What Matters

Productive > polite.

My most limited resource is my time.  I try to deploy it as effectively as possible.  I’m at my best dealing with simple, objective metrics: lift pounds, run miles, make dollars.  More nuanced, subjective goals tend to be bullshit.  If I don’t know what I’m playing for, it is probably because there’s no upside and others simply want to spend my time for their ends.  The biggest struggle I have is that I triage my priorities but others jump in line with theirs.  That often leaves me struggling between being politely reactive – deferring to their priorities – and getting to my own.  Others’ priorities take on this life of their own where I answer questions because I’m asked then the whole thing gets characterized as something of my making even though it might not be a top 10 or even 100 priority, just my effort to be polite and react.  Enough politeness.  Enough reactions.  Back to basics. 

I want to refresh.  I want to hit on what I actually think matters today.  No inventory bias, no polite reactions, just my own view of what I should do today.

• Arbutus Biopharma Corporation (ABUS) has a market cap of $644 million.  It is a science project plus a litigation stub.  I don’t care about the former.  The latter is worth a multiple of the market cap.  The good news is that they will settle or win a suit against Moderna (MRNA) and Pfizer (PFE) worth billions of dollars within the next few years.  The bad news has been that they have a dilutive at the market secondary that bleeds value every day.  But a shareholder activist has come to our rescue and he’s already impacting things to the benefit of ABUS holders.  Management has agreed to stop their ATM secondary for the remainder of this year and possibly well into next.  Shares are a steal under $5.  This is one of my biggest and favorite positions.  I am in it for the long-term and will do everything that I can to insist on our getting the maximal value from this promising opportunity.  Stay tuned… 

• Enhabit (EHAB) EHAB is another steal, at least anything you can get under $10.  Worth $12 on its own or $17ish to the right buyer.  Management is revolting (adjective).  Shareholders are revolting (verb).  With a board and management refresh in Q3, costs can be cut and the company can be put on a healthy financial footing.  Then we can rerun a sale process after management’s botched half hearted and half brained effort.  Either private equity can buy it as a fixer upper or we can fix it then sell it to a strategic buyer after it is cleaned up.  My checkbook and pen are out.  I fade topics that are of others’ making but not those of my own.  This one matters to me (also, one of now 3 personal account positions among immediate family members).

• Ponce (PDLB) is a third badly managed name!  I am not a masochist.  I don’t have some prurient interest in getting spanked by inept CEOs.  I just like hidden value and mismanagement is a great value hider.  Here’s the deal.  Bay Community Bancorp (CBOBA) just sold for $14 per share in cash, an 80% premium to its previous stock price.  Ponce rhymes.  In fact the same math gets it to… coincidentally the same $14 per share in cash in a deal.  This could be one of the next bank deals.  Faster, please.  The reasonably likely downside is $8, base case is $11 which doesn’t take into account their ECIP prefs and upside is $21 taking ECIP into account.  $14 is where a buyer and seller would split this (barely) hidden treasure.  I’d buy any position before the CBOBA deal closes.  Once their buyer marks their books, it will be clear that they paid next to nothing for that deal despite the 80% premium.  The other comparable targets such as PDLB will cost at least 25% more by then as the hidden ECIP value is clearly demonstrated.

• Rusoro Mining (RMLFF) costs around $1 today.  It will probably get a distribution well over $1.50 next quarter (I’m not one for false precision but my arithmetic gets $1.65 for what little that’s worth).  Venezuela’s socialist dictator stole a gold mine, the miner sued and won to collect compensation, a US court is auctioning off Citgo to get our money back, that should be done next month, hopefully/probably Citgo fetches a full price, then we get paid back with that money.  It has been a long windy road.  Full disclosure:  I hate socialism and socialists so my heart is really in this one.  Property rights are human rights. 

Caveat

Something could go wrong.  Everything could go wrong.  As a buyer I always beware. I do my own work and think for myself.  You should too. 

Conclusion

I could be wrong.  Obviously I don’t think I’m wrong or I wouldn’t have invested many millions of dollars in them.  But if I’m even approximately right, even within 20-30% of right, these are terrific investment opportunities.  Freeride away.  On ABUS and EHAB you even get to freeride on hundreds of thousands of dollars of costs that some shareholders will bear to unlock their value.  Whenever I’m politely reacting to some bureaucratic minutiae of some flavor or another, these are the things that I wish I were working on. 

TL; DR

I own ABUS, EHAB, PDLB, and RMLFF.  The first two will require some work on my part.  I expect them to be lucrative and fun, possibly in the extreme.  The latter two should take care of themselves. 

Disclaimer / Disclosure – As previously disclosed, I’m long each of these securities.