GeoInvesting April 2018 Highlights
What We’re Tracking
Stocks we monitor very closely
We recently started watching shares of a company that has performed a warrant restructuring and is in the process of settling some of its outstanding legal liabilities. The company just attained profitability due to restructuring efforts. Our goal is to determine if they can sustain this profitability, which we believe could support much higher levels for the stock.
We are currently considering this company for our “Run to One” portfolio if we are able to secure an interview with management, and the call goes well. For those that are unfamiliar with our ‘Run to One’ mock portfolio, it is a collection of stocks that trade under a dollar that we think could eventually cross that threshold.
To gain access to our notes on this company and all of our proprietary in-house research, click here.
Learn With Us
Education to help you become a better investor
For our educational series this month, we are offering up an interview with an ‘outside the box’ thinker who recently passed away. Marty Whitman holds a special place in the hearts of many deep value investors. As you may know, Marty Whitman passed away on April 16, 2018, but leaves behind a legacy that includes market beating returns and 4 books.
If you have ever had the chance to listen to Marty Whitman speak then you know he had no problem challenging the status quo when it came to value investing. After hearing of his passing, I immediately tracked down videos of Marty Whitman that reminded me of why I respect his work. In 2013, Consuelo Mack interviewed Marty Whitman as part of her ‘Wealth Track’ Series. Like the presentation that Professor Lo recently gave about behavior and investing that we highlighted in last month’s newsletter, this video was shot at the Museum of American Finance.
You can view the interview and read the transcript of this appearance here.
~Maj Soueidan, Co-founder GeoInvesting
Studs & Duds
The reality of investing – Our best and worst picks
Stud: Kewaunee Scientific Corporation (NASDAQ:KEQU)
We initiated a long position in Kewaunee Scientific Corporation (NASDAQ:KEQU) after strong Q1 2017 results in late August 2016. See our original note here. KEQU has been just one major driver of our Buy on Pullback Mock Portfolio 3.0, which has performed outstandingly since its inception in October of 2016. KEQU was added to our Buy on Pullback Mock Portfolio 3.0 on October 4, 2016 when the stock was trading at $22.41.
Also in our Mock Portfolio 3.0 is BXC, a construction and building company that we bought at $8.80 and that now trades for ~$38 per share. REPR, a medical device company, is another name we added to this portfolio at $0.44 per share in October of 2016 – the company now trades at $1.44 per share. KEQU is the ‘dud’ of this mock portfolio, returning only 55.9% at its peak while BXC and REPR have returned 375.5% and 283.6% at their peaks, respectively.
Dud Update: Fog Cutter Capital (OOTC:FCCG)
Last month, we talked about Fog Cutter Capital (OOTC:FCCG) and how we were considering a more activist role to ensure that a dividend owed to the company via its 80% ownership stake in Fat Brands Inc. (NASDAQ:FAT) was passed on to shareholders. Subsequent to that, after an interview with Andrew Wiederhorn (the CEO of FAT), RegAResearch released an article titled, “Investors Might Have Overlooked This Juicy Merger on FAT’s Menu”. The article discusses in detail the relationship we have been highlighting between the two, specifically that FCCG owns 80% of FAT, and that FCCG is owned by a vehicle that is 75% owned by the family office of Andrew Wiederhorn. Doing the math based on this relationship infers that FCCG should trade much higher and offer multi-bagger returns if FAT increases in value. See our full log of research here.
The main takeaway from the article is that it seems Mr. Wiederhorn is looking to merge the two companies and looking out for the best interest of shareholders of both companies. FAT’s last conference call did indicate that a merger between FCCG and FAT may be on the horizon. From an economic perspective, a merger of the two companies would allow FAT to fully take advantage of the large net operating losses (NOLs) that FCCG has accumulated over the years.
The dividend issue we discussed in our last newsletter remains a question mark.
A Final Note
This month’s message from Geo Co-founder Maj Soueidan
The cryptocurrency market continues to grow and expand. Recently, Goldman Sachs came out and announced that they were going to begin implementing cryptocurrency trading and the NASDAQ announced that they were going to develop exchanges for trading cryptocurrencies.
We do not want to be left behind in the space and we have been researching and performing due diligence on various cryptocurrencies for the last year. Some of the principles and concepts and questions that we are looking at and asking ourselves are:
- Will ICOs be a long-lasting trend?
- How will blockchain technology perform in relation to ICOs?
- Can investors make money owning parts of crypto exchanges?
In addition to asking these questions, we continue to seek to perform the levels of due diligence on cryptos that made us a notable name in the equity markets. Our goal is to seek out and identifying not just coins, but also different opportunities in investing in the world of cryptos that meet our rigorous due diligence and vetting standards. There’s a lot to sift through.
I look forward to communicating with you further about our developments in the crypto space on our ever evolving community and offering at GeoInvesting.
P.S. Please feel free to reach out to me any time at email@example.com or follow me at Twitter, @majgeoinvesting, if you have any questions, or just want to talk. You can also reach me on my mobile at 267-246-3263.