No Thesis Creep For Me…
December 20, 2019
The Only Constant Is Change…
January 9, 2020

2019 Position Review

Quick housekeeping note: I’m writing to you from Coimbra, Portugal and will be heading to Porto tonight. Visiting countries is fun, meeting locals makes travel better. If you are in Portugal and would like to meet up, please email me at’ve included some travel pics for good measure)

Lots of people have opinions on the stock market. Once a year, we swallow our pride and get to see who was right. After five years where I crushed the market, I guess I was due to miss by a bit. That said, I’m still up decently on the year—which isn’t so bad, especially given the fact that I got a few wrong this year.

I like to talk about asymmetry on this site. What is asymmetry? It’s looking for opportunities where you risk very little to potentially make a few times your money. Investments often don’t work out as expected—hence the reason that it’s silly to look for small wins. You need to look for multi-baggers. Nothing shows this better in practice than 2019 where I got three of my top-5 positions wrong (AR/SD/TSLA) and one further position in the undecided category (ASPS). Meanwhile, my year was more than acceptable. Why? Because I absolutely crushed it in shipping and that happened to be my largest position weighting—asymmetry in action.

Positions Mentioned Review (in alphabetical order and performance from closing price on day before mention)

Altisource (ASPS – USA) +2%

2019 hasn’t been the inflection year for Altisource. That said, the company has made amazing progress at simplifying the business and cutting costs. Of all my positions, Altisource remains my favorite—particularly as it hedges out the rest of my book as the top “long-short” name I have found.

Antero Resources (AR – USA) -55%

Let’s face it, the US is awash in natural gas. International consumers of LNG are starting to become glutted with supply. There’s too much natural gas globally and the price of producing it keeps declining. I thought that I would be insulated here because of the value of AR’s stake in Antero Midstream (AM – USA) along with AR’s hedge book and ability to pivot towards NGLs. AR created value all year, they grew their production with minimal cash out-spend, they financial engineered themselves some value and the shares remain cheap. None of this mattered in the end. Cheap stocks get cheaper if there’s no tailwind. The best potential tailwind here is a slight recovery in natural gas prices, before higher prices bring on a new wave of supply. In the end, I simply got this one wrong. I predicted a recovery in natural gas that hasn’t happened and may not happen for years.

Cannabis Basket Short +20 to 50%

I got this one stunningly right. While I didn’t short the top (shorting tops is somewhere between reckless and insane), I got short on the first big downside break and rode it. Unfortunately, puts were expensive, in the money calls kept getting assigned and borrow costs were a few percent a month. I booked this one too soon but think most of these companies are just as good of shorts today down 70 to 95% as they were near all-time highs. The vast majority of these companies will disappear over the next few years and the survivors will have economics that are roughly in line with growing highly-regulated celery.

DXY Short -1%

I believe strongly that the US Dollar is overvalued and likely to crack. The charts lined up well for me to take a shot on goal and risk very little to see if this was the break I was looking for. I got stopped out instead. I still believe the US Dollar has downside bias over the next few years.

Bacalhau (cod) is the national dish of Portugal. There are more ways to prepare it than days in the year…

Greek ETF (GREK – USA) +15%

I made about 15% on this one by buying the day of the snap election and holding six months until my time-stop kicked in. I think GREK works its way higher, but I am super bearish about the global economy and the Greek economy is very highly leveraged to tourism, which tends to be the first thing to get cut in an economic crisis. I had a good run and chose to eliminate the position to free up capital for better opportunities.

Health Insurance Innovations (HIIQ – USA) -5%

This is my fastest reversal ever. I thought I was buying a misunderstood company trading at a mid-single digit earnings multiple, while giving me a free look at how their Medicare business would do. Three days later, they announced that they would put their short-term medical business into run-off and use the proceeds to accelerate their investment in the Medicare business. While it makes sense to redirect resources to the higher return on capital Medicare business, I signed up for a cheap earnings multiple with a free look at the upside. I don’t want to have to bet on management execution here. When the thesis changes, get the hell out.

Ponzi Sector Short Basket -10% to +10%

The Ponzi Sector is one of the craziest bubbles ever invented as the vast majority of these companies have no path to profitability and are effectively just stock promotes foisted on shareholders who are too stupid to realize this. After the inability for WeFraud to complete an IPO, investors started to wake up to all the other Ponzi Sector names that were already public. When the Fed panicked at the bubble collapsing and started “Not QE,” I gave up and booked my basket for a small overall loss of a few percent. You can’t fight the Fed when they’re in bubble-building mode.

