$50,058

Financial porn is poisoning the minds of investors. Whether it’s disingenuous headlines or relentless scare tactics meant to drive clicks, modern business news was not built to help you grow your wealth. The Daily Upside, founded by a team of investment bankers, journalists, and scholars, was created for the sole purpose of making investors smarter.  Instead of regurgitating headlines, The Daily Upside goes a level deeper to instantly boost your business IQ and upgrade your investing know-how. Simply put, it’s a must-read. Join over 150k readers and sign up for free

Investors,

The All In Portfolio closed at $50,058 last week. For the month of October the portfolio was up 7.16% or $3,344. Since January the portfolio is up 112.85% or $26,540.

I started the All In Portfolio with one single goal in mind: try to compound a portion of my capital as quickly as possible by investing everything in the highest conviction stock I could find with a near term catalyst. Being up 112% in less than a year has been an incredible blessing.

But man, what a wild ride it has been. Having this amount of concentration on one single stock can produce some wild swings. Earlier this week the portfolio was over $53,500 in value with a gain close to 122%. And back in September the portfolio was at $55,000 with a gain of 131%.

I should be upfront and clear. The All In Portfolio is not my entire net worth. It is a small portion of my portfolio. The portfolio is designed to show readers what a heavy concentrated portfolio can do when you invest all of your capital in your single best idea. In the good months you will make a lot of money. In the bad months your gains can be wiped out pretty quickly. The goal is to have more good months than bad months, invest in the long-term and use strong fundamental to pick winning stocks.

The All In Portfolio is 100% invested in a single commodity name. Last Tuesday I penned an article to Alpha Letter Pro members my investment thesis behind this stock. My price target on the commodity stock is $80-100 per share. With the stock currently trading at $60 per share, it represents significant upside.

But why should it be worth $80-100 per share when it is currently trading at $60? I laid out my thought process below.

• Three different peers have announced 2022 contracts at significantly higher pricing than last year. One peer locked in 2022 contracts at $187 per ton. Another locked in at $196 per ton. And a third locked in pricing for 2022 at $230 per ton. I expect this company to announce their 2022 contracts in the next couple week in the $187-230 per ton range. As a reference, in 2021 contracts were locked in at $87 per ton. This will be pure margin and drop right to the bottom line.

• If this company locks in pricing at $187 per ton they could generate in excess of $1.5 billion in free cash flow. Locking in pricing at $230 would equate to over $2.0 billion in free cash flow. With an enterprise value of a mere $1.6 billion and a market cap of $1.1 billion, the company could generate its entire value in one year.

• Even better, one of their peers has been on an absolute tear since announcing 2022 contracts. This peer is now valued at $805 million. What is interesting is this peer only produces 2.5-3.0 million tons of coal. The company I am invested in produces 14-15 million tons of coal. Based on the relative valuation, this company has significant upside should the market act in any rational function.

• This company is currently over-levered with a significant amount of debt on the balance sheet. However, just 1-2 quarters of pricing in the $180-230 per ton range will put the company in a net cash position, significantly de-risking the entire enterprise. Moreover, a mere six months from now more investors will likely step in and re-rate the company based on the cash heavy balance sheet.

• Q3 2021 earnings could act as a catalyst. Not only will we know where 2022 contracts land but the company received $70 million back in income taxes which will hit the balance sheet when they report. I am also modeling back-half 2021 free cash flows in the $200-250 million range, which doesn’t take into account the $70 million to be received. By the end of fiscal year 2021 the company could be close to being in a net cash position, meaning all of the cash flows generated in 2022 could be used as a large special dividend.

• Supply is severely constrained due to a lack of capital spend in the industry for decades. If this super commodity cycle continues for more than a year, this company could become a multi-bagger at the current price.

The entire All In Portfolio is invested in this name. I think the stock has significant upside in the near-term as investors digest key information from the Q3 2021 earning results this coming up Friday. As a sanity check, I am not the only one thinking these free cash flow results are possible…

The Coal Trader @dyer440

There's a met #coal producer that could very well earn $2 billion of FCF in 2022... their market cap is close to $1 billion today.

Get access to the All In Portfolio and all of my prior research for only $20 per month. As a member of Alpha Letter Pro you will join a community of over 1,500 active investors.

Until next time,

Got feedback? Hit reply.

Want to advertise with us? Reach out.

Alpha Letter is not investment advice

Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.

Alpha Letter is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.

alphaletter.co (“Alpha”) is a website owned and operated by Substack. Alpha is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Alpha in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Alpha is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Alpha does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Alpha does not verify the adequacy, accuracy or completeness of any information. Neither Alpha nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Alpha nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis