Wizz Air (Ticker: WZZAF) – Cleared for Takeoff?

  • Favorable demographic tailwinds in Central and Eastern Europe should continue to drive demand for greater airline capacity.
  • Regional incumbents are less-efficient nationally supported efforts with unions and all the other sundry legacy costs which tend to make them weak competitors.
  • Steady or lower fuel prices will only further goose the bottom line of this profitable ULCC supported by Indigo.
  • The stock is still an attractive GARP with a EV/EBITDA of 6x, EV/Sales of 0.9x, PEG under 0.8, and decent FCF yield.

Wizz Air is the largest low-cost airline in Central and Eastern Europe and one of Europe’s leading ultra-low-cost airlines. Wizz Air operates one of the youngest aircraft fleets in the world with its Airbus A320 and A321s. The company was named 2016 Value Airline of the Year by the editors of Air Transport World, one of the leading airline trade magazines. I believe the stock is undervalued for its growth profile.

The company still has sizable market share opportunities ahead of it across Eastern Europe and yet it trades as though it isn’t growing at all. Many of the traditional Central and Eastern European (CEE) airlines are less-efficient nationally supported efforts with unions and all the other sundry legacy costs which tend to make them weak competitors. We saw this happen with ULCCs in Western Europe a decade ago, and a similar story could play out again.

travelmap

By contrast Wizz is a an ultra low-cost carrier (ULCC) similar to SPIRIT or JetBlue. Consequently Wizz and Ryanair are both share-takers, growing at double-digit rates in the CEE. The stock is a growth at a reasonable price (GARP) play at a very reasonable price.

Indigogo, a well-respected private equity firm, first invested in WIZZ in 2004 and recently sold its 18.7% position in an accelerated private placement. This is mildly concerning, but it sounds like Indigogo is simply interested in setting up more ULCC’s in new markets such as Chile. After accounting for outstanding notes and convertibles Indigogo still owns the equivalent of 24.2m shares, or put another way they only liquidated ~30% of their WIZZ holdings. Furthermore, Indigogo has a good record of successful ULCC stocks after they have exited, see RYAN, Tiger Airways, and SAVE.

The founder and CEO owns roughly 4% of shares, and seems focused on the right things. Here’s a short profile. Wizz currently operates a mixed fleet of 85 1-5 year old A320s and A321s, a very new and fuel-efficient fleet. WZZAF therefore enjoys very low CASKS, on par with RYAN.

It’s my personal belief that fracking tech combined with strong gas and renewable competition is going to continue to drive oil prices lower or at least keep them level. Such an environment should be favorable to airlines and passenger growth. Additionally, WZZAF benefits from OK demographic and economic trends across the CEE. These are under-penetrated markets with about 0.5 seats per capita vs 1.6 in Western Europe per Capstats. I am assuming that ULCC is an attractive model for the CEE region due to the growing middle classes in these countries. Basic monthly traffic stats are posted by Wizz Air here.

The company has a high degree of operating leverage which is working in its favor currently, but could hurt at some point. Additionally, financial leverage is high due to capitalized leases, though that formula will change a bit with upcoming outright aircraft purchases. The firm has solid margins and appears to match up well with RYAN operationally. This stock could double in the next couple of years if capacity continues to grow at the current rate. Overall I like the setup and the underlying tailwinds. I don’t know that WIZZ can really match RYAN head-to-head but it doesn’t have to given the large market opportunity available from legacy carriers.

Wizz Air is listed on the London Stock Exchange under the ticker WIZZ.L and is included in the FTSE 250 and FTSE All-Share Indices. U.S. shareholders can obtain Wizz shares via the OTC PLC ticker WZZAF.

Risks

  • Russian military exercises in the coming weeks could result in a slowdown in business.
  • Overcapacity due to aggressive competition with Ryanair. Indigo converting or selling its remaining stake within the next year would be the tell and should set off some alarm bells about the competitive environment were they to completely exit.
  • Fuel prices rise significantly above current levels.
  • A decline in CEE demographic and economic growth trends would slow down growth.
  • Brexit and the other European political concerns.
  • Strengthening USD would hurt the stock.

