Archive for the 'Market Commentary' Category

Join Eric Schleien in this Q&A format as he answers questions on short positions, investment strategies, destroying your own conclusions on business and investments, and so much more. When asked about the mistakes he's made with investments and what can be learned from them, Eric expounds on what he thinks is a rear-view mirror thinking and on how he managed to lose more money to areas of omission than commission. 

Summary

While it's common for others to work on becoming large firms, Eric's unique gameplay is to stay boutique and manageable. For Eric, it's not necessarily rejecting growth. Instead, it's more about being able to hold control and balance on different elements. When you're running multiple large funds, it will reach a point where you start losing the competitive advantage by becoming too large, he explains.

In this episode, the group also brings up the relevance of Environmental and Social Trends in determining the long-term value of companies. Quoting from Brookfield Asset Management CEO Bruce Flatt, "It's not a good business to not be a good steward of the environment.", for Eric, if a business is taking steps to have an adaptable and inclusive culture – value is quickly elevated. Even though it's not the end-all-be-all, for Eric, when a business does good in proving its CSR, it helps contribute to building a competitive advantage and value in the long run.

Show Notes

  • [01:20] Podcasting is going to be bigger than radio; On Liberated Syndication/Libsyn (LSYN).
  • [06:26] How do you size your investments and know what to trim?
  • [10:38] The art form to portfolio management.
  • [14:00] On the threat inflation poses.
  • [19:50] The advantages of being a boutique firm.
  • [21:53] On not taking short positions.
  • [26:26] Has the pandemic changed investment strategies?
  • [28:22] Rear-view mirror thinking.
  • [34:05] How do you factor in ESTs on a business's long-term value?
  • [36:39] There's only so much you can control when you run large funds.
  • [42:06] When an investor insists on dividends…

Resources

Principles of Power - The Art & Wisdom of Badassery Book by Eric Schleien

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals, including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: intelligentInvesting@gmail.com

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Join Eric Schleien with today's interview guest, Julian Lin, as they discuss the different names in the country's cannabis industry and the stocks he entered and exited in light of the pandemic. For some of these companies, leaving the pandemic with so much debt and having to spend so much for redevelopment isn't going to be an excellent spot to have.

Summary

In this episode, Julian also talks about the presence of Canadian cannabis brands in American markets. Despite them being 'okay,' because they're the only names people can invest in when in America, the evaluations of these brands coming from across the border remain to sore insanely. Nonetheless, cannabis brands have challenges unique to them in general.

Julian acknowledges that when you look at these companies, they scream expensive. In reality, if cannabis is decriminalized and is not to pay a particular type of tax in the future anymore, their shares will trade at multiple folds in earnings. For Julian, the macro picture for cannabis is all promising in the next 2-4 years.

 

About Julian Lin

Julian Lin runs Best Of Breed, a research service uncovering high conviction ideas in the winners of tomorrow. He is ranked in the top 1% of all bloggers on Tipranks.

Show Notes

  • [01:04] "A terrible time to own those stocks."
  • [02:52] How did Simon Property Group enter the pandemic?
  • [04:14] It's a problem with the cost of capital.
  • [07:27] The cannabis industry in the Biden administration.
  • [09:07] Cannabis in Canada.
  • [11:30] The business models of different cannabis brands.
  • [13:03] What cannabis companies are not allowed to do.
  • [15:54] GTI is a multi-state presence.
  • [17:11] The future for Cannabis.
  • [17:48] The primary catalyst for American cannabis stocks.

 

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals, including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

 

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: intelligentInvesting@gmail.com

 

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The GameStop short took many by surprise and brought the world of short selling into the mainstream. Join us for this in-depth panel moderated by Eric Schleien of the Intelligent Investing Podcast with Jake McClure of The Personal Wealth Coach Podcast and Rick Bloom from Rick Bloom Talks Money on the nuances of what actually happened, and how all the pieces fit together.

Eric Schleien's Book

Thank you for supporting the podcast. My new book, Principles of Power, is now on Amazon. I would be incredibly grateful and humbled for a purchase with an honest review.

