I found a way to access Bloomberg’s no.1 competitor for 90% less. Here’s how →
Most of my ideas can be split into two camps:
The first set are ideas that combine a very cheap valuation with a decent, cash-flowing business and activist-friendly ownership structure.
Those are ideas I’m comfortable concentrating heavily into.
The second set are what I affectionately refer to as ‘cigar butts’.
These are things so cheap, that you’ll probably still make good money, as long as you hold a basket of them.
The first set are better overall, but only because the concentration generates far superior returns.
The cigar butts are still brilliant, market beating, investments.
You just need to use less concentration and let the portfolio-dynamic do its magic.
Today’s idea is a cigar butt.
However, it’s also one of the best cigar butts I’ve found in a long time.
My last idea was very similar, and this one is an almost identical set up, in terms of downside protection.
When I found it, I just couldn’t resist writing it up.
As with many cigar butts, the earnings are pretty lame.
In fact, when we normalise out the unsustainable working capital swings, it trades at over 25x FCF.
However, if we did actually buy this business whole, we could extract our acquisition cost comfortably in 1-3 years.
In other words we’re buying a dollar of adjusted net current assets for 25 cents, or a dollar of tangible book value for about 14.5 cents once we include the buildings.
Even after sucking out our initial outlay, we’d be left with hard assets worth almost 5x what we paid.
Let’s take a look...