Yet Another Value Podcast - Random Ramblings May 2024: conferences, control shareholders, energy drinks and stock advertising

Episode Date: May 8, 2024

Welcome to the first edition of Andrew's Random Ramblings on the Yet Another Value Podcast. Once a month, Andrew will share thoughts on a few topics - this episode includes: investor conferences (since returning from Planet MicroCap Showcase: VEGAS 2024), control shareholders, energy drinks and stock advertising. For more information about Rangeley Capital, please visit: http://www.rangeleycapital.com/ Chapters: [0:00] Introduction to Andrew's Random Ramblings + Episode sponsor: YCharts [3:29] Investor conferences - just returned from the Planet MicroCap Showcase: VEGAS 2024 / time for a Yet Another Value conference? [6:28] Control shareholders [12:24] Energy drinks [15:24] stock advertising This episode is sponsored by our friends at YCharts A typical day in the life of a financial advisor calls for back-to-back client meetings, juggling portfolio management, and the consistent desire to improve client relationships. YCharts’ report and proposal tools could be the missing piece to help you effectively handle these time-consuming tasks. Now more than ever, clients want to hear from their advisors. And with user-friendly templates at your disposal, generating impactful client reports can be easily integrated into your everyday routine, helping you free up time and focus on what matters most: enhancing client interactions and growing AUM. Join thousands of users who rely on YCharts by leveraging personalized proposal reports to truly showcase your value add. Click the link in the show notes to start your free YCharts trial and tell them I sent you (new customers only): https://go.ycharts.com/yet-another-value

This episode is sponsored by our friends at Y Charts. With Y Charts, each output is a powerful visual that brings your analysis to life and intuitively explains the why behind your strategy. Go beyond a simple price chart and educate clients about the levers that truly impact performance or risk and emphasize your most important insights with tailored proposal reports designed with custom talking points, compliance-approved messaging, and seamless personalization options for importing marketing with collateral and firm branding. Click the link in the show notes to start your free Y-charts trial and see how Y-charts is a one-stop shop for screening, scenario building,

streamline proposal generation, and beyond, helping you make an impact and grow AUM with fewer hours spent on investment management. See the link in the show notes. All right, hello, and welcome to the Yet Another Value Podcast. I'm your host, Andrew Walker. If you like this podcast, would mean a lot if you could rate, subscribe, review, wherever you're watching or listening to it. With me today, I'm happy to have on as my guest, myself.

I'll explain that in a second. If you're a regular listener, you know, that's how I'd normally. started and intro the guest. But before I get there, just a quick disclaimer, nothing on this podcast is investing advice. That's always true, but particularly true today, because as I always tell everyone, man, sometimes I just wonder if I have, I've been doing this a while and, you know, everybody's got imposter syndrome and all the time, I'm like, do I have any clue what I'm doing? Like, maybe I should just like, am I just a monkey throwing darts at the billboard? I don't know. I don't know what I'm doing. But please consult a financial advisor, all that jazz. This isn't

investing advice. Anyway, what am I doing here? Look, at the beginning of the year, I always put up a little, you know, the state of the yet another value blog and podcast I consider my yet another value empire. I always put up some, most of the time, put up a review of my empire and kind of my plans. And one of the things I said is, hey, look, I love the podcast. It's one of my, I'm so glad I do it. It's one of my favorite things I do. I know it's different. And, you know, there aren't a lot of other people hosting finance podcasts, especially niche finance podcast.

But I really enjoyed it. I find it really energizing. And I said, I want to experiment with different. formats. So yesterday, I was on a run and sometimes when I run, I listen to podcasts and sometimes when I run to listen to music, I was listening to music. I was thinking about a bunch of stuff. I said, hey, you know, why don't you just pop on a podcast for 30 or 45 minutes and just talk about what's on your mind? Because the podcast, you're generally interviewing other people. You generally put your thoughts on the blog and your weekend thoughts. Why don't you try a blend?

So I'm going to try a blend. Do this podcast. I'll do it once, twice, three times, probably like once a month where I just say some things that are on my mind. If you love it, let me know in the comments and maybe we'll keep it going, assuming I think it's kind of worth the time. People are enjoying it. If you hate it, I'd say, please don't let me know, but I found people are much more likely to let me know they hate things in the comments than they love them. So if you hate it, I'm sure it will find its way to me.

Anyway, the way I'm going to do this is I've got some things on my mind. I've got four or five topics today. I'm just going to rant on them for five minutes each. So my topics just to let you know up front are some thoughts on conferences and seeing people in person, some thoughts on controlling shareholders and what they're telling us about, maybe not the market overall, but some situations, a possible bottom in telecom, some thoughts on energy drinks, and a bonus question on advertising as a short signal and when companies include their ticker and their advertisement. So I'll get to all those. Let's start. The first thing is I, you know, I am taping this. It is Sunday, May 5th.

