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Best Ideas For 2019


BG2008
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Can you have a large portion of your portfolio in Flybe given the Brexit risk (both risk to operations and effect of likely decline in pound on cost of USD-denominated debt and fuel)? 

 

I was going to nominate Parkit for this thread, but decided not to because I don't have a significant portion of my personal wealth in it and can't recommend anyone else do so.  But if you asked me what company in my portfolio is most likely to double next year, I'd say that one.

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Can you have a large portion of your portfolio in Flybe given the Brexit risk (both risk to operations and effect of likely decline in pound on cost of USD-denominated debt and fuel)? 

 

I was going to nominate Parkit for this thread, but decided not to because I don't have a significant portion of my personal wealth in it and can't recommend anyone else do so.  But if you asked me what company in my portfolio is most likely to double next year, I'd say that one.

 

It was up around 10% of my portfolio earlier this year. It has dropped about 75% over the last month. I bought it back up to roughly 7.5% today. I don't think I'll buy any more until after March (supposing it looks good then). "No deal" seems an unlikely scenario to me. Either way, I've got the stomach to find out.

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Like you, my longstanding Flybe holding has been a gold medal winning downhiller, but I don't have the bravery to add to it.

 

I'm sure 2019's biggest winner will be something like Flybe -- an existential risk that never materializes -- or something highly levered.  For the same reasons, I suspect I won't own it.

 

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Like you, my longstanding Flybe holding has been a gold medal winning downhiller, but I don't have the bravery to add to it.

 

I'm sure 2019's biggest winner will be something like Flybe -- an existential risk that never materializes -- or something highly levered.  For the same reasons, I suspect I won't own it.

 

The difference between you and me is probably experience. Perhaps I'll learn to be more like you after this.

 

Anyway - anybody have any good ideas? Seems there's got to be some good deals out there and KJP and I have both given out a name.

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Deep value play:

 

CCUR sold off all of their core operating assets at the end of 2017. Since then, they have been looking to deploy cash. They recently signed a letter of intent to purchase 80% of Luxemark Capital, a merchant cash advance lender. This type of business isn't viewed upon with great reverence, but the stock price of CCUR is currently pricing the acquisition at below 0. Also, the payday lending industry faces some tailwinds, as the trump administration is looking to lift Obama era regulations which restricted who payday lenders could lend to.

 

CCUR is currently performing due dilligence under a period of exclusivity and has until January 30th to do so. They could easily walk away from this LOI. If they do this, I believe the stock price should at least converge to their assets held at fair value (adjusted for recent market developments) less their total liabilities. They also have a significant amount of operating losses which could be applied to a profitable company. If they have reason to believe that LuxeMark isn't profitable, I do not think they will go forward with the acquisition. An activist also has been increasing his stake since 2017. He now owns around 39% of the company and his uncle is on the board of directors. CCUR also has bought back a significant amount of stock (around 725,000 shares) since announcing their repurchase plan in March.

 

Two catalysts for 2019 - CCUR walks away from the deal. Luxemark capital is profitable.

 

Worst case scenario - Luxemark Capital isn't profitable... but the valuation of the company is already pricing this acquisition at 0.

 

Payday lending is very risky... but the decrease in share price of this company doesn't make sense due to the relatively small amount of cash (around 11%) they are investing in this company. They also have the option of granting up to $10 million in syndication capital to Luxemark. If this were to go to 0, the company would be trading at a slight premium to fair value assets less total liabilities.

 

Long CCUR

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Like you, my longstanding Flybe holding has been a gold medal winning downhiller, but I don't have the bravery to add to it.

 

I'm sure 2019's biggest winner will be something like Flybe -- an existential risk that never materializes -- or something highly levered.  For the same reasons, I suspect I won't own it.

 

My position that most resembles that description is Bri-Chem [bRY.TO]. It trades at less than 50% of NCAV, so there is certainly room for a double. They kitchen-sinked their last quarter, so just about anything will be viewed as an improvement next quarter. I think the risk-reward here is very good, but zero is on the table so it isn't a huge position.

