Atlanta Braves or New York Knicks: Which One is Worth More?

Jonathan Boyar, Principal, Boyar Value Group and Principal Advisor to the MAPFRE AM US Forgotten Value Fund

The chance to buy a piece of the Atlanta Braves or New York Knicks through the US stock market is highlighted in these interviews with professional money managers Jonathan Boyar and Sam Coquillard.

Jonathan Boyar is a principal at the Boyar Value Group and Principal Advisor to the MAPFRE AM US Forgotten Value Fund.

He is President of Boyar’s Intrinsic Value Research LLC., an independent research boutique established in 1975 that counts some of the world’s largest sovereign wealth funds, hedge funds, mutual funds and family offices as subscribers.

He is also a Principal of Boyar Asset Management, which has been managing money utilizing a value-oriented strategy since 1983. Mr. Boyar has been interviewed by Barron’s, Welling on Wall Street and GuruFocus and is a frequent guest on both CNBC and Yahoo Finance.

“…One of our favorite names there is a company called Madison Square Garden Sports (NYSE:MSGS), which is in a decent position in the fund. So currently, the weighting is a little less than 3% of the fund. And this kind of typifies the type of investment we do.

Madison Square Garden Sports is controlled by the Dolan family and sells for the “Dolan discount.” And the Dolans are a family that everyone loves to hate. But over time we have made a lot of money investing alongside of them.

The company has an enterprise value of $4.5 billion. And primarily what it owns are the New York Knicks and the Rangers.

The New York Knicks are valued by Forbes at $6.1 billion.

And they’ve generally been conservative in their valuations.

And the Rangers are valued at $2 billion.

So with an enterprise value of $4.5 billion, you’re getting part of the Knicks for free and getting paid to own the Rangers. So it makes absolutely no sense, but people don’t think value will ever be unlocked, and we disagree with that sentiment.

And we’ve been investing alongside the Dolan family for a long period of time. And we made a lot of money when they sold Cablevision to Altice (NYSE:ATUS) for a price that we never thought that we would receive.

And right now the value of sports teams is going up and up. And the best move that the Dolans could have taken or made has been not to sell the teams as they’ve just gone up in value.

The CAGR has been tremendous, but right now private equity is getting very involved in this space. And it wouldn’t surprise us — because the NBA and the NHL now allow private equity firms to take stakes in teams — if a private equity firm or a family office took a 10%, 15%, 20% stake in the Knicks and/or the Rangers to give the Street a value of what it would be worth to an acquirer.

So that’s a name that we like a lot.

We think it’s almost a double from here based on the asset value of the company.

They’re assets that don’t go on sale very often. They are trophy properties. The last time the Knicks and the Rangers went up for sale was in the mid-1990s.

So that’s something we’re excited about.

And it fits another theme of ours which is that rights to live sports are getting more valuable each year. And this is a way to participate in that value creation. And then sports gambling is another way that these teams will make money…

On the theme of sports teams, there’s Liberty Braves  (NASDAQ:BATRK), which owns the Atlanta Braves baseball team.

It’s controlled by John Malone, who is a very successful media investor. And we think over the next couple of years, he’s going to sell the team for a lot of money.

And publicly traded sports teams don’t generally stay public for very long if you look at their history. The Atlanta Braves is now trading for around $30.

We think intrinsic value is probably close to $45 or so. And it also owns some valuable real estate. It has a very savvy owner who will sell it at the right price.”

Samuel C. Coquillard, Managing Director, Pacific Global Investment Management Company

Another professional money manager picking the owner of the Atlanta Braves as an investment oppportunity for 2023 and beyond is Sam Coquillard.

Samuel C. Coquillard is Managing Director at Pacific Global Investment Management Company.

Immediately prior to joining Pacific Global in 2006, Mr. Coquillard was a Senior Vice President of Chelsea Management Company, an investment advisory firm.

Previously, he was a First Vice President of Merrill Lynch; Senior Vice President at Chase H&Q; and Vice President, Institutional Sales, at Wertheim Schroder & Co. He received a B.A. degree from the University of Southern California.

“A name that we’ve been involved with for a long time is Liberty Braves (NASDAQ:BATRK).

Liberty Braves is a tracking stock, but that’s changing.

Liberty Braves represents Liberty Media’s interest in the Atlanta Braves baseball team and the surrounding real estate development, which is referred to as The Battery Atlanta.

And in November of this year, Liberty Media announced that it would split off Atlanta Braves and The Battery Atlanta into a separately traded public company via a redemptive split. The transaction will be completed by the end of the first half of 2023.

So basically, what’s happening here is Liberty Media, which has had this tracking stock Liberty Braves, will redeem its existing Braves common share stock in exchange for shares of the newly formed company, which will be called Atlanta Braves Holdings Inc.

We think it adds to the likelihood that the Atlanta Braves baseball franchise will be sold.

We think the decision to isolate the value of the baseball franchise, by converting the shares from a tracking stock into its own stock via the redemptive split, is very positive.

Chairman John C. Malone and Liberty Media have a very successful history of unlocking shareholder value by way of financial engineering; we think it’s going to be another example of that going forward.

This one is interesting. There are very few publicly traded major league teams in the United States.

There’s the Knicks and the Rangers, which are part of Madison Square Sports (NYSE:MSGS). And right now, we have the Atlanta Braves.

And so, you have these companies that are very precious; there aren’t many of them around, as everyone knows. And when there is a transaction, I think people are usually surprised by the price that buyers are willing to pay for these assets.

When we look at the Atlanta Braves, the trailing 12-month revenues for the Atlanta Braves Group was $637 million.

And on an enterprise value basis, if you strip out the debt and the equity that’s associated with The Battery Atlanta, the adjusted enterprise value for the Atlanta Braves is about $1.7 billion, which is roughly the same as the current market capitalization.

So, right now, the Atlanta Braves trades at under three times enterprise value to revenue.

The most recent transaction in professional sports was at nine times revenue for the Denver Broncos, quite a difference there.

And the last major league baseball team that sold was the New York Mets. That was about two years ago in a transaction that was about seven times revenue, significantly more than what we understand the Braves are valued at right now.

We believe that a potential transaction for the Braves might prove to be superior compared to the Mets. So if we look at the $2.4 billion purchase of the New York Mets, based on a 2019 report in Forbes, the New York Mets generated about $302 million in revenue. That’s net of stadium revenues used to pay down debt.

Based on the 162-game season, the New York Mets were generating $1.864 million per game translating into an acquiring multiple of seven times revenue. According to Forbes, in the 2021 Major League baseball season, the Atlanta Braves Group generated $443 million of revenues net of debt service. And based on a 162-game season, the Atlanta Braves generated $2.734 million per game.

So, even though the Braves are generating 47% more revenue than in the Mets’ 2019 season, prior to the acquisition, the Braves trade for under three times enterprise value to sales, whereas the New York Mets were acquired for roughly seven times sales.

Obviously, we believe that’s a significant gap.

And the fact that it becomes a pure play on the Atlanta Braves means that that gap in valuation will likely be rectified by a sale.

So the bottom line is we get very interested when we see things like this. The redemptive split and the spinoff of the Braves into an asset-backed stock is something we’d hoped might happen.

We’re not particularly surprised, however, as Liberty and John Malone are incredibly good at this sort of thing.

We think, within a reasonable amount of time, notwithstanding tax considerations, MLB approval and things of that nature, that the company could very well be sold — and then the shareholders of Atlanta Braves could do very well.”

Get the complete details in the complete interviews from these two professional money managers, and many more, exclusively in the Wall Street Transcript.

Medical Device Stocks: Potential Gold Mines or Land Mines?

Mike Polark, CFA, is a Director and Senior Analyst at Wolfe Research

Medical device stocks are a very heterogeneous sector.

Mike Polark, CFA, is a Director and Senior Analyst at Wolfe Research, LLC covering the medical device industry. Mr. Polark joined Wolfe Research after nearly 10 years with Baird.

In this 2,870 word interview, exclusively in the Wall Street Transcript this month. Mr. Polark details his top picks and reasoning behind them.

“In the worst of the pandemic, surgical procedure volumes were net negatively impacted. There were fewer surgeries done.

There were fewer physician office visits done. So let me put it this way, this group was not a COVID beneficiary defined at the highest level — COVID created a headwind.

And so that was very much the story of 2020 and even some of 2021.

I think we’re obviously beyond the acute phase of COVID and now we’re kind of in a COVID endemic world and COVID is still creating some challenges.

They’re less severe than they were.

But it’s still a struggle for hospitals and health care providers.

And so, yes, I think the other way to frame it is — if you were in 2019 and we’re pre COVID, and you were projecting surgical procedure volumes in 2022 or 2023 and then you go to look where we are now with COVID, we’re below where you would have thought we’d be, where you would have thought we’d been in 2019.

