Best Investment Idea(s) for 2023

[E. Nashton]

Just throwing out the idea of buying a basket of some of the worst big-tech performers of 2022 including darlings AMZN, META, MSFT, GOOG, ADBE, NVDA, TSLA, SPOT, SHOP, etc. 

 

This is a 2023 thread but I can see a future where the 1-3 year returns are decent with this basket. Uneducated, simple and contrary - should be fine    

[Red Lion]

35 minutes ago, ValueArb said:

I'm a net-net guy so here are two.

 

Seritage (SRG) - Sears real estate holdings being liquidated. Trading at $12 which is roughly book value while company distribution range is $18-$27 so they expect to sell properties for significantly over carrying values and so far looks like that is happening. Risks are it's fairly levered, if sale prices come in under book that equity disappears rapidly. And it's an Eddie Lampert play and he's been selling.

 

TCI - A family owned apartments business, trading $44 with a $90 book value. They just unwound a big joint venture carried at way under market value, which massively increased book value. Its a complex structure, it's 80% owned by another public company that is 80% owned by the founders family, and one of their subs issued bonds on the Israeli exchange, but its simplifying. The founder died a few years ago and they've been selling properties the last few years so my thesis is they will want to sell it or  break it up. Risks are the family may want to double down on new real estate or businesses, and its a value trap without a catalyst. But I don't get along that well with my siblings so that makes me bet they all have different ideas of what they'd like to do and will just find the most tax favorable way to break it up.

 

I read the Intelligent Investor and Security Analysis around 2005/2006, and I feel like I got a different understanding of the term "net-net" and wonder if I've been all wrong this whole time which is why I can hardly ever find them. 

 

I thought net-net was where the:  working capital - all liabilities (short and long term) is a positive number higher than the market price of the security. So cash + inventories - short term debt - long term debt. Are you not counting the long term liabilities in this calculation? Not saying you're wrong, maybe I've misunderstood the net-net all along. 

[frommi]

3 hours ago, Dinar said:

I think that you will regret your choice.  BTI is losing volumes at 3%+ per annum, and even faster in the more profitable US market.  Revenues barely grew by 3-4% in 2022 in constant currency despite 10% inflation.  I would not touch it and Altria with a ten foot pole.  PM (which I own) is a much better choice in my opinion.

I own them all (tobacco is 35% of my portfolio), MO and BTI have lost 4% volume per year since more than 30 years and still grown earnings by 7-9% every year. The flywheel of price increases+lower costs are still at work. But i monitor the situation closely. BTI had problems with USD/GBP exchange rate last year. Funnily what everyone perceived as the worst tobacco stock (IMBBY) has outperformed the others last year. MO had problems with downtrading, maybe even the reason IMB performed so well. But what do i know, i only think that tobacco/nicotine delivery is one of the best businesses in the world. Makes addictive, costs only pennies to make and very high barriers to entry. (and the barriers to enter via vaping are increasing now every year when you look at the FDA actions). I also see PM as the long long long term winner, but the market has priced that already into the stock. (its double as expensive as the other options). 

[frommi]

33 minutes ago, RedLion said:

 

I read the Intelligent Investor and Security Analysis around 2005/2006, and I feel like I got a different understanding of the term "net-net" and wonder if I've been all wrong this whole time which is why I can hardly ever find them. 

 

I thought net-net was where the:  working capital - all liabilities (short and long term) is a positive number higher than the market price of the security. So cash + inventories - short term debt - long term debt. Are you not counting the long term liabilities in this calculation? Not saying you're wrong, maybe I've misunderstood the net-net all along. 

Your definition is right   . Look at GIGM or ACTG for real net-nets.

[ValueArb]

1 hour ago, RedLion said:

 

I read the Intelligent Investor and Security Analysis around 2005/2006, and I feel like I got a different understanding of the term "net-net" and wonder if I've been all wrong this whole time which is why I can hardly ever find them. 

 

I thought net-net was where the:  working capital - all liabilities (short and long term) is a positive number higher than the market price of the security. So cash + inventories - short term debt - long term debt. Are you not counting the long term liabilities in this calculation? Not saying you're wrong, maybe I've misunderstood the net-net all along. 

 

You are correct, I should have been clear that they aren't net-nets yet, but that I believe these both will become net-nets this year. 

 

SRG may have sold as much as a half billion in properties in Q4, we'll see when the 10Q comes out. But it should become a net-net as soon as it disposes of about 2/3s of its properties. As a liquidation, its guaranteed to be a net-net at some point.