I just got back from a travel to a conference. No, it wasn't Omaha for Berkshire's annual meeting, which was yesterday. I went to see my friend and the editor of this podcast, Bobby Marks. He hosts the Planet Micro Cap Conference. I went in Vegas. I have to tell you, I had an absolute blast. I love Vegas. I saw several investors who,

I really like. I spend a ton of time. And I just found it really energizing to be at a conference, seeing people in person. You know, I talk to lots of people on the phone, on the podcast, and that's energizing. But there's something particularly different about just like seeing people in person and hanging out with them. You know, I don't think this will, I don't think he'll get mad at me for saying this. I spend a ton of time with my friend and one of the podcast's most popular guests, Artum Foken. We grab coffee.

We grab dinner. It was just a lot of fun. So I guess the two things on conferences first, if Bobby's going to have me, I'll be back at Planet MicroCap next year. There were like, you know, 20, 30 like-minded small-cap focused value investors there. I'd love to turn it into 80, 90, 100. And if Bob, maybe next year I'll start like hosting separate tracks or something, but, you know, if you're interested in meeting up in person, that could be fun next year, just throwing that out. Also, I love being in Vegas for 48 to 72 hours after that, my, you know, my cluster all gets up and my heart kind of stops. The second thing is, you know, I've always had in the back of my mind, maybe I should do a yet another value podcast conference.

And I don't know what that would look like. You know, would I have some of it advertised on YouTube? Because obviously the YouTube channel, there's, you know, I'd have to run out of a stadium if everybody who listened was, it came. Should we, you know, invite 30 people and 30 investors and keep it between us, but have someone on YouTube, keep it all in person. How would you structure it? You know, in my mind, I think it would be like 30. investors. Everybody gets up and does a stock pitch for 10 minutes. Maybe we put that on the internet. Maybe we keep private. But it would mainly be us just like, you know, getting together networking. We'll probably do escape rooms. Anyone who knows me knows. I actually propose my wife through an escape room. I love escape rooms. I don't know if everybody's ready for how seriously I would take an escape room if we did it because I think I've probably done 250 and I've gotten out of 248. So if we didn't get out, we would, you know, the world will be down four or five investors because anyone who was in that room with me might might not be exiting. But. Anyway, it'd be a lot of networking and stuff.

So if you've got thoughts on the right way to do a conference or something interesting like that, I'd certainly be interested in that. You know, I've talked to Bill Brewster before about doing a podcast conference with him. Maybe I'd have to loop him in. Yeah, so if you've got thoughts on that, I'm all yours. Feel free to loop them over. And it's not lost of me that I just mentioned Artem Fokin and Bill Brewster, who claimed they listen to the podcast.

So, you know, maybe I'll see if they hit me up and say, Oh, yeah. I heard the mention. Okay. Anyway, second topic, control shareholders. You know, I did a recent podcast on Target Hospitality. The ticker there is TH. I can include a link in the show notes if you didn't see it. I thought it was a ton of fun. I was kind of losing my voice, but I was super excited to do that. But I cannot remember seeing as many majority shareholder deals as I've seen in the past, call it eight weeks. And a majority shareholder deal is Target Hospitality, right? Somebody owns 60% and they say, hey, I'd like to buy the rest of the company for, you know, the stocks at 10, I'd like to buy it for 12. Or I consider like, you know, if somebody owns 35% of a company and they try to take it private, I basically consider that a majority deal too, because 35% is a lot. You effectively control the company. I can't remember seeing as many of these deals as I'm seeing right now. You know, Target hospitality I listed just this week, wide open West, the sticker there

as well, got a bid last year, late last year, Goldman Sachs took HRT private. it. There's just a bunch of these out there. And I'm not going to list them all, but I think right now there's between 8 to 12. And I can't remember seeing this many out there before. And I don't use this as a sign that, you know, I would be interested because I do think there were lots of take private deals happening in like 2006, 2007 when markets were wide open. And obviously, that was a great sign for the stock market. But I don't think this is a stock market sign. But I do think this is a sign that things that are a little more illiquid, maybe with, you know, something that has a 35 or 50 percent owner is going to be more illiquid because half the stock's taken up.

