Reminiscences of a Stockblogger

Aug 11

Walking through my Mistakes with Walker and Dunlop

With the earnings plate of stocks I own full to the brim, it was a bit of a tough week to be away. The consequence was that I was not able to review many of the reports and conference calls until this weekend, and in a few cases the stocks suffered significant drops in the interim.

This was the case for Walker & Dunlop, the commercial mortgage originator that I’ve owned for the last four months. In my original and follow up post on the company I described the investment thesis as being based in part on the continuation of their history of growth as a multi-family lender, and in part based on their relatively recent relationship with Fortress Investment Group, who I expected to open a few new doors for the company.

One door was opened in the first quarter with the initiation of an $850 million bridge lending program aimed at borrowers who would eventually qualify for Fannie, Freddie, CMBS or HUD channels. This is a solid step for the company as it opens up another destination for its originations, but at 8% of loan volumes its not a game changer. Read more

Aug 5

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Another Leveraged Play: Dex Media

I’ve had a position in Yellow Media (Y.to), for a number of months, but until this week I had not dived into its American counterpart Dex Media (DXM). The reason was timing; I didn’t get the chance to look seriously at the company until the middle of April and shortly after I looked Kyle Bass recommended the stock at Ira Sohn, the stock price took off, and I was reluctant to chase it.

I’ve waited patiently since then thinking that the stock would come down once the shine wore off. This week I was rewarded and able to pull the trigger in the $14’s.

Before I go any further on this one let me just give a hat tip to Glen Bradford for all the work that he has done. Glen has discussed Dex Media and its predecessor companies Dex One and SuperMedia in detail on his website and on Seeking Alpha, and much of my own research started by reading his work.

The story at Dex Media is, of course, not unlike Yellow Media, but its also quite similar to YRC Worldwide, and fits in with my big idea for the year of investing in leveraged companies while the sun still shines. To illustrate the comparison to YRC Worldwide, when I bought the stock it was a $50 million dollar equity with over $1.3 billion in debt. You had a tiny sliver of equity that stood to act in a highly leveraged way if things played out right. Same thing with Dex Media. The equity currently sits at a little over $150 million. The company has debt of over $3 billion. Read more

Jul 22

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Week 107: Back to Commodities

It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that – Warren Buffett

I’m adding a simple year by year and quarterly performance table to the start of every portfolio update. I’ve had the on-line portfolio going for over 2 years now, and I find that the chart is less informative the longer the time horizon gets. The quote, which I have mentioned before, is more of a goal than a statement. Buffett says it’s possible, let’s try to prove him right.

I’ve already written about most of the new stocks that I added in the last month (Ainsworth Lumber, Tronox, Novus Energy,smaller positions in Lightstream Resources and Penn West, and lastly Niko Resources. In this post I will focus on some of the stocks I sold (including most of my large position in YRC Worldwide), and add some thoughts on oil and Canadian oil juniors.

I’m getting this update out a day late so all of the numbers are are of Friday July 19th.

Portfolio Performance

Portfolio Composition

The last four weeks of trades are available here.

Jul 21

The (hopefully) Hidden Earnings of Tronox

I was going to write up a short piece on Tronox as part of my monthly portfolio update but as I started to write it the length became significant. I think it justifies its own post, so here you go.

Basically what you’ve got with Tronox is a housing/economy play whose earnings are being obscured by a trough in the price of their commodity and the fresh start accounting associated with an acquisition.

What they do

Tronox produces titanium dioxide, which is used as a whitening agent in paints, plastics, and paper but of the three its application in paints are the primary end use (made up 77% of consumption in 2012). Tronox produces titanium dioxide from manufacturing facilities in The US, the Netherlands and Australia (called their pigment business). The company is the third largest producer of titanium dioxide in the world, and they sell their product to major paint suppliers like Benjamin Moore and Sherwin Williams.

Tronox was spun out of Kerr-Mcgee in 2005 with a boatload of debt. The company filed for bankruptcy after the recession in 2009 and emerged from bankruptcy in 2011. There is about one clean year of financial statements (2011) but then things start to get messy again as the company took over a miner of TiO2 feedstock, Exxaro, in the middle of 2012 in order to become a vertically integrated titanium dioxide producer. Read more