So we’re still underperforming as a consequence of the pandemic. And I don’t think there’s an overnight fix; it’s not going to catch up all of a sudden even if the patient demand is there.

And I think the reason it might struggle to catch up is because of the supply side — the providers that help the hospitals, the physician offices, they just don’t have enough bandwidth to allow all this potential pent-up demand to come back all of a sudden. And so it can be smoother sailing from here for sure, versus what we’ve had the last couple years, but a lot of folks like to talk about the backlog or the pent-up demand for health care services of all types because of COVID.

And I conceptually believe that it’s there, but I also don’t believe it can all of a sudden come back because of these supply constraints.”

Inflation is also a concern for medical device stocks as well as COVID-19.

“…Inflation, certainly it’s a consideration, a headwind, that companies are working through at the highest level.

It seems to be more acute in companies that make equipment versus interventional products. But I think the impacts are broad, and I think what these companies are attempting to do, and this includes the biggest of the med device companies, like Medtronic (NYSE:MDT) and Boston Scientific (NYSE:BSX) and Abbott (NYSE:ABT) that I follow, historically they have not captured price increases.

Historically their model was pricing each year flat to down a little bit. And that seemed to work for their business when the CPI was +2 or +3. CPI is now +5, 6, 7,  8.

And pricing flat to down is no longer supportive of their overall business goals. And so they are attempting to, again, at the highest level, at the portfolio level, to reorient and start to advocate for some modest price increases where appropriate.

And so I think, you can only turn the aircraft carrier so fast; it’s slow to develop. But the goal is that if historically, pre COVID, your pricing was -1 or -2 at the enterprise level, today, I’m sensing they kind of want it to be +1 or +2, given where CPI is to cover their costs. And so that’s how the industry is responding to clearly increased costs that they’re facing.”

Innovation in automation is essential to the medical device stock sector.

“Robot-assisted surgery is a major development — all sorts of ways to advance minimally invasive surgical procedures continue to get adopted.

So robots are a piece of that.

But there are other tools and techniques in cardiovascular medicine that can further minimize the exposure for patients, the amount of time they stay in the hospital.

You think about a procedure like TAVR — transcatheter aortic valve replacement — a huge home run for the industry broadly.

The standard of care 10 years ago was surgical aortic valve replacement, which is an open-chest procedure. And if you can avoid stopping a heart and opening the chest you would, and TAVR came along and allowed all sorts of aortic valves to get replaced without that intense intervention.

Same for coronary angioplasty.

So this is a catheter-based technique to clear out blocked coronary arteries.

The alternative is coronary artery bypass grafting, which is an open-chest procedure.

So, open-chest procedures still have their role in the field, they’re still used, but you’re seeing interventional cardiology, these catheter-based techniques where you access the heart from a blood vessel in the leg, are continuing to ramp in popularity and adoption.”

Further medical device innovation is in the close tracking of bodily functions.

“A different trend is smart sensors. Think about wearables defined broadly — certainly you’re seeing wearables play a bigger and bigger role in health care, both in the hospital setting and outside the hospital setting.

Certainly the consumer wearables ecosystem is massive, but when I talk about wearables, I’m focused on companies with FDA clearances, medical-grade wearables, and you’re seeing these devices really increase in popularity and use.

And I think the long-term vision is more of this, and more ways to watch patients, monitor patients outside the hospital, especially patients with chronic conditions.

And then you see wearables really change the paradigm in diseases like diabetes management — the continuous glucose monitor, patch-based insulin pumps — with huge benefits to patients and their daily living. And you’re really seeing companies that sell those devices have huge surges in their revenue performance.”

One medical device stock that fits this thesis is Masimo.

“I like Masimo (NASDAQ:MASI). It’s a mid-cap stock — $7 billion, 8 billion in market cap.

It’s a smart sensor company.

They have leading market share in the hospital for certain vital signs monitoring of respiratory vital signs.

So they’re the global leader in hospital-based pulse oximetry.

And they have some interesting opportunities outside the hospital in the home, to help hospitals and health care systems watch patients more closely.

The stock has come down a lot this year.

They’ve done an acquisition, that’s a little confusing, but that’s created an opportunity in valuation, and I’ve advocated for a sum of the parts approach to this stock.

And I don’t think you’re paying up too much for a really high-quality core business at this point. So you’re getting it, relative to this company’s 10-year history, you’re getting the opportunity to invest in the core business at a below-average multiple.”

One recognizable medical device sector stock that is not high on Mr. Polark’s list is Abbott.

“I have an “underperform” rating on Abbott Laboratories.

Abbott is a very large company, they do a lot of stuff, they have some great brands — Abbott a good company.

I just think right now it feels like a potentially bad stock.

And the primary issue for me, or the primary concern for me, is that the last two years, they have had a surge in profit from COVID testing. They sell rapid tests like BinaxNOW here in the U.S. and obviously that’s taken off.

So when you look at the last two years of financial performance, it looks really good and differentiated versus other med techs through the pandemic, but it seemingly was driven predominantly by the COVID testing, and we’re coming down from the COVID testing mountain top.

And I think we’ve seen the peak there.

And I just worry, as the next year or two unfolds, as we enter a new normal or a new era of COVID with maybe less testing generally — obviously, we’re seeing the molecular testing go way down and I worry that the rapid testing might see a similar decline.

It creates a tough dynamic for their income statement to manage through that huge pop which is then kind of deflating.

I do a lot of work around, what is the business earning otherwise.

And I just think that number is maybe not as high as some folks think, and using an average valuation has gotten me a stock price that’s been consistently a bit below where it’s traded.

So it’s not a table pounder, but I do think as 2023 unfolds, this whole COVID testing tide going out will be more visible in the numbers, and I just worry that it’ll result in a little bit of a further reset of the stock price.

So that’s one that I’m kind of differentially cautious on.”

Vijay Kumar, Senior Managing Director on Evercore ISI’s Healthcare Services & Technology Research Team

Vijay Kumar is a Senior Managing Director on Evercore ISI’s Healthcare Services & Technology Research Team, primarily focusing on the medical supplies and devices and life science tools subsector.

Dr. Kumar’s research expertise spans the diagnostic, medical equipment, medical supplies and life science tools subgroups. In this  June 10, 2022 2,430 word interview, Dr. Kumar reveals some mid year medical device stock recommendations that have come to fruition.

Trillium Asset Management Lead Portfolio Manager: ESG Orientation Doesn’t Mean Sacrificing Performance

Elizabeth Levy, CFA, Head of ESG Strategy at Trillium Asset Management, Lead Portfolio Manager, ESG Core Equity strategy, and a Portfolio Manager on Trillium’s ESG Small/Mid Cap Core and Large Cap Core strategies.

Elizabeth Levy, CFA, is the Head of ESG Strategy at Trillium Asset Management, Lead Portfolio Manager on Trillium’s ESG Core Equity strategy, and a Portfolio Manager on Trillium’s ESG Small/Mid Cap Core and Large Cap Core strategies.

Elizabeth Levy has an answer to questions about ESG investing.

“As Head of ESG Strategy, she is responsible for leading the development and oversight of the implementation of ESG-related policies and initiatives across all investment strategies.

With regards to the first question about ESG in general, it depends on how you define ESG. I would contend that there is no such thing as ESG investing.

There’s investing that uses ESG data, and there is investing to drive a positive impact, but environmental, social and government investing on its own doesn’t exist.

It’s really what your intention is and what you’re trying to do, and that might sound a little bit like splitting hairs, but I think it’s quite important.

The second part of your question: Is this a fad? I would say absolutely not, for two reasons. One, right now, we’re living with 1.2 to 1.5 degrees of changed climate already.

We all lived through the last few months; the variety of physical weather challenges around the world has been incredibly severe — and this is just the beginning. So to invest without considering what’s coming, I think, would be silly.

Why would you not consider what is likely to happen in the future? That is literally our job as analysts and portfolio managers. So I think that continuing to use this type of information is going to, of course, be core to any financial analyst job.

But then on the flip side of that, I would say that a lot of the growth of ESG investing has been because people, investors, really care about these environmental and social issues, in particular.

As I said, we’re all living with the same changing climate.

We’ve all lived through the events, for example in the U.S. in 2020, that really showed some of the social divisions and racial divisions in our country, and I think it’s not a coincidence how much growth we’ve seen in sustainable, responsible, impact investing since then — and it’s because people really care about these issues and people really want to align their investing with their beliefs, their attitudes, their values.

So I don’t see this trend ending anytime soon, because these are issues that are really important, and not just to Americans, we’re seeing it all around the world.”

Elizabeth Levy explains the Trillium process for ESG investing.

“At Trillium, we really take a holistic approach to integrating ESG right into our investment process. It’s not an afterthought or an add-on, or a simple screen.

We see real value in considering E, S and G topics right in our investment process.

So that might mean that we do some thematic top-down consideration when we’re looking for a secular growth theme, for example, and we also do a lot of stock-specific bottom-up work.

