporBeast. As of the end of the fourth quarter of 2017, there were five hedge funds in Insider Monkey’s database with positions in TPB.

Turning Point Brands had an impressive performance on the stock market in 2017, with the share price gaining nearly 73%. Shares are down 3.27% so far this year, while the stock has jumped 55.32% over the last 12 months.

For the third quarter ended September 30, 2017, the company reported net sales of about $73 million, up compared to about $51 million in the same quarter the year before. Its net income was $7.4 million, or $0.38 earnings per share, versus $6.8 million, or $0.34 per share, in the third quarter of 2016.