Top Picks 2020: Atrion (ATRI) and Upland Software (UPLD)

01/24/2020 5:00 am EST

Focus: STOCKS

Peter Mantas

CIO, Logos LP

Our investment goal is to find high-quality businesses that are priced below their intrinsic value; here are two that stand out as new ideas for 2020, notes money manager Peter Mantas, editor of Logo, LP Blog.

Atrion (ATRI)

The small cap maker of fluid pumps and medical devices is having a tough fourth quarter as trade deal concerns has made for a volatile period of time.

The company reported slowing growth last quarter (especially in Asia) which sent the stock tumbling. Currently, the stock is trading below 50, 100 and 200 moving day average and is well off highs.

With high ROIC (over 18% 5-year average) and a dividend increase of roughly 15% we think Atrion offers compelling value for the long term given the recent underperformance. We have initiated a position and will look to add on further weakness. 

Upland Software (UPLD)

We think Upland Software (UPLD) is a compelling buy here. With the recent results we saw from Enghouse Systems (Toronto: ENGH), we think that fiscal 2020 will be a good year for the consolidators.

With a plethora of venture capital investments ending up as zombies (and more to come as capital becomes more disciplined), we think there is a robust pipeline in niche work management cloud companies (think software that tracks consumer sentiment when you call your telco to complain about your bill).

At 3.8x sales, 13x forward PE and 4.1x book, the company is not trading at a premium valuation considering it is a consolidator with rapidly growing revenue in a highly fragmented software market. We have initiated a position and will look to add on further weakness. 

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