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A few updates and a new position

I’ve been harping on my lack of risk tolerance for about 9 months now.  The same goes for the leash I keep my positions on.  I sold a couple of stocks already this week: Overstock and Evolus.

In the case of Overstock, my conviction is just not high enough to handle the volatility.  I sold out earlier this week, getting spooked out on the first dip in the $17’s on Monday.  I felt dumb a few hours later but I feel better about it today.

With Evolus, the final straw was the prospectus for selling shareholders.  Now I don’t know the motive, why these guys are putting up their stake for sale and whether they actually intend to sell their shares at all.  But whenever I see this kind of thing I know the stock is likely to be under pressure (and it has been!).   So I’m out.

A couple of other updates.

Digital Turbine got clobbered on Monday (Monday was not a great day for me) on news that Google is reviewing their Chrome ad policy.  That this is negative for Digital Turbine made about zero sense to me.

First, all of Digital Turbine’s revenue currently comes from their pre-install product that has nothing to do with Chrome and nothing to do with cookies or user derived data for that matter.

Second, Digital Turbine doesn’t sell advertising.  In fact the only product that is remotely related to the news is Single-Tap, which even then is not an ad-product itself, it’s something an advertiser or app developer would embed in an existing ad.

Third, I can’t imagine Chrome is that important to Single-Tap because Single-Tap is for mobile and users get most of their mobile content via apps, not a browser.

Anyway I think for these reasons that Digital Turbine got pulled down in error and so I added a little.

I took a new position in Intelligent Systems.  This is the company that won the right to be the back end tech on the Apple/Goldman Sachs credit card.  I’m still digging into the stock and so I could be wrong, but after having read through the 10-K, some transcripts and having dug a little into the technology advantage I have to say it looks like a pretty good bet.

I wish I would have caught it sooner, I mean its run up like crazy since the Bloomberg article I linked to and I have no one to blame there but myself.  Buying here exposes me to all sorts of risk because its way over-bought and probably due for a pullback.  Now that I have a position I fully expect it to see the $20’s.

Nevertheless I decided to take a position because it really doesn’t look as expensive as it appears on the surface (they were profitable last year and generated over $6 million of free cash), the Apple/Goldman revenue should mean a lot of growth in 2019 and there are some indications there are other big customers in the wings.

What’s more, I just like what I hear from the management team.   Their CEO Leland Strange seems like a straight shooter.  I also just love that they doubled their revenue last year while actually showing a decline in operating expense.

I also added back Gran Colombia Gold, Roxgold and added to Wesdome.  I just couldn’t stay away from the gold space, especially now that the Federal Reserve is being stacked with money-printing yes-men.

Finally while I never talk about any of my shorts I do have to say that in my opinion the Canadian banks look pretty weak here.   I’m biased living in Alberta (where the economy remains moribund and us citizens depressed) but even so I have to wonder how the banks can withstand what appears to be an accelerating housing slump and an inverted yield curve all at the same time.

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13 Comments Post a comment
  1. Good post thank you. I’ve been meaning to work on my valuations for bank stocks so I might work on the Canadian ones

    March 27, 2019
  2. R Singla #

    Have you come across acre trader https://www.acretrader.com/

    Any thoughts? RS

    >

    March 27, 2019
    • Wow that’s crazy. I’ve never heard of it but its an interesting idea.

      March 27, 2019
      • arf #

        Check out LAND, trading near book, 4% yield and probably higher quality farm land with almond farms and fruit.

        April 4, 2019
  3. Jeroen #

    Thanks for the interesting articles. Do you mind informing how you are shortying canadian banks?
    On a different note, ever considered a position in Rodium or Platinum? Might be an interesting put on the South African economy. Cheers

    March 27, 2019
    • I’m just short a few of them. I’m short TD, CM, and not banks but relatedly MIC and have puts on HCG

      April 3, 2019
  4. German reader #

    Avram Fisher has also covered $INS pretty well for a long time
    http://thepatientinvestors.blogspot.com/2019/03/information-is-foundation-of.html
    http://www.longcastadvisers.com/letters

    March 27, 2019
  5. arf #

    If rates go down, wouldn’t that mean stocks probably do reasonably well?
    It really seems like in the medium to long term the FED has no choice though. Inflation is low, and debt is piling up. At some point the market will not want to lend the US government more money without the FED buying up debt in the market to guarantee demand?

    March 28, 2019
    • Yup it’s true and it sure looks like it’s playing out.

      April 3, 2019
  6. PleasantComment #

    Regarding Digital Turbine, the pull back makes more sense than you’d imagine at first glance. DT basically auto installs bloatware to a phone. The vast majority of these apps likely make their money by harvesting the phone user’s data (location, etc) and selling it. Completely banning 3P cookies on Chrome damages advertisers ability to engage in behavioral targeting and therefore decreases the market for this data. This means that DT could see decreased demand from its customers (the apps) or maybe will hurt their pricing. OTOH, the data they collect likely will still benefit targeting in other contexts (e.g. mobile and CTV). Since mobile is already ~70% of digital ad market and consumers are increasing time on mobile vs. desktop, I think the general ad tech market decline this past week has been a bit overblown and would expect a bounce back depending on a company’s exposure to mobile vs. desktop.

    March 28, 2019
    • Wouldn’t a ban on cookies in Chrome make the data that apps installed on a mobile device even more valuable?

      April 3, 2019
  7. arf #

    Thoughts on Tesla puts, everything looks bad for that company, and the shareholders seem to not have woken up yet to that reality.

    April 4, 2019

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