 

TCI is a bit tricker. The owners could decide to put it all into crypto and take a gamble. But if it proceeds as I expect, they will continue to unload properties until net cash is greater than liabilities. They have roughly $200M in cash/investments vs. $383M in liabilities right now and the joint venture is carried at $306M on the balance sheet along with $270M in real estate, $146M in receivables, $130M in notes, so there is a lot that can convert to cash pretty quickly.

Edited January 3, 2023 by ValueArb

[frommi]

8 minutes ago, ValueArb said:

SRG may have sold as much as a half billion in properties in Q4, we'll see when the 10Q comes out. But it should become a net-net as soon as it disposes of about 2/3s of its properties. As a liquidation, its guaranteed to be a net-net at some point.

Looks like a gamble at this point to me with all the debt involved and Lambert as the most knowledgable insider already selling down his holding. 

[SharperDingaan]

5 hours ago, Pelagic said:

 

Is this a play on the trans mountain expansion or a more general normalizing of WCS differentials from $27 to something in the $15-20 range? Hard to get a sense of how much the expansion that should come online this year or early next is going to impact spreads. If they're lower than average to end the year thanks to the extra takeaway capacity it seems like it could be a big win for a lot of producers.

 

4-5 simultaneous plays ...

WTI/Brent spike past USD 100 over the winter. Ukraine disruption, SPR fill to release associated gas to Europe, etc.

Higher WTI. Margins on WCSB heavy become comparable/better than light, higher still with changes in drilling practice.

Lower diffs as pipeline/rail egress timing firms up, SPR contracted fill, instant $10/bbl+ margin boost on all heavy.

M&A in a frothy market. Can't div, can't buyback, debt paid down ... only drilling and M&A is left.

Investor psychology; FOMO, MOMO, boom mentality, rub it in into those eastern bastards!

 

While they will not all be in play, or dominating, at the same time;

it's hard to see how at least a couple of them don't impact the year.

 

SD

 

 

 

 

   

[ValueArb]

2 hours ago, frommi said:

Looks like a gamble at this point to me with all the debt involved and Lambert as the most knowledgable insider already selling down his holding. 

 

Yea, I have no idea why Lambert is selling. I've had plenty of success buying when insiders are selling, but often its because they have different personal needs (buying a house, diversifying their portfolio) or might even not understand how to value the business well. But Eddie should have a similar interest to me, finding the highest return opportunities and obviously he should understand how to value things. Only explanation I can think of is that he needs cash for another investment, and maybe thinks SRG will take too long to roll out.

 

The one thing that keeps me in here is that the executives incentives should be inverted. They are shutting things down, which means they have little incentive to pump the stock, their main goal should be to get out without getting stuck in lawsuits for years so that range should be conservative. But maybe Eddies level of massive control over the execs could cause some perverse incentives that I don't know about.

[ourkid8]

1.  Fairfax - Viking described it perfectly, its the gift that keeps on giving - Thank you Prem!

2. Citi   - Approaching CET1 13% ratio where they can restart their share repurchase, Selling-off non core assets, investing in the future to remove structural costs and trading at 0.57x TBV 

3. BN - Selling below it's SOTP,  I love the Insurance and energy transition play, holds 75% of the asset manager while it has 100% of the current carry and 1/3 of the future carry on all new funds.  The question is, are we going to see a large share repurchase? My bet is Yes if the price trades where it is.   

4.  BABA  - I expect all Chinese stocks to rise with the re-opening play, additional government stimulus to kick start the economy along with no further government crackdown -I hope!        

Edited January 4, 2023 by ourkid8
Added BABA

[Luke]

Ill throw in BRK as well of course, compounding all weather machine, further buying great assets and growing earnings. 

Bullish on TSM although we might see a chip slowdown next year. Long term looks great and PE is fair at 13.5. 

Prosus: Buybacks continue every week (around 150-300m € worth of shares!), they are still trading at a decent discount, Tencent is still very undervalued compared to what they can build the next decade (attached prosus buybacks till December). Tencents cloud buisness could be worth current marketcap in a decade, main buisness is great, venture capital arm is amazing.

The rest, amazon, alphabet, apple, meta. All look good longterm.

 

 

 

 

Edited January 4, 2023 by Luca

[UK]

40 minutes ago, Luca said:

Ill throw in BRK as well of course, compounding all weather machine, further buying great assets and growing earnings. 

Bullish on TSM although we might see a chip slowdown next year. Long term looks great and PE is fair at 13.5. 

Prosus: Buybacks continue every week (around 150-300m € worth of shares!), they are still trading at a decent discount, Tencent is still very undervalued compared to what they can build the next decade (attached prosus buybacks till December). Tencents cloud buisness could be worth current marketcap in a decade, main buisness is great, venture capital arm is amazing.

The rest, amazon, alphabet, apple, meta. All look good longterm.

 

 

 

 

 

Luca, what are these numbers?

