Quick Ideas #6
First of all, happy new year to all my readers! May 2024 bring market beating returns for everyone. Again I managed to underperform my blog stock picks by concentrating in the wrong stocks. Although I still ended up over 20% for the year, it was disappointing considering I was getting close to 30% in July. Over the past 3 years over 50 closed ideas on this blog have generated an average return of 28% with an average holding period of just under 8 months. So a CAGR of almost 40%. With about 80% of them outperforming the S&P 500 over the period they were active.
So I am considering putting actionable stock ideas behind a paywall. I'm thinking about $150-200/year. Lately I don’t feel like sharing illiquid ideas as I have almost 1600 subscribers now. It may be harder to get out of illiquid stocks if my thesis does not play out and there is a lower chance I get to buy more at a lower price after writing it up here. For example I wanted to buy more Anexo, but it popped quickly a week after writing it up. Might have been a coincidence but I do have a bunch of funds in my reader list.
Charging around $175/year seems reasonable and easy to get a return on for readers without creating large obligations for me. And I could justify putting a bit more effort in my posts if I get paid for it. I will have to think about it some more, and any feedback is welcome.
A few months ago I mentioned I-Mab (IMAB) at $1.22/share. Shares traded above $2 today and the discount to net cash is no longer as great. So I am closing this idea here. At this point I need to have too strong of an opinion about their IP and hard to resist nearly a double here on no significant new developments.
AvroBio (AVRO) is another one that I sold for $1.47. Liquidation proceeds of $1.5-1.7, so the discount is no longer large enough. These things are better to sell when they pop on no news. And it is bugging me a bit that there has not been any announcement.
I also reduced 111 inc (YI), but still hold a position. I mistakenly thought that getting a STAR listing was trivial, but apparently the CCP has made it far more difficult now to get one. (Google “ft star listing” if you don’t have a FT subscription). There is a committee of apparently amazing CCP employed value investors who will determine if your competitive advantage is really good enough to warrant a listing. I wonder if they have a portrait of Warren Buffett hanging in their office next to chairman Xi. If only they understood that increasing transparency and cracking down on fraud and corruption would probably solve most of their issues.
This has made the thesis more risky. There are still other options, like a sale/merger or a HK listing, and ofcourse a STAR listing is still possible. But making this position too large has been a mistake in 2023. My gut was telling me this already 6 months ago, but my brain thought otherwise. Or the other way around, hard to tell sometimes.
I added to Galecto (GLTO) Their Mylox-1 trial showed a reduction in Fibrosis of the Bone Marrow in Patients with Myelofibrosis. If this holds up, they are the only company who will have a drug with this ability. So that can only mean good things for their liquidation value right? The Myelofibrosis market is nearly a billion $/year. I don’t think they have any realistic option here to complete the trial themselves. I will give this another 5-6 months for a sale to play out.
Finally I got a stake in Transcontinental Realty Investors (TCI) for just under $36. This stock has been written up several times by Clarkstreetvalue here, here and latest mention here. There is about $100/share worth of value here, and >80% is owned by the Phillips family. Bradford Phillips is in charge of the estate of Gene Phillips' 6 children. And they have been selling a lot of real estate recently, which has significantly increased their GAAP book value. So the bet here is that minority holders will be thrown a bone, and the ridiculous Russian doll nesting structure will be simplified some time soon. And while I know this is the Daily Mail, they attributed the following quote to Brad Phillips recently:
“Bradford referenced his father's unusual past in his original suit, saying: 'While Mr. Phillips was very successful, he was also a controversial figure.' He added that he 'has had to overcome his father's reputation with the companies' regulators and others.'”
Gene Phillips was a controversial figure indeed, so controversial in fact that a GOP lawmaker actually returned a political donation in 2008. One would think that not completely screwing minority holders here for 10’s of millions of dollars on a multi billion $ estate would go a long way towards overcoming his father’s reputation. An offer of $70-80 would benefit both minority holders and the Phillips family.
My guess is that a buyout will first happen to IOR (which is trading at a 56% discount to NAV and easiest to merge into TCI), which will then cause a pop in TCI as well. Proposal 3 in latest proxy seems to be an indication towards a simplified corporate structure. I will give this about a year, and probably sell if nothing happens somewhere early 2025.
Readers of this blog should do their own due diligence before buying or selling anything, since I have been wrong before and cannot guarantee all information in this write-up is 100% factual. I may buy or sell the above mentioned stocks at any time.
am hoping you can come up with some clever retrospective analysis on whether your posts have any impact. but am also skeptical such attribution is convincing.
either way, consider public posts for min mkt cap (e.g., >US$40M) or average daily\weekly dollar weighted volume (???) companies.
regarding the phillips and ilk, what is the base rate for putting reputation over money? it seems reputation comes as explicit acts of tax deductible 'charity' as well spent PR, not in the form of minority shareholders!