Portfolio Overview
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Below I will briefly describe some of the stocks in my portfolio relating to the investment qualities identified in my previous post. Additionally, many of my ideas come from “shamelessly” copying others (as I copy the master copier Mohnish Pabrai), so I will share some of the fund(s) and investors I follow that own each stock. (Note: my portfolio is subject to change at any time).
Alibaba (BABA) fits the Chandler Brothers’ framework: the “crown jewel asset” of a country experiencing political and economic challenges. Recent insider purchases demonstrate an alignment with shareholders as well as capital return activities (dividend and share repurchases) and plans to divest non-core assets. Additionally, the stock is cheap with many new fast growing business units creating optionality. Notable funds that own BABA include Oakmark Global Select (OAKWX), Longleaf Partners International (LLINX), Tom Hayes of Great Hill Capital, Daily Journal Corp., Legatum Group (current positions not public), Ariel Emerging Markets Value, Antipodes Global Fund, Pzena International Value, and more.
Cooper-Standard (CPS) is a bet on normalizing automotive production recovering from covid-related supply chain issues, with optionality due to innovative new product lines (recently demonstrated by their contract with Nike) as well as opportunities in EV and hybrid vehicles. Their unique executive compensation structure and focus on ROIC demonstrates an alignment with shareholders. Notable funds that own CPS include Great Hill Capital and Pacific Ridge Capital Partners.
Despegar.com (DESP) is a bet on a resurgence of the South American travel industry. I purchased shares in 2023 when the stock nearly retested its March 2020 lows from the covid crash, despite the business’ recovery reaching its pre-covid revenues. When travel ceased completely during the covid crisis, Despegar aggressively made acquisitions at deeply discounted valuations, and was able to increase the acquired profits by incorporating the business into their existing infrastructure. Additionally, their “Buy Now Pay Later” subsidiary “Koin” is directly expanding the travel industry by enabling people in South America to travel for the first time. Travel is a structurally growing industry and the shift to digital bookings in Latin America should benefit Despegar over time. Notable funds that own DESP include Moerus Worldwide Value Fund (MOWNX), Artisan International Explorer Fund (ARDBX), BBH Partner Fund Small Cap Equity (BBHSX), and Emeth Value Capital.
Burford Capital (BUR) has a decade-long record of mid-20s percent compounding as the leader in the burgeoning litigation financing industry. The stock trades cheaply based on its earnings (which are volatile) and book value, plus it offers a free option on the YPF case which alone may result in its current market cap doubling. Additionally, the unpredictable nature of legal proceedings as well as its complicated accounting may keep some investors away. I initially purchased shares in early 2023 before the YPF court ruling on 3/31/2023 that sent the stock up 50% in one day. At that point, the cheap valuation offered a margin of safety even if the YPF outcome was unfavorable, in which case the stock price may have merely declined temporarily. Notable funds and investment services that own BUR include Bayberry Capital Partners, DG Capital Management, Caro-Kann Capital, and In Practise investment service.
Solitron Devices (SODI) is a successful turnaround led by microcap investor and CEO Tim Eriksen. Its revenue stream is reliable with defense contracts for programs that often last many decades. With minimal maintenance capex requirements, organic growth is mostly driven by their sales efforts; meanwhile, the company can allocate their operating cash flows into additional acquisitions, share repurchases, equity investments, or special dividends. The company recently diversified into the medical device industry through an accretive acquisition which may also offer synergies due to sales support and consolidating administrative costs. Several catalysts exist for multiple expansion due to its tiny market cap: an increase in liquidity, a listing on a stock exchange, inclusion in an index, and increased institutional interest and coverage. Additionally, future growth would meaningfully impact profits due to operating leverage as the production facility becomes more fully utilized. CEO Tim Eriksen owns ~15% of SODI, individually and through his fund, Cedar Creek Partners.
Fairfax Financial Holdings (FFH.TO) is a diversified insurance company with its investable float 60% greater than the value of its market cap. Interest from float alone should generate a ~8% return based on the current stock price, plus the earnings from underwriting profit and other operating businesses and investments. Future inclusion in the Canadian S&P/TSX Composite Index could be a catalyst for multiple expansion. Notable funds and investors that own Fairfax include Longleaf Partners Fund (LLPFX), Charles Frischer, Asheef Lalani, and Twitter/X user Viking Vancouver.
LSB Industries (LXU) is an ammonia producer with traditional usages such as fertilizer and industrial explosives as well as emerging usages to support the transition to renewable energy. Recent private transactions of ammonia plants indicate the replacement cost of their production facilities to be about double the current market cap, suggesting that with growth potential the stock is trading at a greater than 50% discount to intrinsic value. New usages primarily include mixing ammonia with coal to reduce the pollution caused by coal, and providing energy for marine ships. The cyclicality of the traditional fertilizer/industrial business and their dependency on commodity prices masks the steadier clean(er) energy business including a new joint venture in South Korea and Japan with potential to expand globally if successful. LXU is owned by Bob Robotti.
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Definitely some interesting names that most investors or speculators ignore because of their want of increasing returns fast and much too much FOMO. Great analysis and food for thought too.