April 2021 premium update (paywall)
Hi subs,
Before we get to the updates- first, thank you so much for subscribing to the premium site!
Second, a quick housekeeping. This month’s housekeeping has three parts:
I mentioned it in my 2021 vision, but my goal for the premium site is simple: 2 posts/month (24 posts a year). One of the monthly posts will be a well thought out and actionable idea (at least in my mind it will be!); the other post is the monthly premium update that will provide thoughts/commentary on any ideas that have news or new thinking behind them.
As we noted in August, we’re currently running the premium site through both substack and the blog. In the next week or so, I’m going to transition the entire blog (both to free site and the premium site) over to substack. There should be nothing required on your end for this transition as we’re working with substack to ensure a completely smooth transition without any effort from subscribers; I just wanted to give you a heads up. If you have any questions or concerns about the switch, please reach out and let me know!
Just in case you’re interested in why we’re doing the switch: substack’s platform is really good. It just flat works. There’s absolutely nothing more frustrating to me than a sub having any issue with their subscription, or me having issues with uploading a post. That never happens on substack; it happens relatively frequently on the blog. So the switch to substack will just alleviate some headaches and let me spend more time on the stuff I enjoy doing (researching, investing, talking to subscribers and LPs, hitting the Peloton). I think that’s a pretty good reason to make a switch!
The premium site is always a work in progress, so feedback is very much appreciated.
You can always reach me at awalker@rangeleycapital.com with any questions / concerns etc.
I’ve introduced a new segment at the bottom of this post that includes every past idea, both open and closed ones, and links to them for your convivence in looking at / refreshing on past ideas.
In last month’s updates (substack / blog), I called AMBC, SSSS, JEF, CURO, and SIGA out as my highest priority ideas. I’d add PDEX (March’s idea, substack / blog) to that list and HGV (April’s idea; substack / blog) as well. I’d take JEF off that list; it’s still a good value, and their earnings are just smashing expectations and should continue to do so given how wild the market is right now….. but I recommended it at <90% of tangible book and it’s now at 115%, and some of the recent stuff with Archegos and Gamestop has reinforced how fragile these businesses can be. I would also always highlight IAC as an interesting situation; the immediate upside isn’t as large or (potentially) as fast as the other companies but if you asked me for one stock to buy and hold for the next 5/7/10 years and substantially outperform the market, it would be IAC (I mentioned it a little in this post on building conviction).
Anyway, on to the update
JEF- Q1’21 earnings were bonkers; basically every IB is feasting right now but JEF is doing particularly well. I mentioned above that I’m taking it off my highest priority list; I still like / own the stock and think it will do well, but I’ve been cutting the position because with the SPAC window closed and how fragile banks are, I think the opportunity cost with the company trading above tangible book value is too high.
IAC / ANGI- They report earnings next week, so nothing huge here. I’d just note all of their businesses are doing well. IAC will spin off Vimeo in the near future, and I’m eagerly awaiting that as IAC and its related companies have tended to dislocate briefly around spins and corporate events. I’ll have more to say next month.
ARGO- The bad news here is they announced yet another write off. The good news is that the company continues to clean up their book. The original thesis here was this traded under book value and peers and precedent transactions were well above book value, and, if you looked through their bad operations, their core business was significantly better than peers. Today, ARGO trades for about book value, but the rest of the thesis still holds; the company is making all of the right moves to dispose legacy assets and let the strength of the core business shine. By next year, we should get a clean look at the core business, and I suspect shares will rerate higher to catch up to peers (or, with the business cleaned up and an activist still involved, the company could fetch a juicy acquisition premium).
CURO- Towards the end of last month, CURO filed an investor presentation that includes a sneaky Q1 update on p. 29. Results look good; the company is on pace to earn ~$1.40/share in 2021 (tough to be exact, as some of their start up businesses will drag on earnings while hopefully creating LT value). Once the FSRV / Katapult deal goes through, they’ll get cash + stock worth >$10/CURO share (using today’s FSRV price). CURO’s price is currently ~$14/share, so you can look at it as buying CURO’s core business for 10x (probably a little rich, but not crazy) and getting almost the entire share price in FSRV for free, or you can look at it that you’re buying CURO for <$4/share looking through the FSRV stake, implying a <3x P/E on the stock. Either way, CURO is way too cheap. I suspect the FSRV deal closing and CURO reporting some clean financials could serve as a big catalyst for the stock (similar to what happened with WOR / NKLA). I’d also note I’ve talked to a bunch of industry insiders and competitors about Katapult (the business FSRV is SPAC’ing) as part of a different diligence project, and overwhelmingly peers and competitors have spoken highly of the company. Take that for whatever it’s worth; it’s obviously early days for Katapult and the valuation is rich, but the backers here are serious and the feedback on the company is good.
SSSS- Prelim Q1’21 NAV came in around $18/share, driven in large part by Coursera’s “hot” IPO. With the stock at ~$14 and potential IPOs from Nextdoor and Course Hero (two large holdings of SSSS) still on the horizon, I continue to think there’s value here and NAV should continue to trend higher throughout the year.
PDEX- A friend pointed out that Monogram filed an S-1 to raise capital late last year. It’s a reasonably early stage start-up, so who knows what comes of that, but Pro-Dex has an investment in them. If Monogram is successful, the returns to Pro-Dex could be enormous. Aside from that, no real updates; earnings should be out early next month.
HGV- Earnings were this morning and looked good. Demand continues to improve, and I’d say everything was confirmatory of the thesis I originally laid out. I’ll be re-reviewing the earnings this afternoon; to the extent anything new jumpy out at me I’ll provide another update. Aside from that, the real juice here is in the continued reopening trade plus the huge synergies from buying and integrating Diamond. A bonus note: I enjoyed this thread on some management incentive stuff at HGV.
WOW- I did a pitch for the microcap conference on them; I don’t think there’s anything new versus what I’ve been saying on them recently, but it’s a nice summary if you’re interested in hearing it (and seeing my face!). No other real news here; most of the telecom sector has reported at this point and broadband adds have been relatively on fire. WOW is a little bit of a different beast given it’s an overbuilder, but if those trends continue the stock should be set up for a really nice 2021 given their cheap multiple and leverage.
Prior Ideas still open / actionable
SSSS (July 2020 idea; substack / blog, though the November update (substack / blog) was important)
WOW (July 2020 idea; substack / blog); taken off priority list in March 2021 (substack / blog).
Prior Ideas, Closed
IWG (April 2020 idea); closed November 2020 (substack / blog)
LGF (May 2020 idea; substack / blog; closed Feb. 2020 (substack / blog))
COOP (May 2020 idea: Substack / Blog); closed August 2020 (substack / blog)
KTB (June 2020 idea); closed January 2021 (substack / blog)
WUBA special sit (July 2020 idea; substack / blog); merger closed September 2020
WOR- (July 2020 idea; substack / blog); closed September 2020 (substack / blog)
JWN (October 2020 idea; substack / blog): closed December 2020 (substack / blog)
CNNE (September 2020 idea; substack / blog): closed December 2020 (substack / blog)
MAC (April 2020 idea; substack / blog): closed December 2020 (substack / blog)
TCO prefs (our first idea in March! Substack / blog): closed December 2020 (substack / blog)
GHIV (December 2020 idea; Substack / blog); closed January 2021 (substack / blog)
GTXMQ (originally publicly published, but a fairly lengthy premium update in October 2020 (substack / blog) and an update on the new bid in January 2021 (substack / blog)); closed March 2021