Edited January 4, 2023 by UK

[Luke]

[Luke]

8 minutes ago, UK said:

 

Luca, what are these numbers?

Sorry, the explanation by bracket is not attached. You can see the daily bought back shares from Prosus since they started the open end buyback programm.

[Luke]

At current Valuation they bought back around 4% of shares outstanding in half a year. I think prosus knows how to do buybacks and the close contact to management of tencent gives downside protection since tencent really understands the market and regulations. I think they even have people working side by side in tencent offices, heard that in one of pabrais interviews. Prosus is just great because downside is lower thant buying tencent HK shares due to discount and additional basket+mangament that works together with tencent. 

 

One problem i had last year when shares dropped 50+% was that i could not fully understand what was going on, especially because my chinese is non existent and i dont understand the regulations there. Its nice to have a extra layer between the investment so if there are any problems between countries i expect naspers and prosus to have higher chances saving the investment if shit hits the fan+prosus has a basket of other buisnesses where some have also decent potential in interesting markets.

 

It all depends on chinas regulations and developement, guy spier uploaded a nice video yesterday where he shares what i agree on: China is not going backwards, they are a developing nations which got used to prosperity by markets and trade and that wont change. Yes they might make mistakes and be more radical in regulations but i dont think they will kill tencent or forbid tencent to make investments out of china (which tencent does and focusses more on because they are smart). Just the venture capital arm i believe compounded north of 25% annually and they own a lot of great buisnesses. They also can navigate the chinese market better and invest in start ups there, if the chinese dont go crazy i think a lot of wealth will be created in the chinese tech markets the next decades. Lots of smart people graduating and working there. 

 

From a valuation standpoint i am most bullish on Tencent of all stocks right now, if they are let free to play out their hand. Prosus is just an extra layer that gives me peace of mind and at protects the potential downside.

[UK]

16 minutes ago, Luca said:

At current Valuation they bought back around 4% of shares outstanding in half a year. I think prosus knows how to do buybacks and the close contact to management of tencent gives downside protection since tencent really understands the market and regulations. I think they even have people working side by side in tencent offices, heard that in one of pabrais interviews. Prosus is just great because downside is lower thant buying tencent HK shares due to discount and additional basket+mangament that works together with tencent. 

 

One problem i had last year when shares dropped 50+% was that i could not fully understand what was going on, especially because my chinese is non existent and i dont understand the regulations there. Its nice to have a extra layer between the investment so if there are any problems between countries i expect naspers and prosus to have higher chances saving the investment if shit hits the fan+prosus has a basket of other buisnesses where some have also decent potential in interesting markets.

 

It all depends on chinas regulations and developement, guy spier uploaded a nice video yesterday where he shares what i agree on: China is not going backwards, they are a developing nations which got used to prosperity by markets and trade and that wont change. Yes they might make mistakes and be more radical in regulations but i dont think they will kill tencent or forbid tencent to make investments out of china (which tencent does and focusses more on because they are smart). Just the venture capital arm i believe compounded north of 25% annually and they own a lot of great buisnesses. They also can navigate the chinese market better and invest in start ups there, if the chinese dont go crazy i think a lot of wealth will be created in the chinese tech markets the next decades. Lots of smart people graduating and working there. 

 

From a valuation standpoint i am most bullish on Tencent of all stocks right now, if they are let free to play out their hand. Prosus is just an extra layer that gives me peace of mind and at protects the potential downside.

 

Thanks for your comment!

[Xerxes]

I don’t have any unique 2023 ideas or any other year for that matter. Just letting the portfolio run and add to the same name as they dip and money becomes available. I got dinged on long-duration assets in 2022, however going forward the “expected return” ought to be better. 
 

Added more to Onex yesterday. 

I do plan to start a new position in BX sometimes in Q1. 

I lost Lockheed. Had a close eye on it in late 2021 but it went away. 
 

I like FFH and understand the cheaper then before argument. But that thing has rallied quite a bit. Hasn’t it. 

[Gregmal]

1 minute ago, Xerxes said:

I don’t have any unique 2023 ideas or any other year for that matter. Just letting the portfolio run and add to the same name as they dip and money becomes available. I got dinged on long-duration assets in 2022, however going forward the “expected return” ought to be better. 
 

Added more to Onex yesterday. 

I do plan to start a new position in BX sometimes in Q1. 

I lost Lockheed. Had a close eye on it in late 2021 but it went away. 
 

I like FFH and understand the cheaper then before argument. But that thing has rallied quite a bit. Hasn’t it. 

Agree. Just kind like a lot and am content letting it roll. 
 

Fairfax has been stellar. Stuff like Brk and MKL should also benefit. But indeed it seems every single year on this forum FFH is a top idea. Which isn’t surprising given the name.

