by Travis Johnson, Stock Gumshoe | March 22, 2019 3:26 pm
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Glad to hear you’re planning to attend the $BOMN get together in June, would love to hear your feedback on that. It’s a stock that’s been a bit of a personal challenge to stay excited about, but I really like what they’re doing and have been adding one share at a time whenever they dip below $25 (thanks Robinhood!)
I think your description of “slow burner” is dead on.
If it gets at all exciting, as we saw when the WSJ made the Warren Buffett connection las fall, it will be too expensive to buy. It’s arguably awfully expensive now, I just like the potential of their trajectory and their strategy and earnestness enough to see how it plays out. I’m kind of hoping that investors give up on them soon and let the price wither down to the teens, but we’ll see. These are not big cash-generating assets they own so far, there’s no compounding yet, so if they have more good ideas to build the business they could also sell shares again before too long, though I think the more likely path they’d take is putting some debt behind the billboard business and using that borrowing to expand. We’ll see.
Thanks Travis. I too worry about the massive debt we are in and when the sky will fall. The decision of not raising the interest rate makes me worry about inflation and bigger fall of the market even more. But I have been totally wrong about the Chinese housing market and the US stock market before.
You talked about Nokia and Erickson. Any other companies that will potentially benefit from 5g you like?
Have a great weekend.
Those are the two that are most reasonably priced and reasonably low risk, in my mind. There are lots of more exciting ones and little guys that I haven’t been willing to buy, and some that have run up too much (like CCI), but I keep looking.
Pretty much all telecom and networking stocks will feel the impact, too, though it may take several years to become a meaningful impact. 5G rollout is going to take a long time, and is likely to be in addition to, not replacing, 4G for at least the next 5 years.
I am hoping CCI will drop a bit in the summer.
I believe the Modern Monetary Theory states debt and deficits no longer matter as long as a government can borrow in its own currency and keep interest rates low. Unfortunately, I have lived through and lost through several “the old rules no longer apply” scenarios and whenever I hear that I believe a beating is following close behind. I’m flabbergasted t has only been 11 years since the great recession that was supposed to change everything- I don’t see where much has changed. I have developed my personal economic indicator related to E-trade commercials about how easy it is to make money in the stock market- when things are ready for a turn you see them, when things are tough they don’t advertise.
Trade Note:
I don’t write a lot about my long/short positions, partly because some of them have been extremely illiquid, but I have promised to update you on changes in the Real Money Portfolio so I note today that this morning I closed the majority of my stake in Phunware (PHUN), in which I was short at about $54 a share and long the warrants to hedge that short position (this was a SPAC called Stellar Acquisition that merged with Phunware, a venture-funded blockchain-related app development company). It was a crazy and volatile position mostly because the equity is extremely illiquid due to the odd structure from the SPAC conversion, which locked up most of the existing shares for a time and created an illiquid and ridiculous trading situation, and the warrants are also not exerciseable yet due to the pending SEC registration… and it was also a very high-cost short (more than 100%/year is the current fee structure for the short), so I took advantage of the big collapse to about $20 to sell off my short position and take those profits. As I type this, it has fallen another few dollars, though, again, super illiquid so I have no idea where it will be when you’re reading.
I expect the stock to fall substantially further eventually, probably to below $10 once the registration takes place and real liquidity returns to the shares (along with a big chunk of insider selling, I expect), but I don’t know when that will happen, I could be wrong, and a hard-to-borrow short can always be called away from you at a bad price (PHUN could, after all, see another trading spike to $100+ if there’s an surprise mania or some manipulation of the shares, which would be a huge cost if I had to cover then), so I’ll take the bird in the hand.
Relative to the actual cash outlaid for the initial warrant position (you don’t have to buy anything to initiate a short position), this is a many thousand percent return — though that’s not the right way to think of a short position, since you’re putting more at risk than you’re actually spending, so I calculate the return based on just the actual return in reverse… the cost of borrow plus the cost of buying the shares to close the investment being the cost, and the cash received from the initial short sale being the gross return. I’ve held a small short for a long time, but most of that short position wasn’t put on until a borrow opened up a couple weeks ago, so the bulk of this has been a very short-term trade.
Net that out and it’s about a 130% return on the short after costs, and add on a little boost from the warrants and it’s a nice pop for the portfolio… though, as with all short positions and volatile derivatives it’s one that has given me some heartburn over the past couple weeks and probably consumed more of my attention than is rational.
As with some other similar trades I’ve done in the past, I’ll hold on to a small stub position in the warrants on the odd chance that the stock gets back to manic prices briefly… though in the main, that has been a mistake in the past (thank fully a small and inexpensive mistake, but the “stub” positions for older long/short positions ESTR, RBZ, ADIL have all fallen in value).
LOOKS LIKE THE “SKY IS FALLING” this morning
Craziness just about always comes to an end… it’s just hard to guess when.