by Travis Johnson, Stock Gumshoe | January 19, 2024 4:01 pm
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As to comments on TSM, what about the risk of a Chinese invasion of the island? Are we taking this company for granted?
It is only the possibility of the CCP invading that keeps TSM below the $350-$400 trading range.
That’s certainly part of the “discount” for TSM, but $350-400 would mean a real premium growth stock valuation for a company that will probably have about the same earnings in 2024 as they did in 2022. Estimate for 2024 is about $6.25 in EPS and $84 billion in revenue, following the company’s increased guidance last week, so $350 would be a little over 55X earnings and 22X revenues. That would be a 20-year high valuation, roughly speaking, that’s about where TSM traded during the dot-com boom. I suppose that’s possible, and it’s a much better company now than it was then, but $350, which would mean a market cap of about $1.8 trillion (roughly where Alphabet is today, and well ahead of NVIDIA’s $1.5 trillion) is pretty ambitious.
I signed up for this publication in 2020 in a bid to understand, control and direct where and what my retirement money was doing. In my effort to meet these goals this subscription has been money well spent. A tip of the hat (to you)for a fine product.
It looks like there’s been a lot of dilution at ACTG, roughly doubling the number of shares in a year. What was that for and is it a concern going forward?
That was Starboard’s exercise of their warrants, part of the recapitalization and restructuring… so the new shares each brought in cash, and were part of creating the opportunity. As I recall, the strike price on those shares was above the current share price. Not a concern to me, they’re more likely to do buybacks than dilutive share issuance in the future.
Thanks Travis! FYI the McCormick ticker in the Quick Take should be MKC not MCK.
Oops, thanks
FYI Travis:
MKC ticker is McCormick & Company
MCK ticker McKesson Corporation
You got the wrong ticker!
Trade Note: Reducing exposure to a longtime commodity position.
Altius Minerals (ALS.TO, ATUSF) pre-announced their 2023 revenues and segment performance by commodity, and the weakness continues, the business has gotten worse every quarter over the past year… but that’s no real surprise. I reduced my Altius position for the first time in a very long time last year, when the shares were persistently selling at a rich valuation despite the likelihood of at least two or three pretty weak revenue years, absent a wild bull market in commodity prices, and I’m still pretty cautious about their near-term prospects. I bumped the position down further today, selling about a quarter of my remaining position at a hair under US$14.
In total, through several sales over the past six months or so, I now own about half as many shares of Altius Minerals as I did in 2022. My effective cost basis is now dramatically reduced, and it now sits as a 1.5-2% position in the Real Money Portfolio. I still like the company, and think it will provide good exposure to copper and potash prices for a long time, but those prices are down and unlikely to snap back in a hurry, and they have no growth projects that look likely to improve cash flow in any meaningful way before 2026, so this smaller allocation is much more comfortable for me. There are good and undervalued assets within Altius, particularly their potash royalties, but that’s been true for many years and investors have shown no great enthusiasm for embracing those 100-year assets, and there’s also a pretty high probability, at least in my calculus, that their cash flow is likely to be on a downward trend over the next couple years.
Much more detail to come on Friday, but I’ve promised to let you know of any trades I make during the week that have more than a 0.1% impact on the Real Money Portfolio, so that’s the news today.
Since I’m writing, I should note that there was also a much smaller trade in the Real Money Portfolio today — I also bought a few more shares of Evolution AB (EVO.ST, EVVTY), bumping that still-small stake up by about 25% at roughly US$107 per share. More on that on Friday as well.
About 3 months ago, I read about a new CT scan machine that can give more info on tumors. Researched to see who the manufacturer was as I thought this might turn into a big thing. It took a while to find that LAB had bought the manufacturer. I bought LAB at that time. Looking for big things from them! Fingers Xed!
LAB Up 17% over the last three months