So in practice, there’s several different components to our ESG process, because it is so integrated.

We do have a quantitative process that compares companies within their industry to look at the E, S and G topics that are most material to that business model, and that helps us set our investment universe.

And then once our analysts have narrowed in on a target company, we roll up our sleeves and do a deep dive and really get to know the sustainability profile of the individual company that we’re investing in.

All of this work is done collaboratively between our ESG team as well as our fundamental research analyst team, so it’s not something that happens at the end.

All of our fundamental analysts are focused on a specific sector, they understand the environment, social and governance challenges within the particular industries they’re looking at, so we really think it’s holistically integrated into the full process from the beginning all the way through portfolio construction.”

One of the top picks from Elizabeth Levy is First Solar (NASDAQ:FSLR).

“One example I can give you is one of our very long-term holdings, a company called First Solar (NASDAQ:FSLR).

They are a domestic U.S. manufacturer of solar photovoltaic panels for use primarily in utility scale solar power projects, one of the leading solar manufacturers in the U.S.

They have a differentiated technology that allows them to provide utility scale panels at a lower cost than many of their competitors.

We like that they are domestic, and that the current regulatory context, with the new Inflation Reduction Act that was passed this summer, will provide some tax benefits to them as well as policy credits.

We have long admired their strong balance sheet, which is not something that has historically been common throughout the renewable energy industry.

And, we really like that they have a focus on end-of-life responsibility for recycling their solar panels.

As I mentioned, we’ve owned this stock for a number of years, and shareholder advocacy is very important to us.

Last year, we filed a shareholder proposal asking the company for enhanced policies and practices around board diversity.

We actually got a greater than 90% vote on that resolution, which is fantastic. And even better, over the summer, the company added its first woman of color to the board.

So we really think this is a great example of a company that we’ve owned for many years, that we’ve continued to work with, and that fits both our financial as well as our secular growth themes, and has been a good holding for us over a number of years.”

The lack of clarity about ESG investing is an issue for Elizabeth Levy of Trillium:

“I just told you that I don’t think “ESG investing” exists, but there are lots of products out there, including the one that I run, that have ESG in the name, because it’s trying to signify to clients what it is that we do.

I think that the challenge for us as practitioners in responsible or sustainable or impact or ESG investing, whatever you want to call it, is being clear about what it is we are providing to clients, and making sure that clients understand what they’re getting in our products.

Because I think a lot of the challenges, the pushback to this type of investing that’s been out there, has been from folks not understanding exactly what the intention behind the product was.

So I think for all of us, continuing to be clear about what we’re doing is both an opportunity and a challenge at this point.”

Agnico Eagle (AEM) and Solitario (XPL): Gold Stocks Shine as Crypto Tarnishes

Ralph M. Profiti, CFA, a Principal focused on Metals & Mining equity research at Eight Capital

Christopher E. Herald has been Chief Executive Officer of Solitario (XPL) since June 1999

Agnico is the top pick from gold stock analyst Ralph M. Profiti, CFA, a Principal focused on Metals & Mining equity research at Eight Capital, covering Senior North American Industrial Metals and Precious Metals companies and commodities.

His previous experience including gold stock analysis was as a key member of the Global Metals & Mining Equity Research Teams at Credit Suisse and Deutsche Bank, covering North American Industrial Metals & Precious Metals equities in Toronto and New York, as well as Corporate Banking at Royal Bank of Canada.

His perspective on gold stocks in 2023 is enlightening.

“A lot of management teams are thinking, I would probably say the consensus is, another 5% year-over-year inflation on unit mined costs in 2023.

I think that’s something that’s probably going to get flushed out of management commentary when guidance comes out for 2023, with Q4 2022 results.

The other thing is that companies are responding to these inflationary pressures by managing their mine plans more strategically. So, for example, there’s less waste stripping.

There’s more high-grading going on.

These proactive ways of searching for margin are actually going to help the metal price.

Because what it actually does when a company sacrifices quantity and goes for quality is that it has the embedded feature of taking metal out of the market, and that’s actually positive for metal prices.

So I think that there are some proactive moves being done by managements to combat inflation that are actually to their benefit in 2023 and to the benefit of metal prices.

And then the last thing I’ll say is, I think that there’s a common theme emerging that the true nature of value creation in mining — at least over the next three to five years — is going to be through exploration as opposed to M&A.

M&A now has become much more difficult, because not only have valuations declined in terms of multiples contracting, but what you’re also seeing is a divergence of managements willing to sell at such low stock prices.

I think that’s delaying any M&A cycle. And when that happens, I think management teams will focus more on exploration, and that is actually a much better way to create net asset value per share.”

The top gold stock pick from Ralph Profiti is Agnico Eagle (NYSE:AEM).

“My top pick in the gold space is Agnico Eagle (NYSE:AEM), and I like Agnico because of its dominance in terms of its jurisdictional profile.

Agnico operates 12 mines across five regions in four countries — Canada, Australia, Finland, Mexico. My valuation methodology places a premium on a successful track record, on building operational consistency, strong governance practices, and dedicated track records in solid, safe mining jurisdictions, and that’s what Agnico gives you relative to its peers.

In addition, the pro forma Agnico production, which is 3.6 million to 3.8 million ounces a year, that to me is a real sweet spot in the gold mining space, where you’re large enough to attract generalist investors into the shareholder base, but nimble enough that you can create value through exploration, advanced stage development projects, and new discoveries.

I think that Agnico is an enviable position of having great jurisdictions, the ability to move the needle on strategic initiatives, and having a strong balance sheet as well — $2 billion in undrawn credit facilities goes a long way in being able to protect any downside risks that I think the gold market might give us.”

There are gold stocks like Agnico Eagle (NYSE:AEM) and then there are gold stocks like Solitario (NYSE:XPL).

Christopher E. Herald has been a Director of Solitario since August 1992.

He has also served as Chief Executive Officer since June 1999 and President since August 1993.

Previously, Mr. Herald served as a Director of the former Crown Resources since April 1989, as Chief Executive Officer of Crown since June of 1999, President of Crown since November 1990, and was Executive Vice President of Crown from January 1990 to November 1990.

Prior to joining Crown, Mr. Herald was a Senior Geologist with Echo Bay Mines and Anaconda Minerals. He currently serves as non-executive Chairman of Viva Gold Corp. Mr. Herald received an M.S. in Geology from the Colorado School of Mines and a B.S. in Geology from the University of Notre Dame.

His gold stock management experience is elite.

“…About two years ago, after focusing on zinc for a number of years, we decided to go back into the gold space.

And about a year and a half ago, we were presented with this very early-stage project called Golden Crest in South Dakota.

It was a project that didn’t have any drilling on it, it only had a couple hundred surface samples taken, and we looked at it and just really loved what we were looking at there.

We decided to take a flier on it, picked it up, leased this 4,000-acre property from a private company, and that was the start of what I think is one of the most exciting gold plays in North America today, our Golden Crest property.”

The enthusiasm for this gold stock opportunity is infectious.

“It’s in South Dakota, and when we first started mentioning this to our shareholders and the people that may be potential shareholders, they’d say, “What are you doing in South Dakota? Is there gold there?”

The fact of the matter is, South Dakota hosted the single most important underground gold mine ever discovered in the United States, and it was called the Homestake Mine.

It produced 42 million ounces of gold.

At gold’s high, that’s an $80 billion gold deposit that was mined over a 120-year timeframe from the late 1880s. It closed around 2000.

The Homestake mine was phenomenal.

It was owned for almost its entire history by the Homestake Mining Company. And I can tell you, the industry, including ourselves, thought if there was any other gold in the Homestake area, Homestake Mining Company would have found it.

That was our perception, and I’ve talked to a lot of people in the industry and that was their perception.

But when we were presented this new property, it was only about six miles west of the largest underground gold mine in the country.

At first we thought, “Is there really going to be something there?” We started working there, and we started finding gold all over the surface, and the more we looked, the more we found, and the bigger our land position got.

We started with 4,000 acres. A couple months later, we were at 8,000 acres. Six months later, we were at 15,000 acres.

And as we stand today, we’re over 28,000 acres that we control.

And we’re not staking moose pasture, we’re staking areas that have gold on surface.

Our geologic team, including myself — I’m a geologist also — we’ve been looking for gold for 40 years, and I can tell you on this property we’ve found the most gold on surface of any property in the history of our exploration efforts.

It is phenomenal.

We shake our heads at this, because we always assumed that Homestake Mining had found everything, and nothing could be further from the truth.

In fact, if I can give one example, one area that we call Downpour we started sampling about a year ago, and we got some good gold numbers right from surface — and those were right along a Forest Service road.

We went back three times.

We’d get our gold assay results from our first round; we went back and did more sampling.

We got those assay results; we went back and did more. We did it basically four times, and it kept getting bigger.

