KR1 plc…The #Crypto #Alpha Bet

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Bitcoin, bleeding edge, blockchain, Cosmos, crypto, DeFi, digital gold, Ethereum, fiat money, Galaxy Digital Holdings, George McDonaugh, KR1, KR1 plc, network effects, Owner-Operator, Peter Thiel, Polkadot, proof of stake, venture capital

My main 2020 investment thesis is the assumption this #pandemic does not herald new & permanent societal change. But it will reinforce & accelerate existing trends, with #cryptocurrency/#blockchain innovation, development & adoption poised to benefit hugely. It’s just three years since my first & last crypto post (& Bitcoin‘s only twelve years old!), but its progress since has been astonishing…

We kicked off with a spectacular crypto-bubble in late-2017, with the launch of Bitcoin futures triggering the devastating early-2018 collapse…which fortunately played out in less than a year. Fidelity, Coinbase & Bakkt launched institutional-grade digital custody platforms & even the OCC confirmed US banks can now offer digital custody services. Crypto exchanges like Binance, BitMex, Coinbase, Huobi & Kraken now boast hundreds of millions/billions of dollars in daily crypto volume. Libra was announced by Facebook. More & more hedge funds are getting involved – Mike Novogratz launched Galaxy Digital, with Paul Tudor Jones & even Stan Druckenmiller buying into Bitcoin as a digital asset/inflation hedge – not to mention, family office/college endowments (are pension funds & sovereign wealth funds next?). Square & PayPal now accept crypto & more payment companies will follow. Proof of stake has emerged as a green alternative to crypto-mining. Grayscale‘s listed crypto funds now boast a $14 billion+ aggregate market cap (alas, most of the US fund industry still awaits SEC crypto approval), while Total Value Locked Up in #DecentralizedFinance is also at a $14B+ all-time high (& doubling every month/two since June!). Stablecoins are also emerging as stable-value/high-volume bridges to the fiat world. We’ve even seen listed companies like MicroStrategy & Square buy Bitcoin as a corporate treasury asset. And Bitcoin’s now only 6% off its all-time high…

The volte-face in attitudes has also been impressive, with the crypto sector recognizing that embracing (& promoting change in) existing financial/regulatory regimes offers a slice of an infinitely larger pie. While regulators are also more open too – though US regulators may remain as schizophrenic & over-reaching as ever – with central banks (like the PBoC, Fed & BoE) now floating (& trialing) digital currency proposals, to co-operate/compete with crypto. As for investors, the Bitcoin survival debate’s dead…it’s been anointed digital gold & nobody could disagree it’s not a contender. While the mantle of blockchain innovation passed to Ethereum (& the imminent Ethereum 2.0), plus the smart-contract projects & infrastructure being built atop it (3,750 DApps & counting, mostly on Ethereum). And #DeFi is shaping up as a killer app for blockchain…to join forces with #fintech & eventually #BigTech to challenge the legacy financial services/payments industry. [Maybe even value investors get this…look at bank valuations!?] Its IPO may be on ice, but Ant Group‘s still a prescient reminder (for the West) of how easily bank-customer relationships & economics can be cannibalized by disruptive technology & business models.

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Livermore Investments (II)

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catalyst, delisting risk, intrinsic value, investment companies, Livermore Investments, MBO, NAV discount, Oddball Stocks, Owner-Operator, portfolio allocation, principal-agent problem, Richard Beddard, risk management, share buyback

Continued from here.

…We also have the elephant in the room – insider ownership! With the share buybacks, insiders now own 84.6% of Livermore! Gulp…

Jesus! Investors would normally be diving for the exits, at any price, based on the potential de-listing threat this represents… LIV’s actually defied this by marching ever higher. So much so, LIV was recently forced to announce they knew of no non-public reason for the sharp price increase (22% in a single day!). Was this sharp jump the drying up of supply in the face of share buybacks, an abrupt switch in market-maker/investor sentiment, or on the back of a genuine market rumour? Well, the takeover of an investment company by management is relatively rare… And an actual de-listing rumour usually seems to prompt selling, not buying, as it appears to terrify most investors…

Livermore Investments (I)

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activist investors, Baker's Dozen, CLOs, closed-end funds, delisting risk, Everest Capital, intrinsic value, investment companies, Leverage, Livermore Investments, NAV discount, Net LTV, Owner-Operator, principal-agent problem, private equity funds, real estate, safe-havens, share buyback, TER

Livermore Investments Group Ltd. (LIV:LN) is one of my 2012 Baker’s Dozen stock picks. And doing v nicely too…up +79% YTD! This post isn’t just specifically about Livermore – LIV also offers great perspective on owner-operators, share buybacks & shareholder value. Oh, and – shhh, draw the blinds – I’ll whisper it: De-listings...

