Friday File: Time for Cows, not Horses
by Travis Johnson, Stock Gumshoe | November 13, 2020 5:13 pm
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Source URL: https://www.stockgumshoe.com/2020/11/friday-file-time-for-cows-not-horses/
GOOD Job, Travis…….thanks for the info, and as usual,,,,,,,,,,,good research and publishing
An investment update with a reference to James Herriot, thank you. I remember reading his books at school & watching All Creatures Great and Small on the telly when i was studying in England.
Travis, there is definitely a Michael Lewis lying dormant in your brain. Bring him out and let us all profit from the result.
Great metaphor Travis! Being a cow looks not so bad anymore
I believe you best be regurgitating a Biden election, that will very soon give you a Pres Kam Harris. Only a Repub controlled Senate can slow a parallel tax increase greater than the 1993 Clinton tax increases. That said; if L/T Capitals gains have an appreciable tax increase under Biden, even if there is a sniffle, you would see big profit-taking selling is MO. One Would have to sell by Dec 2020 to get the current effective tax rates. With debt bursting through a $30 Trillion + plus debt ceiling, The Fed Res will never allow interest rates to appreciate if they can. But, FR can’t stop the eventuality of the debt implosion. The Gov’t can’t pay any increases in interest rates and that is primary reason. There is Trouble in Rivercity., and that will incur before the 2022 election.
Certainly the deficit and debt are unsustainable… but that was certain and widely predicted to shake the world in 1985, too, and every few years since then, depending on which political tide you might have been riding… predicting when the unsustainable will stop happening is far more difficult than just saying it’s logically unsustainable. Logical assessment of government finances hasn’t helped any investors in my lifetime…. maybe it will this time around, but I would hesitate to bet on that.
If you hide from investing because the government finances are a mess (a mess we’ve all insisted on, by the way, by electing only those who promise us something for nothing), you haven’t been able to invest since at least the 1970s, missing out on the fantastic growth of the economy and the success of creative and innovative companies over the past 50 years.
$APTO reasons to buy and catalysts: https://pbs.twimg.com/media/Emz0pisXUAErNhk?format=jpg&name=large
and link to excellent chart: https://twitter.com/semodough/status/1327704989595279360?s=20
Thank you Doug and Joe! #Best2ALL!
I like the idea of Goosehead and feel like I do need to diversify my portfolio a bit from its tech heavy current state. Trouble is although its core business is insurance with the sky high valuation and forward P/E will it be treated like a tech stock if there is a crash or general rotation? The insider selling also seems high though I understand its quite common for new companies (though if your really confident in the company I would have thought that this would be a bit lower).
I like the steadiness of Brown & Brown but if you haven’t got a lot of money to invest or protect it kind of seems like treading water particularly with a really small dividend.
I was also looking into Brookfield Renewable Partners as the current political situation seems to have put a big emphasis on climate stocks and it pays a 3% dividend, mmm decisions decisions.
Yes, GSHD is very likely to trade with the tech and other “growth” stocks in the short term.
Brought some shares of Pershing Square Holdings last August. (up 27%). I have been playing cow either since neither adding or substracting from my holdings. (I am a rancher by the way.)
I look forward to your comments about different promotions.
I am looking at one from Casey Research promoting the idea that the USA will soon convert to a digital dollar and completely eliminate paper money. Any comments.
Your ‘computer is choked with enough cookies to make Cookie Monster surrender,’ (!!)
Some of your prognostications are dependent on Biden certified as Prez being a done deal. I saw Attorney Sidney Powell on ‘Sunday Morning Futures’ and she said that Neffinger, president, and on the board of directors of Smartmatic, and also on Biden’s presidential transition team, used software to flip millions of votes to Biden in multiple states. She claims to have sworn testimony and will present it in court. What happens if He-who-can-not-be-named lest some descend into the mouth of madness …. (Sorry, Been watching too much Lovecraft Country)– but, seriously, what happens if he flips this? Stranger things have happened. Picture the famous “Dewey Defeats Truman” photo. What happens to the stocks of the media outlets who called it for Joe? What chaos will grip the market, as Antifa burn their bras (or local AutoZones)?
That Dewey v. Truman shock is a big deal today mostly because of the Chicago Tribune — it was just an early call made by one major newspaper that rushed to press early, with the newspaper’s editors making a bad call before results were counted, emboldened by bad polls and near-certainty among the punditry that they knew what would happen, it was not a massive illegal conspiracy in multiple states.
The market is not worried about a constitutional crisis at the moment… hopefully it will continue to be able not to worry.