Finally, we dug trenches, and right now we have five trenches.

They’re right in the middle of a Forest Service road.

I mean, people have been driving over this road for 50 or 60 years.

One of the trenches has 27 meters of 15 grams gold.

If you’re not in the gold industry, 15 grams gold, that’s half an ounce per ton gold.

And the nearest mine to this, the Wharf Mine, which is close to the Homestake Mine, but it’s an open pit mined by Coeur Mining, the average grade that they’re mining there is less than one gram, but we’re finding 15 times that right at surface.

Trench number two had 30 meters of 8.5 grams.

Phenomenal numbers that we had never seen.

And our team has discovered over 5 million ounces of gold on early-stage projects — we’re good at this.

This, by far, is the best project we’ve ever worked on.

We have other trenches not quite as good, but still, for the start of a project, almost unheard of: Nine meters of 2.6 grams, 12 meters of half a gram.

I think we had 12 meters of something like another 15 grams. And we have a series of these types of gold systems scattered over this 28,000-acre property.

For us, I can tell you it is the most exciting property we’ve worked on.”

Get all the detail by reading the entire 3,995 word interview with gold stock CEO Christoher Herald of Solitario (XPL), exclusively in the Wall Street Transcript and more on Agnico Eagle (AEM) in the 2,625 word interview with Ralph M. Profiti, of Eight Capital.

Dividend Paying Stocks: USA vs. China: Which One Is Better?

Ronald Chan, Chief Investment Officer and Co-Portfolio Manager, Chartwell Capital

Dividend paying stock investor Ronald Chan founded Chartwell Capital in 2007 and currently serves as Chief Investment Officer and Co-Portfolio Manager. As CIO, he steers the firm’s investment strategy. As Co-Portfolio Manager, he oversees stock selection and portfolio allocation.

A frequent contributor to Bloomberg Opinion and Financial Times Chinese, Mr. Chan is an adjunct professor for the MBA program at The Hong Kong University of Science and Technology and the author of two books: Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffett’s Top Business Leaders in 2010, and The Value Investors: Lessons from the World’s Top Fund Managers in 2012 and 2021 (second edition).

Mr. Chan served as a member of the Listing Committee Panel of The Stock Exchange of Hong Kong Limited from 2016 to 2022. Since his appointment in 2018 by the Hong Kong Trade Development Council, he has served as a member of the Greater Bay Area Committee: Smart City and Digital Connectivity Task Force.

Since 2019, he has served as an Independent Non-Executive Director for Powerlong Commercial Management Holdings Ltd. He has also been an international committee member of the Hong Kong M+ Museum and a founding member of the Hong Kong Biotech Development Council of the Hong Kong Science and Technology Park since 2020.

Mr. Chan has been the Vice President of the Education Development Foundation Association in Hong Kong since 2005. Mr. Chan graduated with Bachelor of Science degrees in Finance and Accounting from the Stern School of Business at New York University and is currently the President of the NYU Hong Kong Alumni Club and the Vice President of the Pan-Asia Alumni Committee.

He is also a member of the Board of Trustees at Malvern College in Hong Kong and at Worcester Academy in Massachusetts.

“The news headlines seem extremely frightening, and I can understand why people are scared about investing in our region.

Being local, however, we are having the best time of our lives because we are investing in companies that are trading at multiples and valuations that we haven’t seen for the past 25 years.

We are fetching all this low hanging fruit with really high dividend yields. These are companies with dividend yields of over 10% and with sustainable income streams.”

‘As I mentioned, we are investing in the Greater Bay Area of China. This is a region with a population of 86 million people with a GDP of $1.9 trillion.

This means that the economy in the Greater Bay Area is already larger than Spain, Australia, and close to Italy. Most economists predict that in 10 years’ time, the GDP of the Greater Bay Area will grow to $3.7 trillion to $4 trillion, which will surpass France, the U.K., or even Germany.

So I’m betting on the economic growth in this area, with a very high population and good demographics.

For example, we invest in a telecom company that is based in Macau. As you know, Macau operates a lot of casinos. It’s like the Las Vegas of China.

It has a population of only 800,000 people, a very small city.

The main operator in the telecom business is a company called CITIC Telecom (HKG:1883). This company pays an 8.5% dividend yield, trades at relatively attractive multiples.

From a top-down angle, this company is affected because of the COVID policy.

Normally it serves millions and millions of customers from all over the world visiting local casino facilities. But in the past two years, this city has no customers, and the company has had to streamline itself, and it still managed to pay an 8.5% dividend yield to investors.

As this lockdown COVID policy will eventually change, imagine when visitors can return to Macau. Roaming fees will see exponential growth. So for now, we keep buying this stock and let the magic of compounding based on its high dividend yield work its magic.”

Dividend paying stocks are not the investing only focus for Mr. Chan.

“ESG is very important nowadays, especially for Hong Kong listed companies.

In fact, I used to sit on the Listing Committee at the Hong Kong Stock Exchange, and I was part of the committee that steered the ESG policy.

Being at the forefront of ESG, I can assure investors that Hong Kong has one of the best standards in terms of ESG reporting.

The company I just mentioned, CITIC Telecom, which is a listed company in Hong Kong, must comply with all the ESG standards that the exchange set forth. What I can see is that corporate governance has improved dramatically over the past five to seven years with companies being more transparent.

As a fund manager myself, corporate transparency is important certainly, and while we have to ensure that all of our companies comply with the “E,” one thing that I am at the forefront of pushing is how do we improve on the “S.” These days we can’t just think about shareholder value, but also stakeholder value.

In terms of Ukraine and the war, certainly it’s frightening.

No one wants to see war.

In Hong Kong, or in Asia, we are relatively stable in terms of the currency, in terms of inflation, and in terms of how the war affects our region.

Since we don’t have a lot of trades with Ukraine, and many Hong Kong companies don’t have much exposure in Russia, we are not that affected.”

Thomas E. Browne, Jr., CFA, Portfolio Manager, Keeley Teton Small and Mid Cap Dividend Value

Another dividend paying stock investor, Thomas E. Browne, Jr., CFA, is a Portfolio Manager at the Keeley Teton Small and Mid Cap Dividend Value strategies.

Mr. Browne previously was a Portfolio Manager at Keeley Asset Management Corp.

He was also a Portfolio Manager for Oppenheimer Capital, SEB Asset Management and Palisade Capital Management.

Prior to that he was a sell-side technology services analyst and was twice recognized in The Wall Street Journal’s Best on the Street survey. Mr. Browne received a B.B.A. from Notre Dame and an MBA from New York University.

“At Keeley Teton, we manage small- and mid-cap value strategies with a focus on what we believe are misunderstood or underappreciated areas of that market. Our overall view is that in order to outperform over time, you have to do something different than what other people are doing. And so, we found a couple of different niches that we focus on.

We have two distinct strategies.

One focuses on companies undergoing significant corporate change, so events like emerging from bankruptcy or companies being spun off from larger companies or sometimes companies dividing themselves into two relatively similar parts.

Other areas in that genre are companies that are undergoing conversions to REITs.

We’ve invested in companies that have a franchise business model and sell their company-owned stores to use the proceeds to buy back stock and shrink the capital base.

A lot of different things with the common theme that they’re difficult to understand. By putting a bit of effort into it, you can create a very differentiated opinion about the future of the firm.

That’s one group of strategies that we manage.

The other group of strategies we manage is dividend strategies. We focus on these in the Keeley Small Cap Dividend Value Fund and the Keeley Mid Cap Dividend Value Fund.

Both focus on small- and mid-cap companies that pay dividends.

This is an area we got into about 12, 13 years ago because, one, it was a bit different from our restructuring strategies.

Secondly, it was very much aligned with what we’re already doing — i.e., focusing on small- and mid-cap companies.

And thirdly, and most importantly, dividend-paying stocks have historically produced good risk-adjusted returns.

They tend to produce better-than-average returns over time with less-than-average risk. And that’s kind of the holy grail in the investment business.”

Dividend paying stocks are the bread and butter investing strategy for Mr. Browne.

“Most of the money we manage is actually invested in the dividend strategies.

I think that a lot of smaller-cap investors don’t appreciate dividends. Very few actually look for them within companies.

And I think that some small-cap investors don’t really want to see them.

After all, if a company is small and it’s got nothing better to do with the cash than to give it back to shareholders, why would I want to invest in that? That would be the negative case.

Our view on dividends is that dividends tell you three important things about a company.

Number one is it tells you that the company can, and at least the management team believes that it can, sustain the free cash flow that it’s generating because ultimately sustainable free cash flow is the source of your dividends.

Secondly, because they have made this long-term financial commitment, we think that companies that pay dividends are more likely to be more disciplined about other ways in which they allocate capital via buybacks.

They may be more price sensitive about how they buy back stock or make acquisitions.

