by Travis Johnson, Stock Gumshoe | September 10, 2021 1:30 pm
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I liked the part about (paraphrased) ‘the overhead costs and the gross profit gradually moving toward each other as the revenue climbs’ (re DOCN).
I went in on DOCN based on Left’s report a week or so after it came out.
Regarding carbon capture. This brief WaPo article discusses an interesting new technology solution recently opened in Iceland
https://www.washingtonpost.com/climate-solutions/2021/09/08/co2-capture-plan-iceland-climeworks/
Non-subscribers need only register their e-address for access to the article.
Thanks… I expect it will be a really interesting decade for carbon reduction projects, hopefully some of them will scale well and fall in cost.
I bought DOCN a few weeks ago after you first wrote about it. Thanks! Since you asked for lockbox suggestions I will suggest OPRX.
Thanks… new to me, what do you like about it?
It meets all of your criteria plus it is profitable now. Not cheap but potential huge growth in life sciences.
“Life sciences” as software, not bio.
Might just be me, but I struggle to quickly find the current $100,000 lockbox portfolio. Any chance to provide a link to your paid subscribers for easy reference? Love the newsletters. Frequency perfect.
Good idea. I haven’t separated it out, those positions are in a little box halfway down the Real Money Portfolio page, but I should move it to a new spot and make it easier to find.
1. I bought a small position in DOCN today.
2. About the “baby and the bath water” thing…in the spirit of some fun, here is a copy and paste from Mental Floss:
“To throw the baby out with the bath water
The Tall Tale: Baths consisted of a big tub filled with hot water. The man of the house had the privilege of the nice clean water, then all the other sons and men, then the women and finally the children—last of all the babies. By then the water was so dirty you could actually lose someone in it—hence the saying, “Don’t throw the baby out with the bath water.”
The Facts: In the 1500s, when “running water” meant the river, filling a large tub with hot water was a monumental task. A wet-cloth version of a sponge bath was all most people could manage. In the 19th century, English writers borrowed the German proverb “Das Kind mit dem Bade ausschütten] [to throw the baby out with the bath water].” The saying first appeared in print in Thomas Murner’s satirical work Narrenbeschwörung (Appeal to Fools) in 1512. Judging from the woodcut illustrating the saying, mothers were able to fill a tub large enough to bathe a baby, but the child could hardly be lost in the dirty water.”
PS: Tried to attach the mentioned woodcut using the tool in the corner, but this space didn’t take the jpeg file.
Excellent, thanks!
Travis, any idea why DreamFinders dropped 10% today (9-13). I didn’t see specific news that would’ve prompted a drop.
They announced their largest-ever acquisition, buying a Texas homebuilder.
I have only done a quick skim of the info, but I like the deal strategically.
I did see that but the reaction seemed disproportionate and I didn’t see terms disclosed. Thanks!
Regardless, I’m not necessarily an NFL fan but until this weekend I didn’t know that the JAX stadium was DreamFinders stadium. The team still stinks but maybe with Trevor Lawrence at QB and some wins in the next few years, there is some increased branding.
I think the reaction is disproportionate, we’ll see. I’m in a trading embargo or probably would have added today.
The basic deal is about $450 million if you look at their actual filing, the press release doesn’t include that info. A low price on the surface, probably very accretive given their number of orders and book value (it’s about 1.2x book, it appears), but there’s a four year earnout of 25% of net income so that ups the price. I wish they had held a conference call to go over this one, since it’s fairly complex with the land and option purchases partially separate from the corporate acquisition, but they don’t generally do calls even for quarterly earnings.
Didn’t know they had bought naming rights in Jacksonville, that’s a mild negative in my book, usually, those deals are pricey… but perhaps it will help with their brand building.
PAR just dropped by 15 percent. With proposed offering of stocks. What is your thinking moving forward with the stock? Add more and hold?
My quick reaction? My opinion on PAR’s potential hasn’t changed, and it’s well below my max-buy price still. That assessment might change a bit with a little dilution here, but they’re only adding 1.5 million shares (roughly 5% dilution) and will probably ease up their balance sheet a bit as a result and pay down debt with at least some of the money, so I’m not terribly worried.
I expect PAR will continue to be volatile, and investors will worry about huge competitors like Toast (which is getting some attention for its pending IPO), but I also expect them to reach $100 million in ARR by sometime early next year, and I expect their leading market share with enterprise restaurant chains to remain sticky. They’re introducing some new products, will very likely continue to make acquisitions and therefore either raise capital or issue shares to fund those acquisitions, and the competition isn’t standing still, so nothing is guaranteed… but I like the management and strategy and still think it’s attractively valued if you can wait for the underlying cloud business to grow.
Adding the convertible notes, it could climb to about 20% dilution, right?
It could perhaps approach that, but I don’t think they’ve priced the notes yet so we don’t know the conversion price. I weigh that against their current relatively high debt position at fairly high cost, and unless the convertibles are at an awful price it should work out fine — putting that capital to work either paying down debt to reduce risk, or generating substantially more growth with a meaningful acquisition or two (probably a little of both) should mitigate the dilution.
We’ll see, though. Clearly investors are nonplussed today.
Added to it early today as I am all about Savneet. He is very strategic and this will be utilized well.
I’ve been wanting to add for a while. Glad for today’s opportunity!
They have now. About 13 shares per 1000$ (so 77$ per share). All the details are out now. Also they’ll use it to pay 100% of bank debt and will pay 1,5% per year for the notes. Looks good and the gods of the market seem appeased. Good thing I bought more around 56. 🙂
I was taught in Med School the the saying “Throw the baby out with the bathwater”, came about in a time in our past when obtaining a bathtub filled with water was difficult and to warm it as well, so the entire family used the same bathwater with the baby being last. The water would be fairly dark at that point and the baby could become less visible.
Trade Note:
I added on to a relatively new position today after they announced their first real dividend increase.
AFC Gamma (AFCG), our marijuana mortgage REIT, had told us to expect a dividend that was at least as high as the 38 cents they paid last quarter… and had all but promised that it would grow, as they intend to pay out more than 90% of net income and that number is growing fast as they build the loan portfolio and charge their huge fees to borrowers.
They followed through with that, declaring a dividend of 43 cents for this quarter (ex-div date should be a few days before September 30). That’s 13% growth sequentially from last quarter, and they didn’t exist to pay a dividend a year ago so I guess it’s infinity-percent growth since then. In yield terms, if the dividend stays flat for the next four quarters (I don’t think it will, I expect they’ll raise it regularly… but that’s still a guess on my part), that would mean we’ll receive $1.72 in dividends — a very strong 8.2% yield at $21.
AFC Gamma is not as comfortable a company to own as the marijuana property REITs like IIPR (which also announced a 28% dividend increase today, raising the comfortable “buy” price up to $200), or even our newer holding NLCP, partly because of the related party management fees at AFCG that could be abused, but they are faster-moving and will cycle through their capital more regularly, with less stability to the portfolio but also less interest rate risk (because they’re generally offering four year amortizing loans, not 20 year leases), and they are probably the most likely players in this group to lever up meaningfully with debt in the next few years, which creates both more risk and more upside potential.
But it sure has high return potential if the business can remain viable. An 8% yield that grows even 10-15% a year can provide amazing compounding power as you reinvest those dividends. If you buy 100 shares and reinvest the dividend, even assuming that the dividend growth is a slower 10% and the shares rise even more slowly in value, perhaps 8% a year, in five years you’d have 150 shares just from the dividend reinvestment, and the annual income from the dividends on those 150 shares, at that point, would represent something like an 18% annual return on your original investment, just from dividends. That kind of compounding is what builds fortunes for long term dividend growth investors — it’s not guaranteed to work, and certainly there’s risk in this new company in a space rife with legal and regulatory uncertainty, but when it does work, it works spectacularly. Usually you don’t find high current dividends (above 5%) and high dividend growth potential (above 8-10%) in the same stock, so my inclination is to take the risk and lean in when that’s available. I boosted that position by about 25% on the news.
Lots of questions about some other big movers in the portfolio this week as well, and I’ll go into more detail on all of that in your Friday File. No other buys or sells, though, as you can tell from the discussion thread here, there are several positions I’m embargoed on that I would have otherwise liked to add to on dips in recent days. Perhaps I’ll have a chance to do so tomorrow or Friday.