• theretailsedge

It's Been A While - Portfolio Update

Hi Subscribers,


It's been a while since I posted a blog, so I wanted to give a quick portfolio update.


SNNY - I wrote an article about the bidding war going at Sunnyside Bancorp back in April when shares were trading hands at $17. I figured, based on the high ownership of the incumbent bidder (Rhodium BA Holdings), the offer would likely rise above the current bid of $15.55 to $18.50. This trade worked out even better than I thought. Not only did SNNY accept Rhodium's offer, a different shareholder came in with an even sweeter offer at $20/share. Then, Rhodium stepped up and added to their offer bringing the price to $20.25. I have since sold my shares at $20.20. It is possible the price might continue to rise in the event the bidding war continues, but I have decided my capital could be used elsewhere in better opportunities. Luckily, this was a great trade - generating a roughly 18% return in 6 months.


BTN - I wrote about BTN in an article I posted in April when shares were at $4. I thought, based on the recovery of the cinema screen unit and strong appreciation of their core holdings in GreenFirst Forest Products, shares could appreciate considerably to the $6-$8 range. I ended up selling all my shares between $4.50 - $5.36. Although the risk/reward was and still is favorable, I didn't consider what would happen if the price of lumber fell off a cliff. Lumber took a nose dive and thus GreenFirst's share price plummeted. Although I do believe BTN is run well by shareholder-friendly management with a lot of potential upside, I am going to stay on the sidelines until there is more clarity surrounding the overall strategy behind GreenFirst's operations. BTN will only do as well as its portfolio holdings so jury is still out on that. I did end up making a 12.5% - 34% return in a short time frame though. Short-term swings in micro-cap companies can be powerful - be careful.


GROW - I've shared a few different articles regarding GROW on this site as well as Seeking Alpha. Despite the drop in share price, it remains my largest position for a few reasons. I believe the worst of Covid is behind us. More people are getting vaccinated and Delta is spreading faster and infecting more people. As the year progresses, more people will be immune either through being infected or through getting the shot. People are sick of staying indoors and will continue to travel as we enter holiday season and next spring/summer. The JETS ETF, the ETF GROW manages, has stabilized in the 3.3 Billion range despite the fear. In my opinion, assets will likely rise higher as more people bet on an airline recovery. It has proven to be resilient (briefly eclipsing $3.5 Billion in assets this morning) and I think the ETF has proven to be the foremost way to invest in a basket of airline stocks. Over the next two years, I anticipate GROW will earn close to $40-$50MM in fees from JETS alone. I believe fair value is at least 50% higher than today's price of $6.15. Shares could even rise to double digits if we see a prolonged airline recovery and crypto bull market.


LAZY/LAZYW - I haven't written about Lazydays Holdings on this site, but I encourage readers to read my article on Seeking Alpha from almost a year ago. The team at LAZY have been phenomenal and have executed on their RV dealership expansion plan flawlessly. They have just expanded their credit facility and have reiterated numerous times that demand is through the roof. Shares continue to be obscenely cheap due to the convoluted capital structure. I also believe the share price has hovered in the $20 - $25 range because management has been selling shares rigorously. Not to worry, though, it is from an already in-place automatic share selling program. Once that is exhausted, I think the price will drift to the $30 range. I remain long and am excited for 2022. My cost basis for the warrants is $4 and I anticipate they'll hit $9 when LAZY makes new highs over the next 6 months. Exciting times ahead.


WELX - Winland Holdings is an interesting play on the crypto currency craze. I believe in the long-term viability of crypto, but so much of it is noise. WELX is my way of playing the crypto industry in a way that provides significant upside if bitcoin explodes higher over the next 2-3 years. WELX operates two businesses - electronic temperature monitoring and bitcoin mining and investing. The team is run by exceptional capital allocators and the company is very cheap. Currently, the company is worth about $22MM and will hold about 100 bitcoins by the end of 2022. In the event bitcoin explodes higher to $75,000 by the end of next year, that'll be worth about 1/3 of WELX's current market cap excluding the cash, net operating loss carryforwards, and expanding temperature monitoring business. I believe WELX is fairly valued at today's price, but I always like to keep limit buy orders in because the stock is so illiquid. Shares go up and down 20%-25% a day depending on how many shares get traded. If the crypto bull market continues, I think WELX will be double digits by the end of next year without as much risk associated with owning bitcoin outright.


WHLM - Wilhelmina is a new position I've been building over the past 3 weeks. The company is currently trading at a $28MM market cap despite having an activist join the board, having generated $2MM in EBITDA pre-covid, a high short interest, an extremely illiquid float, and an inflecting business. Wilhelmina is the only publicly traded modeling agency and I think shares have 50% - 80% upside over the next six months. I'll likely put out a seeking alpha article on my thesis once I finish adding to my position.


SPOK Short $10 1/21/2022 Puts - I love a good special situation investment. SPOK is a company that is undergoing strategic review after receiving a bunch of bids to purchase all outstanding shares. Acacia Research/Starboard quickly accumulated a 6.5% position in the stock and offered to buy the rest of the company for $10.75. As of this morning shares were trading at $10.14. I think the price will drift higher as the company discloses where they are at with the bidding war and strategic review. We know Acacia wants the company at $10.75 so I think shares will likely trade closer to that level in the short-term. I sold 3 $10 1/21/2022 puts and generated $150 using $3,000 as collateral. If I'm right and shares drift higher, my puts will expire worthless and I'll collect my $150 premium and get my $3,000 back. That means I'll make a 5% return in 4 months - or a 15% annualized return. Not bad for a trade I think has pretty low risk.


As always, I might buy or sell any stock mentioned without warning. Always due your own due diligence.


Happy Investing,

Josh

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