The bar gets raised if they know they have to pay their dividend. And so a dividend can help discipline capital allocation.

And then the third thing that dividend tells you is that the management team and the board understand who owns the company because they’re focused on returning capital to the owners.

If you think about those three things, sustainable free cash flow, more attention to the leverage, and acknowledgement of who owns the companies, those are a pretty good starting place to make an investment.

If you compare that to the perception, to the view that small-cap companies that pay dividends are not interesting, we think that difference is what is interesting to us.”

Dividend paying stocks the Mr. Browne currently owns have some interesting characteristics.

“For example, one of our longtime investments that we still have is a company called Marriott Vacations Worldwide (NYSE:VAC).

Marriott Vacations Worldwide is the timeshare business which was within Marriott International (NASDAQ:MAR), one of the largest hotel companies in the world.

When that business spun out in 2011, the shares given to the Marriott shareholders were a very small percentage of the value of Marriott. And so typically, when that happens, the Marriott shareholders simply are not interested in holding this other company. It’s new.

They don’t necessarily know it all that well.

At the time, the timeshare business was perceived as being a less interesting business in the hotel business. Also, the large-cap managers who owned Marriott didn’t have much interest in holding a small-cap company. And so, the stock generally falls pretty sharply after the spinoff, which gives us an opportunity to do our homework and make the investment.

Also, the information is incomplete. So you have to do your homework and really get to know the business. We have to understand the business.

I would say companies do a lot better job of presenting spinoffs these days than they used to, but we still see opportunities in that theme.”

Get the complete details on all the dividend paying stocks that these two portfolio managers own and recommend, only in the Wall Street Transcript.

Republican v. Democrat Stock Picks: Make Your Portfolio Government Friendly

Mark Boggett is the CEO of Seraphim Space Manager LLP and manager of the Seraphim Space Investment Trust PLC (LON:SSIT)

A Republican dominated or Democratic dominated government has immediate implications on the stock picks in your portfolio depending on the results of next week’s elections.

Mark Boggett is the CEO of Seraphim Space Manager LLP and manager of the Seraphim Space Investment Trust PLC (LON:SSIT),  which includes a portfolio of over 20 world-leading SpaceTech companies. Mr. Boggett is a pioneer in SpaceTech investment having co-founded the Seraphim Space Fund and invested into a portfolio which includes three companies that have achieved billion-dollar valuations.

In this 2,331 word interview, Mr. Boggett discusses a politically interesting portfolio pick.

Tracking commercial trade flow data in real time is a prime concern of hedge fund operators looking for an edge.  In a Republican dominated US government, the hedge funds will have ample capital to pursue this important information.

“Spire Global (NYSE:SPIR)is a good example. One of the things that Spire is doing is they’re able to track all of the vessels across all the oceans in real time to calculate patterns of trading activity. This enables them to generate insights on food security and, specifically, how the impacts on trade flows as a consequence of the war in Ukraine.

By identifying individual ships, Spire can determine what the cargo of those ships is carrying. So they’re able to understand what’s happening to the supplies of wheat and grain and maize and all of these products and can understand how global activity within food is being disrupted by the ongoing conflict.

Spire was one of the first space companies we invested in through our venture fund back in 2016. It’s now listed on the New York Stock exchange after going through a SPAC merger.

The company has a constellation of micro satellites, typically the size of a shoebox, with around 150 operational in space today. These satellites have three payloads: they collect weather data, track every ship across every ocean, as well as tracking commercial airlines in flight.

They are showing rapid year-on-year growth — with more than 100% per annum — and their revenues are in excess of $80 million ARR with the underlying business growing very positively.”

Another of Mr. Boggett’s portfolio holdings is a competitor to the space based business of Elon Musk.

“One of my favorite holdings is a company called AST (NASDAQ:ASTS) which now trades on the NASDAQ. The company has created a technology solution that enables them to put cell towers into space. They can provide satellite connection from space to any mobile phone without any hardware or software adjustment to the phone.

That is game-changing because while half of the world today is 5G, half of the world is still on 0G.

AST is seeking to address the imbalance. If people in developing countries can suddenly have access to connectivity from a very, very low-cost smartphone, it’s going to have a global impact, enabling access to education, health care and business opportunities.

The company has recently partnered with Vodafone (NASDAQ:VOD) to provide roaming service to their customers through the AST global.

Furthermore, they have already signed contracts with eight other mobile network operators providing roaming access to billions of end customers.

The company is now looking to build out their initial constellation to provide cell tower coverage to the equatorial region — an area with the lowest mobile phone density. It is these important developing economies where AST is going to be able to have the biggest impact.

They have just launched their first commercial satellite to demonstrate this technology working at a commercial scale. This is a really exciting business and one that will provide connectivity to the parts of the world that can’t connect today.”

Pedro Marcal is Director of Equities and High Yield at Aquila Group of Funds, and the Lead Portfolio Manager for Aquila Opportunity Growth Fund.

Pedro Marcal is Director of Equities and High Yield at Aquila Group of Funds, and the Lead Portfolio Manager for Aquila Opportunity Growth Fund.

Mr. Marcal has more than 27 years of investment industry experience. Previously, he was founder and owner of Maccabee, LLC from 2012 to September 2021.

Mr. Marcal was also a Director in the Equities Group and mutual fund portfolio manager at Foresters Investment Management Co. from 2018 to 2019, where he managed Foresters’ global equities mutual fund and co-managed its U.S. equity analyst and trading teams.

He also held portfolio management responsibilities with Fred Alger Management, Inc. and Allianz Global Investors.

Mr. Marcal has a bachelor of arts in economics from University of California, San Diego, and an MBA from University of California at Los Angeles, Anderson School of Business.

In this 2,650 word interview, Pedro Marcal identifies a portfolio position that may benefit politically.  Solar powered electricity has become seen as a Democratic Party agenda item.

“There are other attractive beneficiaries of the electrification trend. Electrification requires batteries, and batteries require lithium. We anticipate strong demand for lithium products as demand for batteries increases as part of the electric vehicle transition.

Lithium Americas Corp. (NYSE:LAC) mines, produces and supplies lithium with permits to open up the largest lithium mine in the United States at Thacker Pass in Nevada. LAC is an idea of analyst Steven Yang, who covers industrials, materials and other sectors for the team.

On a recent trip, my co-Portfolio Manager, John McPeake, and I went to Thacker Pass to see the mine site and toured the research center in Reno, where they’re running a scaled-down version of the lithium extraction and processing facility they plan to build.

Thacker Pass will be the largest lithium mine in development in the United States.

Lithium Americas has received all permit approvals from the Nevada division of the Environmental Protection Agency — EPA — and the federal Bureau of Land Management to develop a lithium mine. It is in the early stages of loan approval from the Department of Energy.

We believe the mine at Thacker Pass, if developed as anticipated, provides LAC with a massive resource advantage, which provides a huge moat around its business.

Furthermore, President Biden’s Inflation Reduction Act may benefit LAC in two ways.

One, expanded tax credits for energy-efficient commercial buildings, new energy-efficient homes, and electric vehicle charging infrastructure. Energy infrastructure includes battery technologies and production.

And two, a “make it in America” provision, which focuses on American-made equipment for clean energy production.

While lithium metal is early in the stage of battery manufacturing, having a U.S. domestic supply of lithium is expected to benefit LAC.

We feel the market is underappreciating the difficulty of acquiring federal and state permitting, with appeals processes and large capital investments for both mining and processing that’s required.”

David Swartz is an equity analyst in the consumer sector research group for Morningstar Research Services.

David Swartz is an equity analyst in the consumer sector research group for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

He covers consumer-focused companies in retail and apparel. Before joining Morningstar in 2018, Mr. Swartz worked as a money manager and equity analyst for a family office in the Seattle area.

He also worked as an analyst and fund manager for three equity hedge funds in the San Francisco Bay Area.

Mr. Swartz holds a bachelor’s degree in economics from the University of California at Berkeley and a master’s degree in economics from Yale University. He also holds a certificate in finance (investment management specialization) from UC Berkeley Extension.

Luxury brands are also often associated with a Republican dominated government that avoids taxing wealth. In this 2,290 word interview, an equity analyst identifies luxury goods that will benefit.

“I have a lot of companies right now that I think are quite undervalued. Some that I would highlight as being undervalued would be Tapestry (NYSE:TPR), which is the parent company of Coach and Kate Spade. Tapestry just had an analyst event this morning, and it was quite positive.

I think the stock is very inexpensive, trading at a low p/e and with plenty of cash flow. I think the handbag category, which Tapestry is highly exposed to, is quite healthy. And also, wealthier consumers that shop its brands are also doing better. So I think luxury companies or close-to-luxury companies are looking strong. And Tapestry is one that I would highlight.