About Principles of Power

"Principles of Power can be related to as an advanced Coaching Handbook for Leaders. 
If you are a leader, an aspiring leader, a coach, consultant, or program facilitator, this book is designed for you. The material is delivered inside of a modern leadership context of service and contribution. 
Eric features many partnerships in Principles of Power. His inclusion of useful quotes from Warren Buffett, Charlie Munger, Werner Erhard, Nassim Taleb, Seth Godin, and many other leaders attests to the thinking and the research that went into the writing of this book. 
It is now undeniable that the understanding and implementation of powerful Listening, authentic Relationship, and a recognizable Permission to Lead, are cardinal distinctions of effective leadership. 
The word, ’cardinal’ has a Latin root and means ‘hinge’ – like a hinge on a gate. So, like a hinge, cardinal distinctions are connected to every nuance of leadership. You will see these distinctions in action in the background of Eric’s many leadership conversations. 
Authentic Relationship, for example, is essential to the effectiveness and empowerment of the participants and the leader. If authentic Relationship is missing, any outcome or result devolves to the result of domination or force, and is not an outcome of effective leadership.
Consider this: Leadership is granted by the permission of those being led. Take a moment and allow that to sink in.

The job of the leader is that of an environmentalist, providing the space for people to collaborate, flourish, and create. These two different activities, management and leadership are often commingled, especially in business schools and in the workplace. They are distinct and operate under different rules and measures. It’s like Checkers and Chess – Same game board, different games with different rules and outcomes.
Disentangling and distinguishing the two arenas of activity grants power to both managers and leaders.
 So, the fundamental exercise of listening for people’s greatness is in the background of every sentence in this book. And there is much more…
Principles of Power is strongly influenced by the transformational work of Werner Erhard. Much of the author’s thinking is also grounded in the classic distinctions of Tribal Leadership and the thinking of Warren Buffett and his partner, Charlie Munger. 
Those, plus Eric’s own extensive practical experience renders Principles of Power to be an extremely useful ‘go-to’ resource, filled with useful, implementable information, sprinkled liberally with memorable quotations from intelligent diverse sources – all apt and worth adding to YOUR leadership lexicon."

- John King, co-author of Tribal Leadership

Other Resources

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals including board members of public companies and Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been featured in The Wall Street Journal, GuruFocus, and was featured in Warren Buffett’s Biography, “Of Permanent Value.” Eric is also a certified Tribal Leadership consultant with over a decade’s worth of experience in the field of transformational coaching. Since 2012, Eric has specialized in producing breakthroughs at the level of organization. He’s also the co-creator of the Udemy course, Leadership By Design. Eric also hosts The Intelligent Investing Podcast which is a business/value investing podcast.

Eric loves interviewing interesting people and has interviewed Warren Buffett’s son, Peter Buffett, Jimmy Fallon, and former adult film star, Bree Olson as well as over 100 interviews on his podcast.

Eric currently serves as the Chief Executive Officer of Granite State Capital Management, LLC and runs a real estate investment and consulting firm, Wyoming Warehousing & Safe Deposit Company.

About Jake McClure

Jake McClure has been working with his father and partner, Jeff in finance since January of 1991. In 2010 he completed business studies for his designation as Certified Investment Management Analyst® at The Wharton School, University of Pennsylvania. In 2007 In concert with Jeff, he founded an objective, fee-based fiduciary service in The Personal Wealth Coach, an SEC Registered Investment Advisory Firm.

Jake is married to Alissa, a cellist, and a world traveler. They have two children. Jake is also a successful artist, having been commissioned by the Austin Ballet’s BATS to create the 2011 annual Long Award, and has had showings of his artwork in many public places. Jake has also given musical business advice to several major recording labels and production companies. His passion lies in finding the links between economics, art, and music, then defining those links in the lives of his clients.

 

About Rick Bloom 

Rick is a partner and co-founder of Bloom Advisors and the law firm of Bloom, Bloom & Associates. He is a licensed attorney, certified public accountant (CPA), and financial advisor. Additionally, Rick holds the Series 65 license.

Rick currently hosts the podcast "Rick Bloom Talks Money" and writes a weekly financial column in the Observer & Eccentric Newspapers. He served as host of the popular “Money Talk” radio show on WXYT-AM 1270 and the “Rick Bloom Show” on WDTK-AM 1400.

