Buy New York Real Estate for Nothing!
Good morning everyone. Markets were on fire last week. It appears as if investors are thinking the Fed will slowdown their rate hikes and potentially reverse course sometime in the next twelve months. Should rates decline discount rates will fall again and valuations will rise across the board. I continue to stay bullish on stocks over the long-term and I’m finding a lot of interesting investment opportunities so far in 2023.
Last week I wrote about a company I think will get acquired over the next 12-18 months. It is a special situation with desirable assets in key markets. A catalyst just occurred in the stock just a few weeks ago and I don’t think the market understands the opportunity. Check the full write-up out here. Investment opportunities like this only come once in a blue moon.
I also published an article over the weekend highlighting my new favorite industry. Assets in this industry are trading at twenty cents on the dollar and economics continue to improve for the space. Over the next few years assets prices should trade more in line with tangible book value (or even higher) and implies a 4-6x upside for the industry. The full article can be viewed here.
The trading week is shorter this week but expect the same level of research and analysis in your inbox. Alpha Letter Pro subscribers, I will see you in the Telegram channel were we can chat about stocks. Now before we get into the insider buying activity of the past week, first a word from today’s sponsor…
“Internet Of Things” Now Includes Your Brain
NOT Sci-Fi: Naqi is making it possible to control all of your digital devices by *thinking*.
And you can invest in their company before the Global Smart Earbud market (a real thing) grows a projected 764% by 2030.
The web of interconnected phones, tablets, wrist watches, cars, fridges, toasters, etc…keeps getting bigger. In fact, the total IoT market is projected to hit $2T by 2029.
Before you let Elon Musk talk you into an expensive brain implant – Naqi uses a simple earbud.
And the science is surprisingly simple, too…
There are these things called “microgestures”, or tiny physical movements we make that no one else sees. Naqi figured out how to turn them into commands that potentially control billions of digital devices all around us.
Naqi has the potential to connect biological humans to essentially all things digital. But instead of being afraid…
Insider buying activity
We had a lot of insider transactions over the past week. I only included insiders who work at the company so this list is excluding any 10% plus holder such as an investment firm that has continued to purchase stock in the open market. If you want the full list for the week that includes a 10% holder reply to this email and I will send it over.
Let’s dig into the insider transactions.
Trinity Place Holdings (TPHS): It is a pretty small transaction of only $460 but the assets here look pretty interesting. The market cap is $27 million. The company has a cash position (including restricted cash) of $11.6 million and $241 million of debt, resulting in an enterprise value of $257 million. So for $257 million you get a property located at 77 Greenwich Street in Lower Manhattan, which is a real estate development nearing completion consisting of a 90-unit residential condominium tower, retail space and a New York elementary school. The company also owns a recently built 105-unit, 12-story multi-family property located at 237 11th Street in Brooklyn, New York. The company also owns a 10% interest in the recently built 234-unit multi-family property at 250 North 10th street in Brooklyn, New York and also a property occupied by retail tenants in Paramus, New Jersey. The company also owns intellectual property consisting of FilenesBasement.com and rights to the Stanly Blacker brand, IP associated with Running of the Brides event and An Educated Consumer is Our Best Customer slogan. The company is currently not profitable but once the completion of 77 Greenwich is complete there could be net income. To offset that net income there is $268 million of federal net operating loss carryforwards that could reduce taxable income or capital gains. There were also other large insider buys before the New Year that look pretty interesting. Finally, Third Avenue and Michael Price are large shareholders in the company. The assets here look pretty interesting and it’s likely the company is undervalued. I might spend some time digging into the NAV and seeing what value I come out with. This is a good way to own New York real estate, potentially for next to nothing.
Hudson Global (HSON): The CEO of Hudson Global purchased $46,551 worth of his own company on January 9th. The company has a $70 million market cap and the stock recently nose dived from $37 per share to $25 per share in November. The company provides talent and recruitment sourcing for employees/employers which is an industry I have never dug into before. But the drop in the stock price looks interesting and the recent buy from the CEO is a show of confidence. TTM P/E ratio is only 8.0x which seems reasonable.
Karat Packaging (KRT): The VP of Manufacturing purchased $13,440 worth of Karat Packaging just last week. I’ve never heard of this company before but the stock looks like it recently went public and has fallen from $20 per share to only $15 per share over the past year. The market cap is $300 million and they have around $33 million of net debt. The company distributes disposable products such as plastic cups and forks to restaurants and other end-users and looks to be generating $30 million or so of operating income per year. Trading around 10x EV/EBIT isn’t bad so it might make sense to do a bit more work here and understand the industry and the goals of the management team. The stock is relatively unheard of so anyone who wants to be an expert on the equity could be.
American Resources Corporation (AREC): The CEO of American Resources purchased $6,900 worth of stock last week. The purchase price is small but the assets look interesting enough to spend sometime on. The company owns, controls and is developing met coal assets. There is revenue but the company is currently unprofitable given the developing cost they expense. There is also a short report on the company that any potential investor should read through. Also some related party liabilities and convertible debt. Despite the hair, should met coal prices skyrocket again, high costs producers like American Resources will do well, at least from as share price perspective. It might be hard to get to a fair valuation as a real investor in assets, but this one could be good for short term traders.
Martin Midstream Partners (MMLP): Two small insider buys from the CEO and CFO, but still buys in a beaten down stock nonetheless. Over the past ten years the stock has collapsed 90% and is trading with a share price of only $3.25 and a market cap of $126 million. The company operates as an MLP in the oil and gas industry and has $577 million of net debt. There is probably enough assets here to protect an investors downside, but at the end of the day you are dealing with an MLP so you will have to file a K-1 in every state Martin Midstream does business in, which can be a big headache. I might do a bit of digging here as the stock price is pretty beaten down.
That’s it for this week on insider transactions. If anyone sees anything else interesting on the full list reply to this email or comment below. I’d love to dig into some other stocks.
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