23 December 2023
Exits
CNX
I have sold out of CNX entirely with a 60%+ gain. It is a well-run business, but I am not comfortable with capex rising much faster than production, which has a negative impact on FCF. Recent buybacks have not been covered with cash flows, which has led to higher borrowings.
The Internet Company (TIC)
I sold out of TIC on 14 December with a nominal gain of 2% as I have not managed to develop a strong conviction in its business model. While valuation remains undoubtedly cheap (c. 6x forward P/E and mid-teens FCF yield), a lot of earnings come from recently acquired businesses. I have not found evidence that the company has a superior M&A process that adds consistent value. Even more importantly, digital marketing remains highly competitive, with most of the value coming from individuals, especially at smaller companies. With a narrow moat, TIC’s earnings have much lower visibility and higher risks.
New positions
I opened two new positions in the past two weeks. One of the companies was profiled in the latest November MSIL edition. The other is a business that has increased its EPS by 13.4% annually over the past 10 years while reducing its share count by 30%. Here is why the opportunity exists.
xx__
xx__