Another one that I will highlight in the same category would be Capri (NYSE:CPRI), which is the parent company of Versace and Michael Kors. Capri also has high exposure to handbags. It’s also had a good year. And I think demand for its products is strong. Versace has been growing and has become profitable. Capri is also an inexpensive stock. And I think it’s also one that’s worth a look.

Others that I think are inexpensive would be some retailers that have had a difficult year this year, but their stocks are down quite a bit. And that would include Nordstrom (NYSE:JWN), which has had kind of a difficult year, but is well off its high and I think it’s quite inexpensive. And I think as luxury shopping recovers, I think Nordstrom would be in pretty good shape.

And another one to consider would be Kohl’s (NYSE:KSS), which went through a sales process this year which did not result in a sale, and the stock right now is trading way below the potential sale prices that were discussed. And I think it is quite inexpensive. Kohl’s owns considerable real estate, which it may actually be selling soon for as much as $2 billion.

Another to consider might be Nike. Nike’s been affected by the troubles in China this year with COVID lockdowns, but I think its China business will recover.

It might take some time, but I think it will recover.

And Nike, I think, is inexpensive and typically it’s worth owning over the long term based on its historical performance. Similarly, Adidas has had a difficult year, and its CEO is actually leaving next year and its stock price is probably as cheap as it’s been in some years after it’s been down about 50% this year. And so, that’d be another one that I would highlight.”

Pavel Molchanov is Managing Director, Renewable Energy and Clean Technology, for Raymond James & Associates

A Democratic led government in DC will continue to support the existing government of Ukraine from Russian aggression.

A contuation of that conflict, dependent on US supplied funding, will also increast the resolve of the European Union to rapidly replace future energy flows from the Russian supplied NordStream system to alternatives.

Pavel Molchanov is Managing Director, Renewable Energy and Clean Technology, for Raymond James & Associates, Inc.

He joined the firm in 2003 and has been part of the energy research team ever since. He became an analyst in 2006, the year he initiated coverage on the renewable energy/clean technology sector.

In this role, he covers all aspects of sustainability-themed technologies, including solar, wind, biofuels, electric vehicles, hydrogen, power storage, grid modernization, water technology, and more.

Within the energy research team, he also writes about the broader topics of geopolitical and regulatory issues, climate change, and ESG investing. He has been recognized in the StarMine Top Analyst survey, the Forbes Blue Chip Analyst survey, and The Wall Street Journal Best on the Street survey.

He graduated cum laude from Duke University in 2003 with a bachelor of science degree in economics, with high distinction.

In the broader community, he is a member of the Board of Visitors at the University of North Carolina’s Institute for the Environment; a member of the Advisory Board at Cool Effect, an environmental project funding charity; and the founder of the Molchanov Sustainability Internship Program at the Royal Institute of International Affairs in London.

In this 1,906 word interview, the Raymond James analyst proposes some stocks that may benefit.

“A company that is uniquely well positioned in the context of Europe’s energy security urgency is ADS-TEC Energy (NASDAQ:ADSE).

This is a German company, and 72% of its revenue came from Germany last year, but it is listed on the NASDAQ. ADS-TEC Energy provides ultra-fast charging equipment. This is the leading edge of electric vehicle charging technology.

For Europe to become less dependent on Russian oil without buying even more from the Middle East, the solution needs to be electric mobility.

As it stands, almost 25% of the new vehicles sold in Europe are electric. Within three years, that will probably be close to 50%. So that means Europe needs more and more charging infrastructure.

ADS-TEC Energy is one of the few public companies that is directly tied to that infrastructure buildout. This is a small-cap, very-high-growth company.

For people that are looking for something a little bit larger, I would point to Bloom Energy (NYSE:BE).

It is the world’s largest provider of stationary fuel cells, which are used in data centers, hospitals, and office buildings to generate clean electricity on site. The electricity can be from natural gas or from hydrogen, in which case, there is zero CO2 emissions.

Also, Bloom will soon be launching its electrolyzer product. The electrolyzer is literally the inverse of a fuel cell. Instead of using hydrogen to generate electricity, an electrolyzer takes electricity and water and makes hydrogen.

This is very relevant in the context of disentangling Europe from Russian energy, because a portion of the Russian natural gas is used to make hydrogen. An electrolyzer enables the production of hydrogen without natural gas. Green hydrogen is a nascent, fast-growing market, and Bloom is about to enter it.”

Election proof your portfolio with these recommendations, and many more, exclusively at the Wall Street Transcript.

No Recession, Just Slow Growth and Booking Holdings [BKNG] Will Shine

Dan Wasiolek, senior equity analyst, Morningstar Research Services

Dan Wasiolek has Booking Holdings [BKNG] as a top pick.  Mr. Wasiolek is a senior equity analyst for Morningstar Research Services.

He covers lodging, online travel, global distribution system, and gaming operators. Before joining Morningstar in 2014, Mr. Wasiolek spent 16 years as an analyst and portfolio manager covering U.S. mid- and large-cap strategies for Driehaus Capital Management.

Mr. Wasiolek holds a bachelor’s degree in business administration from Illinois Wesleyan University and a master’s degree in business administration, with a concentration in finance, from the DePaul University Kellstadt School of Business.

“Morningstar currently does not expect a recession in the U.S., although we do expect very low economic growth in 2023.

But if a mild recession were to occur, this might not follow the patterns that we’ve seen historically, like in the early 1990s, when a mild recession dipped U.S. hotel demand by several percentage points. Now, although demand has recovered from pandemic lows, we still think demand remains several percentage points below the normalized trend line.

So even if we get a mild recession that typically would contract hotel demand by several percentage points, we actually think that’s kind of where we are already, and that signals that there’s still some pent-up demand.

And then in addition to that pent-up demand there is the trend related to remote worker flexibility, which is something in this cycle that was not around in previous cycles that could aid this rebound, or continue to allow a recovery in travel demand.

As far as regulatory headwinds, the one that could come back is local governments restricting supply of alternative accommodations.

We did see that pre-pandemic, as local governments wanted to make sure that the quality of life of its residents were not overly impacted by units being rented out instead of given to residents to live in. But we’ve actually seen that regulatory headwind reduced during the pandemic.

And we think that trend might continue, at least in the near term, as a lot of local governments are probably depending on travel demand for economic revenue, especially if we’re going to go into a period of slower economic growth.”

This new type of leisure travel combined with business has an implication for selected stocks like Booking Holdings.

“With more people working at home or in a hybrid work-from-home environment, that’s allowed them to work from any location, and take what’s sometimes referred to as “bleisure” trips, where you might be working, but you’re also kind of taking a longer weekend with a family.

In support of this, hotel data shows increased demand for what are called shoulder days.

So you know, you have the weekend — Saturday and Sunday — and then the shoulder days would be Monday and Tuesday, and before the weekend, Thursday. So weekend hotel demand has been extending into these shoulder days, which is signaling that people are combining work with leisure type trips.

Further, both sentiment surveys and travel surveys indicate that people are taking incremental trips because of current worker flexibility.

So, to the degree that that remote flexibility endures, we think that that can allow for those incremental trips to continue to occur.”

This new trend leads the Morningstar analyst to his top recommendation.

“So the bleisure trend touches a lot of the travel industry — the hotel guys, the alternative accommodation players, and even the travel companies exposed to airline transactions. And one name in online travel is Booking.com, which is the main core platform for the company Booking Holdings (NASDAQ:BKNG).

They have a really strong online travel network globally, where you can go and book all types of travel supply, like hotel or alternative accommodations, flights, experiences and so on.

So we think Booking shares actually trade at about a notable discount to our $3,000 per share valuation.

This discount is despite Booking being a really high-quality business and management team that continues to see strong demand.

That said, one headwind for the company would be currency, but we just think that their execution, the amount of demand recovery that they’ve seen, both for traditional hotels and alternative accommodations, has been indicating that they’ve been taking share during the pandemic.

A lot of people are familiar with Airbnb (NASDAQ:ABNB) when it comes to vacation rentals, but might not realize that the number-two player in alternative accommodations is actually Booking Holdings.

They have about half of the share of Airbnb in that vertical. And alternative accommodations probably represent about a third of Booking Holdings’ total room nights. So that would be one name that could benefit from this bleisure environment.

when you look at network advantages — which we think both Booking and Airbnb have — the network is kind of built by a lot of travelers going to that platform. And they’re going there because there’s a lot of supply from travel operators offering hotel content and other accommodations. So people might go to Booking versus Airbnb for several reasons.

Booking.com is a top 10 travel app in about 140 countries in the world. That compares with Airbnb which is a top 10 travel app in about 80 countries in the world. And the demand that Booking has stems from the fact that Booking is really well known in European countries and international countries, maybe even more so than Airbnb.

And in addition to Booking having alternative accommodations, they also have pretty much every hotel type room that you could think of, which is not something that’s present on Airbnb. So if you’re looking just for alternative accommodations, you’re going to go to Airbnb and maybe Booking. But if you’re not sure and you want to look at both hotel and alternative accommodations, you’re probably better off looking at Booking Holdings, especially from a global perspective.