My first post on the best stock advice site on the interweb got a reply from truth-speaking Travis! Get off my roof, Santa! I already got my Christmas present!
What you said about Truman is true, man. ‘Twas but an allegory, simile, metaphor, or whatever.
If I could prevail on you, or any geloscopic gumshoes here, -(BTW, geloscopy is telling the future by laughter)- what thoughts have ye on Door Dash’s filing IPO papers on Friday? They’ve captured 50% of the food delivery market, which seems to be gettin’ bigger by the day, thanks to lockdowns. $885 M to the plus, but $149 M in losses on the books. Should I hop on the horsie, dash to their door, and “Hi-Ho! Spend some Silver!” or chew my cud with the cows? Will an SEC filing on Friday the 13th be unlucky and get them burned at the stake like the Templars? (And anyone got the skiiny on the exact date of the IPO?)
Haven’t looked at DoorDash, sorry — when it comes to that one, I’d want to think about their market presence vs. GrubHub and Uber Eats, all three are pretty strong and essentially identical in our area and I haven’t looked into the competitive dynamics at all.
I suggest that some of you need to add a unique new due diligence for your mind. I am quite serious as most people are not in Lovecraft country but victims (and I am not trying to ramp up your blood pressure) of what is identified under Dr. Robert Lifton’s long recognized 8 principles of Thought Reform.
Just Google Dr. Lifton and the 8 Principles of Thought Reform. Look for the short version of the principles not unless you truly are fascinated by how the mechanism work in the cultural milieu.
Focus on the Principles which originated decades ago as Dr. Lifton uncovered the keys of Mao’s re-education system and how it literally Mao set about to control individuals and literally in a matter of reasonable time change human core principles and values.
None of us would encounter any of this unless your are involved in law enforcement investigations of companies, groups and even countries.
Dr. Lifton’s work is a standard understanding of how quick cultural change and rapid change of values can change a billion people’s ideology
It offers a deep dive beyond the news, commentaries, pitches etc because as investors you are on the one hand a target and on the other hand likely the best group of people to understand how thought reform unfolds because you invest . Why? Because you are driven to step back and latch onto a stable base that removes the many mirages Travis so deftly continues to amaze all of us. At his core his acumen reveals a honorable man we respect because he gives us clear evaluations and analysis of what he knows and when he doesn’t he does not waffle he does what any honest individual will do-meaning he honestly answers what he has uncovered and if he surfaces in swampy waters he tells us where the gators and Burmese pythons are around. Every intelligence agency in the Western world is keenly aware of Dr. Lifton’s work. It’s not just the definitive answer to the NXIIM cult documentary. Nor does Thought Reform require that all 8 points. must be checked off.
Sorry for my long reply but I truly believe it gives investing risks an added asset that hangs around like a good defensive safety roving and looking for deep unseen routes that whispers ‘‘pull the trigger’ and move forward or ‘ watch and wait.’
If you’re going to draw a parallel, realize that in that scenario the president is the newspaper, jumping the gun by calling his own number too soon.
Hi Travis, I wonder in this cows time how you live with hedging..
I mean, if this bull continues driven from vaccine/economy healing promises, you think some hedging is to be re-established at new top, and what would be some ideal timing of the year for that (I know the silliness of this question but just consider the first part of question eventually..).
Hedging is a constant expense, I tend to put 1-2% of my equity portfolio into hedging to roll over options as they expire… though sometimes they’re too expensive for it to be worthwhile.
Thanks I notice that. But I also noticed that in the Portfolio that is overdue already. So my question is partly if you think you will do it again, partly if/when, and also if that type of action will be monitored in the real money portfolio or not.
Thanks
I haven’t been willing to put on large hedges of late, because volatility has been so high that pricing is extreme. My active hedges all show up in the Real Money Portfolio, in the options holdings — some of my SPY hedges are rolling off over the next month, but I do still also have meaningful hedges in the form of IWM put options. I’ll note if and when I reinvest in more, but recently have been just hedging against company-specific risks to large positions.
Trade Note
Boston Omaha’s (BOMN) new Special Purpose Acquisition Corp. (SPAC), called Yellowstone Acquisition (YSACU), went public a couple weeks ago, without much fanfare, as the world of SPACs continues to explode. They raised a little bit less than they had hoped, $125 million versus the $150+ million they originally anticipated, but it’s done now and they have the capital in trust… we just wait to see what they do with it.
As I’ve said before, buying a SPAC at its redemption price is essentially a no-brainer, as is starting your own SPAC — the risk is all taken by people who pay a premium price (more than $10 and change, for most SPACs), and by those who bid the stock up after it announces a deal or hold on after the redemption date. Until the deal is done, buying a SPAC at near $10 is just a call option on the future decision made by that management team… so if you’re holding a bunch of cash, as I tend to be most of the time recently, then setting some of that cash into SPACs that are run by managers you like seems like a reasonable low-risk enterprise.
