As we kick off the fourth quarter, it looks like any potential rallies in stocks will be propelled by investors who believe in progress and the ability of companies to navigate their way through troubled waters despite negative news flow. The markets and sectors rallying the hardest are giving us a strong hint of good things ahead, so we have to take note of the “price is truth” axiom and position correctly. True believers are frantically putting money to work straight into the face of domestic and global uncertainty which is really quite impressive. In the short-term markets could melt up leaving most investors caught off-guard and we do not intend to be one of them. But be warned that my bullish stance has a best-before date of two to three months, after which extra caution will be warranted.
SOFTBANK (SFTBY.US) – Most recent purchase Oct 6th, 2017 at US$41.22
SoftBank is multinational telecommunications and Internet corporation headquartered in Japan. What drew my attention to this name was the fact that the company has a market value of about US$99 billion, 40 per cent less than the US$160 billion combined value of its holdings in three listed companies—Chinese e-commerce giant Alibaba, U.S. telecom operator Sprint and web portal Yahoo Japan. That seems low given the quality of those assets, which include U.K.-based chip designer ARM. It also runs the Vision Fund, a $95 billion technology fund that has invested in companies like WeWork and chip maker Nvidia and today we learned of a new investment Mapbox. SoftBank generated US$5 billion in free cash flow last fiscal year.
IMPINJ (PI.O) – Most recent purchase August 15th, 2017 at US$31.40
Impinj is a leading provider of RAIN RFID solutions. Impinj enables wireless connectivity to billions of everyday items such as apparel, medical supplies, automobile parts, food, and more. Radio frequency identification (RFID) is a form of wireless communication that uses radio waves to identify and track objects. RFID is a generic term that encompasses different frequencies and standards which include both NFC and RAIN – two technologies which are supported by industry alliances. RAIN RFID is a passive (battery-free) wireless technology system that connects billions of everyday items to the Internet, enabling businesses and consumers to identify, locate, authenticate and engage each item. RAIN has connected over 20 billion items to date. The RAIN RFID Alliance is an organization founded in April 2014 by Google, Intel, Impinj, Smartrac and AIM. Impinj’s total market opportunity is highly correlated with IoT-related hardware spending. The company could sustain 25 per cent plus near-term growth and 20 per cent plus growth on a long-term basis.
ALIMENTATION COUCHE TARD (ATDb.TO 0.39%) – Most recent purchase March 1st, 2017 at $61
A long-term holding of mine whose stock price has not performed very well of late. The recent announced acquisition of Jean Coutu by Metro has created some weakness in the name. ATDb shares were under pressure this month as investors were concerned that MRU may monetize its Couche-Tard position in order to fund the PJC.A acquisition. MRU holds 32.2M shares of ATDb and would likely look to monetize part of that in order to finance part of the transaction, as has been telegraphed many times in the past. I expect this weakness will be temporary in nature and would view this as an opportunity to add to ATDb positions. In addition, growth by acquisition is an important part of the ATDb story, and management has proven time and again it can execute this strategy well. Given the fragmented nature of the convenience store market, there remains plenty of opportunity for further consolidation. Lastly, ATDb mentioned in a conference call that it was close to forming a relationship with a consortium of car manufacturers on a charging network throughout most of its core markets in Europe which will aid in driving traffic to its locations.