 

 

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2Q Results

It’s been a mixed 2Q, and it looks like the levee may finally be breaking. The enthusiasm that drove the markets for the past 10 months could quickly turn to pessisimism.

I knew white nativism was a problem, and wrote about it in the context of a likely HRC win, but wow. The one-night stand that is Donald Trump is beginning to disappoint investors under the harsh unforgiving light of mid-morning. No doubt the orange spray tan and outlandish hair looked good to tired eyes in a lonely, dark bar where the only other option was a woman so out of touch and overconfident that she dismissed half the bar as irrelevant and deplorable. It all sounded so good at 2am after several rounds of drinks: something random about business and taxes and healthcare reform but also some odd things about groping women, war veterans, and the disabled? Surely some sort of drunken jest.

But it’s becoming apparent that not only does our president have the awkward race relations of Strom Thurmond’s grandfather, but he is also woefully under-equipped to be president, and has only exacerbated latent culture wars. Empires crumble more often from internal rather than external pressures. It worries me, but there’s not much that can be done other than grit my teeth and hope that we as a country can do what we’ve done pretty well in the past, find a good political compromise. That and keep a sharp eye on the already stretched markets.

I dabbled in shorting a few stocks on margin (ZAYO, ENT, WIN), but I’m uncomfortable with that style so I reverted and am now buying long-dated puts instead. Margin is a tiger I don’t want to ride.

Portfolio

Things I Sold

UNIT I have held for a year. I still think that UNIT stock is safe, and unlikely to see a dividend cut, but when a stock moves this much in the wrong direction I have to cut it. I plan to keep an eye on it and will reassess, but I’ll be waiting for WIN revenue to get below 50% of all sales. Analysts have been downgrading the stock, and I expect to see more as we hit the point in coverage where they actually can. I closed out my position immediately after the earnings report around $23/share and avoided most of the downslide thankfully.

CBMX ended well. I closed up roughly 40% between the warrants and the stock.

AOBC I closed out of at break-even. The new Shield product line isn’t selling well in a highly competitive and generally trashed retail environment. I’ll sit on the side until earnings. Management deployed their last buyback to defend shares around $19 in the Spring. Will they do it again or has demand dried up?

WIN announced the cancellation of their dividend. When a company announces that they are eliminating their dividend you see a massive rotation by investors with dividend-focused mandates out of the name. So I shorted for a day and then closed out. I think this was a smart move by WIN’s part, but there was no avoiding some pain, the stock was going to take a serious hit on the news. The whole RLEC space feels strained right now with perhaps too much selling going on.

CTL Calls and Puts. CTL put up a horrible quarterly, and it has killed any stock momentum they had going from the LVLT deal. I still own a few $23 calls dated for January, and large position. I may increase my position, but I think timing this stock is hard and at these levels I’d rather take the 11% dividend. It could take Jeff Storey a long time to fix this company, but I was encouraged to see that Corvex added to their position today.

TMUS Calls. I bought some $65 calls for November for $2 when the stock was trading around $60, and slowly sold them off when the stock started rising post earnings and the price was close to $3. I think my average was something like a 50% return. I’m unwilling to hold them longer because of the uncertainty around a TMUS-S merger or acquisition. It sounds like TMUS wants to be in the driver’s seat?

WCG I closed out of after the stock had rallied 20% from February and operating metrics had declined, likely due to the acquisitions. I think the stock could still run but I’m not an industry expert and sell-side analysts have been surprisingly bearish.

GV I closed out. The energy services companies across the board have had a worse year than I had anticipated and I should have read-thru GV earnings to see what kind of hit was likely coming with ESOA. This is setting aside the increasingly unlikely potential for government supported infrastructure spending. ESOA I don’t mind holding thru the pain and will chock their operating loss this quarter to an anomaly. GV is such a trading stock and they haven’t used their buyback yet. So I’ll watch and wait here.