Rick was a featured writer of regular financial columns for the Detroit News and Oakland Press and also aired twice-daily business updates on the Michigan Radio Network. He has been recognized by a variety of esteemed financial publications and has been named a top financial advisor for several years. He has presented at conferences and given speeches to hundreds of business and civic organizations throughout his career and has made appearances on both radio and television. Rick is a member of the Fidelity Investment Financial Advisory Council.

Rick is an honors graduate of both Michigan State University and the University of Michigan Law School.

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: IntelligentInvesting@gmail.com

 

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Join Eric Schleien with his guest Andrew Sather as they talk about Warren Buffett's Cash Cows, Hedging the US Dollar, Residential Real Estate, Griffon, and Electronic Arts.

In this episode, Andrew also sheds light on stock buybacks and turning over rocks in order to unearth value even from beat-up ventures and potential investments. He emphasizes the strategy of having enough key players in a business or investment that's enough to stabilize everything.

Stay tuned to this discussion and find out what else Andrew has to say about the current financial industry.

 

About Andrew Sather

Andrew is a self-taught investor since 2012. He specializes in identifying value traps and avoiding stock market bankruptcies.

"I didn't see a resource to walk beginners through investing, step by step. So I went out and made it.", Andrew said.

 

Show Notes

  • [03:31] Warren Buffett's Cash Cows
  • [04:55] Companies need to do it smartly with Buybacks.
  • [06:45] The parallels of EA Games and DairyQueen.
  • [09:10] What makes EA Games a Cash Cow?
  • [12:10] On turning over rocks; books by Peter Lynch.
  • [13:13] An observation I disagree with…
  • [14:34] What needs to be understood in flipping rocks in beat-up industries.
  • [18:23] Having a hedge for the US dollar.
  • [19:00] What I found out about the Top Companies in the S&P 500?
  • [19:58] Companies whose revenue did well even if the US dollar didn't.
  • [26:35] The likes of Paypal; the likes of Mastercard.

 

Resources

 

 

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals, including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

 

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: IntelligentInvesting@gmail.com

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Join Eric Schleien with today's interview guest, Trey Henninger, as they talk about Entercom, Northfield Precision, and the new SEC rule that impacts dark companies and small businesses. By taking a close look at the outcomes and probabilities close to ETC and the merger made with CBS Radio, he explains what Entercom holds for the next 12-18 months and tells us the technicalities on why he thinks owning shares from the company can still end up positively.

Summary

In this episode, Trey will also be getting into all the old news, the expected, and the good with Northfield Precision Instrument Corp. Listen as he discusses the company's performance during the pandemic, their ROI report, and how NFPC will seemingly be affected by the new SEC rule that targets dark companies. For Trey, once the new regulation comes into effect in the following months or years, going expert or grey may become an option to be considered for Northfield.

Going in further on the upcoming SEC rule, tune in as Trey explains what the regulation aims to do, what it requires from business entities, how it can backfire, and what it means to trade without a quoted price –a scenario that may just mean good deals for experts. For him, there are always as many opportunities in matters like these as there are risks in every leverage.

 

About Trey Henninger:

Trey Henninger runs the blog and podcast DIY Investing. Trey is a private value investor focused on microcap and dark stocks in the United States. His focus is on high-quality companies with predictable, durable earnings where management has skin-in-the-game.

Trey runs a concentrated portfolio of 5 stocks with a 20% weighting each. By focusing on small companies, Trey hopes to find overlooked compounders at value prices. His favorite opportunities have a market cap below $50 million.

 

Outline of the episode:

  • [00:42] Entercom Communications – America's #2 Radio Broadcasting Company.
  • [02:18] ETC as a radio company and as a growing digital audio presence.
  • [02:49] The crashing merger of ETC and CBS Radio.
  • [03:46] Binary outcomes and the probabilities for the company now.
  • [06:55] What the debt market is telling about it.
  • [08:03] Covid as an excuse...; The company's ownership.
  • [09:49] A business with no assets, basically.
  • [13:09] Bad as expected – Northfield Precision
  • [15:54] What SEC Rule is, not retail investor-friendly.
  • [16:40] How the new regulation can backfire – a theory!
  • [18:25] What it means to not get quoted a price…
  • [19:45] Anytime you have leverage, there's risk and also lots of opportunities.

