Cruise, Uber, Tesla and a brief portfolio update

Yesterday Cruise unveiled their Origin vehicle which is to be ride-hailing vehicle, with no steering wheel and capable of doing 1 milion miles. Couple of relevent videos from Cruise and The Verge.
From some other articles on this topic it is apparent that they did not get the exemption from having the steering wheel just yet, and will likely introduce the AV taxi using some older tech, presumably the one based on Bolt. Anyhow, their launch gets closer and this is exciting and will perhaps serve as a catalyst for the GM share price.

Uber share price, in the meantime saw a significant uptick, presumably after exiting their India eat delivery for a stake in local competitor. While good move on it's own, it was telegraphed quite clearly way earlier that they want to be #1 or #2 within 18 months, so it's not exactly a surprise. As this will reduce the red ink and maybe even get recognized through P&L in Q1 thanks to the fair value of the new equity stake, it is certainly bullish news, although the scale of the rise surprised me. I've reduced my position quite significantly into this strength, especially since it rallied 43% from my cost basis of $26.47. Would be happy to reenter if it drops, but between California contractor/employee uncertainty and Cruise service at some point potentially eating into one of their most profitable markets with their launch (SFO), I prefer to wait at the sidelines at this time / until it drops again.

This brings me to Tesla, which continues their share price rise and incurs large losses on shorts, including paper ones for myself. I'm unwilling to give up that bet right now - as the valuation approaches $100B - going past VW and well more than GM and Ford combined. It is impossible to predict if/how/when this will get to more sane levels.

The combination of large TSLA and SPY shorts and taking some profits in other positions, mostly BHC, FB, GOOG and UBER made my IB margin account have positive balance for the first time in a few years. If/when a market will decline I expect to cover the two shorts and go into the margin again, but it's nevertheless interesting that I got to that point with still large stakes across long positions. But if market continue to appreciate and the BHC/FB/GOOG go up I might end up with a large net positive, which I currently wouldn't know what to do with - a good problem to have :)

More VIC ideas evaluated

Another bunch of VIC ideas that I looked at, but decided to pass on:

1. Nu Skin (NUS): I am not a fan of direct selling and MLMs so it would need to be a significant discount to intrinsic value to entice me to go there, but it is simply not there. The China risk discourages me even more, as I have no insight whatsoever into how this market can develop for MLMs in general and Nu Skin in particular.
2. New Fortress Energy (NEF): This short idea would be reasonably interesting, given relatively rich valuation, lack of interest from the fixed income investors (12%+ interest rates), but 91% insider ownership gives me a pause - arranging a short squeeze wouldn't be too hard.
3. Discovery Inc. (DISCA): While I like the FCF and deleveraging story, I think that the reality of streaming and distributed content creation might catch up with them sooner than people expect. Live sports is probably the only sustainable 'bundle' that users would pay for, apart from their Netflix/Disney+ subscriptions. With younger viewers, the YouTube channels will disrupt traditional network content and value of aggregation in this content will continue to move to the aforementioned platforms. I could possibly buy this story as a 'cigar butt', should management be committed to buybacks and deleveraging, but given the investments in DTC, it's much less compelling story.
4. Pluralsight Inc (PS): This company is rather expensive ($2B+ market cap), for what it is worth, which is essentially a provider of highly-rotating (low shelf life) content. Moreover, there are lots of negative reviews about their billing practices, which I think can destroy the business like that in terms of consumer trust. I gather that they are more of a B2B business, but still with so much of a free content out there, their valuation is rather rich, so I'll pass. I'd actually be inclined to short it, but an acquisition by a big player is not impossible, so safer to stay away.
5. Daneos (DAC): While very cheap on paper, I have real doubts about the equity raise, which disproportionally enriched the insiders ($6.00 offer price with the stock being in $11-12 range in the previous weeks. This does not build much confidence in them, and I'll simply pass.
6. MIC: Somehow doubtful special situation - no clear catalyst.
7. EPD: I know too little about energy to make well informed choices in this space. 
8. JD.COM (JD): While JD is likely a solid business, the valuation is not really very low and China adds a significant risk from my perspective.
9. Cimpress (CMPR): Stock is already lower compared to the original thesis, and given the heavy insider ownership and the core of the thesis being around decelerating revenue it is not a compelling short.

