In today’s briefing:
- Razer’s Scheme: And that Is a Pass
- Razer Inc (1337 HK): Storm In A Tea Cup
- Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
- Giverny Capital Asset Management Q1 2022 Letter
- Teekay Corp: A near Net-Net, Special Situation
- Revisiting the US Dollar View and Its Implications for EM Currencies
- Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom
- Moonbirds. NFTs as a Funding Mechanism
- Greif B Shares – Boring and Reliable
Razer’s Scheme: And that Is a Pass
- Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
- Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme.
- At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.
Razer Inc (1337 HK): Storm In A Tea Cup
- Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.
- The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup.
- Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close.
Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
- We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
- There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
- We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place
Giverny Capital Asset Management Q1 2022 Letter
- Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
- The best companies tend to weather crises better than average ones, Poppe says.
Teekay Corp: A near Net-Net, Special Situation
- I am quite wary of the shipping industry, due to an almost flawless tendency towards value destruction, but have been following Teekay Corp (NYSE:TK) for several months after the recent sale of its LNG division has left it with enough net cash to cover its market cap.
- The group was founded by Danish shipping broker Torben Karlshoej in 1973 and has headquarters across the globe today.
- The margin of safety seems generous today at a $333m market cap.
Revisiting the US Dollar View and Its Implications for EM Currencies
- As the US dollar approaches its highest level in a decade in line with my expectation, I reiterate my view of the dollar remaining strong in the near term.
- The dollar spike coincides with the rise in US rates volatility, which makes sense as the market is trapped between Fed tightening and risk aversion arising from rising recession probability.
- As the year progresses, I expect the dollar to weaken and the environment to turn supportive of EM currencies. Until then, I recommend relative-value trades and hedging with the euro.
Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom
- This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
- The key judgement is whether a slowdown is temporary or the beginning of a trend. These shorts tend to have high valuations and betas. Multiple compression accelerates the stock’s decline.
- Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom
Moonbirds. NFTs as a Funding Mechanism
- The latest sensation in the NFT space is some automatically generated pixel art animals that people are buying for astonishing amounts of money to use as their profile pictures.
- Yet here we are again. This new collection is Moonbirds: a set of 10.000 (yes, they also used the 10k number) cute little creatures, and it has broken records with over $281M in sales.
- The reason being, probably, that they have masterfully recapped under one collection some of the best practices in the NFT space, and then added their own flavor.
Greif B Shares – Boring and Reliable
- They make steel/plastic/fibre/paper based industrial packaging. 10-15% ROIC including intangibles, and nearly 20% ROIC on tangible assets.
- Earnings this year will only be a tad bit higher than in 2019 (before synergies of their early 2019 Caraustar acquisition were realized), so it is not a Covid winner.
- Yet it trades at a historically low PE multiple
Before it’s here, it’s on Smartkarma
