Portfolio Update 3.31.21

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March 31, 2021

Here’s the portfolio as of 3.31.21…

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For starters, this is where I cover most of my “portfolio management” commentary. As a reminder to new subscribers — I take a bucketed approach to investing:

  1. Core
  2. General
  3. Option

Here’s the current makeup by bucket:

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I’m a long-only investor so no shorts on here and I almost exclusively look at traditionally cheap stocks (but not necessarily in a purely quantitative sense). So don’t expect any high-flying growth stocks around here.

Overall, as I’ve commented in past posts, the trend in my portfolio is to maintain a decent cash level (around 10%) and get more concentrated in the best ideas. Feels like a natural transition as markets have moved higher. When things were in the gutter last spring it felt easier to scoop up plenty of good businesses at cheap prices. As opportunities have dried up over the last 12 months, I’ve essentially “doubled down” on the better ideas with some Options or starter General positions sprinkled in. Nothing more complicated than that.

Core positions makeup the bulk of my portfolio with the big 3 still the same — Viatris, bebe, and B Riley. Meredith is hanging in there as well as that thesis continues to play out. This bucket consists of stocks I intend to hold for years and allow management to continue deploying cash. I’ve discussed each of these top holdings following Q4 results — check out those notes here.

Some of the Generals began as starter positions and never got topped up as the stock moved higher (i.e. Franchise Group). Others are still in the research phase like Gilead, Northrop and Lockheed. These are mostly plain vanilla cheap stocks, some with a catalyst and some without. I’m not typically a thematic investor but I like the pharma industry in general. Particularly generics (Teva and Viatris) but there are a handful of others I’m evaluating right now. My bet on the tax providers (Blucora, sold, and H&R Block) has mostly played out; though I’m hanging onto H&R Block to see if they can execute on an achievable LT plan:

H&R Block investor day plan

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As I commented in the last portfolio update, I’ve exited a handful of the Option bets as the markets gave me some wild price swings to take advantage of. There remains a group of “regulars” that have been playing out for quite some time now. Rubicon has graduated to the Core bucket as I’ve built some trust with management and their plan; I view it as less of a cash shell at this point. HG Holdings (the old Stanley Furniture) is still a work in progress.

Let’s take a look at the activity this month:

  • NN Inc ($NNBR) — New Position
  • This is a starter position while I’m wrapping up some research. The business was a highly levered conglomerate until they sold a valuable life sciences division to wipe out most of the debt. Now it’s 2 automotive/aerospace driven manufacturing businesses with a murky outlook thanks to COVID impact. Results are starting to turn positive as of 4Q20.

  • Trecora Resources ($TREC) — New Position
  • This is another starter position as I dig in. It’s a specialty chemical company with a CEO who has been relentlessly buying shares for 2 years now. Fortunately for outside investors, the stock price hasn’t budged much during his buying so you can get in at same-or-better prices. More to come on this one.

  • Yellow Pages ($Y.TO) — New Position
  • Wrote about this one recently, you can find the write-up here. This one may leave people scratching their heads. The business is in decline. But it’s backed by a quickly growing net cash position which fits my Option bucket perfect. By end of 2021, I assume they’ll be returning plenty of cash and most of the value will be backed by cash on the balance sheet.

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