Friday File: Camping, Smoking and Dreaming

Four add-on buys and some speculations this week in the Real Money Portfolio

By Travis Johnson, Stock Gumshoe, September 17, 2021


Happy Friday! We’re coming to you pre-open instead of after the close today, for a little change of pace. I’ve mostly got some relatively optimistic comments to share, including a bunch of small purchases I made as stories shifted a little, so I thought I should start you out with some pessimism from someone else — money manager Vitaliy Katsenelsen is a fairly stubborn “value” guy, and I really appreciated a brief article he posted recently called Fool’s Gambit… here’s a tiny excerpt:

“Today the stock market is in a bubble; this is not a secret to most market participants. Most investors are ignoring it and just infatuated with the ride. They are playing Fool’s Gambit – waiting for a greater fool to buy their overvalued stock from them. And why not, greater fools have been showing up in droves for years. Low interest rates inflated the prices of all assets forcing everyone to take greater and greater risks….

“Today the market is filled with people who want to get rich fast. You cannot use logic and reason with a person who wants to get rich fast. The allure of winning a stock market lottery overnight is too strong.”

I’m not as conservative as Katsenselsen is… but then again, I’m also not investing anyone else’s money, so I have only my family’s future to worry about. If you’re feeling super excited and throwing money at things right and left, I commend that article to you as a little antidote.

And now on to the fun stuff…

We may look back and conclude that Dream Finders Homes (DFH) doubled in size this week with the acquisition of McGuyer Homebuilders, which builds houses in Texas under the Coventry brand (the initial impact is a little smaller, they increase capacity by about 30%, but could pretty quickly double book value depending on how the debt they’re using works through the balance sheet). They’re adding 100 new communities in which they are building, bringing the total to 220, they’re increasing their presence in the hot Austin market, and they’re getting into the Dallas and Houston markets for the first time, acquiring a homebuilder who built about 2,000 homes last year (with 1,850 orders in the backlog right now), and they’ll also buy some lots to establish their inventory for the homes in Coventry’s backlog, as well as options to buy several ...

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