Friday File: “Mysterious M-Boxes” and more
by Travis Johnson, Stock Gumshoe | March 8, 2019 4:09 pm
Checking out a Nova-X teaser, plus updates on Nokia, Facebook, Fairfax India and more...
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Source URL: https://www.stockgumshoe.com/2019/03/friday-file-mysterious-m-boxes-and-more/
Any thoughts on OKTA earnings?
Generally pleased, still thinking it over and will likely cover it in more detail next week.
any new thoughts on IIPR?
Not since a couple weeks ago, nothing has changed. Just awaiting their next earnings and next dividend announcement to get a sense of how things are developing. That will be on Wednesday.
Travis, I wonder if you could go into a little more detail on your thoughts on Fairfax India. I’m really unhappy with them, and what I see in the recent press release doesn’t encourage me. While their assets have increased slightly (in thousands) from $2,672,221 to 2,705,550, their net earnings have gone from $452,509 to $96,432 and earnings per share of 3.10 to 0.63 in 2017 and 2018 respectively. This is a 79% drop in net earnings and an 80% drop in EPS. They do say that the common shareholder equity was $2,117.9 million in 2018 compared to $2132.5 million in 2017, which is less than a 1% loss. They say this has to do with currency translation losses, and I am not real proficient with determining the effect of currency translations. These figures just look terrible to me and even with Fairfax trading below book I am wondering what is going to happen to them. I’d appreciate your further comments on this company.
The earnings are largely irrelevant — the impact of the rise or fall in value of their investments in any given quarter has to be recorded as “earnings” (or losses) whether they sell or not, so that drives almost all of the earnings volatility.
The biggest impact on the share price has been going from a premium to the value of their assets and investments to a small discount to that value, and that’s almost entirely driven by sentiment both about Fairfax and it’s management and about India’s political and economic future.
I expect this to be an extraordinary investment over the next 5-10 years, and think it’s undervalued now because of weak India sentiment. I could be wrong, of course, it has happened before 🙂
Thanks Travis, I sure appreciate your comments.
Two items. 1) I enjoy your updates and continue to learn from you. Thanks. 2) when I tried to purchase more FFXDF, my broker noted they were flagged as Rule 144A and my order couldn’t be placed. When I called Fidelity to ask why I received this note, all they could tell me was that there was an outstanding issue (could be minor, could be major) with the govt and no buy orders could be processed. I can sell but not buy. Any ideas why you could purchase but I can’t?
I haven’t traded the OTC US shares recently, my purchase was direct in Toronto via Interactive Brokers, but it sounds like they’re probably cracking down on Fairfax shares trading without any SEC filings (Fairfax India didn’t sponsor the OTC ADR listing and makes no effort to file with the SEC). Your broker is trying to protect you, I expect, though why they’d try to protect you in this case and not in lots of similar ones that probably also exist I don’t know. If you would like to trade in that case, you might need to buy or sell the shares in Canada instead of OTC in the US (which most brokers will also happily do for you, though accounts and comissions and brokers all differ).
Thanks for the quick reply and explanation. I think I’ll just hold onto my original investment and follow your comments in the years ahead. I went into it with a long term perspective and don’t see any reason to change that.
Travis, Does LGND have to follow the royalty model? SAND turned its fortunes when it broke the mold. Perhaps LGND is going to purchase one or three small biotechs it identifies as undervalued. This would explain the sale of its prize asset. CO2
Could be, but they have a pretty long history now of being cheap when it comes to R&D, that’s really their identity. I could see them buying an approved drug, but not doing their own late stage trials.
Travis, imo you are the best securities analysis out there. Your Friday files are invaluable. Your analysis of companies, industries and markets will doubtless become required reading for aspiring analysts and anyone trying to understand how it all works and trying to get their bearings. Your wisdom is priceless. Thanks for your work, wherein you work harder and more thoughtfully then your subscribers deserve and which can be found nowhere else for sure. Don’t know how to thank you enough, but I tried.
You made my day! Thanks so much for the kind words, undeserved though they are.
There’s still time to buy-o the ZAYO
I have to admit I bought some Zayo then sold it shortly before this pop. I received the advice that “one should never buy a company hoping for a buyout.” So, I chickened out. Apparently I was wrong. It’s only a buck or so above where I first bought in, so I’ll watch it for an entry. I’m still skeptical but trying to evaluate further
Skeptical is good. I wouldn’t buy for a takeover bid unless I also thought they’d show a good 2-3 year return with the REIT conversion if they do t get acquired.
@Travis,
Once again, thanks for your valuable insight. Given your keen interest in the Indian market, I wonder if you have taken a look at EBIX. It posted a very good result and the CEO indicated the plan to take a market leading position in the online travel industry in that country in the next couple of years. For what it is worth, the stock has been falling since then though some have ascribed that to a recent run up after an earlier drop due to alleged accounting issues which has since been disputed by an independent auditor. It will be great if you and others can chime in on this.
Haven’t looked at them recently, though I see they’ve been trying to build in India through acquisition… including, just today, offering to buy out the second-place Indian travel company, Yatra Online (YTRA), on which I still have a small warrant position.
It might be a tough go, but I haven’t looked at the details — MakeMyTrip (MMYT) has a big head start and strong backing.
Trade Note:
I sold the remainder of my Yatra Online warrants (YTROF) this morning, following the details being released regarding the takeover offer from Ebix (EBIX).
EBIX is offering to buy Yatra at a nice premium, about $7 a share, and there’s a decent chance that offer will be accepted given Yatra’s low price and failure, so far, to get any real traction versus MakeMyTrip (MMYT). That doesn’t do warrant holders any favors though, because the terms of the deal are that Yatra has to buy back those warrants on the open market as part of the deal.
I don’t know how it will work out, of course, the warrant holders (including some insiders and large investors) might object, or they might use their leverage to insist on a higher price for the warrants. That’s the possible upside.
On the downside, the warrants are technically worthless if Yatra gets bought out for cash… so there’s a real chance that the warrants will be bought back at lower prices if the warrant holders don’t hold out and exert some pressure (assuming, of course, that the deal goes through).
Either way, I think the odds of the warrants losing all of their value just increased considerably (though the odds of the warrants getting a little boost from the pressure of closing the buyout deal also increased, since Yatra might negotiate a higher buyout price for warrant holders)… and we’re getting closer to expiration and that little jolt the warrants got from this attention was enough for me to clear the decks, so I’m out.
I sold my remaining warrants, which had an effective cost basis near zero because of the fact that I previously sold a big chunk at much higher prices in happier (for Yatra) days to book profits. This final sale is at a loss of about 2/3 of the initial investment, the total Yatra Warrant position now is closed at an effective profit of a little over 13% (first sale was in September of 2017). Not a great return,, but there you have it.
Travis, what is the exercise price on the warrants?
I never see mention of the dangers of 5G networks, with the huge expansion of satellites so that your refrigerator can send emails. (I0T technology). But I have reservations about the so-called advancement, as everyone charges forward and am not so sure it will happen without a lot of pushback. Would obviously affect NOK, among others. But thank you, Travis, I love the gumshoe.
https://es-ireland.com/5g-5th-generation-greater-dangers/
There is a lot of coverage of the possible health risks, though neither the “obviously safe” nor “clearly causes cancer” arguments seem to have any real merit according to the study reports I’ve looked at. Most of the studies that seem to have good and reliable data are pretty old at this point and reference radio waves at a different wavelength (the frequencies used in 3G, mostly, though there are WiFi studies as well), and I too come away with the feeling that there’s a lot for a non-expert to be concerned about. Hopefully there will be better data coming, and a clearer understanding of what the actual risk level is, but the wave of 5G investment is a steamroller at this point — it would take pretty definitive data to slow it down, I would think, and there is a lot of both government and business pressure to speed it up.
Well, am glad to think that the data has been updated and is less foreboding, Travis. I appreciate your feedback, thank you.
Travis I tried to log in to the Irregulars page and could not. I came here to ask you why and it says I am logged in? What gives?
I think Nokia is well-positioned for substantial gains in the next few years, yes, even 10x. Its long-term technical chart pattern bears that out also. So: I’m a fan.
Travis, do you think those “M-Boxes” might actually be made by Airspan (AIRO)? This is currently a $7 stock, and this product is actually what they make. (I also have NOK and Ericsson as my 5G plays).
…Larry
No, that’s a nano-cap company if the data I’m looking at is accurate — market cap of only $1.4 million? That means they shouldn’t be public, and certainly no newsletter could recommend them (trading volume maxes out around $500 per day, it appears).
Don’t know anything else about that one, but the financials say it’s several orders of magnitude too small and illiquid to be taken seriously.
Thanks Travis for the confirmation on Nokia, do you know why MYGN took such a big hit?