More Q3 Letters, A Takeout Bid And TechCrunch’s False Start

This world’s spooky. There’s lots of uncertainty in life. Yet there’s four things that remain true:

    • Death
    • Taxes
    • Bill Belichick owning rookie QBs
    • Value Hive producing killer content

Here’s what we’ve got in store this week. More of our favorite value manager Q3 letters. Tiffany receives a premium takeout offer. A 16-page article on everything Jim Chanos. TechCrunch has an ‘oopsie’ with SnapChat, and more!

Housekeeping: Some of you may have noticed we didn’t include the Idea of The Week section in last week’s letter. The reason is that we’re profiling at least 1-2 investment ideas with each quarterly letter we cover. Once the Q3 holiday season wraps up, we’ll presume with our normal content.

Let’s rock and roll!

October 30, 2019

A Thief In The Night: What profession prides itself on deception, misdirection and charisma? No, I’m not talking about the CEO of Tesla Motors. I’m referring to magicians. This week’s trivia is simple. Which famous magician died on Halloween night?

You know the drill. House rules, no Google. Good luck!

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Investor Spotlight: Arquitos Capital & Massif Capital

GIFs by tenor

Last week we received two of my favorite letters: Arquitos Capital and Massif Capital. Steven Kiel (of Arquitos) and Chip Russell (of Massif) are exceptional investors. I had the pleasure of meeting Chip in Vail, CO. at the ValueX Vail conference. He’s a fantastic human and investor.

If I recall, he also beat me in corn-hole. So Chip, if you’re reading this. Yes, I am ready for a rematch.

Both letters offer thoughts on the markets and ideas on individual companies.

Let’s dig deeper.

Arquitos Capital: Staying Patient

Kiel’s fund returned -12.6% net of fees in the third quarter. YTD the fund’s returned -12.5%. Since inception (2012), Arquitos has compounded capital at an annual rate of 16.9%. That ain’t bad!

Kiel spends the letter discussing his three favorite ideas: MMAC, WED.V/WEDXF and SYTE. These are companies that Kiel would “own over the next decade even if there were no share price quoted.” That’s some serious conviction.

How can Kiel have that kind of conviction? Kiel believes the operations of each business provides potential exponential increases in value. He outlines this belief through his thesis on MMAC.

MMA Capital Management (MMAC)

MMAC is Arquito’s largest position. MMAC invests in debt associated with renewable energy infrastructure and real estate.

The company’s darn cheap.

It trades less than 4x earnings, 15% discount to book value and sports 24% ROE. Along with those figures, the company generated $22M in FCF last year. That’s good enough for a near 13% FCF yield.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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