And various investments (mostly from VIC) that I liked:

1. Campbell Soup Co (CPB): This short idea makes a lot of sense to me,  and while it won't go under, the valuation is certainly extended and building a short position here makes sense, especially compared to shorting S&P 500 (which I'm already doing). So I'm putting some orders to sell a bit of CPB.
2. Seachange International (SEAC): The overall story seems reasonable, but given that the price is so much higher compared to 52 week lows, I'm hesitant to commit more time for analysis and money on this bet. I put a single order at $3.07 level (with $3.91 current price), just to revisit if there would be some interesting development here.
3. Westrock Co (WRK): Hard to find as boring story as a paper and cardboard producer. But with little excitement, there's the potential for depressed valuations and few new entrants. Even though it's a commodity, the oligopoly nature of the business should ensure healthy profits and the secular trend of e-commerce is only going to help. Similarly, WRK seems well positioned, with their innovative products, to the trend of trying to reducing plastic usage. Given the defensive nature of this holding, I'm comfortable putting orders that will build a 15% position of the net worth. The only drawback is the relatively high dividend, which is not the most efficient way of returning capital. But I can live with flat or growing share prices and in case it declines further, the buybacks are increasingly likely.
4. Wolverine (WWW): An interesting idea, but the price is too high for my taste right now, so similar to SEAC, I'll put an order (@ $25) at well below the current price.
5. Pangaea Logistics Solutions (PANL): A reasonable idea given that the owners are still operating it and the relatively depressed valuation.
6. Global Idemnity (GBLI): An OK insurer, which trades at low valuation. Given what I learned from Buffett, seems like a decent opportunity.
7. LRAD (GNSS): Looks like an interesting, promising entity, but their competitor (Everbridge) is large and fast growing, so this one needs more insight.
8. Alteryx (AYX): This short thesis is quite compelling, given the doubtful practice of front-loading revenue from long-term contracts. 
9. American Airlines (AAL): Even though it's challenged by 737 MAX delays, the current valuation is attractive enough to invest.

GM investment idea for VIC

I've submitted this write-up on GM as a long idea to Value Investors Club. Keep your fingers crossed for it to be accepted!

End of year update

I haven't posted a portfolio update in a while, so it's a good time to catch up:

The biggest change compared to EO Q1 was the disposal of AAPL - after it has risen so much it did not seem like such a bargain anymore. I sold last shares at approx. $260, so have undeniably missed the last part of the current run, but I don't feel bad about that at all - I have rebalanced into a lot of GM, which had relatively stagnant stock price throughout 2019, despite being great value. Even though BHC has also seen a great run from the October dip where I loaded up,

In fact, after learning about Value Investors Club I've decided to put my GM bull thesis into writing and have submitted that as an idea there. It may take weeks until I'll know if it'll be accepted, so in the meantime, I'll post it here.

The too-small-to-be-seen stakes are UBER at 2% and KHC, BBBY, ITI and EZPW at less than 1% each. Not included here, are three short positions: very large position in TSLA, a rather large SPY and very small EYE. These large shorts positions have taken my margin to almost zero and I intend to use it much less going forward.

Evaluating VIC ideas

I've looked through several ideas on VIC between Dec 24th and end of year, but decided against these:

1. NVFY - there is a significant risk it's a fraud - the $50M of 'mats' is suspicious. Rest of the numbers are hard to analyze in this context.
2. MNST - 25x multiple being attractive is hard for me to swallow - the 20% growth is nice, but GOOG/FB have similar valuations with far better moat.
3. CLW - interesting idea, with decent valuation. But the recent run up of the price makes me less interested. I'll put token order at $18 to remind me of this once it moves down. 
4. NWSA - the valuation was not particularly compelling, and the media/publishing business is in my mind one that is still going to be challenging.

The ones I liked are listed below.

Iteris (ITI): even though a relatively small, it sounds like a well positioned business with good leadership in a growing market.

My simplistic DCF based on 7% growth rate is only yielding share price of $4.66, but with 15% (not unreasonable) it goes to $12 and a 5x revenue multiple yields similar number in a potential takeover - quite likely with companies that do smart cities being hungry to acquire someone who already has foot in the door with states, counties and municipalities. The VIC write-up lists a few promising lines of business that have no/little revenue just yet, so it's quite reasonable to expect double-digit growth.

I decided to put several purchase orders and while I don't think that they'll all fill, the story is interesting and I'll be happy to be part of it. Right now it's a minuscule part of my portfolio.

EZ Corp (EZPW): a lot of interesting write-ups, with very cheap price due to problematic owner (Cohen). I put several orders to build ~2% stake if it goes to $6.4. Few filled by 1/1, but given that the management is making reasonable steps (i.e. initiated buyback), I'm inclined to increase the price I'm willing to pay.