And so Booking Holdings would be the one that we would highlight first in our travel coverage, because of the discount that we think it’s trading at relative to our $3,000 per share valuation. And we think it’s earned our top rating, also just because of the quality of its competitive position.”

Get the complete picture on Booking Holdings (NASDAQ:BKNG), Airbnb (NASDAQ:ABNB), and many more hotel and travel stocks by reading the entire 2,781 word interview, exclusively in the Wall Street Transcript.

Cannabis Stocks Reacting Badly to Return to the Office

Andrew Partheniou, Vice President, Research at Stifel GMP

Andrew Partheniou is the Vice President, Research at Stifel GMP covering the health care, cannabis stocks and psychedelics sectors, where he joined its predecessor firm GMP Securities L.P. (“GMP”) in 2017.

He provided support to Martin Landry who has been ranked as a TopGun Analyst in the Small Cap/Special Situations and Healthcare sectors in the Brendan Wood International Worldwide Equity Capital Markets Performance — Canadian Equities Report.

Mr. Partheniou has a technical background stemming from his years at a global engineering conglomerate and holds both a B. Eng. from McGill University, and an MBA from the John Molson School of Business.

His take on cannabis stocks as an investing thesis is an interesting one.

“Cannabis falls within the risk/growth sector, which has been impacted by the rising rate environment leading to its underperformance.

There’s also the dynamic within cannabis where some markets are maturing more rapidly than we previously anticipated.

As a result, cannabis retail prices are falling despite us being in an inflationary environment. So companies are experiencing pressure on both ends.

COVID is also waning.

And we say that that’s kind of a headwind because during COVID, consumers had a lot more money to spend sitting at home, and with a lot more time on their hands. Cannabis is definitely your friend when you are in that situation, so there was a lot of spending during COVID.

Now that stimulus has gone away.

However, there are some bright spots.

For example, in supply chain, there hasn’t really been a lot of negative effects in cannabis compared to some other sectors that are a lot more global in nature.

Cannabis, for the most part, is a domestic product.

It is grown within the country and sold within the country. So they have less exposure to supply chain challenges.

There are also important secular growth opportunities with medical states converting to recreational that are still very much a driver of shareholder value creation, and part of our fundamental thesis as well.”

The geography of cannabis stock investing is intriguing.

“In the U.S., it’s a state-by-state structure, because cannabis is illegal at the federal level.

And so every state has its own rules. We see cannabis as a geographic play in the U.S. favoring the East Coast; it’s important to choose the right states that have the most favorable regulations to have an extra layer in terms of barriers to entry with limited versus unlimited licenses.

We believe that there are other moats as well. But that is a very important one — regulatory moats.

In Canada, it’s an unlimited license market that’s legal at the federal level, which is one reason why we’ve seen such intense competition.

This translates to low selling prices, making it difficult to reach profitability which affects equity valuations.

Europe is a completely different story and it depends on which country you’re looking at.

There is no full federally regulated recreational market within Europe; it’s all very medical focused.

Germany is where everybody pays most attention since it is the largest and most influential country within the region. It has a small medical program and right now they’re in the process of creating a recreational market.

But it’s very early days. They haven’t released the draft legislation yet.”

The U.S. also has geographical implications for cannabis stocks within its borders.

“Typically, if we were to segregate the U.S., we would say the East Coast versus the West Coast.

The West Coast states are actually very difficult markets to operate in: prices are low, competition is high and profitability is difficult to achieve.

On the East Coast, states like New Jersey, Pennsylvania, Florida, Maryland — these states are very attractive, for a few reasons.

Number one, they are less mature than those on the West Coast. And so typically, you see less competition and higher selling prices, which leads to better profitability.

For the most part, they are also limited license markets which caps competition and creates a sustainable competitive advantage for those companies that have those licenses.

Our favorite names are those that have more exposure to East Coast states and generate better returns for shareholders.”

The cannabis stock sector expert has his favorite picks.

“Right now, our top pick is Green Thumb Industries (OTCMKTS:GTBIF/CNSX:GTII).

We brought them public back in 2018 and we’ve liked them for a very long time.

They are best in class, one of the largest companies in the country with $1 billion in run-rate sales at around 30% EBITDA margin, generate great cash, and the least leveraged amongst all of our coverage at one times debt-to-EBITDA.

So they have the least refinancing risk as a result, which is important when you’re thinking about a rising rate environment in a capital-intensive industry.

And a reminder, these companies are taxed at egregious levels because cannabis is federally illegal.

They’re taxed at the gross margin level, so they can’t benefit from all the deductions that a normal company does, which translates to over 50%-70% effective tax rates and sometimes higher.

So when you think about that matched with the need to build out production facilities in every state, access to capital is a very important factor.

GTII is also the only cannabis company in the U.S. that’s exposed to every single recreational conversion state, giving them a growth catalyst every year into 2024.

That’s important when thinking about a growth sector, because if you’re not growing, you’re going to get penalized.

So GTII has exposure to a potential $20 billion of mature industry sales in these recreational conversion states, which is roughly what the entire country generated in 2020. And it secures GTII’s growth outlook for the long term…

Two other companies that we like in the U.S. cannabis space are Curaleaf (OTCMKTS:CURLF) and Trulieve (OTCMKTS:TCNNF).

There are more, but those are number two and three. Curaleaf is a $4 billion company and the largest in the country with the only true national footprint as well as the only U.S. company to have assets in Europe.

So that leaves a good amount of optionality if Germany works out in terms of going recreational.

Currently, they’re in a period actually where they’re expanding EBITDA margin, which is a little bit different from others that are trying to defend their margin. And that’s because Curaleaf started off from a lower base.

So that’s a good story to tell right now in this type of environment.

They’ve got great access to capital as well, with their Executive Chairman Boris Jordan. He’s a wealthy, successful businessman with an impressive network.

Trulieve is a cash-generating machine.

They’ve got by far the largest footprint in Florida which is a cash cow for them and have a roughly 14% cash flow yield next year even with a tax rate above 50%.

Despite that, the company is trading at a roughly 30% valuation discount to the top five companies.

We think the main reason is because they still have a relatively narrow footprint.

They’re in Arizona and Pennsylvania as a result of a large acquisition, which was actually the largest in cannabis history.

But the future growth profile is dependent on doing further M&A.

In this type of market, we think that they could pick up some distressed assets, as smaller companies see themselves as losing ground to the larger companies.

We think shares have the potential to re-rate as that plays out.”

Get the complete picture on cannabis stock investing by reading the entire 2,459 word interview, exclusively in the Wall Street Transcript.

Marijuana Stocks: the New Frontier in Growth Investing

Marijuana Stock sector expert Russell Stanley, Managing Director, Equity Research, Beacon Securities Limited

Russell Stanley is Managing Director, Equity Research at Beacon Securities Limited and has become an industry leading expert on the Marijuana stock sector.  He has focused on the cannabis space since 2016, and his formal coverage universe is dedicated to the U.S. market.

As a controlled subtance, marijuana is in a peculiar grey area of U.S. law.

“Like most, we have followed the progress of federal reform in the U.S.

The rally that we saw in late 2020 and early 2021 certainly reflected overoptimism for the pace of federal reform in the U.S.

It then became clear that it was going to become difficult to get any legislation through the current government, specifically the Senate given the 50/50 deadlock there, as well as filibuster rules. So what we’ve seen since then has been a long decline in sentiment towards cannabis stocks in the U.S., as optimism for reform has declined with little mini rallies here and there, whenever optimism briefly improved.

More recently, the operators we’ve talked to have expressed greater optimism than in the past for the SAFE Banking Act to be passed in some form — more likely during the lame-duck session…

One of the big drivers behind the renewed optimism for the SAFE Banking Act is that its biggest obstacle to date hasn’t been Senate Republicans.

The strongest opposition has been from the key Senate Democrats that released a much bigger, broader legalization bill, the CAOA, which they formally introduced this past summer. Given that bill is not expected to go anywhere, it seems that the Senate Democrats behind that bill have realized that they need to pursue a more moderate pace of reform.

And each of the three key authors there, including the Senate majority leader, has made comments lately indicating that they’re open to passing the SAFE Banking Act if it can be augmented with social equity provisions.

There’s still negotiating to be done for sure, and the lame-duck period is not long at about seven weeks or so, and perhaps less because of the holidays. So they do have to thread the needle, as far as the calendar is concerned. But the operators we talk to haven’t been this optimistic on SAFE in quite some time.

”

This legal uncertainty along with the general market downturn has not been kind to the Marijuana stock sector.

“The entire space has taken a hit. By our math on a year-to-date basis, the U.S. operators that trade on the Canadian Securities Exchange are down by an average of 50%. The underperformers relative to that 50% include Ayr Wellness (OTCMKTS:AYRWF), Ascend Wellness (OTCMKTS:AAWH) and TerrAscend (OTCMKTS:TRSSF), and each of them have specific contributing factors that we think explain the relative underperformance.