 

Probably my current best idea is Labrador Iron [LIF.TO]. Premiums for high quality ore are very high, and the market has missed how much it'll help them because of the strike (resolved). Could easily end up paying $4 or more in dividends next year on a $27.50 price.

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I

Like you, my longstanding Flybe holding has been a gold medal winning downhiller, but I don't have the bravery to add to it.

 

I'm sure 2019's biggest winner will be something like Flybe -- an existential risk that never materializes -- or something highly levered.  For the same reasons, I suspect I won't own it.

 

My position that most resembles that description is Bri-Chem [bRY.TO]. It trades at less than 50% of NCAV, so there is certainly room for a double. They kitchen-sinked their last quarter, so just about anything will be viewed as an improvement next quarter. I think the risk-reward here is very good, but zero is on the table so it isn't a huge position.

 

Probably my current best idea is Labrador Iron [LIF.TO]. Premiums for high quality ore are very high, and the market has missed how much it'll help them because of the strike (resolved). Could easily end up paying $4 or more in dividends next year on a $27.50 price.

 

Since we're talking about best ideas that can go down to zero or double or better, I'll add FNMAS onto the list. We're 'hoping' housing will be the priority in 2019 and Mnuchin will resolve the lawsuits.

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I've said cash the past 3 years, so maybe a contra move to suggest something different: Product Tankers

 

If you want low debt, likely to survive if rates stay low: Ardmore Shipping $ASC

 

If you want an equity stub, with shady family insider transactions: Scorpio Tankers $STNG

 

 

Order book for product tankers has been at all time lows so whenever this thing turns it's going to go up like a rocket with demand outpacing supply. Which a catalyst is likely to be IMO 2020 where all shipping vessels will have to use low sulfur fuels so there's likely to be a demand spike as ports stock up ahead of the transition on Jan 1, 2020.

 

https://seekingalpha.com/article/4216449-scorpio-tankers-inc-stng-ceo-emanuele-lauro-q3-2018-results-earnings-call-transcript

 

STNG had a call this week where they're seeing green shoots, rates are off all time lows.

 

The message is that markets have moved positively in the last few weeks. In some markets, these moves are quite considerable and more substantial than we have indeed seen with these many quarters. Fundamentally, we’re seeing structural change with increased capacity utilization levels. This will benefit markets positively as we move into 2019 against the backdrop of benign new tonnage supply.

 

We are experiencing a very early seasonal upswing too. Normally, this product market doesn't stop to get moving until really mid to late November and it's starting up a very strong platform now in any context at all, even in years where the product market has actually been strong, right to have really been this strong at this point prior to Thanksgiving and the winter season starting.
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  • 1 month later...

Any further thoughts given the recent declines? 

 

I'll reiterate my suggestion of Parkit.  See its thread for recent developments.  A sale of the Canopy lot would be a significant catalyst, assuming the bottom has fallen out of its performance or cap rates for parking lots. 

 

For a larger cap, I nominate NVR, but that contains an embedded macro call that new single-family house sales in the US won't decline in 2019.  I don't see any hard catalyst that would prevent NVR from staying cheap in 2019 even if the US housing market holds up, but there is the soft catalyst of large share repurchases.

 

EDIT:  I'll add another:  Command Center (CCNI).  See the thread for reasons why.  I believe 2019 will see continued significant buybacks and perhaps more, given the make up of the board. 

 

I'll also confess that when judged against the criteria of (i) underlying business quality, (ii) current valuation, and (iii) potential catalysts, these are all B-level ideas at best.  I don't have what I believe to be an A-level idea. 

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I really like GUD.TO right here.  It is around 1.1x book value with a large portion of book in cash.  It seems that the selloff in pharma is beneficial as they are sitting on so much cash.  I think some of the smaller companies will start to get hungry and knight should be able to scoop up some good deals.  After BRK/BAM it is my largest position.

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I like intelsat and rimini street.  intelsat owns lots of spectrum, and is trading at levels before all the positive rulings out of the FCC.  Bond markets have already reacted positively, but equity holders are a bit slow it seems...  See kerisdales thesis on SA.  rimini good too but dont have time right now to describe as I'm writing this in the restroom of fogo de Chao.  (family dinner).