Sandridge (SD – USA) -59%

Sandridge is unusually cheap. It trades for between one and two times EV to cash flow and that’s before even including the value of the headquarters building. Management spent 2019 destroying value. However, there’s a lot of value here and it was impossible to destroy it all. Uncle Carl has a plan, but we don’t know what it is. I refuse to believe that $4 a share is the right price for the shares when Icahn turned down a bid at $13 per share under similar commodity prices as today. I’ve continued to average down on this one. I’ll either be spectacularly right or a bag-holder like Uncle Carl. With the removal of the CEO a few weeks ago, I assume Icahn is preparing for a sale here—particularly as it’s non-core to him in terms of size. Then again, I have zero insight here except that it’s cheap. Mea Culpa.

We visited a wine-making facility. These barrels are 15 feet high and go on for over a thousand feet…

Scorpio Tankers (STNG – USA) +124%

I have closely followed shipping for almost two decades. Shipping bull markets are short-lived but explosive—particularly as fleets tend to trade at a discount to NAVs based on discounted asset values at the lows and at a multiple of cash flow at the peak. Often leading shipping companies appreciate by ten to fifty-fold. Scorpio is up 124% from my entry. More importantly, I made it a position limit position with a healthy weighting in call options. Dirty tanker rates are now at multi-year highs and some individual routes are at all time highs. Clean tanker rates have lagged a bit, but are still at impressive rates in the $30 to $40k range for LRs and $20 to $30k for MRs. At these rates, STNG should have cash flow of $20 to $30 a share, even before adding another $5 to $15 a share of savings from scrubbers. Put it together and STNG could have cash flow between $25 and $45 a share in 2020. Of course, rates are volatile and these numbers could prove conservative or totally inflated. In any case, I think we’re in the third inning here and I suspect that if rates hold at roughly today’s levels, STNG is going to trade for a triple digit share price soon—particularly if the company gets aggressive about buying back shares on the way up. Then again, this is still shipping and bad things can and often do happen.

Shipping Basket +0% to +100%

I have been rather emphatic that IMO 2020 will be a boon for all shipping companies. I have a basket of the better ones as I was already at my position limit in terms of STNG and wanted more shipping exposure. The basket has done just fine and I suspect that these companies will continue to trade higher in 2020. Individual stocks are up between unchanged and 100%.

Stage Stores (SSI – USA) +135%

Sometimes you get it right and the market reprices a security almost instantly. This is what happened with SSI. Channel checks by friends show a business that is experiencing huge comparable sale increases on newly converted stores. I suspect we see some good news soon as Q4 results get reported at ICR.

Tesla (TSLAQ – USA) -3%

Tesla started the year as a fraud—it remains a fraud. Fortunately, I threw in the towel at $295. I was up a lot, traded around the position a bit at the lows and ended up losing small. Since we live in a post-factual world, I’ve simply moved on. That said, congrats to Musk, he bluffed his way past $420.

Value investors should rejoice at how cheap it is to eat, drink and get hotels in Portugal. A high quality liter of house-made wine at a high-end place is 4 Euros.

Uranium Participation Corp (U – Canada) -3%

I knew I would be early when I put this one on. Clearly, I’m still early. That’s fine. UPC decays by three cents a year and is effectively a perpetual option on higher uranium prices. Conversion and SWU pricing continue to increase, this will ultimately drag physical higher. Meanwhile, above ground stocks get worked down every day that the structural deficit lasts. Every day that passes, puts us one day closer to when prices respond. I continue to slowly add to this position.


In summary, despite a few misses, the year turned out as a winner. As mentioned above, asymmetry made up for my mistakes in energy. 2019 was also a year to refine my strategy of only investing with a tailwind going forward. Cheap doesn’t matter any more as it can always get cheaper. You need to know that you have the wind at your back. The trend is all that matters. With that in mind, I’m off to enjoy my last few days in Portugal. I return on the 5th and am focused on finding more great asymmetric opportunities.

2019 has been profitable. Let’s hope 2020 is even better. I want to wish everyone a great year ahead in 2020.




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Disclosure: Funds that I control are long shares of AS, SD, STNG, STNG call options, various shipping equities, SSI, U CN and short HIIQ puts.