INSW had an OK quarter, but the tanker shipping industry is still challenged and will continue to be next year. I invested for the low net-asset valuation, and as that has largely winded up I have sold my position. This is another one I intend to watch carefully. The company has strong corporate governance compared to most shipping firms and could see more interest in a stronger market for oil tankers.

What I Bought

SNOA is a pharmaceutical firm which should be cash flow positive by the end of 2018 if things go right. The company is growing revenue and hired more sales folks, hopefully resulting in fuel for operating leverage. I bought a mix of warrants and stock.

AYSI is a mining equipment provider based in Australia. It looks as though management is cleaning up the company for a sale or an up-listing. I was impressed with how steadily the stock performed over the past several years while commodities tanked so I feel OK investing a small position here.

WSTFS is a Canadian timber supplier with a unique product mix and favorable geography. The company is cheap and recently announced a standing buyback policy, and seems like a good way to play resurgent demand from Asia and a housing rebound in the U.S. (even accounting for Trump Tariffs).

TPRFF is a Colombian gold miner with fantastic numbers, but a lot of debt. The new CFO seems pretty bright, and if they can climb the wall of debt the stock should do well. See the write-up here.

ENT and FTR Puts from my last post.

In general I think it’s a good time to own hard assets, stocks outside the U.S., or potentially both. I also have my short list and continue to groom it. For some reason the puts aren’t showing the current prices, both should be slightly in the green currently.

 

 

When the Levee Breaks – A List of Stocks to Short

We’re in a record bull market. Because of the bailout and ensuing relaxed monetary policy associated with the recession, a lot of deadwood companies have managed to float with the tide. So I made a list of the shadiest, smelliest, most overvalued junk that I could find for when the levee breaks.

I have no mandate and can therefore be more tactical. I prefer to only short companies which have glaring fraud/accounting issues, heavy debt loads, and negative insider commentary. From a macro perspective I think we’re getting close to the peak. My one real limitation is that I have to short stocks by buying puts. While this makes timing perhaps more important, I don’t like investing on margin and/or paying rates just to short. I prefer to rely on my prospects being so terrible that they will be down in 6 months to a year anyway.

The Short List
The Short List

 

A few comments on some of the listed companies are below.

Frontier Communications overpaid on several acquisitions. They’ve been able to show cash-flow only by adding more debt to the business and buying more things. Leverage ratios are at the high-end at almost 7x -even for telecom this is high- and the company was forced to service debt with cash-on-hand last quarter because operating income was negative. The Verizon asset flash-cut which was executed last year, appears to have been an unmitigated disaster which alienated both existing customers and local government officials. The entire RLEC space is seriously challenged, as evidenced by results at WIN and CTL. It has forced me to question my current long positions in both UNIT and CTL. I think there might be easier money to be made at this point and am considering selling both. I expect that investors will be scrambling to FTR in the short-term for the dividend now that WIN has eliminated theirs. FTR currently yields 15% vs CTL around 10% and UNIT at 12%. WIN should not have had a dividend post spin-off, the whole point of UNIT was tax efficiency for shareholders… but whatever, ultimately this *should* be good for UNIT. The market doesn’t seem to agree so I need to dig further. FTR stock could rise in the short-term, but I think uninformed investors seeking an easy dividend will realize their mistake, and view long-dated 2019 $13 FTR puts as a good way to hedge out some industry risk.

Global Eagle Entertainment recently fired most of its c-suite, including the Chief Accounting Officer, and was forced to delay their 10-K. ENT has been struggling to compete in a crowded field of in-flight wireless providers, and with only one major customer (LUV), is not heading anywhere good. Shareholder interest was never aligned with management and thus it looks like incentives may have driven questionable account keeping, poor due diligence, and dumb acquisitions. The firm has been forced by its creditors to report cash-on-hand every week. Since June, ENT has spent $20m and is down to $46m cash, with outstanding revolver principal of $50m. It’s very hard to see how this firm survives unless Southwest Airlines purchases them outright and with the messy accounting I don’t see it happening. I bought some Feb 2018 puts at a strike of $2.