[Xerxes]

2 hours ago, Gregmal said:

Agree. Just kind like a lot and am content letting it roll. 
 

Fairfax has been stellar. Stuff like Brk and MKL should also benefit. But indeed it seems every single year on this forum FFH is a top idea. Which isn’t surprising given the name.

 

I am overexcited to read what Buffett has to say in his letter in a few weeks.

A lot of stuff happened in 2022, but we never got the Buffett side of the story.

 

 

[thowed]

I think small-cap Japanese value is super cheap & companies are doing well (I invest through a fund).

 

I think Vietnam got unfairly beaten up late last year, & everything is cheap & growing fast.  There is often a divergence between large-caps & small-caps - I usually have a bit of both (again through funds).

 

I expect more volatility in 2023, and so use a Macro hedge fund (mainly rates) to exploit this (it's a closed-end feeder, so open to mere mortals like me...). 

[formthirteen]

1 hour ago, thowed said:

I think Vietnam got unfairly beaten up late last year, & everything is cheap & growing fast.  There is often a divergence between large-caps & small-caps - I usually have a bit of both (again through funds).

 

Yes, Vietnam is interesting. I like the Vietnamese Dong compared to other EM currencies. Which funds do you buy to get exposure to Vietnam and Japan?

 

[thowed]

Japan Small-Cap Value - I think Samarang is best for this.  Milestone Japan has a good, experienced manager - I haven't looked at it recently.

Vietnam - VEIL.L is the easiest option I think, and for small-caps, AFC Vietnam has very good figures.  I struggle with VOF.L.  VNH.L has a good team & portfolio, but I think can be too illiquid sadly.

Obviously not recommendations.

[Parsad]

I'm going to stick to what I threw out last year...it's just become a bigger bargain and ridiculously cheap.  Maybe the cheapest it's ever been other than during the March 2020 pandemic.

 

OSTK - Overstock.com

 

Jonathan Johnson runs it now instead of the erratic Patrick Byrne.  They switched over to selling higher margin "Home" goods instead of everything, so that cut into sales over the last 6 months.  But essentially:

 

You have a $2B revenue online retailer that is completely profitable selling for $850M.  But they have $430M of cash on hand that they don't use...plus a corporate office that is worth north of $70M.  Only about $35M of debt that was issued to build the corporate office for $50M. 

 

Finally, you have their entire Medici Ventures portfolio, including the stake in tZero, that is now managed by tech private equity firm Pelion Ventures.  That portfolio is worth a minimum of $500M and could be worth up to $4-5B depending on what they can do with it and how they monetize it over the next few years. 

 

So you're paying net $400M or so for the entire retail business that does $2B in revenue and a no expiry call option on all of Medici Ventures.  If you believe in blockchain long-term, this one is frickin' cheap and a true deep value stock!  Cheers! 

 

[Xerxes]

3 hours ago, Parsad said:

I'm going to stick to what I threw out last year...it's just become a bigger bargain and ridiculously cheap.  Maybe the cheapest it's ever been other than during the March 2020 pandemic.

 

OSTK - Overstock.com

 

Jonathan Johnson runs it now instead of the erratic Patrick Byrne.  They switched over to selling higher margin "Home" goods instead of everything, so that cut into sales over the last 6 months.  But essentially:

 

You have a $2B revenue online retailer that is completely profitable selling for $850M.  But they have $430M of cash on hand that they don't use...plus a corporate office that is worth north of $70M.  Only about $35M of debt that was issued to build the corporate office for $50M. 

 

Finally, you have their entire Medici Ventures portfolio, including the stake in tZero, that is now managed by tech private equity firm Pelion Ventures.  That portfolio is worth a minimum of $500M and could be worth up to $4-5B depending on what they can do with it and how they monetize it over the next few years. 

 

So you're paying net $400M or so for the entire retail business that does $2B in revenue and a no expiry call option on all of Medici Ventures.  If you believe in blockchain long-term, this one is frickin' cheap and a true deep value stock!  Cheers! 

 

 

In 2019, revenue dropped by 21%, do you remember why ?

 

 

[Paarslaars]

Have been keeping an eye on overstock, trying to 'hit the bottom'. So far glad I haven't pulled the trigger yet.  

[formthirteen]

10 hours ago, thowed said:

Japan Small-Cap Value - I think Samarang is best for this.  Milestone Japan has a good, experienced manager - I haven't looked at it recently.

Vietnam - VEIL.L is the easiest option I think, and for small-caps, AFC Vietnam has very good figures.  I struggle with VOF.L.  VNH.L has a good team & portfolio, but I think can be too illiquid sadly.

Obviously not recommendations.

 

Thank you. I will look into these options.