 

Resources:

CBS Radio and Entercom merger

Follow and subscribe to the new, The Eric Schleien Podcast:

 

About Eric Schleien:

Over the past decade, Eric has trained thousands of individuals, including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

 

Help Out The Podcast:

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

 

CONTACT ERIC SCHLEIEN:

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: intelligentInvesting@gmail.com

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Join Eric Schleien with his guest Peter McCormack as they talk about podcasting, the unique characteristics of Bitcoin, and what the future holds for it. Because of the oppositions and baseless accusations against it, for Peter, Bitcoin should've already failed. Today, it is still operating and growing even higher.

 

In this episode, Peter gets into discussing decentralization, Bitcoin mining, his piece of advice to anyone looking into investing in Bitcoin, and so much more. To interested investors, Peter believes there should be a profound investment strategy before throwing money onto Bitcoins. He believes cryptocurrency can be a very punishing investment if done wrong.

 

Stay tuned to this casual exchange and find out more of what Peter has to say about Bitcoins and investments.

 

About Peter McCormack:

 

Peter McCormack is a full-time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship, and Bitcoin. He is the host of the What Bitcoin Did Podcast.

 

The What Bitcoin Did Podcast, is a twice-weekly Bitcoin podcast where host Peter McCormack interviews experts in the world of Bitcoin development, privacy, investment, and adoption. Launched in November of 2017, the podcast has grown to nearly 200 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community.

 

Individual podcast episodes have focused on engaging and accessible conversations with some of the industry's most influential minds. Established veterans such as Adam Back, Charlie Shrem, and Andreas M. Antonopoulos have shared the WBD mic along with rising stars. No areas of discussion are off-limits, and differences of opinion are encouraged. Past topics have ranged from Cannabis to Censorship, Libertarianism to the Lightning Network, and Sex Workers to Segwit2x.

 

You can find Peter McCormack on:

 

Outline of the episode:

 

  • [01:59] Stumbling upon Podcasts in a vegan retreat in Italy…
  • [03:29] Podcasters – just get out and do it!
  • [04:50] Are cryptocurrencies worth investing in?
  • [06:20] What is decentralization?
  • [08:04] The resistance of Bitcoin.
  • [11:24] On Bitcoin's stability.
  • [13:40] What does Blockchain do?
  • [17:15] Bitcoin Mining.
  • [20:00] A bit of advice to anyone wanting to invest their money in Bitcoins.
  • [21:51] Is Satoshi Nakamoto fame-driven, rich, alive?
  • [24:39] What could break Bitcoin?
  • [27:53] Privacy in Bitcoin.
  • [30:30] The first thing to do when getting into Bitcoins.

 

Resources:

How to Start a Podcast in 2020 Pat Flynn

 

Understanding DigiCash

 

How to Download Kraken Pro: Advanced Bitcoin & Crypto Trading on PC:

 

Kraken's Official Mobile Apps

 

About Eric Schleien: 

 

Over the past decade, Eric has trained thousands of individuals, including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

 

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

 

Eric currently resides in Philadelphia, PA.

 

Help Out The Podcast:

 

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

 

You can subscribe to the podcast on the following platforms:

 

 

 

CONTACT ERIC SCHLEIEN:

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: IntelligentInvesting@gmail.com

 

 

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I discuss why I hate shorting stocks and discuss the recent example of GameStop (GME).

 

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

 

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: IntelligentInvesting@gmail.com

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Welcome to the Intelligent Investing Quick Thoughts Series, where I just spend a few minutes on relevant topics, thoughts, or things in the news. Episodes are all under 10 minutes.

In this episode, I discuss some success I've had with overbid opportunities where you buy a stock that is getting bought out at an absurdly cheap price with the hope for a higher bid and where your downside is low due to the low valuation already. With a low-interest-rate environment, I expect these opportunities to continue to run into 2021.

 

About Eric Schleien

Over the past decade, Eric has trained thousands of individuals including board members of public companies as well as several Fortune 500 CEOs. Eric specializes in organizational culture and has become a leading authority on organizational culture in the investment industry.