Oramed is a shell company that’s been used as a pump and dump for seemingly forever. I wrote about this one too on Seeking Alpha, and the stock is only down 50% since. The trouble with ORMP is even though it is a glaringly obvious fraud, a lot of the float is controlled by the manipulators. They are not based in the U.S. and that makes it harder for regulators to do anything. I mean, they aren’t committing accounting fraud. They just submit the same sensational drugs for testing to the FDA again, and again, and again while stock promoters write steroidal posts about the market opportunity. So all you can really do is ride it up and down when they change directions. It’s frustrating, but my hope is that the next market crash drives this thing to zero where it belongs. The manipulators behind this one appear to have insane resources backing them up. You can read the multiple boiler room shill Seeking Alpha articles  about it, or my own article, which is as true today as it was 3 years ago. Puts are so expensive that this one might require a naked short.

Groupon was a flash in the pan, the sizzle is gone. I barely even want to talk about it as a short, because it is so obvious. Like many people, I used to use Groupon, and quickly realized how lame it was. Management is paying itself and offsetting the dilution with share repurchases…. not exactly turning the ship around. The fundamentals appear to be turning, but far too slowly to justify the current share price. No short position yet, but if things get nasty on the macro level this thing will go under.

Tuesday Morning is the perfect place for old people to shop at before they die or get shipped to Gitmo. The retail sector is getting crushed by Amazon. Meanwhile Tuesday Morning is still hawking its horrible castaway junk merchandise. There’s no reason to root around in the dim lighting for the stuff that Hobby Lobby refuses to sell. Does anyone actually expect Tuesday Morning to be around in 5 years? No, but unfortunately it’s mostly priced in. I think retail is oversold currently and think TUES could jump the very low hurdle in front of them. Better entry-points might be in store later this year if retail rallies. Additionally, insiders have been buying.

Planet Fitness is a capital-intensive business which IPO-d about 1.5 years ago, which means it has 6 months until the sell-side analysts covering it will start to downgrade the stock. Gyms are (in general) terrible businesses. You try to charge a nominal fee for a bunch of nut-jobs to beat up all your fancy gear. A franchise model makes sense, but I would expect franchisees to get frustrated over time. I need to research this one further. Short interest is probably too high making it too expensive to borrow the shares. It may take a real change in employment here before this one starts trending down.

Cartesian is a super small ($10m) nano-cap based in my hometown. I’m still learning more about it, but my read is that the GPs are extracting as much cash from the company as shareholders will permit. The level of frustration on the quarterly calls is palpable. I kind of respect CRTN for even holding them at all. CRTN management destroyed  roughly 75% of the shareholders equity last year. They have several off-balance sheet non-arms-length transactions with entities related to the general partners. Doesn’t look/smell right. Furthermore, I think the global consulting firms are going to be the real canaries if globalization stays on the wane. CRTN has been spending quite a bit on marketing and failing to get much new business, and they apparently had a hand in the FTR flash-cut mentioned above. Asset turnover is higher than it has ever been, which makes me wonder if perhaps the business is peaking despite eating through a ton of cash without anything to show for it. I’ll be watching earnings next week pretty closely.

IBM is being and will continue to be crushed by the cloud. You can only buy back shares for so long. At some point you actually do need to grow revenue and cash flow. I haven’t seen a single product from IBM that has a chance of out doing what MSFT and GOOGL offer. It’s probably not a good time to short this one, yet. They still have a lot of cash on hand, but are becoming more and more irrelevant to their customer base.

U.S. stocks have been overbought for some time now. It’s about time we started clearing out the deadwood and I am positioning accordingly. So many great investors have commented on this that I’ll just leave you with a Led Zeppelin classic.

