Value investor rides global stocks to big gains

Published Tue, Feb 24 20156:00 AM ESTUpdated Sat, Oct 14 201710:44 AM EDT

Oscar Schafer of Rivulet Capital is one of the most widely followed investors out there and he's showing that is for good reason this year. His Squawk Box Platinum Portfolio is up 14 percent already in 2015 and he's finding growth at a reasonable price in unusual places to get it done. Two of his three picks for the portfolio are based outside of the country. "We have found that there are more overlooked stocks abroad," said Schafer. " These companies can be at discounts for a variety of reasons, such as an industry that I think is changing for the better, a new management team that can significantly improve operations or a fundamental misunderstanding of industry dynamics." Below are his updates on the stocks as he's sticking with all three despite the hefty gains. On the overall market Schafer said: " I think this is going to be a year for stock pickers. There won't be a lot of moves in the averages." Read More Wall Street's 5 burning reasons to buy Apple Israel-based Nice Systems , up 14 percent year to date: "Nice is a good example of the impact that a new management team can have on a business. Its core business is selling software that serves as the operating system for some of the largest call centers in the world. It also has a large bank fraud detection software business as well. Revenue has been growing in the high single digits, and over 40 percent of revenue is recurring as it is maintenance paid for annually by customers. The company has $8 a share of net cash on its balance sheet and currently trades at $58. Backing out the cash, it's trading at 15 times 2015 earnings estimates and five times its maintenance and subscription revenue. I think the stock has been 30-40 percent upside from current levels." Netherlands-based Interxion , a cloud company, up 18 percent in 2015: "The company just announced a transformative, all-stock merger with Telecity, a very similar competitor based in London. INXN shareholders will own around 45 percent of the combined company. It is a phenomenal deal. From a financial perspective, the company conservatively projects EBITDA synergies of 40 million pounds (or 60 million USD). From a strategic perspective, the combined company will have a No. 1 position in Europe. I value Interxion by separating out the spending on high-return growth projects from the cash flow generated by the existing assets. By my math, the company still trades at only 10 to 11 times this core, recurring free cash flow. The stock has 50 percent upside from these levels." Washington, D.C.-based Cogent Communications , an Internet provider, up 10 percent year to date: "Cogent stock has underperformed over the last year as it has been caught up in a very public dispute with several large carriers regarding their peering relationships, a byproduct of having Netflix as a customer. We believe this issue will resolve itself soon, and in the meantime, the only effect for Cogent is that 5 percent of their business will not grow. This issue aside, we believe the business should grow 15 percent on the top-line and the company will deliver on its historical average of 200 bps of margin expansion each year. What's more, Cogent should return $450 million to shareholders between dividends and buybacks, or approximately 30 percent of today's market cap. We think a few years from now the company will be generating $3 per share in free cash flow and will trade north of $60."

Oscar Schafer of Rivulet Capital is one of the most widely followed investors out there and he's showing that is for good reason this year.

His Squawk Box Platinum Portfolio is up 14 percent already in 2015 and he's finding growth at a reasonable price in unusual places to get it done.

Value investor rides global stocks to big gains

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