Covestor model manager Cheng Yuan’s diverse Value with Catalyst model is filled with positions that are deeply discounted and that Yuan feels have a possible catalyst in place that will further unlock their value to shareholders. Yuan does not restrict the model to any particular sector.
Reviewing the fund's top holdings, you will notice Reading International Inc (NASDAQ: RDI) has the largest allocation of the fund’s assets. RDI is a company that owns and operates cinemas and live theaters in the United States, Australia and New Zealand. They have other real estate holdings as well but according to their website, most of their current cash flow comes from their cinema operations. The company’s earnings per share are low but their price to sales and book indicate that they are likely undervalued. The possible catalyst for further value is in the fact that not only does this company buy and develop real estate, but they develop it into entertainment facilities that have the potential to bring in consistent earnings for years without many of the pitfalls of rental properties.
The next top holding is Enzon Pharmaceuticals Inc (NASDAQ: ENZN). ENZN is a pharmaceutical company that develops medications for cancer patients. The company has developed a sophisticated technological platform that allows it to enhance pharmaceuticals that might otherwise struggle to deliver their treatment in a patient’s system. At a glance, the company does not look undervalued. At the time of this writing, their price to earnings ratio and price to sales and book are all high. The company has two potentially life-saving cancer treatments currently being studied. If the studies prove that these treatments work and the FDA approves them, it could radically change this company’s outlook. Not only might this be viewed as a catalyst fit for Yuan’s model but it might prove that the company is undervalued if profits start coming in.