Borrowed Ideas
Revealing a few interesting positions in my book
Next Plum Capital Pitch
Dear Subs, hope you all had a great weekend. Just as a tease, I am working on the next high conviction pitch, and I think this one is going to be a real crowd pleaser. Good news for larger funds and HNW subs too, because this one trades like $10mm a day and should be actionable for most people. Not sure when I’ll be able to finish all the work, but hopefully should be hitting your inboxes later this week or the next.
Borrowed Ideas
As I alluded to in earlier posts, I am very mindful of the content I publish, because I’d imagine it to be pretty annoying if you sign up to a Substack and they bombard your inbox with frivolous emails. You will never get spammed by me, I only plan to publish when there is a new idea, or if there is a meaningful update to existing ideas. That’s not to say that I will never experiment with different forms of content, but I will take subscriber feedback into account and be judicious about it.
With that out of the way, I am writing to you because since I started the blog, I have received numerous inquiries about my portfolio in regards to what other names I currently own. In response, I wanted to get a short post out to address that question (yes I like to give my subs what they want!).
To be fair to all subs, I am not going to disclose new ideas to different people at different points in time. Everyone will receive new Plum Capital ideas at the same time, upon publication, so that matter is easily settled.
However, I don’t mind sharing some of the existing positions in my portfolio that were originally “borrowed ideas” – and what I mean by that is ideas that I found as a fully fleshed out thesis in the public domain, loved the setup, did my own DD and subsequently invested. I won’t go into huge detail here on the respective investment theses, the original authors did the heavy lifting and I am not trying to sneakily get credit for their work. Also, I am only including the true “public” ideas – there are some others that I sourced from pitches that were behind a paywall, and I will not be mentioning them to be respectful to those businesses.
Hunter Douglas (AMS: HDG)
Jeremy Raper (@puppyeh1) did great work on this, including a successful activist campaign (check out his open letters!). Hunter Douglas is a building products company, focusing on windows, blinds and drapes. The Company trades at an absurdly low valuation, at 4.7x – 6.0x EV/EBITDA (depending on what your estimate for FY’21 EBITDA is) while inferior comps are trading at 10 – 15x on 2021 numbers. Downside is well protected as the recent tender offer was pulled at €82/share, when the founding family did not want to go through a contested squeeze-out, where they had a good chance of losing. The risk/return profile is truly asymmetric, and this is a large position in my book.
Various SPAC situations
Andrew Walker (@AndrewRangeley) has a number of interesting SPAC ideas in the public domain. Andrew is a triple threat, he does really good work on compounders, deep value and special sits – a rare combination! I particularly enjoy his SPAC-related posts, as he has uncovered a ton of alpha there in the past 12 months. I think all his pitches are well thought out as standalone investments, but has the added protection of the put option on Trust value at the deal vote. Therefore, I have allocated a good deal of my cash to these positions, as I see no reason not to. Downside protection is unquestionable, and you get the “free look” to a potential pop if one or more of them captures the attention of the market for whatever reason. And you get Andrew’s expertise for free as he has hand-picked the more interesting ones out of the entire SPAC universe.
Hemisphere Energy (CVE: HME)
Caveat Emptor – this one is illiquid, and definitely up there in the risk spectrum so a strong word of caution is required. With that out of the way, I loved Harris Perlman’s (@OtterMarket) writeup on Hemisphere Energy, a micro-cap listed in Canada. This is an oil play, at a very cheap valuation with strong potential for a multi-bagger outcome in the next couple of years if the Company is able to execute. The opportunity exists because basically no one knows about it (@OtterMarket is an expert at turning over rocks in the micro/nano cap space). I personally like setups like this, because I am a general commodities bull and a strong believer in the reflation trade. Again, this one is not for everyone, but it is one of the more fascinating pitches I have come across in recent months.
I’ll stop here, but if subscriber feedback is positive, I am happy to do more of these posts in the future. Speak soon,
Plum Capital
love the borrowed ideas, thanks for sharing
Thank you. This is useful