Mid 12 months 2023 Portfolio Evaluate

This will probably be extra of a quick check-in quite than a full evaluate.  Sadly, my current spell of underperformance has continued into the primary half of 2023, my portfolio is up marginally, 6.75% versus 16.89% for the S&P 500.  I am nonetheless above my long run objective of 20+% IRR; the present goes on.

The primary efficiency detractors have been outsized positions in MBIA (MBI) and Transcontinental Realty Buyers (TCI), two speculative M&A candidates which have did not materialize.  A lot of my different speculative M&A concepts did announce offers, however effectively beneath the place I had penciled them out.  In consequence, I’ve leaned extra on smaller place sizes within the damaged biotech basket and different flavors of particular conditions for brand spanking new concepts not too long ago.

The one outsized performer was Inexperienced Brick Companions (GRBK), homebuilders have exceeded low expectations as single household house stock has remained tight regardless of rising rates of interest.  I’ve begun to promote down my place, it had grow to be too giant and would not actually match into a worth or particular scenario bucket any longer.

Closed Positions

  • Radius International Infrastructure (RADI), INDUS Realty Belief (INDT) and Argo Group Worldwide (ARGO) all acquired bids that have been a bit disappointing from elevated early 2022 expectations when rumors surfaced that every have been on the market.  All have been rate of interest delicate companies the place the worth declined as charges rose sooner than initially anticipated.
  • Within the damaged biotech basket: 1) offered Talaris Therapetuics (TALS) after their current reverse merger with Tourmaline Bio for a pleasant achieve; 2) offered Oramed Prescription drugs (ORMP) for minimal achieve after just a few readers identified their promotional (possibly being sort) administration after which noticed it first hand; 3) Offered Carisma Therapeutics (CARM, fka Sesen Bio) after the reverse merger, was left with a stub place (acquired the non-tradable Sesen CVR) that I offered pretty indiscriminately for a small loss.
  • The Franchise Group (FRG) story ended quite disappointingly, have a little bit of a bitter style in my mouth, after rumors surfaced early within the yr that CEO Brian Kahn was contemplating taking the corporate non-public.  FRG then went on to have a horrible Q1 the place they breached a covenant of their credit score facility, stopping them from persevering with their dividend, that was disclosed similtaneously the corporate agreed to Kahn’s $30/share buyout.  For the reason that firm is sort of a one-of-one primarily based on Brian Kahn’s deal making, with a covenant breach, it was unsurprising that no different bidder got here ahead in the course of the go-shop interval.
  • I offered Star Holdings (STHO) shortly after the shut of iStar/Safehold transaction after just a few readers reached out with some issues on SAFE.  I will re-evaluate down the highway, that is one I will seemingly rebuy once more in some unspecified time in the future in its liquidation journey.
  • My thesis in Liberty Broadband Corp (LBRDK) was stale, I initially purchased Basic Communications as a merger arb and held via GCI Liberty into Liberty Broadband.  Offered it extra due to the chance value, reinvested these proceeds into extra present concepts.
  • Digital Media Options (DMS) ended up rejecting administration’s buyout provide and as an alternative took on debt to make an acquisition, now it is buying and selling beneath a greenback.  I wish to consider the existence of all these busted SPACs will ultimately flip into extra particular scenario kind alternatives, however these are questionable administration groups and it’d take a short time longer for administration and boards to totally come to their senses.
  • Sonida Senior Residing (SNDA) disclosed a going concern warning, I discussed some place else that I outsized this place given the mix of working leverage and monetary leverage, ought to have handled this extra as an possibility than a core place.  Shares have recovered a bit, however they nonetheless face a difficult labor setting and a scarcity of scale.

Present Portfolio

I do even have an assortment of non-traded securities (CVRs, liquidating trusts and a bond with no market) that I’ve omitted above.  Thanks for persevering with to learn and observe alongside, additionally thanks to all which have despatched me concepts.  Everybody please have a protected vacation.

Disclosure: Desk above is my taxable account/weblog portfolio, I do not handle exterior cash and that is solely a portion of my general property.  In consequence, the usage of margin debt, choices or focus doesn’t totally symbolize my danger tolerance.

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