Well Hello There...
A Visitors Guide to this Oddball Substack
Thanks to the “Walker Bump1”, I have a few new followers around here, so I thought it would make sense to give a bit of background and tell you what I hope to accomplish with this Substack.
My goal is to write up all of the major positions in my personal account, and possibly throw in some thematic work as well. Given that my portfolio is almost entirely free of sector, style and size constraints, it could get pretty funky around here.
For most of my buy-side career I covered a pretty niche corner of the consumer universe - Casinos, Restaurants, Hotels, Airlines and Leisure. How many of those industries are currently represented in the portfolio? Nada! Yet I have exposure to Oil & Gas, Coal, Lumber, a BPO, and a mini-Franchisor conglomerate. I wasn’t kidding when used the phrase GO ANYWHERE.
For those of you who believe investing in Energy and Commodities is a no-fly zone, you’ll have to be patient. In the past year, I have ventured into a Restaurant liquidation, a gentleman’s club which I thought was the perfect reopening trade, a Mexican airline, a broken preferred that was slated to be taken out at par if M&A went through, and a timeshare company, among others. But right now, the portfolio is about as Energy/Commodity heavy as possible.
Since I have spent the better part of the last year furiously getting up to speed on these commodity businesses, I thought it was worth a quick overview on why I decided to take this plunge. At a very high level, nearly every industry I look at has maximum skepticism that there is ANY duration of higher commodity prices.
You will see from my ARCH writeup that the company might come close to doing their MARKET CAP in free cash flow next year; the only way this math can ‘make sense’ is if Met Coal immediately and dramatically crashes down below its long-term average. I will soon write up a small-cap lumber company that is currently trading at, check notes, 1.3X EBITDA on the last CME lumber quote. The vast majority of the Oil & Gas universe is trading at free cash flow yields that should not exist unless companies are dead-set against returning cash to shareholders - exactly the opposite of what nearly every management team in that industry is telling you.
So why are these opportunities available? Is it because of macro skepticism? Is it because of ESG knocking out some potential buyers? Is it because you ‘just can’t invest in these sectors’ (cough, cough, recency bias). Honestly, WHO CARES? My cardinal rule is that if I believe I am going to receive the vast majority of initial investment back through capital returns in a short period of time, I am not going to spend a whole lot of time dissecting the ‘why’.
One favor to ask - I would be deeply appreciative of feedback, and especially pushback, on my ideas. There are a lot of smart people who have signed up for my emails, and my ideas will only be made better by having extra sets of eyes. I promise you I won’t get offended if you call out something that you think is wrong… quite the opposite.
And before I forget, I need to make one crucial disclaimer - we are going to have some fun on this page. I think my average reader has enough time staring at Excel and boring research reports all day; let’s add some memes to that mix, and maybe even laugh at ourselves a bit.