Portfolio Update 1.31.21

Period
January 31, 2021

Back with another portfolio update!

Check out new-ish posts on Sally Beauty and H&R Block.

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Not much change in the composition of my portfolio other than concentrating a bit more in the Core names and a few Option positions that have played out.

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Most of the recent portfolio changes have been geared at concentrating more in the few remaining cheap stocks I own. Many boats are being lifted right now (in the markets). Back in spring/summer, it felt appropriate to broaden out and own a plethora of cheap companies but today the bargains are less widespread (though they still exist).

I had owned about 50 stocks back in the summer and that list has whittled down to about 30 or so today. May fall further from here too…

As for the Core holdings — I’ve added some to existing positions Viatris, H&R Block and B Riley (especially following the National Holdings deal).

Pretty much everything below the 2% weight is an Option position.

Recent additions Gilead Sciences ($GILD) and Franchise Group ($FRG) are essentially placeholder positions until I evaluate whether I want to own more of them. Both look cheap with solid upside.

I’m typically not one to make sector or thematic bets but earlier this year I found myself scooping up a few financials at low multiples of book value and earnings. Especially as they were facing a moratorium on share buybacks. I’ve since exited all of these positions (Citi, Wells Fargo, ING Group, and PNC) with the exception of Third Federal ($TFSL). This last one is a bit unique and I may wind up owning for years.

My energy exposure is limited to Bristow ($VTOL) and Marathon Petroleum ($MPC) but this is a space I plan to investigate deeper. Plenty of these stocks have rallied from their lows but are still cheap or down significantly over the past 1-5 years.

Portfolio Commentary…

  • Atlantic Power ($AT) — Exited
  • Wrote about this one back in August 2020 around $2 per share. I also owned some call options that expired on Friday January 15… The very same day the company announced a $3 buyout offer

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    This wound up playing out much sooner than anticipated…

  • Gogo Inc ($GOGO) — Exited
  • Admittedly this was a quick flip from November 2020. The stock had rallied from $9 to $15 in such a short period as the market has accelerated higher. With my guiding star of getting more conservative, owning fewer stocks, and capitalizing on quick moves; it felt appropriate despite this looking like a good business.

  • Discovery Group ($DISCA) — Exited
  • Originally purchased this back in July. At the time, it was trading at something like 5x FCF and insiders (particularly John Malone) were buying. They launched their own OTT streaming service and resumed share buybacks. The stock price responded by rallying >100% to a recent $43. Now we’re trading at >10x FCF which is by no means expensive. But this is still a business facing a rapidly changing landscape with cord cutting and they have a large pile of debt on top of that.

    Again, my primary motive was to take the quick gains and concentrate further in my top holdings.

  • TheMaven Inc ($MVEN) — New Position
  • I’ve long professed my love for everything B Riley touches and this is yet another idea sourced by a combination B Riley and 180 Degree Capital ($TURN) holding.

    Maven is a digital media business which recently acquired notable brands thestreet.com and Sports Illustrated. They are sorting out some SEC filing issues and dealing with some activist pressure led by B Riley and 180 Degree Capital. This is flying blind in a sense but the business has the makeup to generate great cash flow (digital publishing) once these deals can be combined and the expense side cleaned up. They have solid equity owners backing the situation too.

    More to come on this one…