1Q Portfolio Wrap-Up

Over the past month I closed out my UNH and LNG positions. I’ve also continued to flesh out my positions in RDCM, SBFG, TMUS, LILA, and DISH. Additionally, I opened 3 new medium size long positions in DSKEW (warrants), CTL, and SILC as well as 3 small positions in GV, SBAC, and TWLO. I (briefly) attempted to short ANGI and ENT, but they retraced so I exited. Doesn’t seem like it’s quite that time in the cycle to be shorting… yet.

1Q Wrap

Twilio is a cloud communications platform as a service (CPAAS or PAAS). TWLO has the potentially to seriously disrupt a lot of telecom services. I have had an eye on it since last Fall, but wanted to wait until the insider lock-up expired. No insiders sold a significant number of shares. That’s pretty bullish when your company isn’t economically profitable yet, but I’ll bite. Analysts have been upgrading the stock, and I expect the company will surprise to the upside on the next earnings call. Culture matters with tech startups like TWLO, and I’m fairly impressed with what the founders are building on both the technology and the personnel side.

Silicom is a manufacturer of various semiconductor components for memory. They typically compete in product fields with 1-2 competitors, which is a big advantage compared to many other parts of the electronic components industry. The rough details of the company can be found here.

Daseke is an oversized truck shipping consolidator, which newly IPO’d via the SPAC process. SPAC IPOs are a cheap way for companies to access the public markets, without all of the associated costs of the more standard bank-run IPO process. You can read a good description of the process here. I bought some warrants, an often misunderstood way to purchase shares in a company, similar to options. Dane Capital wrote this fantastic pitch here.

Centurylink is a poorly-run telecom provider which is in the process of acquiring Level 3, an enterprise focused communications service provider with a ton of interconnects. The combined company will have a strong business segment focus and a LOT of fiber assets. I think CTL’s management team is sub-par, but this acquisition makes sense. CTL can use LVLT’s substantial tax losses to maintain its dividend payout. Shares in CTL which have been as high $33 in the past year traded down to the $23 range after the company reported weak earnings. I think management purposely sandbagged guidance in order to surprise to the upside, and it was notable to me that several directors bought shares in November at $23-24.

I helped cover this company on the Sell Side. I did not like them. I do not like them now, but even bad assets can be undervalued, and at a >9% dividend yield (vs as little as 6% last year) and with the rising probability of business stability post-merger with LVLT, I find it hard to ignore. I expect shares will trade up into the $28-32 range as management beats guidance and shareholders realize there aren’t that many large telecom/cable names to put money into. Due to its size and business, CTL will likely become a must-own name for the largest institutional investors.

SBAC is in the process of becoming a REIT, so the valuation spread between it and AMT and CCI has been narrowing. I figured there might be some upside to current guidance due to AT&T winning the FirstNet contract.

Goldfield Corporation has been on my screen for a while, but I think the stock may have finally found a floor. It’s a bit similar to ESOA, but located in Florida rather than West Virginia. It has been around for a looooong time, and lately its backlog has been growing nicely. I think with more Baby Boomers retiring and moving to warmer climates GV could have several nice years ahead of it. Similar to ESOA two of my bigger concerns with GV are labor costs and backlog growth, so it’s not a huge position just yet.

United Health probably has upside to it, but I feel better about HUM and WCG vs a business that depends somewhat on software/PBMs and appears to be getting top-heavy. The market is up 8% from my buy time in August and the stock is up 16%.

Cheniere is probably fine, but it has a lot of debt and I would rather be positioned for energy distribution through INSW and ESOA. With the shares up 22% from when I bought in May vs the market up 14%, and the potential for increased competition from new LNG exporters I recognize that I have no real edge in the stock and would prefer to play within my wheelhouse somewhere else.

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Author: secondhandstocks

The genesis for this blog stems from a Marine buddy and I came back from Afghanistan with more money than knowledge, and heedlessly tossed our hats into the stock market ring. A few months later, I remember discovering the classic book The Intelligent Investor by Graham and Dodd, and ravenously devouring my first introduction to value investing. That framework - with some generous additions by Seth Klarman, and Joel Greenblatt among others - guides my investment philosophy. I spent five years working in the intelligence field, both in the Marine Corps and then for a government agency after that. I speak Arabic and Pashto, have programming and analysis experience, and enjoy investing in technology companies as a hobby. I also spent a year on Wall Street working on a #1 Ranked Institutional Investor team, before deciding that that the Sell-Side was not for me.

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