Eric has been investing for 15 years and has been using breakthrough coaching methodologies for over a decade. Eric had the insight to combine proven coaching methodologies with shareholder activism techniques to create an entirely new model for shareholder activism that was more reliable and created greater sustainable results in a rapid period of time. On average, Tribal Leadership produces a 3-5x increase in profits of culturally troubled companies within an average of 24 months or less.

Eric currently resides in Philadelphia, PA.

Help Out The Podcast

If you like The Intelligent Investing Podcast, please consider leaving a rating and review on Apple Podcasts. It takes less than 30 seconds to do and makes a huge difference! You can also join the Facebook page!      

You can subscribe to the podcast on the following platforms:

 

CONTACT ERIC SCHLEIEN

Facebook  |  LinkedIn  | Twitter  | YouTube | GSCM | Instagram

Email: IntelligentInvesting@gmail.com

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Subscribe

If you like The Intelligent Investing Podcast, please consider subscribing on:

 

Summary

After global merchandise trade dropped ~20% in the wake of the Covid-19 policy response, shares of shipping companies collapsed, underperforming even the airline ETF. The industry now trades cheaper than at any time on this side of the millennium - less than 25% of liquidation value for some companies. Braxton believes this is unwarranted. Even during the seasonally weakest month of year, tanker earnings are still covering operating costs. In spite of analyst downgrades and widespread panic, tanker companies have used hefty profits from storing excess oil to rapidly deleverage.
 

Structural Balance

Although ULCV containerships are currently garnering far better rates than tankers, Braxton feels that this masks a precarious structural balance between supply and demand. Containership demand has actually plummeted, and rates are only being propped up by an ad hoc cartel of dubious legality. Whereas ample tanker demolition candidates provide a cushion, a young fleet severely limits scrapping potential for ULCVs. Worse, new capacity to the tune of 24% of the existing ULCV fleet is set to hit the water over the coming years.
 

International Seaways

Braxton discusses corporate governance in the industry and shares a favorite current tanker pick - International Seaways. INSW trades at half of liquidation value, with its strong balance sheet further fortified by an FSO joint venture with Euronav that generates consistent contracted cash flow. The company is repurchasing shares.
 

Distressed Mortgage Notes

Braxton outlines his investment in the Navios Maritime Acquisition Corporation First Priority Ship Mortgage Notes due 2021. The bonds trade at a highly distressed valuation, despite solid covenants and a short time to maturity. Braxton says that the value of the underlying fleet and NWC fully covers the bonds and implies a positive value for the equity.
 
NMAC is now aggressively repurchasing bonds out of cash flow (most of which is contracted). While the embezzlement ratio is on the high side even for the shipping industry, Braxton feels that management incentives are likely to favor noteholders.
 

Show Links

 

Staying In Touch With Braxton Gann

 

Staying In Touch With Eric Schleien

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Subscribe

If you like The Intelligent Investing Podcast, please consider subscribing on:

 

Coronavirus Investing Series: Part 10

This is Part 10 of a special Coronavirus Investing Series. If you have not listened to Part 1, please click here to get the overall context/market overview during this unprecedented time.

You can also listen to:

 

Summary

Eric Schleien and Brian Dress discuss investment opportunities in the bond market. Brian Dress is an investment analyst at Left Brain Capital Management, LLC.  Brian's angle relates to value opportunities his firm is seeing in the corporate and municipal bond markets, based on the massive selloff in credit markets over the past 6 weeks.  Particular discussion points in this episode include:

 

Discussion of Bond Markets Pre-COVID 

Brian thinks the spreads were far too tight which made it very difficult to position portfolios with income to match future expenses.  Investors were forced to take too much risk to attain yield. This is something we have discussed extensively before on The Intelligent Investing Podcast.

 

How Credit Cycles Work Historically

The main takeaway here is that credit booms and busts occur far more often than do booms and busts in the equity markets.  Savvy investors should be willing to take risks on bonds in trough phases like this one and gradually lighten the load as spreads tighten, creating the capacity to take advantage of the next down cycle. 

Note: high yield bonds have led stock recoveries after every market drawdown since 1980 (1982, 1991, 2002, 2008-9, 2016) 

 

Observations In Credit Markets 

Brian has noticed indiscriminate selling related to a liquidity crunch, causing bonds at all levels of credit quality to sell off heavily.  Brian believes this creates fantastic opportunities across the credit spectrum, which he and his company are taking advantage of to reposition clients. I discuss that in regards to all markets, here.

