Oil Flies

Mar 22

`Together With Composer`

Good morning investors,

Lots of stuff in the news over the past few days. The Federal Reserve announced they will begin to tighten rates above neutral if needed. Cathie Wood’s Fintech Innovation ETF (ARKF) plunged over 5% as Shopify, a key holding, crated 16%. Oil jumped to $113/bbl as conflict in Ukraine continued combined with Saudi Arabia saying it won’t bear any responsibility for the shortage of oil supplies. Occidental Petroleum (OXY) reached new highs as investors expect Warren Buffett to continue to accumulate.

On the personal side, I’ve started to build a position in a new stock that has gotten absolutely hammered. The stock is down 60% year-to-date and has a short interest of 40%. In addition, the management team recently announced they plan to sell two of their distribution facilities for $80 million. With net cash of $50 million, this puts the implied enterprise value at only $180 million.

The new management team has aggressively repurchased over $182 million worth of stock since 2019 and the team increased the repurchase plan to $60 million after quarter-end. Q1 will be weak, but full year guidance suggest they will generate $65 million plus in EBITDA. I will be doing a full write-up on this stock over the next few days. Alpha Letter Pro subscribers will get first look.

Want to chat with a tight group of investors? Consider joining our free chat room on the Odyssey app. After downloading the app (IOS only) you can use this link to join the discussion. I post there a few times per day on companies I am researching and also my general thoughts on everyday market moves.

A Message From Composer

Unleash Your Inner Hedge Fund

Here’s a cold reality — 80% of day traders lose money. Oof.

The reason is simple: human emotion.

For years, “quant” funds have consistently outperformed the market while managing trillions of dollars.

These market wizards build algos that buy and sell stocks systematically - removing all human emotion from investing. For example...

"Buy Tesla and Rivian everytime Ford, GM or monthly auto sales (SAAR) drop 5%"

"Sell ETH and short bitcoin if BTC hits $50K"

But unless you can code, algo-trading has been out of reach - until now...

With Composer, you can build algo strategies for free. No code, no spreadsheets, no hassle.

Use their intuitive visual editor to create powerful investment strategies from scratch, simply by picking and choosing your favorite moves

Or, browse their library of ready-made strategies to find one that fits your goals, then emulate it.

From there, you can track, tinker, and adjust to your heart’s content.

Citadel returned 26% last year with the power of quant trading — tap into the power of Composer by opening an account right here.*

Sectors I am watching

The oil and gas sector: This is a given. Oil is over $113/bbl and anyone producing oil is making a killing. I’m invested in a low cost producer that plan to rapidly expand production over the next few years. I am also invested in another oil and gas company that recently emerged from bankruptcy. Both of these names are unlevered and low cost which help me sleep at night investing in an extremely volatile sector.
Private Prisons: There are only two private prison operators out there and I am taking a hard look at both. Both are trading near multi-decade lows and have over-levered balance sheets. The industry is not ESG friendly and it may be hard to refinance some of this term debt that is coming due along with a change in regulations that could impact the sustainability of the private prison model. Despite these headwinds, private prisons are backed by high quality real estate that is irreplaceable. The liquidation value of this real estate is likely worth more than the current public market valuations. See note below on key holder of private prison stocks.
Thoughts on land banking: I have continued to look to invest in plots of land in the United States. I like the idea of parking some money in a large contiguous plot of land that will hold its value through an inflationary period. In addition, I am interested in buying a single or multifamily house in Hawaii over the next few years. I believe that the work from home trend will continue allowing individuals to work from wherever they want. Hawaii has perfect temperatures 99% of the year and there is a limited amount of inventory on the islands. Buying and holding a property in Hawaii seems like a no brainer if you have a long-time horizon.

Geopolitics

Ukraine rejects Kremlin demand to surrender Mariupol; Russia says U.S. relations ‘on the verge of rupture’ (CNBC)
US Sending Soviet Anti-Air Defense Systems To Ukraine That Were “Secretly Acquired” (ZeroHedge)
ESG funds piled into Russian oil over Canadian energy (BNN)
Yield curve business cycle indicator says no recession imminent (BNN)
Moscow stock market reopens for some bond trading (BBC)
Russia to open stock market this week: Impact will be 'internal,' not global (Fox)
Russia-Ukraine: How the top stock and bond funds exposed to Russia are performing (Yahoo Finance)

Commodities

Fertilizer makers Nutrien, Mosaic, CF Industries continue to shatter records (Seeking Alpha)
If You Think Fertilizer Prices are Bad Now, Here's Why China Could Make the Situation Even Worse (AgWeb)
Sanctions on Russian energy and commodities explained (S&P Global)
Saudi Aramco to bring on significant incremental capacity from 2024 (S&P Global)
Replacing Russian uranium in case of ban might cost over $1 billion (S&P Global)
Uranium outlook improves - UK plans to increase nuclear to 25% of energy mix (Reuters)
Senators move forward with bill to ban Russian uranium imports, Cameco takes off (Seeking Alpha)
US coal producers cannot ramp up to feed Russia's European customers (S&P Global)
US gas-fired generation gains as Russia-Ukraine war hikes coal prices globally (S&P Global)
Global coking coal market reacts positively to 'transparent' ArcelorMittal sell tender (S&P Global)

Michael Burry’s Top Stocks

Michael Burry recently dropped his stock holdings for the month of February. According to the SEC filing, Burry now only holds six stocks. Two of these stocks are private prison companies.

AEA-Bridges Impact Corp. (IMPX)
Bristol-Myers Squibb Company (BMY)
CoreCivic Inc. (CXW)
Fidelity National Financial Inc. (FNF)
General Dynamics Corporation (GD
The Geo Group Inc. (GEO)

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

7 Comments

Joe Brown

Mar 26

Interesting article, I'm not knowledgeable on private prison REIT's but what is it about private prisons that their real estate is "irreplaceable" as you say? Could you expand on that one?

Expand full comment

ReplyCollapse

2 replies by Alpha Letter and others