Together with Alts
Good morning investors,
Busy week ahead as the last straggling companies report their earnings for the fourth quarter. Alpha Letter Pro subscribers will get updated notes on two OTC companies that should report early this week.
One of these companies is in the process of selling their oil and gas assets and in this inflationary environment should be able to fetch strong bids from multiple players. If an asset sale doesn’t occur, the current valuation isn’t too aggressive as they will generate strong free cash flows where oil is trading today.
The other company is a de-leveraging traditional media play that is trading meaningfully below peer competitors despite much stronger margins and higher quality assets. There is some hair on this asset as they came out of a messy *almost* Chapter 11 and have more than one class of stock. This stock has traded down recently on zero news even though 2022 is expected to be one of the best years in recent history.
In other market news, lumber prices plunged 28% over a three week period as the housing market is showing signs of a slowdown. I expect interest rates will continue to rise putting pressure on the housing sector. I think individuals who locked in sub 3.00% interest rates not be tempted to sell given the almost “free” debt they have and home prices could come down from here as rate increases cut valuations. I will be keeping an eye on timberland companies as their valuations could fall.
Fertilizer prices have continued to soar to nosebleed levels as the war in Russia/Ukraine continues onward. I highlighted a small fertilizer play on May 2, 2021. The stock is up over 150% since my original article (I sold too soon). If I knew we were going to be in a super commodity cycle in 2022 combined with a European war I would have held on.
I continue to look for commodity ideas that haven’t taken off yet. There are a few OTC illiquid that I am toying with but nothing of size. I have also taken a small position in a oil fields service company that has significant hair. Be on the lookout for a quick writeup on that idea over the next week or so.
Anyways, have a great week and see you on the trading floor.
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