Special Situation Investments

SSI tracking portfolio is up by 5% in January 2023. A detailed performance breakdown is provided below.

Summary of SSI activity during January 2023:

Portfolio Ideas – 1 previously closed Portfolio Idea was returned to active cases. 3 Portfolio ideas were closed.
Quick Pitches – 14 new pitches were covered in our weekly reports.
1 New Guest Post was featured during the month as well.

Below you will find a more detailed breakdown of tracking portfolio returns by individual names as well as elaborations on names exited during the month.

TRACKING PORTFOLIO +5% IN JANUARY AND +676% SINCE INCEPTION.

Disclaimer: These are not actual trading results. Tracking Portfolio is only an information tool to indicate the aggregate performance of special situation investments published on this website. See full disclaimer here.

The chart below depicts returns of SSI Tracking Portfolio since the start of 2017 – these are not actual trading results but rather an aggregate performance of Portfolio investment ideas published on SSI.

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PERFORMANCE SPLIT JANUARY 2023

The graph below details the individual MoM performance of all SSI Portfolio ideas that were active during the month of January 2023.

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IDEAS CLOSED IN JANUARY 2023

Blucora (BCOR) +21% in 2 months
Recently the name and ticker were changed to Avantax (AVTA). Last year, the company sold a large business segment for $620m in after-tax proceeds and promised to return most of the excess cash to shareholders. The total capital return was expected to amount to 40%-50% of the market cap. Similar situations (sale of large division + return of capital to shareholders) have been covered on SSI before and have generated excess returns. Given the trading liquidity constraints ($8m/day), a large tender offer at a premium to market prices was clearly in the cards. After the idea was published BCOR shares ran up in anticipation of the tender announcement, then later in anticipation of tender pricing, and then even further after the tender was launched. All turned out exactly as outlined in the initial thesis pitch and the idea was closed with +21% gain in 2 months.

Nanoco Group (NANO.L) -22% in 4.5 months
This was a patent infringement case between Nanoco and Samsung with a binary outcome – multi-bagger upside if the litigation works out or a very steep downside if it fails. Nanoco was arguing that Samsung has willfully infringed a number of NANO’s patents in the production of Samsung’s QLED TV’s. Litigation background and several additional details suggested that NANO might have the upper hand, whereas even the most conservative calculations of potential damage claims pointed towards a possible jackpot for the company. Both parties have eventually reached a settlement right before the trial was about to start, however, the terms were not disclosed to the public and negotiations were still ongoing. Unfortunately, subsequent communication from Nanoco‘s management was very ambiguous but kind of suggested that the settlement award is likely to be much smaller than initially expected. Given the remaining uncertainty and materially changed upside scenario, the idea was closed at a 22% loss.

Link Administration (LNK.AX) -20% in 8.5 months
Aussie superannuation fund services provider Link Administration was getting acquired by its peer Dye & Durham for $5.50/share in cash + A$0.15/share in potential further distributions. The spread stood at 26% and the downside seemed well protected – the setup appeared very attractive after my initial due diligence. However, I have clearly underestimated the regulatory push-back. The transaction right away ran into roadblocks from regulators, which demanded divestments and penalty payments on legacy businesses. After a rollercoaster ride and number of back and forth with the buyer and the regulators, the merger was withdrawn and the idea was closed at a 20% loss.

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