by Travis Johnson, Stock Gumshoe | March 22, 2017 7:00 pm
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Interesting. I’m a Morningstar subscriber, they only have 9 stocks getting their 5 star rating these days & Express Scripts is one of them. Their fair value estimate is $100 a share. I took a position a few months ago so I certainly hope they’re right! 🙂
Does anyone know a fairly practical way to short Europe debt more broadly? Thanks in advance. Love your work Travis. Great read!
There are some broad bond ETFs that are mostly in Europe, though I don’t think there are any remaining that are just in Euro bonds — and I don’t think there are any inverse euro bond ETFs, either, so you’d have to buy puts or short the bond funds. There used to be ETFs and ETNs for euro debt and even specific countries, like Italy and Germany, but those mostly got destroyed in the euro crisis and are defunct, as far as I know. The big ones like IGOV and BWX and IAGG all have at least 20-25% in Japanese bonds, I expect, since that’s the big market outside of the US and Europe.
How do you buy warrants? How do you find out who even offers warrants, or is my ignorance just showing? Please advise.
Warrants are typically quite difficult to find, mostly because there aren’t very many of them that trade on the public markets (and the vast majority are for junior mining stocks). There is no central official listing, though a few people have started businesses that are based on essentially finding and tracking warrants (like Dudley Baker’s Common Stock Warrants, for example), and there are some free listings that are not necessarily kept up to date all the time (Financial Post lists Canadian warrants here, for example).
The best listings I’ve found for US warrants are through Interactive Brokers, which is one of the brokers I use — it looks like the lists are available for everyone, account or no. They’re listed by market here, you have to search through each market (including Knight to see a lot of the OTC traded warrants, NYSE, Nasdaq, etc.). Neither of those yet includes Yatra, not sure how often they update (the listing/name change was in late December, but I also didn’t notice the previous SPAC, Terrapin, that did the reverse merger with Yatra to get Yatra listed).
IB has basic data for all of those warrants, too — strike price, expiration date, etc., it’s the most complete list I’ve seen for US warrants, but it’s not necessarily convenient or exhaustive.
Most US-listed warrants are either OTC listings for Canadian companies, TARP Warrants from the 2008-2011 bailouts of financial companies, or the result of challenging financings that little companies have had to do — providing warrants to “juice” the deal and give the financiers better terms — in Canada that means they’re mostly risky junior miners, in the US it means a lot of them are risky biotechs.
Special Purpose Acquisition Companies (SPACs, or “blank check” companies) also typically include warrants in their initial financings — they raise cash that some (we hope skilled and reputable) person or company will use to make an acquisition, and once that acquisition is made the warrant terms trigger (or, if the acquisition isn’t made by a set deadline, the SPAC liquidates and returns the money to shareholders). That’s what happened with Yatra, it merged with a SPAC (Terrapin 3, it was called) that included 5-year warrants upon exercise of a deal, and those warrants triggered on the merger. I’ve had good luck with warrants from SPAC-created companies before, probably ROIC was the most successful, but certainly some of them turn out to be terrible companies as well.
Yatra may well end up being a terrible investment, by the way, in case that’s not clear. It relies on the surge in wireless internet access in China leading to more online buying and providing the industry with some profitability and, perhaps, with a rise in the Rupee against the dollar — so far, online travel in India has not yet been consistently profitable for anyone despite the launch of these services more than a decade ago, even MakeMyTrip (the largest and dominant player so far) is still in “investment” mode and not focused on making money. With the market growing so fast, I think there’s opportunity for others to build share and make it a more economic business that generates real cash flow, like online travel in the US and China… but it’s definitely not guaranteed.
Thanks for the detailed explanation. Do you have to be an accredited investor, to purchase warrants?
in this case the warrants are listed, so they trade just like a stock. Most brokers should treat them just like stocks and don’t impose special restrictions… though they’re usually much less liquid and, as leveraged derivatives, have higher risk.
Got it, thanks.
Thanks for your MMYT / YTRA comments. I picked up a few of the warrants but MMYT is running away today. Without you I wouldn’t have known where to start in the Indian travel market…..
I would like to hear about the Sloan meeting too–even if it’s just ‘those MIT folks are boring’
(I did very well with CTRP– huge rising middle class wanting travel was the thesis. Are you responsible for my purchase in 2006? I can’t remember. I made an unusually large buy for those days and that sort of thing so I am unusually grateful!)
Thanks, I liked the MIT conference and got some good insight there — including a few ideas I’m digging through, though it was largely macro-focused and quantitative.
As Gumshoe readers know I am pretty well focused on resource stocks, but I do read widely and do look for some diversification opportunities and since Travis mentioned missing 1000% gains by selling TenCent too early I would note that in years past I made excellent money by investing in ETF’s of specific “emerging markets” I won’t mention, because they may not be relevant to-day. One however came to my attention to-day I had not heard of before, and it makes a compelling case for CHINA’S GROWING DOMESTIC ECONOMY which has shown amazing growth in internet equivalents of Western companies like Amazon, Facebook, EbAy, Twitter etc and has investments in Chinese companies like Alibaba, Baidu, Ctrip, Tencent, and most importantly WEIBO and many more Internet stocks. With only 50% participation of their vast population compared to 88% utilization in the smaller U.S. population, there is plenty of room for growth in the growing middle class of Chinese middle class younger generation catching up with Western standards.
Gaining exposure to all the significant Chinese players under one roof seems like a no-brainer to me, and this ETF has a 5 STAR Morningside rating. This is KRANE Shares CSI China Internet KWEB and I will probably take a small trial position.
Can anyone tell me where I could find the offering memorandum concerning the warrants (YTROF), discussed by Travis in this post, that would fully describe the terms of the securities?
Registration statement for Terrapin 3 is here: https://www.sec.gov/Archives/edgar/data/1608298/000114420414043616/v384098_424b4.htm
(That’s the SPAC that Yatra merged with to go public)
Merger details were proposed here: http://www.terrapin3.com/wp-content/uploads/2014/06/v435635_Terrapin3_proxystatement_PressFinal.pdf
I got into Fairfax India due to India’s economy and it has been doing well.