 

COVID-19 Gameplan 

Brian is upgrading the credit quality of bond portfolios, taking the opportunity to lock in large coupons on stable companies, some of which continue to trade at a discount. Markets have been starved for these types of opportunities in the bond world and, while many of these have already narrowed, plenty of mispriced securities are still out there for investors.  There are still chances to lock in great coupons, along with the potential for capital appreciation.  Brian believes it is important to recognize that it is likely we will be in a 0% interest world for the foreseeable future.

 

Bond Opportunities

After Eric and Brian discussed the general overview/strategy with respect to bonds, Brian presents a few examples where he sees opportunity.

  • Qurate (QRTEA) 8.25% 2030 bonds (Yield to maturity >12% at current price levels)
  • Travel and leisure: Delta 4.375% 2028s (yielding >7% at current prices) and Carnival Cruise (unsecured 2020s and secured 2023s)
  • Illinois Municipals General Obligation 5.1% bonds: effective yield of more than 8% for those in highest tax bracket, possible appreciation potential with interest rates now firmly at 0.

 

New Service

Brian is debuting a new service next week at Left Brain Investment Research, which is a twice-monthly pay-per-view Zoom call for investors of all types, where his firm will be introducing a single bond idea and a single stock idea each month and explaining the entire research process that went into those recommendations.  

Brian has his firm's “shelter-in-place” specials available on his firm's website

Listeners can enter the promo code “Eric” on the subscribe page and receive a full research service (stocks and bonds) for $99/month for the life of the subscription. 

***FULL DISCLOSURE, I, Eric Schleien, DO NOT MAKE ANY MONEY OFF THIS PROMO CODE. ALL SAVINGS GET PASSED BACK TO INTELLIGENT INVESTING PODCAST LISTENERS.

 

LBIR Investment Ideas Forum

Second, Left Brain Research has its LBIR Investment Ideas Forum with the first two installments coming on April 30 where Brian and his firm will discuss a stock idea with the same format.  Listeners can find all the information for these events on the front page of the LBIR website.

 

 

About Left Brain

Left Brain opened the wealth management business in 2014, a hedge fund in 2016, and an investment research platform in 2019. A differentiating characteristic of Left Brain's investing platform is an emphasis on selecting individual securities, particularly individual bonds in the high yield space. Brian genuinely enjoys and gets excited to share his investment philosophy with both individual investors and advisors.  The company has slowly built up its investment staff in order to cover a large universe of high yield bonds (about 900) and about 200 stocks.  What they've come to realize is that many advisors lack the resources to replicate this type of research apparatus, so they decided to create a product to provide this research to advisors so that they can select stocks and especially high yield bonds that will help clients achieve income goals in a compressed interest rate environment.

Data-Driven Bottom-Up Approach

Left Brain has a data-driven, bottom-up approach that incorporates technology to rank securities on the basis of a number of quantitative and qualitative factors, including revenue growth, gross margins, competitive dynamics, and accelerating results. The company portfolios are concentrated, as they view this as an allocation model with the best chance to deliver superior results and excess returns; usually no more than 20-25 stocks at any given time, particularly in the hedge fund.

 

Management

Company management is paramount in both equities and credit.  Left Brain wants to see a history of success for the CEO, a strong capital allocation strategy, and an alignment of interests with investors (“skin in the game”); also for equities and bonds, they want to see strong fundamentals in the underlying business, no matter what the valuation or possible yield compensation

 

Equities

The company looks for strong (and accelerating) revenue growth, high (and expanding) gross margins, favorable competitive dynamics

 

Distressed Bonds

For distressed bonds: Left Brain looks for deleveraging (either through improved EBITDA or retiring debt through asset sales), improving trends in operating metrics (revenue, EBITDA, total debt), high yield compensation per unit of leverage (Debt/EBITDA), and most importantly, a strong Free Cash Flow (FCF) profile.

 

Staying In Touch With Left Brain Investment Research

  • Click here for more information on Left Brain Investment Research
  • Click here for more information on Left Brain Wealth Management

 

Staying In Touch With Eric Schleien

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