 

SBFG – A Boring Bank with Buybacks

I bought two banks earlier this year, SBFG and CKFC. CKFC is smaller and operates in Michigan near the Detroit area and I should probably disclose that I added to my position after they reported earnings last month. CKFC was written up not too long ago on Seeking Alpha, so I will focus on SBFG here. I originally read about SBFG here.

As interest rates creep up, loan rates tend to lead deposit rates upward, so banks become more profitable on the spread between the cost of their loans in a rising rate environment. About 6 months ago I looked for undervalued banks with high net interest income margins, solid returns on equity and assets, and conservative loan to deposit ratios. Over time these banks should deploy more deposits at significantly higher loan rates, netting the growing spread.

SBFG is a small community bank headquartered in Defiance, Ohio on the border with Indiana. Like most banks, SBFG (formerly known as Rurban) was hit hard by the financial crisis, became unprofitable for a time, wrote-down a lot of loans/mortgages. Eventually insiders bought shares, the bank recovered, and the stock has rallied from $3 to $17 over the past 5 years. SBFG remains cheap on a P/B basis, is highly rated among the thousands of community banks across the country, and most banking metrics point to a continued slow grind upwards.

Book value per common share for the bank is $14.21 per the most recent quarterly report, so SBFG trades at 1.2x book value as of 7/31. Peers are trading between 1.5-2x. Setting aside share price appreciation, returned capital to investors has been 3% over the past year, split evenly between share buybacks and a quarterly dividend. Pretty good for a small bank. Ignoring the dividend and buybacks, should SBFG trade-up to peer levels, it would be a 25-65% gain for shareholders.

ROA consistently over 1% and ROE > 10% are my rules of thumb for bank operating metrics and SBFG does just fine on both counts as well. Net Interest margin of 3.5-4% is solid and loans/deposits is around 90-92% implying some potential to offer loans at higher rates. Operating efficiency is probably the one metric which can be dinged here at a somewhat high 68-70%. This is likely due to branch additions which will take time to contribute to the bottom line.

Small community banks are not sexy, and they almost never go to the moon, but given the improving rate environment, it looks like they could have room to run.

Risks

Regional focus is a double-edged sword. Should the local communities which SBFG operates in experience problems, SBFG could be in trouble. Looking at the auto industry, it seems clear that this stock could have headwinds in its future, but so far they haven’t showed up within the financials or management commentary. Banks still appear to benefit from lending rigors imposed by the financial crisis.

Much of this thesis depends on rising interest rates, but should the economy turn south, the company’s loan loss reserves should help protect it.

Have you heard about this new guy, Donald Trump? It’s possible that all of the bank stocks could take a hit if investors stop believing in things like tax reform. Given the low valuations I don’t see a lot of downside from here.

But have you heard about this new guy, Donald Trump?

Amazon Is A Trade Not An Investment

“The best investment decision I have made has been purchasing Amazon during their IPO and the worst decision was selling Amazon.” – Bill Miller on The Investor’s Podcast

I’m currently reading “The Everything Store” on my local library app (not Kindle ironically), so now seems like a good time to talk about a potential investing mistake that I made last year.

In February of 2016 I purchased AMZN at $570/share. I sold it a few months later for $675. Even after today’s mildly disappointing earnings report the stock is around $1,000 today.

Obviously I left A LOT of money on the table. I don’t actually feel bad about it though, because I’m not so sure that Amazon is worth $1,000/share today. Yes the company is aggressively growing, but the company is currently valued as though it will keep growing forever, and while there is surely runway in retail (and possibly cloud), Amazon is probably the most expensive way to play these trends. Amazon is one of the MOST expensive FANG stocks, with a PEG approaching >7x! On a trailing EBITDA basis AMZN trades at 40x, and even with a growth rate of 40% annually this is a very pricey stock, rivaling Netflix in expense.

