Last few weeks I’ve been tweaking my portfolio. I sold one position and bought another. Also, I’ve been allocated capital towards positions that I think will have higher upside then others.
I sold out of Hollywood Media. HOLL was a trading position for me. It was a play that the settlement would create increased cash and upside value for its interests in Movietickets.com. I was able to buy the stock at prices right before the settlement became public. Although the settlement created increased equity value in MT.com, the value in MT.com has actually diminished over the years due to the AMC moving to Fandango. So MT.com has been losing value and that is likely one reason AMC was willing to give up its equity position to HOLL. Also, the settlement doesn’t seem to have created any increased cash for HOLL. For me, the HOLL trade was a trading position which I expected to get out of in a few weeks to month. Although it didn’t work out as well as I expected. There is still potential upside on HOLL based on what they do with MT.com. But I decided to sell HOLL as it is unclear what the last secret piece of the settlement is and I never saw holding this company’s stock for too long.
I bought a position in Horsehead Holdings (ZINC). ZINC is Pabrai’s core holding. He owns over 11% of the company and has been buying the shares at anything below $14. It was his recent buying that peaked my interest in the company. The play on ZINC is public knowledge. There are many articles written on what is happening here. The company’s new plant, that should be operational in Q1 ’14 will dramatically change the fundamentals for the company. The company should become one of the lowest cost producers and that will be a huge moat. Based on potential cash flow from this new plant, the stock is extremely cheap. Also there is huge upside based on what could happen to zinc prices. The supply for zinc is suppose to slow down in the next couple of years, due to closures of mines. This should put an increasing pressure on the zinc prices. If prices increase, then the lowest cost producers are some of the biggest winners. So there is a good upside just from the new plant being in production, and a much bigger win if the zinc prices move up. The downside is delay in bringing the plant to production, which can cause cash crunch. We saw the company do a small capital raise by selling equity at $12. So if there are any major problems w/ the new plant, you run a risk of where the company comes up with cash.
I recently sold all my shares in Sears. There is nothing wrong with SHLD or the price at which the stock is trading. This was a question regarding where I saw more upside. I still think SHLD is a great story and the shareholders will be rewarded well for holding shares at current price. For me, I think XPEL Technologies has much better upside than SHLD. So I rolled-over my SHLD money into XPEL.
SHLD was a roller coaster holding. Right after purchasing the shares they stock moved up almost 40%. In the end, I sold out the shares at a small profit. In a world of unlimited capital, I would be buying SHLD at current prices. But with the limited capital, I see XPEL having much more upside potential than SHLD.
BAC did a recent presentation at Goldman Sachs Financial Services conference. This is a superb presentation to get a summary of how far the company has come along in the last 2 years. I highly recommend looking through the presentation slides and listening to the Q&A. The key take away from the Q&A is Moynihan hinting at returns lots of capital to shareholders in 2014. He was specifically hinting at dividends. This will be great news for warrant holders, as the strike price for the warrants will drop and the number of shares the warrants get will increase.