And Yellowstone is one of those — yes, the best news for my portfolio is that Boston Omaha is managing it, so they get all those juicy promoter perks, they buy into ~20% of the shares for very low cost and have a large sponsor warrant position that cost them about $5 million, and they get to swing that big pile of cash around to get attention from possible sellers of interesting businesses. They don’t work all the time, but when they fail they fail small… and when they work they work big. At least for the sponsors (for the SPAC shareholders, of course, they can fail big, too, but that’s really only after the deal is made and if you’ve passed on your redemption opportunity).
I think the news of Yellowstone completing this launch is probably a larger and more certain positive for Boston Omaha than it is for speculators in Yellowstone Acquisition, but given low interest rates I don’t see any meaningful risk in allocating some capital to a SPAC that’s run by managers I trust, and which is trading at below its redemption value — given the fact that we can buy YSACU now at $10.10 or so, which is below the $10.20 that’s in the trust fund and available for redemption eventually, we essentially get the call option on “what if they do something impressive” for free, and we also effectively get the warrants for free (one half of a five-year $11.50 strike warrant to buy YSAC is attached to each YSACU — YSACU will be split into YSAC common shares, with that redemption right, and YSACW warrants over the next few months). It’s an opportunity risk, in that I could put that cash into something else, but I don’t see a real risk of losing that money (that doesn’t mean no risk, fraud or a lawsuit that has to be settled from the trust fund are theoretical possibilities, and there are probably others… it’s just that I think the risk is minimal).
So a bit of YSACU goes into my Real Money Portfolio today, a little bit less than a 1% position, and it will show up in the next update on Friday.
This post is eerily prescient.
I was literally just readiing about Billionaire Billy Ackman and “Moneyball” star Billy Beane dropping 400M on Pershing Square Tontine SPAC for the possible merger with Stripe.
Was set to seacrh for any Gumshoe posts on that (and any other SPACS) and you put this up.
Bravo.
I read back in September that Ackman had approached both Stripe and Airbnb and been rebuffed by both, but haven’t seen any news lately out of Pershing Square Tontine. I am invested in Pershing Square Holdings, which has a major stake in PSTH, but haven’t felt the urge to pay a ~15% premium to buy into Ackman’s SPAC directly when Pershing Square Holdings is available at a ~30% discount.
Billy Beane’s RedBall SPAC is in talks to buy into the Red Sox/Liverpool sports empire, last I heard, don’t know if there’s an actual deal agreement… but it’s interesting that Seth Klarman, the Baupost founder and a minority investor in the Red Sox (and big local fan) did buy into RedBall (as well as PSTH).
SPACS seems like a good investment, I will dabble a bit in YSACU and see where it takes me. Thank you Travis!
I am super new to SPAC and never bought any. So if I want to purchase I simply go to my online broker and purchase the SPAC with the ticker symbol?. What about redemption and warrants how do they play out. My online broker is TD Ameritrade TOS platform.
I’ve gotten a few questions about that, I’ll go into it some more on Friday. SPACs in general are not terribly complicated, but there are a few key things to keep in mind.
Thanks – I will be watching on Friday. I have had a little nibble on this one, and although I have read the prospectus and generally understand what is going on, your very clear explanations are always helpful.
This post is eerily prescient.
I was literally just readiing about Billionaire Billy Ackman and “Moneyball” star Billy Beane dropping 400M on Pershing Square Tontine SPAC for the possible merger with Stripe.
Was set to seacrh for any Gumshoe posts on that (and any other SPACS) and you put this up.
Bravo.
Has there been any indication of what Yellowstone is eyeing to bring public?
Not really. I’d guess it will be something in the financial and/or real estate sectors, I’d particularly like to see them take Dream Finders Homes public but we’ll see (I’m not sure that would be kosher, since they own part of Dream Finders already, but that’s the kind of thing they seem interested in). This is what they said in the filing, for what it’s worth
The most likely candidates would be businesses where Boston Omaha has been interested in investing or has had some direct knowledge of the industry, but where the company is too big for BOMN to swallow on their own or they would face regulatory constraints on acquiring a major stake — mostly that’s financial businesses, like their investment in auto lender CB&T, but we’ll see.
I can’t tell you how much I value your opinion/advice/feedback. Please don’t ever retire! I will be following you for as long as you keep writing…..thanks for all your hard work and for giving it to all of us at such a reasonable price!!!