Rewey Asset Management: Uncovering a Hidden Gem in Richardson Electronics ($RELL)
Rewey Asset Management, a value-oriented investment firm that focuses on small and mid-cap companies, has recently taken a position in Richardson Electronics ($RELL). In their first quarter 2024 investor letter, portfolio manager Chip Rewey and his team outline the investment thesis behind this underfollowed small-cap company.
Richardson Electronics manufactures electron tubes and microwave generators, technologies experiencing resurgence in demand from the semiconductor manufacturing industry and green energy applications. Rewey Asset Management believes that RELL’s strong balance sheet, diverse growth avenues, and significant undervaluation make it a compelling investment opportunity.
The firm highlights several key factors underpinning their thesis:
- Financial Strength: RELL has over $22 million in net cash, no debt, and $116 million in inventory (90% in finished goods) supported by long-term orders.
- Green Energy Solutions (GES): RELL’s proprietary battery replacement solutions for windmills, locomotives, and other green energy applications could drive substantial earnings growth.
- Semiconductor Equipment Cycle: As the industry recovers, supported by trends like AI, 5G, and electric vehicles, RELL is well-positioned to capture significant orders.
- Valuation: Rewey Asset Management sees over 100% upside to RELL’s current share price based on a return to fiscal 2023 revenue and earnings levels.
The firm believes that $RELL’s growth prospects are significantly undervalued by the market, presenting an attractive risk-reward profile for patient investors. As the company’s end markets recover and its GES unit gains traction, Rewey expects $RELL’s earnings power to be recognized, driving outsized returns.
By leveraging their expertise in identifying underfollowed small-cap companies with strong fundamentals and attractive valuations, Rewey Asset Management aims to generate superior returns for their clients while managing downside risk. The firm’s investment in Richardson Electronics exemplifies their long-term, value-oriented approach to investing.
Click here for the full investor letter.
Disclaimer: The information provided in this blog post is for informational and educational purposes only and does not constitute financial, investment, or other professional advice. The content is based on a third-party investor letter and does not represent an endorsement, recommendation, or solicitation to buy or sell any particular security or investment product mentioned.
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