Last week I spent a few days in Dallas attending the Southwest IDEAS conference, one of three wonderful conferences the investor relations advisory firm Three Part Advisors holds each year.
What makes these conferences special is not just the companies presenting but the hospitality of the Three Part Advisors team and the impromptu dinner some of us were able to put together for old friends and some new ones. The dinner in Chicago and Dallas last year were both oversubscribed and this one was no different.
This year, 69 micro-cap, small-cap, and mid-cap companies were supposed to attend the Southwest IDEAS conference. Since they hold three presentations simultaneously, I can only attend a maximum of 20 presentations. To narrow the list of companies I want to check out, I usually create a spreadsheet looking at 20 metrics, including growth, management effectiveness, balance sheet strength, valuation, etc.
I also used the IA Score model to help me narrow the list of presentations to attend. For the companies that pass my quantitative filter, I dig deeper before, during and after the presentations. Conversations with fund managers and other attendees during and after the presentations help surface any interesting companies that didn’t look good based on the numbers but were potentially at an inflection point.
The three companies from the conference that really stood out to me were:
1. Ligand Pharmaceuticals (LGND): $206.89
Market Cap: $4.07B
EV: $3.86B
We covered Ligand Pharmaceuticals, a biopharmaceutical royalty company, as a spotlight idea in our September 2025 Special Situations Newsletter and I have included select excerpts from that newsletter about the company below:
“When my podcast co-host Tamanna and I attended the IDEAS conference by Three Part Advisors in Chicago last week, we came across a company that reminded us very much of the kind of confluence of events we saw in the Biohaven – Pfizer situation.
This year, when putting together a similar spreadsheet before the conference, we saw a company called Ligand Pharmaceuticals (LGND) on the list and the name rang a bell. The reason we were familiar with the company was on account of a confluence of events. Ligand decided to spinoff its drug development platform OmniAb (OABI) and merge it into a SPAC through a Reverse Morris Trust transaction. A month after this transaction was completed, Ligand announced that it was appointing long-serving board member Todd Davis as its new CEO.
Since we cover spinoffs, SPACs and C-suite transitions, we had been reporting on each of these events as they relate to Ligand. However the reason the name really struck a chord with us was on account of a flip-flopper insider transaction by the CFO Octavio “Tavo” Espinoza that we covered briefly in an article titled Three Recent Flip-Flopping Insiders earlier this year.
The three companies covered in that article Palantir (PLTR), Ligand Pharmaceuticals (LGND) and 908 Devices (MASS) are up 22%, 56% and 38% respectively since May 15, 2025. During the same period, the Nasdaq was up 12%.
You can start to see why we were excited about catching the Ligand Pharmaceuticals presentation at the IDEAS conference last week. Serendipitously we also got a chance to talk to CFO Tavo Espinoza and his team and I realized that Ligand also held a stake in another company I was invested in, Viking Therapeutics (VKTX). Like we have done in the past, we decided to pick two companies from the IDEAS conference as our spotlight ideas for this newsletter and incidentally both companies are asset-light high margin businesses”
Instead of reproducing the entire writeup from the September newsletter, I have included the summary of the idea from the September newsletter below:
Summary
Ligand Pharmaceuticals started as a drug development company over four decades ago, but after financial issues, activist investor Dan Loeb and Third Point helped pivot the company to its current business model
Under the leadership of former CEO John Higgins, Ligand transformed into a biopharmaceutical royalty aggregator, focusing on investing in late-stage drug assets
The company’s lean business model, which involves investing in royalty streams rather than developing drugs from scratch, allowed it to reduce its headcount from nearly 400 employees to just over 40
Ligand’s portfolio is now one of the most diverse in the industry, with over 90 partnered programs, including 30 commercial-stage products that generate royalty revenue
CEO Todd Davis and CFO Tavo Espinoza recently made significant stock purchases, with the stock price subsequently rising by over 55%
The company has a strong pipeline of promising drugs like Ohtuvayre, Filspari, and Zelsuvmi, with recent catalysts such as Merck’s acquisition of Verona and the upcoming FDA decision for Filspari
Despite having a risk-averse business model, Ligand still faces risks from potential government policies like the Inflation Reduction Act, which could limit future royalty revenue by capping drug prices
With extremely high margins that can be expected from a royalty business, the stock appears to trade at a high valuation when considering traditional valuation metrics
With expected revenue CAGR of 22% through 2029 just in their royalty business, we are sufficiently excited to start a position in the company for the model portfolio
Last week, in addition to meeting CFO Tavo Espinoza, I got a chance to catch a presentation by CEO Todd Davis and Executive Director Melanie Herman. The story is essentially unchanged and it looks like the company is going to continue executing on its strategy with enough liquidity to support its investments.
Consensus estimated sales of Ohtuvayre, Verona’s drug to treat chronic obstructive pulmonary disease (COPD), increased from $1.2 billion in December 2024 to $3.4 billion in August 2025. Sales could potentially be even higher following Merck’s acquisition of Verona, which closed on October 7. Ligand receives 3% of Ohtuvayre sales as royalty payments.
The one concern I had was that with biotech companies coming out of the nuclear winter that haunted the industry for a long time, clinical stage biotechs now have options to raise capital through secondary offerings. This could limit the opportunity set for Ligand, at least on the public market side of things. A positive offset to this is the frenzy of M&A activity in the pharma industry, which could create additional situations like we saw with Verona’s acquisition.
By far, this is one of the most interesting companies I have come across this year and I will look into starting a position for my personal portfolio if market weakness presents an opportunity to do so.
2. CECO Environmental (CECO): $51.44
Market Cap: $1.81B
EV: $1.79B
An investment in CECO Environmental – a company that helps its industrial clients with air pollution control, industrial water treatment, and energy-transition equipment and services – is mostly a “bet on the jockey instead of the horse” kind of opportunity. An excerpt from the Management Changes chapter of my book The Event-Driven Edge in Investing is given below:
Danaher, which gets its name from the tributary of a river in the state of Montana, started out as a group of manufacturing businesses in 1984. Over the years the company transformed itself through a series of acquisitions and divestitures to become a life sciences and diagnostics company. Danaher adopted the Japanese business philosophy of kaizen, or continuous improvement, in its early days and has since transformed it into its own Danaher Business System (DBS).
While a superior operating system for a company goes a long way to achieving success, at the end of the day it is the people that drive outcomes. Just like the leader of a country, a CEO and their team has a huge impact on the future direction of their company. Danaher’s current CEO, Rainer Blair, had been with the company for over a decade when he took the top job during the depths of the Covid-19 pandemic. Matt McGrew was with the company even longer before he took the job of CFO in January 2019.
The company has an enviable gross margin of over 60%, a net margin of nearly 23%, and has more than doubled its revenue over the last five years from $15.52bn in 2017 to $31.47bn in 2022. Much of that success can also be attributed to Danaher’s previous CEO Larry Culp, who has engineered a similar transformation at GE as discussed in our first case study later in this chapter.
Investors pay attention to a lot of metrics, but for some reason company management doesn’t get as much attention as it deserves.
When I watched the presentation by CECO Environmental’s CEO Todd Gleason, I was reminded of Danaher. He mentioned that he had friends who worked at Danaher and was alluding to employing a system like DBS to drive positive change and outcomes at CECO. He has been the CEO of the company for a little over 5 years and you can see his impact on the business from the following slide that was included in their Dallas presentation:
The company has driven this growth through a combination of small tuck-in type of acquisitions and organic revenue growth. I asked him if the $108 million Profire Energy acquisition they completed earlier this year was their largest acquisition in recent years and he confirmed that it was.
A combination of earnings growth and multiple expansion has driven the stock up more than 570% over the last five years. Consensus analyst EPS estimates for 2026 are $1.48, which implies the stock is trading at a 2026 P/E of 35. Companies like GE and Danaher trade at higher multiples but they also sport stronger margins. Given this valuation, I have added the company to my watchlist for now and plan to do more work on it in the future.
3. Ranger Energy Services (RNGR): $13.13
Market Cap: $283.82M
EV: $268.12M
Investing in cyclical stocks is difficult and you compound that difficulty when you choose to invest in an energy company. I have enough scars from investing in energy and other commodities stocks at the wrong part of the cycle to treat them with a healthy dose of skepticism.
After paying my tuition in the 2010s, especially with offshore energy service companies, I started to get a better handle on the industry and was able to participate in the right part of the cycle coming off the 2020 lows. I still made mistakes with companies like Atlas Energy Solutions (AESI) but that was mostly because of company-specific issues.
WTI crude oil prices have been range-bound for the better part of the last two years, oscillating between $60 and $80 per barrel, but recent weakness has driven them into the high $50s. At various price points, different modes of production become economically unviable, starting with Canadian tar sands, followed by deep offshore, near shore and then fracking in specific locations (Bakken, Permian, etc.).
In this environment, Ranger Energy Services, which focuses on providing onshore oilfield services, primarily in the Permian Basin, has managed to stay consistently profitable and for several quarters even had net cash on the balance sheet. The company is the largest oil well services provider in the lower 48 states. Last week was my third conversation with CFO Melissa Cougle and this time I also got a chance to talk to CEO Stuart Bodden and VP of Finance Joe Mease.
The company, which has a market cap below $300 million and trades at a forward EV/EBITDA of less than 4, was excited about their recent $90.5 million acquisition of American Well Services (AWS) for just 2.5 times trailing EBITDA. Ranger paid $60 million in cash, 2 million shares and a $5 million earn-out if AWS achieves $36 million in EBITDA in the twelve months after closing. Unlike some of the 100+ public market M&A transactions we are currently tracking on InsideArbitrage, this deal was announced and closed on the same day.
The positive impact of this acquisition will really start to be felt in 2026 but will be partially offset if the current weakness in oil prices continues. Overall Ranger is very well positioned for a rebound in the cycle.
When the cycle turns, there is a season for investing in production companies, then a season for the midstream companies that transport and store oil & gas, and then the servicing companies. When the season for servicing companies arrives, the offshore drilling company Tidewater (TDW) and Ranger Energy Services (RNGR) are at the top of my list.
This was just a brief overview of three companies I found interesting from the conference and I plan to do a more detailed write-up on one of them for our December Special Situations newsletter.
Disclaimer: I hold long positions in GE (GE), Viking Therapeutics (VKTX) and Atlas Energy Solutions (AESI). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.