Shares of IDT (IDT -0.25%) were up on Friday after a positive report was released for the stock by Alta Fox Capital. The conglomerate of telecommunications and payments businesses was up as much as 24% on the news and is up 19.8% as of 12:12 a.m. EST today.
IDT is a small-cap stock with a market cap of $1.2 billion. It was founded in 1990 by the current chairman, Howard Jonas, and is currently run by CEO Schmuel Jonas and CFO Marcelo Fischer. The company owns many businesses, including a point-of-sale (POS) platform called National Retail Solutions, a cloud-based communications platform for enterprises called net2phone, and a money remittance service called BOSS Money Transfer.
Alta Fox's thesis is that IDT is undervalued because investors do not understand how much each subsidiary is worth and that any shareholders in IDT may realize this value with two expected spinoffs over the next two years. The fund also touts Howard Jonas' track record of capital allocation, with five successful spinoffs that were previously incubated within IDT and a stock that has compounded at a 49% annual return over the past decade.
Alta Fox makes a compelling case for the strength of IDT's management and its collection of businesses, so it is understandable why investors bid up the stock early on Friday. If you are thinking about adding this small-cap stock to your portfolio, make sure not to purchase shares just because of one positive report. Before hitting the buy button, make sure that you are aware of the opportunities and risks ahead for each arm of its diversified operation.