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I'm still doing my DD on these companies, but given the massive losses they've taken in just the last 2 months, I think that US Natural Gas upstream producers are undervalued. I'm bullish on NatGas breaking out of its 2.50-3.00 long term range to $4+ in 2019 or 2020, which would be a significant tailwind for these companies. And right now most of them look as cheap as they've ever been.

 

Biglari Holdings (BH, BH/A) is currently trading at 0.7x book value, but owns close to 50% of its own shares, so its really closer to 0.35x book. Of course its trading down there because Sardar Biglari controls over 50% of the voting stock and I might be the only living person remaining that still believes he will deliver long term out-performance.

 

Still, the value of the shares are significantly less than the value of their CBRL stake, a stake Biglari has started monetizing over the past few weeks.

 

Note that Biglari has been buying BH and BH/A shares in his personal accounts recently.

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Heresy ... but pretty much any intermediate in the WCSB (WCP, OBE, PD, etc).

With pipeline/rail capacity coming back by 2019 year-end, it's pretty hard to see how some of these do not at least double.

 

SD

 

SD sorry for my ignorance but what’s the capacity that’s coming back?

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Heresy ... but pretty much any intermediate in the WCSB (WCP, OBE, PD, etc).

With pipeline/rail capacity coming back by 2019 year-end, it's pretty hard to see how some of these do not at least double.

 

SD

 

SD sorry for my ignorance but what’s the capacity that’s coming back?

 

Enbridge Line 3 replacement comes on-line at the end of 2019 (760,000 bpd), and the first of Alta's rail-car fleet starts arriving (120,000 bpd by mid-2020). The existing aged Line 3 does roughly 380,000 bpd. With 600,000 bpd of net new capacity becoming available, the current shut-in will end, differentials should further decline, and o/g properties currently listed for sale should start to move again. Then add to it that at current valuations it's far smarter for new money to simply buy P2P reserves at cents on the dollar, versus drill for them.

 

Yet the oil-patch isn't talking about it?

Our own view is that it's being 'squashed' until Alta's 2019 election gets going ;) 

 

https://ca.reuters.com/article/domesticNews/idCAKBN1O203A-OCADN

https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-us

https://www.mprnews.org/story/2018/11/19/line-3-oil-pipeline-moves-closer-to-construction-in-northern-minnesota

 

SD

 

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Heresy ... but pretty much any intermediate in the WCSB (WCP, OBE, PD, etc).

With pipeline/rail capacity coming back by 2019 year-end, it's pretty hard to see how some of these do not at least double.

 

SD

 

SD sorry for my ignorance but what’s the capacity that’s coming back?

 

Enbridge Line 3 replacement comes on-line at the end of 2019 (760,000 bpd), and the first of Alta's rail-car fleet starts arriving (120,000 bpd by mid-2020). The existing aged Line 3 does roughly 380,000 bpd. With 600,000 bpd of net new capacity becoming available, the current shut-in will end, differentials should further decline, and o/g properties currently listed for sale should start to move again. Then add to it that at current valuations it's far smarter for new money to simply buy P2P reserves at cents on the dollar, versus drill for them.

 

Yet the oil-patch isn't talking about it?

Our own view is that it's being 'squashed' until Alta's 2019 election gets going ;) 

 

https://ca.reuters.com/article/domesticNews/idCAKBN1O203A-OCADN

https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-us

https://www.mprnews.org/story/2018/11/19/line-3-oil-pipeline-moves-closer-to-construction-in-northern-minnesota

 

SD

 

Thanks. That’s all oil not gas, correct?

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Heresy ... but pretty much any intermediate in the WCSB (WCP, OBE, PD, etc).

With pipeline/rail capacity coming back by 2019 year-end, it's pretty hard to see how some of these do not at least double.

 

SD

 

SD sorry for my ignorance but what’s the capacity that’s coming back?

