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New buys

November 15, 2013 Leave a comment Go to comments

A short update on recent buys. I have been active in the market in Nov but just haven’t blogged about it.

MBIA Jan ’15 call options: I bought some MBIA call options. The play here is clear, MBIA is going to get a credit rating upgrade, they will write new biz, stock will move up. Options give me a good way to play the upside and the Jan ’15 date gives plenty of time for the company to get the rating upgrade. I think the upgrade happens in a few months.

Freddie / Fannie stock: I have been buying this up as I think the Berkowitz lawsuit has leg. The stock has been risky bet until Berkowitz came out with his plan to take parts of Freddie/Fannie private and Ackmann reported his 10% position. It will be an interesting ride to watch. I expect the stock to do very well.

Hollywood Media: I bought shares of HOLL the day I saw the settlement on the court website. I was buying more on 11/14, as people are selling the shares due to the confidential nature of the settlement. I think the stock has plenty of upside once the details come out. I think the details will come out fairly soon.

Auxilio: This was one of the few micro-cap positions that I had bought for my basket. It was the second biggest after XPEL. I sold the shares to buy Freddie/Fannie stock. The return on this was a nice 40%+ in little over 2 months. It is still cheap given the tailwinds, but I liked other things more.

http://www.sec.gov/Archives/edgar/data/912544/000114420413062494/v360796_8k.htm

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  1. Shaun Noll
    November 15, 2013 at 7:04 pm

    hope all is well!

    this is an interesting situation Paras, I did some work on this a year ago and have been following but difficult to get comfortable that MT is not impaired as scale and first mover are everything for a business like this.  Would be interested to hear how you think this moves on from here.

    I always get worried when a legally complex case has a chess piece move and the stock sells off on huge volume as everyone I talk to says they’re bullish and I can’t find anyone selling so not sure where the huge volume of selling is coming from?

    What gives you confidence that monetary damages are included here? and if that is so why do you think they did not disclose this?

    • paras
      November 15, 2013 at 9:15 pm

      I think first mover advantage in IT is over rated. Obviously users that have now gotten used to Fandango will want to shop there only. But if the price is better at MT.com, switching is very easy. eBay is where I want to buy used stuff for cheap. But if I can find it even cheaper at some other place, I’m going to switch. Switching is much easier now than before.

      Yes the legal case is complex. Plus when you got a small cap going against a huge company, you get worried too. But the way I get comfortable is based on price. At $35M market cap, 25M cash, 10M EV my risk is little. Plus I know MT.com is worth something. So what I’m putting at risk is small compared to what I’m getting in return.

      When General Growth Properties was selling for 50 cents, there was a huge chess game going on with how the debt would be rolled-forward. But I was paying very little. At risk was 50 cents but upside was huge, $20+. These are the risk worth taking.

      As for monetary damages, AMC recently amended its S-1. In the amendment it listed the legal case disclosures. So why would AMC do this? If all that is happening is HOLL is getting more stake in MT.com and AMC is doing non-exclusive deal w/ MT.com, that is not enough to cause an amendment.

      Plus if you are HOLL, then there is a huge loss from what happened 2 yrs ago. You business model was damaged, you lost huge revenue, and you spend legal expenses for this case. I think HOLL can’t settle w/out getting compensated for these damages.

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