Some Updates

This has been an interesting year so far. Despite being 30% in cash, I am down about 1.5%, which is more than the market.

Two relatively large positions are down significantly YTD. LUK is down nearly 20% ($26.50 to $22), and CFX is down nearly 25-30% ($40 to $30).

LUK made quite a few changes including changing its name and ticker to JEF, selling a large part of National Beef and all of Garcadia, and bought back nearly half a billion dollars in stock. For a $8B market cap company that is nearly 6%. While LUK or JEF has been a frustrating stock to hold, I can’t help thinking management is trying to do the best they can. I still think this is a stock worth north of $30, and am happy to hold on.

CFX expects to earn between $2.05 – $2.20/share (slide 20 on Q1 2018 presentation, link) for 2018. It seems like it is getting itself back on track. At a 18x multiple, they should be worth $36-40/share. Plus, it is a cyclical business that gets better with time, and it seems like a lot of its end markets are improving.

My most frustrating holding has been ALJJ. 2018 has been absolutely disappointing for reasons outlined in my last post on the company. Since then an additional “meh” quarter has gone by. The stock has halved from $3.15 at year end to $1.50-$1.60 last week. The company issued updated guidance calling for adj. EBITDA of $31-34m compared to $36-39m at the start of the year. If I assume interest, capex and tax to be on the higher end of previous guidance ($10m, $9m, and $1.5m), and divide by number of shares (37.9m), I still come up with a FCF/share of 28c – 35c. At 10x FCF, the stock could be worth twice its current price! The valuation was too compelling to pass up. I held my nose, and increased my position by 40%. I currently own 7000 shares at an average price of $2.81.

If the price of Under Armour holds steady, I will have escaped another holding full of drama with a small profit (5%). I started chasing UA to teach myself some options trading, and ended up buying at $20 and $16.50. The stock got halved from $20 to $10 over 2017, and has now jumped back to near $20. I think it is easily worth $15-$20, and might, with good execution, be a worth several times more. However, with the market getting choppy, I thinking there are more lower risk propositions available than last year.

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