 

Enbridge Line 3 replacement comes on-line at the end of 2019 (760,000 bpd), and the first of Alta's rail-car fleet starts arriving (120,000 bpd by mid-2020). The existing aged Line 3 does roughly 380,000 bpd. With 600,000 bpd of net new capacity becoming available, the current shut-in will end, differentials should further decline, and o/g properties currently listed for sale should start to move again. Then add to it that at current valuations it's far smarter for new money to simply buy P2P reserves at cents on the dollar, versus drill for them.

 

Yet the oil-patch isn't talking about it?

Our own view is that it's being 'squashed' until Alta's 2019 election gets going ;) 

 

https://ca.reuters.com/article/domesticNews/idCAKBN1O203A-OCADN

https://www.enbridge.com/projects-and-infrastructure/projects/line-3-replacement-program-us

https://www.mprnews.org/story/2018/11/19/line-3-oil-pipeline-moves-closer-to-construction-in-northern-minnesota

 

SD

 

Sharper, is there any prospect of a tax or Federal ban or allocation regulations ie a forced auction of "air barrels", to force majors with an interest in low oil prices to increase the profitability of their refineries? Any info on the scale of that problem and whether the new capacity might result in more air not more oil shipped? Is there any hope of the Feds being nice enough to Russia to coax the Russians to license to Canadians their better catalysts for lightening heavy oil to make it easier to ship and refine in cold climates? As I doubt the Russians are the only ones with these catalysts any chance of these being developed here and brought to market or is the technology just being shelved? My ex-NASA friend living in Alaska tells me of massive recent oil finds in the North Slope. Any chance the Feds will leverage the US need for an oil pipeline to Alaska in exchange for pre-building now the links for these future lines from Alberta and Saskatchewan to the Gulf? Will the ding-dong feds help save the killer whales by shipping the Transmountain pipeline to Anacortes so the 145,000 bpd Shell refinery start using oil sands oil again instead of shipping it in from Alaska and also start shipping out the oil from Anacortes instead of Vancouver so less killer whales are impacted and so the bigger oil tankers can be used to better reduce the tanker miles which are impacting the killer whale populations? There has been no live births for the Southern resident killer whales for some years so extinction is imminent.Will the Feds lift the gag order on the Health Canada employees imposed by the Harper government in 2011 when the milk became sufficiently radioactive to start killing children? (I learned this as I happened to be defending a client selling humic and fulvic products both which help against radiation the former by protecting cells and the latter by helping the body transmute and eliminate the radio-nucleides and the two Health Canada employees sent to seize the products told my client that their job was testing the milk and the alarm went off in spring 2011 and repeatedly thereafter and they were gagged. Now if we could somehow figure out how to get these products into the killer whales, for instance by putting all the leaves gathered in Vancouver on land beside the Fraser river so they decay and release fulvic and humic into the river like used to happen when there were more trees right up to the waterline everywhere. Notice how the BC hospital statistics for newborn deaths became hard to get after 2011.

 

http://www.fossilfuelconnections.org/anacortes-oil/

 

My best ideas for 2019 is Lisbon real estate (focusing on buildings with fiber optic connections and lots of power) to take advantage of their being future Silk Road ports and the increased demand for data. Portugal will also get Irish corporate tax rates when Ireland joins the UK in Brexit.  I also think Central banks will cease to be independent very soon as the Leviathan State take them over to allow continued growth. Those Space forces are expensive much like the oil battleship construction expense pre-WW1. I think US will be rolling out their electro-gravitic technology so the transition will be expensive. Remember those $2B each B2 bombers? Lockheed Martin is how I am playing that bet. Any related suggestions are welcome. I am thinking Boeing but I am not sure if Boeing will finally be allowed to use their ion engines on their commercial jets. Paul Laviolette's book as available for loan on archive.org if anyone is sceptical about the technology.

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My best value ideas (risk adjusted) are preferred and selected bonds. You can buy lower grade investment quality or high grade junk with good coverage and pot. forcredit upgrades with around 9% yield. Upside potential is about 20% plus whatever you earn in interest until they recover.

Which issuers/CUSIPs fit your description?

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