Portfolio Update 6.30.21

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June 30, 2021

Portfolio as of 6.30.21

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Despite my overall concern with so many stocks and the market as a whole having moved significantly higher, I still seem to be finding plenty of ideas to put money to work.

There was a decent amount of activity over the past month…

First were some of the exits:

  • Gilead Sciences ($GILD) — This wasn’t a big winner but wasn’t bad either. Bought at $57 in December and sold in June at $67 in change. I still like the story and the valuation is more than reasonable at 9.5x earnings. At $85bn, it’s a bit larger than my typical holding and I’ve found other ideas to work.
  • Lockheed Martin ($LMT) — Same story, larger company and a reasonable valuation / growth outlook but better opportunities available. I originally paired this one up with Northrop Grumman ($NOC) — a company I like a bit better — as they are selling assets vs. buying, returning huge chunks of cash to shareholders, and own a prized asset in Orbital ATK.
  • Sonim Technologies ($SONM) — In June, the company announced that CEO Tom Wilkinson was resigning… This was a part of the Option bet for me in that Tom was the one who turned and sold a similar business, Xplore Technologies. That announcement led me to cut the rest of the stake. After buying in October 2020, turned into a double from $0.51 to $1.06 (some sales at higher prices).
  • Trimmed positions — I’ve reduced sizes of a few holdings that have run up a bit… $HRB, $MVEN, $RILY (only a tiny bit here!), and $GOED.

New positions have been adding up too…

  • Organon & Co ($OGN) — Write-up is available on the Quick Value website. Yet another pharmaceutical company with a major off-patent portfolio of products. The business is levered but management seems to like it that way. They are confident in their growth assets (1/3 of sales) and can manage the slow/no growth assets (2/3 sales). Trades at 6x my estimate of free cash flow with ~3.9x leverage.
  • 1847 Goedeker ($GOED) — I bought both the common stock and warrants. There are so many write-ups out there I’m not sure where to start! I initially purchased shares after noticing a ton of discussion on Twitter… it seemed there was going to be a lot of interest in owning this unique situation. Basic story, minnow-swallows-whale, GOED acquired much larger Appliances Connection in an all-stock deal which tanked the share price. Growth is up a ton as this is an e-commerce appliances business. Dust is still settling and I’ve been selectively selling shares into strength.
  • DXC Technology ($DXC) — Back in this name again! Quick recap, formerly loved CEO abruptly departed in 2019 and shares tanked on bad guidance. New CEO has stepped in and is slowly executing the turnaround. Sales are nearing a tipping point to growth, margins are improving, and debt is in-check. Shares still trading at ~10x earnings and could double over the next 2-3 years.
  • Valaris ($VAL) — This is a post-reorg energy stock. Valaris is the combination of Ensco and Rowan, offshore oil rig operators. Shares look cheap based on the bankruptcy plan. I’ll likely do a write-up on this one in the near future.
  • NRG Energy ($NRG) — In tandem with my shares of Vistra ($VST), I bought some NRG. This one is a bit less levered than Vistra and took a much smaller hit on the Texas winter storms… They’ve doubled down on retail vs. power generation which may or may not have less exposure to volatile Texas energy markets. They held an investor day outlining a path to $12.50/share in free cash flow (before growth investments) by 2025… It’s a $40 stock…

My allocation to each bucket hasn’t changed significantly. There may be some additions to the Core bucket after getting a more thorough review from the General category.

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YTD returns are +40% at the moment but I feel like there’s plenty of room for upside in the portfolio — several of my top holdings have not appreciated meaningfully from cost.