LIV is a London-listed (closed-end) investment company. Its portfolio is focused on 3 different investment areas:

i) Real Estate:   The major holding is $38.2 mio (net of related debt) invested in Wyler Park, a commercial/residential Swiss property. It’s fully let, on a gross 5.1% rental yield, with development potential for another 37% of floor space. The other significant investment is $14.7 mio of convertible debt in SRS Charminar, an Indian real estate company. Unfortunately, the stake’s been subject to long-running litigation. But with ample initial over-collateralization, and an agreed settlement this year, continuing uncertainty’s now hopefully related to timing & expenses, rather than recovery value. Net of interest rate swaps, total net property investment is $45.9 mio, or about 32% of NAV.

The Jewel in the Crown

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blind stock valuation, caning, catalyst, Fair Value, Final Destination, Jewel in the Crown, Owner-Operator, segment/divisional reporting, stock screener, TGISVP

Continued from here. Lord, you’re harsh task-masters..! Erm, thank you, sir!

Let me just post the blind stock figures again, as a reminder:

Trinity Biotech, Be My Valentine… <3

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Adriana Lima, Clearstream Technologies, Ex-Cash Ratios, FBD Holdings, intrinsic value, Owner-Operator, Price/Sales, relative value, Richland Resources, Trinity Biotech, Valentine's Day, value investing

To celebrate Valentine’s Day, I thought it was only fitting that I write about my favourite stock… For some of us, Valentine’s is still about love and constancy. (Not that the Valentine’s ‘industry’ agrees – much as I enjoyed this ad, among others, the increasingly strident commercial ‘come-on’ that a gift guarantees sex seems far too crass for all concerned). So, I’m not going to fall for some hot young tramp like Richland Resources (RLD:LN)…

Instead, I wanted to revisit my fondest love, Trinity Biotech (TRIB:US). How did she win my heart? Well, she’s never let me down, about 40% of her market cap consists of cash, I currently have a 265% gain on my average entry price, I see 30% upside from the current price (with a secondary price target that offers 68% upside), and it’s my largest portfolio position at 7.6%!

Asta Funding – Buying Debt for Cents on the Dollar

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Asset Acceptance Capital, Asta Funding, distressed assets, Encore Capital, Ex-Cash Ratios, Margin of Safety, Owner-Operator, Portfolio Recovery Associates, value investing

Asta Funding, Inc. (ASFI:US)

• Mkt Price:  $7.65
• Mkt Cap:  $112.0 mio
• P/E:  10.8
• P/C:  1.02
• P/B:   0.65   

Asta Funding’s a NJ based company which purchases, services and collects on charged-off, semi-performing and performing consumer receivables. This strategy offers attractive growth prospects, driven by increasing levels of consumer debt, defaults and use of third party collection agencies. As they say: ‘Never count out the American consumer’. Of course, one can also count on the US consumer to rack up and default on ever increasing amounts of debt! I was shocked to see, especially in the current environment, that Black Friday was the largest ever. But then again, the US savings rate is collapsing again, after a brief recession-induced spike to 8% in 2008. Longer term, this puny savings rate doesn’t bode well for the US. Globally, most countries have a savings rate that’s a multiple of the US rate…

Trinity Biotech – Cheap Diagnostics

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Clearstream Technologies, ELG Scheme, Ex-Cash Ratios, FBD Holdings, intrinsic value, Owner-Operator, Price/Sales, relative value, Trinity Biotech, value investing

Trinity Biotech (TRIB:US)

• Mkt Price:  $9.57
• Mkt Cap:  $203.1 mio
• P/E Ratio:  13.5
• Ex-Cash P/E:  9.1
• P/S Ratio:  2.6
• Ex-Cash P/S:  1.5

Trinity Biotech specializes in the development, manufacture and marketing of diagnostic test kits. These kits are used in the clinical laboratory and point-of-care segments of the diagnostic market to detect infectious diseases, sexually transmitted diseases, autoimmune and hemoglobin disorders, and to detect, monitor and control diabetes. It’s also a significant provider of raw materials to the life sciences industry. TRIB is headquartered in Ireland, with Irish and US manufacturing facilities, and quoted on NASDAQ. Through R&D and acquisitions, the company’s assembled a portfolio of over 400 products to date. It has a direct sales force in the US and UK, and sells in 75 other countries via a network of distributors.

Cresud (CRESY:US), Part II

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Argentina, BrasilAgro, Cresud, Debt/Assets Ratio, Elsztain, farmland, IRSA, Margin of Safety, Owner-Operator, Price/Book, value investing

Cresud (CRESY:US)

Mkt Price:  USD 11.30

Mkt Cap:  USD 561.1 mio

Debt/Assets %:  12.7%

P/B:  0.35  (adjusted)

Fair Value:  USD 32.66

Upside Potential:  189%

Continuing from my previous Cresud post:  CRESY has a tough B/S to tackle. First, it’s denominated in Argentinean Peso (4.2620 ARS per USD), a fairly stable…but potentially very unstable currency, second, it wildly understates many assets which are carried at cost, and third, it consolidates listed entities (IRSA (IRSA:AR), and also BrasilAgro (AGRO3:BZ) going forward) in which Cresud has a controlling and/or majority stake. My approach to dealing with this is to construct a B/S and Fair Value on a ‘look-through’ basis. There are a number of components to work through: