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What are you buying today?


LowIQinvestor

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Cash.

 

Following the sale of 20% of my S&P 500 puts. Waiting for 30+ VIX to sell more.

 

Have been buying & selling over the last 2-3 weeks. Typically 20-30% of the position. When VIX dropped to 15-17 I was buying and selling those same contracts each time it went to 20+.

 

Entire position has basically been paid for in profits at this point and I purchased more today.

 

 

Sold ~15% of the core put position today when VIX hit 20. Will probably let a bit more go if me move closer to 25, but still waiting for that elusive 30+ print on the VIX to signal panic to let the bulk of the position go.

 

Repurchased these a few days back. Added more today.

 

Still expecting a 30+ VIX move this year, but will keep trading the position.

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In short:

 

The business solves a problem for its customers (vets)

The end market is attractive (pet care) given its recession-resistance

The valuation looks increasingly attractive given a price for the entire enterprise of $2.3 billion and unlevered free cash from the legacy Henry Schein business of about $150 million, giving us a 6.7%  unlevered free cash yield on just Henry Schein. This effectively values Vets First Choice, which is why everyone was so excited about the stock in the first place, at zero.

 

I've purchased twice now, once around $13 per share and again yesterday below $11.

 

It's a small position for me given the leverage and somewhat limited free cash flow. In a downturn, they will generate cash from inventory liquidation, but still the free cash could be ugly and people who don't understand the business now really won't want to own it in a downturn. So, I've left some room to average down further because I think I could get a chance to.

 

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1080485861&serialid=LwV70A1WGcAVwyFsrunHo7%2BWJh%2FyveCGDQap19XIDWs%3D&cspId=1928917291656192000

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In short:

 

The business solves a problem for its customers (vets)

The end market is attractive (pet care) given its recession-resistance

The valuation looks increasingly attractive given a price for the entire enterprise of $2.3 billion and unlevered free cash from the legacy Henry Schein business of about $150 million, giving us a 6.7%  unlevered free cash yield on just Henry Schein. This effectively values Vets First Choice, which is why everyone was so excited about the stock in the first place, at zero.

 

I've purchased twice now, once around $13 per share and again yesterday below $11.

 

It's a small position for me given the leverage and somewhat limited free cash flow. In a downturn, they will generate cash from inventory liquidation, but still the free cash could be ugly and people who don't understand the business now really won't want to own it in a downturn. So, I've left some room to average down further because I think I could get a chance to.

 

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1080485861&serialid=LwV70A1WGcAVwyFsrunHo7%2BWJh%2FyveCGDQap19XIDWs%3D&cspId=1928917291656192000

 

To invert this, with CVET doing poorly, it seems that HSIC (from which CVET was spun off) dodged a bullet and ought to be a better business now. It seems reasonably valued too. I put it on my watch list together with CVET. I would be more inclined to buy HSIC here than CVET.

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In short:

 

The business solves a problem for its customers (vets)

The end market is attractive (pet care) given its recession-resistance

The valuation looks increasingly attractive given a price for the entire enterprise of $2.3 billion and unlevered free cash from the legacy Henry Schein business of about $150 million, giving us a 6.7%  unlevered free cash yield on just Henry Schein. This effectively values Vets First Choice, which is why everyone was so excited about the stock in the first place, at zero.

 

I've purchased twice now, once around $13 per share and again yesterday below $11.

 

It's a small position for me given the leverage and somewhat limited free cash flow. In a downturn, they will generate cash from inventory liquidation, but still the free cash could be ugly and people who don't understand the business now really won't want to own it in a downturn. So, I've left some room to average down further because I think I could get a chance to.

 

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1080485861&serialid=LwV70A1WGcAVwyFsrunHo7%2BWJh%2FyveCGDQap19XIDWs%3D&cspId=1928917291656192000

Helpful and I'll continue watching. Thank you.

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ACHN. Domestic merger, small deal for buyer, two different CVR's that you get on the cheap and a $40m reverse termination fee on a $700m deal (on a net-cash basis). Might open a topic at some point about it - curious if anybody has thoughts about it. There could be some antitrust issues.

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Calls on HGV. Speculation, obviously, but I think the chances of a deal getting announced are relatively good. Blackstone knows the economics well and will be attracted to the ability to put significant capital to work at high returns, and Apollo being in the mix pushes the price up.

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WFC

 

Why now?

 

Just a starter/foothold so I will pay attention and can get mailed copies of the reports.  If I had to guess, I would expect Scharf to kind of clear the deck with expectations/problems/expenses after he has had a chance to get an inside look.  That might be getting too cute (and the market probably expects that).

 

I just keep ruminating on Munger's comments at the BRK A.M. and the fact that the god of skinny, quality-compounder, bros has like 98% of his DJCO portfolio (which is not constrained by size) in money center banks and this is clearly his favorite of those.

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ACHN. Domestic merger, small deal for buyer, two different CVR's that you get on the cheap and a $40m reverse termination fee on a $700m deal (on a net-cash basis). Might open a topic at some point about it - curious if anybody has thoughts about it. There could be some antitrust issues.

 

I've done some work on this since the announcement and own it. Agree that this situation is all about whether or not FTC signs off. I think the odds are pretty good this gets through. If you make a thread I'll be happy more than happy to share anything/everything I know.

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Cash.

 

Following the sale of 20% of my S&P 500 puts. Waiting for 30+ VIX to sell more.

 

Have been buying & selling over the last 2-3 weeks. Typically 20-30% of the position. When VIX dropped to 15-17 I was buying and selling those same contracts each time it went to 20+.

 

Entire position has basically been paid for in profits at this point and I purchased more today.

 

 

Sold ~15% of the core put position today when VIX hit 20. Will probably let a bit more go if me move closer to 25, but still waiting for that elusive 30+ print on the VIX to signal panic to let the bulk of the position go.

 

Repurchased these a few days back. Added more today.

 

Still expecting a 30+ VIX move this year, but will keep trading the position.

 

Once again, we've failed to break 3000 sustainably on the S&P and the China trade 'deal' turned out to not really be a deal.

 

Purchased more puts.

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GIL.TO. Re-established a small position on the 25% sell off today. Saputo). Stock is trading at close to a 4.5 year low band.Their largest and most profitable business (selling t-shirts and fleece to screen printers) continues to chug along. Every couple of years cotton prices swing and 6 months later it hits their short term results, the stock sells off aggressively.

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