Activist Investor Monitor

Over the course of several years in the public markets I have seen investors make the same mistakes year after year. Chasing highly valued stocks. Investing in mega-cap companies where they will get zero informational edge. And falling for technical analysis scammers who promise get rick quick schemes with little effort.

Investing in public markets is not easy. It requires a substantial amount of time and research. Patience to watch your ideas play out. And the gut to trust your analysis when a stock price turns against you.

My goal with Alpha Letter is to provide high quality independent research on stocks off the beaten path. Find actionable stock ideas no one else is talking about. Create a community of likeminded value investors who are true contrarians at heart.

In 2023, the free version of Alpha Letter will start publishing weekly actionable lists of stocks that look attractive. I have already started the Monday Insider Buying Monitor. Today I am launching the Activist Filing Monitor. Every week I will track stocks that have recent 13D filings so we can try to predict which stock will have an activist investor raid the ship.

When an investor goes activist on a stock it usually means they think the value of the company should be much higher than the public market value. To get the market to value the assets at a fairer value, investors file a 13D and start having dialogues with the management team. Staying up to date on activist shareholders and their positions is a great way to find new ideas to research.

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Activist Stock Monitor

Every week I plan to run a screener to monitor all newly filed 13D filings. Having a weekly post dedicated to fresh 13Ds will not only help me stay up to date on what other smart investors are putting their money into, but will also give everyone who follows this newsletter a new batch of companies we can put on our research list. Overtime, this list should grow comprehensive and we can all learn more about new companies.

I attached an image below of the recent newly minted 13D filings, what investor or fund filed the 13D, the amount of shares they own and the market cap of the security.

Let’s dig into some of these names and figure out what ones might stand out.

• TCX: Down 60% in a year. Legendary short investor Kerrisdale Capital Management wrote a short report on the company in 2019 that has paid off. The 13D filer is Blacksheep Fund Management that now owns 10.6% of the outstanding shares. The purpose of the transaction was highlighted in the 13D with an intent to have further conversations with the management team to enhance shareholder value including capital allocation, mergers, acquisition and disposals, balance sheet management and board composition. I think Blacksheep might try to push for a board seat and then start selling assets. It might be good to dig a bit more into the business model here.

• CARV: I love small community banks because they are illiquid and almost every value investor ignores them because they are so damn boring. This one has a $16 million market cap which makes me like it even more and the stock is down 60% this year. A gentleman named Jeffrey Bailey filed a 13D recently and now owns 6.59%. In the 13D Mr. Bailey states the purposes of the transaction is because the company is undervalued and that he plans to push for operational changes to enhance shareholder value. The company looks like they are currently unprofitable but it might be worth a closer look to see what the fair value is.

• FMBN: Another small community bank with a market cap of only $6.7 million. The bank is family controlled and located in Burlington, Iowa. The 13D filer is a gentleman named Barry Renbaum and his wife Carol. It looks like Barry is a private investor and ex-lawyer who is now the Director of Carroll Community Bank. Stockholders equity is $15 million and the bank generates $1 million or so in net income per year with a 4% dividend yield. There was one article on the bank a few years back saying it was undervalued and someone could take it out. I might spend some time on it.

• SVT: A company riddled with sexual misconduct from the CEO and trading in value territory. Multiple 13D filers have filed over the past 18 months and we have a new one by the name of Beaver Hollow Wellness who acquired 11.7% of the outstanding. The 13D is pretty vanilla but the stock has collapsed from $14 per share to around $10. There was a good article written on the history of the company.

The rest of the companies look like garbage to me but could be worth spending a bit of time on in case someone else spotted something I didn’t. Let me know what you think of the four companies highlighted in the comment section below.

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