This isn’t to say that Netflix and Amazon are not going to keep growing, but they may *never* deliver an acceptable cash flow yield to justify an investment. A “your margin is my opportunity” strategy only works when you get buy-in from investors and employees. At some point, when investors realize that they may never see the margin expansion they are currently modeling for Amazon, faith in the company is going to get rocked. And then rocked again when employee options take a hit. Massive growth tends to mask problems, but they are there somewhere inside of Amazon. No business is perfect and this one has been priced for perfection.

In “The Everything Store”, Bezos comes across as incredibly smart and aggressive, but he is no god, and I think investors must be drinking Kool-Aid to imagine that anti-trust concerns are not just over the horizon for a company which has so publicly and single-handedly destroyed the retail sector and is now slavering over groceries.

If you want to position yourself for online retail, Amazon is not a bad bet, but not the cheapest stock, in many cases it no longer offers the cheapest wares. Eventually shoppers will figure that out.

If you want to position yourself for cloud growth (like I am doing), Google and Microsoft are both well positioned to benefit from the high-end customer market. Google is offering class-leading AI and ML tools while Microsoft has a better sales entry point through Office and Windows add-on capabilities.

Both MSFT and GOOGL generate higher internal rates of return. Both have allotted money to buybacks (though Google has yet to act). Over the past 12 months Microsoft has repurchased 3.9% of outstanding shares and currently pays a 2% dividend. Both would benefit significantly from cash repatriation.

The one wildcard is Bezos himself, who still owns a significant amount of Amazon stock and still runs the company. He has certainly surprised the market so far, and perhaps he will continue to do so.

I currently own Facebook, Google, and Microsoft, all solidly in the tech growth complex so I’m not a tech heretic. I could absolutely be wrong about AMZN, and there’s no signs that the stock will come back to earth anytime soon.

For my money though, Amazon is a trade at these levels not an investment.

 

 

Portfolio Update Heading into 2Q

The weather is too nice to be spending cycles on the blog, so here’s a quick summary of where I stand. Top 20% performers in green.

2Q pre-earnings

I added to my CTL position on news of the lawsuit. This strikes me as a ridiculous money-grab attempt by a disgruntled employee, and I expect any damages to be small. I think the stock has not rallied because investors are nervous about the report for this quarter. So I have a lot of exposure to CTL now. I appeared to be in good company. Activist Corvex submitted an updated filing showing that they added to their position and also owned some January 2018 call options.

I sold NSAT after a solid 40% gain in less than 6 months. I think the bidding war has mostly run its course.

ALIOY did what it was supposed to and did not move, but I did not end up getting any of the spin-off biotech shares.

HUM I closed out with a nice double-digit gain. I feel like the valuation is less attractive and there is a fair amount of healthcare uncertainty out there. I am still holding WCG because it still *looks* pretty cheap and they have consistently sandbagged guidance, resulting in big beats. I may change my mind depending on how they do now that they are through a long stretch of deals. Execution will be key, but I’m holding out some hope that they get bought.

I exited RDCM up 7%. I think this could be a one-trick pony stock, and while AT&T is a big customer to have they also have a lot of negotiating leverage and a track record of using it on small suppliers.

I also closed out of DISH and TMUS.

DISH I think will have other more attractive entry points within the next couple of years. I don’t see it being sold for several years at this point.

TMUS I was worried they were going to overpay for Sprint. It sounds like maybe they scoffed at the price Masa wants, and walked away for now. That’s a good thing. Operationally I think TMUS is doing just fine. The company should continue to take share away from VZ and T, and probably Sprint to a lesser degree. So I bought a few call options just out-of-the-money for November. At the very least I expect the phone cycle should help.

I did trim AOBC a bit immediately after the earnings report. I still think the stock is very cheap, but the share price had rallied a bit since I purchased and management sounded very cagey about 2Q in particular. Combined with a high accounts receivable, I decided to keep some powder dry. I plan to add more shares when I see insiders move or a change in the buyback setup.

I also added CBMX warrants and more DSKE warrants. My only real “new” company is SHECY since my last post. I plan to write more about them next month.

 

 

 

 

 

 

Summer Reads for Success

Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it. – Warren Buffett

Successful people read. A lot. With that in mind, here’s what I’ve been reading and loving. I hope you do too.

The Vital Subject They Never Teach In School: Money

The Richest Man in Babylon – This is a classic guide for personal finance, told through entertaining and easy to understand parables. Money works for me now. I don’t work for it.

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! – A bit cheesy, but also timeless. Make this one of your first reads as you think about money.

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy – The second book I ever read on personal finance. The author conducts a survey of hundreds of millionaires to determine what behavioral and business patterns they display. Guess how most of them got rich? Hint: Not the stock market.

Handling People and Work

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich – I’m a little bit cynical about Tim Ferris, but this is definitely a motivating read if you want to break out of the 9-5 grind.

How to Win Friends & Influence People – A classic. I’m pretty bad about having amicable discussions with coworkers/bosses, but this book has helped quite a bit.

Conscious Capitalism, With a New Preface by the Authors: Liberating the Heroic Spirit of Business – The founder of Whole Foods understands people, and how to get them to work together. A lot of what he talks about reminded me of the best company I ever worked for.

Investment Methods

Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations (Wiley Finance) – Tobias Carlisle writes about activist investors in an entertaining and educational way. This has been my favorite investment read in a long time.

Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue – The best written account of a short-seller campaign in our lifetime.

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits – I was late to read this book because of the cheesy title, but it is excellent. Greenblatt talks quite a bit about the benefits of playing market dynamics against themselves, and his record of returns is pretty amazing.

Reminiscences of a Stock Operator – I am about 75% of the way through this amazingly entertaining tale of a trader from the 19th Century. Jesse Livermore traded his own money, and developed a system which made him millions. This is a must-read for anyone interested in trading or investing. It is both a cautionary tale of what happens when you do not stick with your own system, and an inspirational story of betting and winning big several times.

Understanding Afghanistan, the Middle East, and Jihadism for the Professional Spy

Lone Survivor: The Eyewitness Account of Operation Redwing and the Lost Heroes of SEAL Team 10 – There aren’t many good accounts of “my” war. Marcus Luttrell has been to hell and back, and lived to tell the tale. I don’t completely agree with his portrayal of the Taliban as bloodthirsty savages, but the sheer will to win (by both sides) is certainly on display in his account of one of the notable firefights of Operation Enduring Freedom. It also highlights what we have been doing wrong: sending in hit teams to assassinate people at night is not effective COIN.

War in the Shadows: The Guerrilla in History – David Petraeus popularized COIN (Counter-Insurgency) in our time, but the guerrilla has been around for centuries. This massive tome by Robert Asprey painstakingly records and examines most of the major insurgencies and counter-insurgencies throughout history. This book is not for the faint of heart, but it does a fantastic job of noting what has worked and what has not since the dawn of time, wrapping up with a lengthy analysis of Vietnam. If you want a single book to understand how to win against insurgencies this is it.

Afghan Guerilla Warfare: In the Words of the Mujahideen Fighters – If you want to get into the nitty-gritty of Afghan tactics, these vignettes from the Soviet Invasion are still relevant today.

The Confrontation: Winning the War against Future Jihad – Walid Phares lays out the religious and economic factors which fuel jihadist attacks in the West, most recently the van and stabbing attacks this week in London which sent 48 people to the hospital. If like many Westerners you STILL don’t fully understand why these attacks have occurred (and will continue to) here is a great primer.

 

Fiction for Fun

American Gods: A Novel – Just fantastically well-written and hard to put down. An entertaining story for anyone even mildly intrigued by mythology.

A Fine and Pleasant Misery – Any fan of the outdoors will quickly find themselves chuckling at the ludicrous yet relatable stories told by McManus. Good for a summer trip.

Cryptonomicon – I lobbied hard to name one of our daughters “America” because of this book. Keen wouldn’t let me.