I think things that are a little more illiquid, maybe a little more cyclical, which most of these businesses have a little bit of cyclicality or hair or maybe some unique risk. You know, target hospitality has the government risk. I think that a lot of these companies are trading cheaply. And, you know, if you think of a majority shareholder, generally they're a majority shareholder because they want to reduce their shareholders over time, right? It's a private equity firm that owned 100%. They IPO to go down to 70, and over a series of maybe five offerings over the next three

years, they're going to go from 70 to 60 to 40 to 30 to 15 to zero, right? So generally, a majority shareholder wants to go down. And I wonder if it's almost the old, okay, you're forcing my hand, right? The majority shareholders are sitting there. The stocks are super cheap. Maybe a lot of these are buying back stock, but because they own 50%, there's not a ton of liquidity there. So they're saying, hey, debt markets are wide open. These are training for a fraction of their private market value. If the stock market's never going to give these a multiple,

maybe we do this. And then, you know, two years from now, we'll re- IPO it or we'll sell it to strategic or we'll sell it to another P. So I'm not using that as something where I'm saying, hey, there are eight take privates now. The market on a whole is cheap. Or, hey, two months from now, there are zero-take privates. The market's flatly overvalued. Neither of those, I just think it's interesting. And, you know, I do think debt markets are really wide open. And while the stock market's been decently stronger over the past 18 months, I think there's a really big discrepancy between public and private market values, particularly in more liquid stocks. So just something I'm thinking of. Speaking of, I mentioned wide open West in the ticker there

as well. I mentioned that and control shareholders, they got a bid last week from their control shareholder plus digital bridge. I look, I'm a huge bagholder in cable stocks. I mean, the worst the worst investments I've made over the past two years have been. I have just, I love cable stocks. I've always loved the story. I think that if you, whatever, I've loved the stories and I've just gotten killed on all of them. And it's been the real differentiator in just absolutely outstanding results and whatever. I do wonder if in the past month we've kind of seen the bottom of telecom.

And I mean that in a few ways. Look, wow, just got a bid from their controlling shareholder in Digital Bridge. you get a bid because your stock's really cheap, right? If you look at T-Mobile, which is a big telecom player, obviously, they've started buying and taking off little small fiber deals. They're not giving tons of disclosure around them, but I think if you look at the implied price that they're taking fiber deals and all these telecom deals out at,

it would make a public market shareholder blush in terms of the multiple that they're giving. And, you know, the wow offer and the T-Mobile deal comes on the heels of consolidated got taken out by their majority shareholder late last year slash early this year. So a lot of these assets are trading well below replacement value. You know, Cable 1, who I had their CEO on the podcast, I've got their stock trading at about $2,000 per home pass. And if you think about a fiber buildout, which there's still plenty of interest in doing, a fiber buildup generally takes about $1,000 per home pass to upgrade copper to fiber.

So, you know, there's $1,000 there. It takes several years to get that upgrade in. Once you get the upgrade in, you have to go spend another about $500 per subscriber to connect them to the fiber network. You've got to do advertising. You've got to do, you know, there's the time value of money and all this sort of thing. So I think for a lot of these cable and telecom players with assets in the ground right now, they're trading well below their replacement value, what it would cost to go. And, you know, if you think about green fielding fiber, what it would cost.

They're trading below replacement value. they still gush cash flow. Yes, the near term has been a lot rockier than anyone two years ago thought. Fixed wireless has taken a lot more share than all but the most bullish telecom people can look at. But, you know, these stocks are really cheap. They're absolutely hated. And it's not loss on me that you're starting to see lots of private market money come

in at multiples that, again, I think would make public market multiples. If you told me, hey, my target price for Frontier is this practice. and I based that on the T-Mobile deal, you know, people would think you were absolutely insane based on how high the price would be. So I do wonder if they're bottoming there. Let's see. Oh, two last thoughts, energy drinks. So if you watch the podcast on YouTube, I'm holding up a Celsius right now.

An embarrassing confession of mine, you'll notice I'm drinking energy drinks a decent bit. Embarrassing confession of mine, I absolutely freaking love energy drinks. And I understand there's a little bit of a stigma associated with them. I'm only drinking sugar-free. It's okay, but I love them. I've got some no-coes at the table. My wife always asked me to quit, but I just, I love them. So anyway, I've got a post.

I might do this at some point, but, you know, if I told you, hey, what's the biggest stock winners of the past 20 to 30 years? Number one, maybe not actually number one, but maybe actually number one. I know it was for a while was Monster Energy Drink. But actually, what's the biggest stock winner of those? last 10 years. Maybe not actually number one, but close would be Celsius, the energy drink, which I'm literally drinking right now. It's not lost in me that two of the biggest winners are in the energy drink space and like literally shame on me because as I just said, I'm a huge

energy drink fan and I missed both of them. A monster because when I started public market investing, the stock had really run and I just didn't realize how far ago. And Celsius back in 2018, there were some, let's call them yellow flags, but they were very yellow in the accounting. But, you know, at some point it's, hey, do you like accounting or do you like making money? And I think in 2018, I specifically remember I went to a workout class and there were four people in the class, including the instructor who were all drinking Celsius energy drinks. And I was like, oh, this seems to have legs. So, I mean, I guess where I'm trying to go is, what is it about energy drinks that has created such big winners, right? Like Monster, I could understand.

It's at the forefront of a brand new trend. It's got this great, it's got this great brand. But Celsius is kind of hard to believe how well they've done, right? Like, there's plenty of competition in the energy drink space right now. Everybody's going for it. You know, I don't understand how Celsius is one so big. And I'm just really interested in exploring, like, there's some categories that it seems keep producing winners, energy drinks being one of them. There's some very small energy drink players out there right now that I think could be interesting.

I probably need to spend more because, again, they should be in my wheelhouse. And you've, you know, you miss Monster, shame on you. Then you miss Celsius. It's approaching shame on me. And if you missed the third one, I'd kind of be like, hey, you know, what's going on? But anyway, just there's something interesting about the energy drink market, you know, with soft drinks. You really only saw Coke and Pepsi be winners. and diet, Dr. Pepper Snapple, if you got in the stock at the right time, you could do well

on and off, but that was it. And energy drinks, they appear to be able to leverage other people's distribution. I'm just, I'm really interested in why we keep seeing big winners there. Okay, last thing I wanted to mention, I saw a tweet on this. I can't remember who said it, but I'm sorry for not giving you your hat tip. But somebody said, hey, when I see a company that advertises their stock, You know, they put their ticker, oh, my wife's here. I'm going to pause it.

And then I'll finish this thought in one second. All right. Sorry, my wife was walking in with the kiddo. There's the nice thing about doing a solo podcast. You can pause and press record whenever you want to and not have to worry about the guest time or an awkward pause or anything. Anyway, the last thing I wanted to talk about was companies that advertise their ticker. You know, if you sometimes, I watch like no CNBC.

I'm a cord cutter. I don't watch any CNBC. But I do remember sometimes you'd see an advertisement and, you know, there'd be an advertisement for a company. And then the next one would be an advertisement. And at the end, it would say, you know, like Exxon, traded on the NYSC under XOM or something. And, you know, sometimes you'll go on CNBC. I always almost screenshot it when I see it. You know, it'll just be a company.

They're not even advertising their product. They're advertising their ticker. And a lot of times, you know, it's the smaller companies with a lot more hair on them that you'd expect. But sometimes I see like decently. big companies advertising, like with real businesses, advertising their tickers, and what I'm trying to, you know, if you're advertising your ticker, you're no longer your company, your product is not your, you don't have a product. You're really advertising your product as your stock. And I just wonder, A, is there a short signal there in terms of companies that

advertise their stock? I would have to imagine the answer is yes, but I don't know. I'd love to see some academic research or if anybody's done anything and you know maybe it's the company where you know it's there's a bunch of things about hey we're exon mobile and i'm just using exon mobile as an example i don't even think they do their ticker but if it's we're exom mobile comes to our gas stations everything and then the last thing is exomobile here for humanity ticker xom maybe that's benign but then when you see the company that says xombs traded nysc look at our stock later company all this sort of stuff maybe that's a short signal i don't know maybe tv isn't a short but when you see someone advertising on like the top of CNBC.com or when you see somebody

advertising on Twitter, I Twitter, oh my God, I can't tell you how many, you know, 50, 100 million companies I'd see that were just advertising their stock. But anyway, I just wonder if there's some short signal or if there's something around companies, there are some companies who their product is their stock, right? And I wonder if there's some academic studies or anything that delineate how you can like separate these things out. My gut is all these companies are massive underperformers. but my gut is also, hey, these companies are very small, very difficult to borrow.

You know, people should remember nothing on this podcast investing device. Shorting is risky, very risky, but shorting really small companies is really, really risky. So I wonder maybe there's some alpha there, but it's kind of impossible to capture just because of high borrow, risks of squeeze and everything. But I am always interested in those. And yeah, so anyway, this was the five things on my mind. If you have thoughts on any of these, if you have thoughts on any of these, if you have thoughts on how I can improve me just rambling for 30 minutes into the microphone, if you have thoughts

on the conference ideas I mentioned, or anything. You can always hit me up on Twitter, response to the podcast, whatever. I'm probably going to commit to doing one or two more of these. And then if everyone hates it, you'll never hear from me. Well, you'll hear from me again. It just won't be hearing from only me. And if everyone loves it, you know, you'll probably hear once or so a month for me on this. But look, I had fun.

I obviously enjoy talking. and people might accuse me of doing this just because I enjoy listening to myself. So this was fun. Thanks for listening. And I'll see you next month. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast.

Please do your own work and consult a financial advisor. Thanks.