But the entire space is off about 50% and it’s very difficult to find any true outperformers.”

The marijuana stock expert does have some top picks.

“Our top pick right now is Verano Holdings.

It’s one of the largest multi-state operators — MSOs — and it’s also traditionally been one of the strongest performers on EBITDA margins and particularly on cash flow margins which we think is really important. It’s one of the most liquid stocks amongst MSOs.

And we think that as sentiment returns to the space, investors are more likely to gravitate towards more liquid stocks first, from a risk management perspective.

And we think it continues to trade at a discount to its closest peers for a number of reasons, one of them being it doesn’t have a long track record as a public company. And so it doesn’t have as large an investor base, or as wide analyst coverage, although both are increasing as those names do.

On a relative basis, it has outperformed the key benchmark, the MSOS, since early August, which is a trend that we expect to continue. So that’s our top pick.

Another pick on the other end of the size spectrum would be Vext Science (OTCMKTS:VEXTF).

This is a small company.

Its primary operations right now are in Arizona and secondarily in Ohio. Its margins are traditionally amongst the best in the industry as well, but because it’s a small company, it flies under the radar.

We think Vext is an inevitable acquisition target because Arizona is one of the few limited-license markets that does not cap the number of licenses any one company can own. And the MSOs are running out of room to acquire operations in a number of other limited-license markets, particularly in the East, and sooner or later Arizona is going to be one of the only states that they can buy more in.

And we think that makes Vext a worthy buy at this point.”

The marijuana stock sector has less of an inflation worry as more mature consumer product companies.

“Inflation’s impact depends on the state and its market maturity.

In states where the operations or the market itself is considered mature, valuations can be very, very attractive. For example, we recently initiated coverage of a company called Schwazze (OTCQX:SHWZ), and they operate in Colorado and New Mexico.

And Colorado is perhaps the closest thing to a mature cannabis that we have. So Colorado did over $2.2 billion in sales last year, but it is intensely competitive.

And combined with inflation and the impact on the consumer, we think Schwazze is very well positioned to acquire additional assets in a state like Colorado with little bidding competition.

So I’d say it does have an impact in as much as where you’re dealing with a more mature market, and you see pricing pressure on top of that, then the assets might be more attractively valued.

On the flip side, if you’re looking at a new market that is growing aggressively, or is recently legalized — so for example, New Jersey, or a New York, where the state is working to implement adult-use legalization — inflation still matters, but it plays less of a role because those are new markets where the anticipated growth should more than offset any inflationary challenges.”

To get the full detail on the marijuana stock sector and its prospect for growth, read the entire 2,151 word interview, exclusively in the Wall Street Transcript.

Space Tech Investing: Is this the Perfect Opportunity to Invest in a Moon Shot?

Mark Boggett, CEO of Seraphim Space Manager LLP and manager of the Seraphim Space Investment Trust PLC (LON:SSIT), a portfolio of over 20 world-leading SpaceTech companies.

Space Tech is a new growth sector opportunity for individual investor.  Occasionally, 10x returns in 10 years in publicly traded stocks are possible if the cash investment timing is made during a panicked market that has abandoned growth stocks in general and the general tech indices drag down individual winners.

Opportunities happen.

Internet connectivity in the 90’s, e-commerce in the 2000’s, solar energy for the second decade of the 21st Century and now Space Tech.

Mark Boggett is the CEO of Seraphim Space Manager LLP and manager of the Seraphim Space Investment Trust PLC (LON:SSIT),  which includes a portfolio of over 20 world-leading SpaceTech companies.  In this 2,331 word interview, Mr. Boggett outlines his portfolio of private and public companies with the potential to unlock a fortune for investors in the next 10 years.

“…Last year we founded, launched and listed the Seraphim Space Investment Trust (SSIT) on the London Stock market.

Since then, we’ve gone on to invest $200 million through that trust during the course of the last 12 months, continuing to build out our space-thematic business and diversify the portfolio.

Globally, we’re now the most prolific investor in the space market, with an overall portfolio of nearly 90 companies, and we’re very much at the center of what’s going on globally in this exciting market.

SSIT was really the next stage of development beyond our venture fund, which was solely focused on investing in businesses that were early-stage seed and Series A companies.

However, the sector was developing so quickly that the Investment Trust was created to provide growth capital both for businesses that we have previously invested in in early funding rounds that were now growing into industry-leading companies, as well as new businesses that we identified.

There was a lack of growth capital opportunity for financing these types of companies and we wanted to set up one that was specialist focused on space to enable us to be a leader in the funding rounds but to also bring other non-space-focused investors into these rounds.

My background has always been as a generalist deep-tech investor.

I had a group of partners, which included Michael Jones, who sadly passed away the year before we launched the investment trust. He was the founder of the company Keyhole Corporation which was bought by Google in 2003. Keyhole Corporation became Google Earth, and Michael became the CTO at Google Earth, Google Maps, and Google Local and helped to scale their operations.

He joined me at Seraphim as a partner because he recognized how the space industry was evolving, the opportunities that were going to be presented for earth observation and the opportunities that were developing from this new digital infrastructure that’s being created in the sky.”

The current market turmoil has also impacted Mark Boggett’s fund.

“The revenue streams are coming from two different areas: One is around global security, with defense and intelligence making up significant demand for space businesses.

This has been a particular driver during the last six months, particularly accelerated through the crisis and war in Ukraine, with budgets around defense and intelligence increasing during the course of the year.

These are the types of technologies, solutions and services available from new space companies that make up the SSIT portfolio and are still recording strong growth during the market downturn.

The other side of the revenue stream from these portfolio companies is centered around climate, sustainability and the issues the world is facing on climate-induced weather events.

Similarly, there is a global trend in identifying solutions that can address these big problems, which has led to the growth of impact funds and green funds, as well as strong retail and institutional interest in addressing these big global problems that we’re facing.

Overall, from a portfolio perspective, these companies are continuing to be able to access funding.

However, as a London Stock Market listed fund, we have seen our share price decline significantly, in line with other investment trusts focused on private companies with growth-related strategies.

There has been a general selloff from the start of the year from companies that are pre-profit and particularly technology-related businesses, which we are completely focused on.

Consequently, we have seen limited volume and liquidity in our shares, and as a consequence, we’ve suffered share price declines — today with the value at a significant discount to our net asset value.

There’s uncertainty in the market as to where we are right now. Therefore, in July we put out a trading statement aiming to give confidence to the market that the numbers that we’re going to be putting in mid-October are going to be reflective of a robust position of our portfolio.

Specifically, the trading statement was to demonstrate the strength of the underlying revenue growth and bookings of the underlying portfolio companies.”

Eric M. DeMarco is President and Chief Executive Officer of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)

Eric M. DeMarco, President and Chief Executive Officer of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is another Space Tech pioneer.

“In the space business, the ground equipment for the vast majority of the legacy satellites that are up there follow geosynchronous orbit — it’s kind of analogous to a 2G cellphone network 20 years ago.

There’s lots and lots of hardware, racks of equipment for the command and control, the telemetry tracking control, etc., to give instructions, etc.

We made a significant investment over the past five years — including we hired executives and technical people from the telecom industry and the wireless industry that worked on 5G networks — and we have converted that satellite hardware ground equipment to software.

It’s called OpenSpace; and it’s open architecture.

I analogize our OpenSpace software to the iPhone iOS system, similar to an operating system.

And now the various modems and other functions and applications, we are also converting those boxes from hardware to software like apps to run on our OpenSpace software.

We have seen incredible market acceptance both with DoD and commercially.

We’ve recently announced two very large program wins, one with Intelsat on the commercial side, and one with BlueHalo and a military program called SCAR, on the national security side.

We’ve just been informed that we have won a another one; it has not been publicly announced yet.

And we have several more that we’re working on that we hope to be successful on by the end of the year.”

John R. Scannell, Chairman and CEO of Moog Inc. (MOG.A)

Another space tech exec John R. Scannell, Chairman and CEO of Moog Inc. (NYSE:MOG.A), has similarly rosy view of this new investment sector:

“The space business is going very well.

Most of our space business is in some way U.S. government funded and is defense related.

The formation of the Space Force a couple of years ago will have an impact.

The way I describe it is that historically to win a battle, you always sought out the high ground, whether it was at the top of the hill, or the top of the mountain, or in the air in an airplane.

Now space is the high ground, and so there’s a lot of investment going into space opportunities.

We’re seeing some nice business there.”

The skill to provide space tech is a rare corporate attribute.

“…That just gives you a sense of “performance really matters”; it’s in highly critical applications, but it’s also in military jets where we control the surfaces on the wings and the tail that moves the jet.

On commercial airplanes, we do flight-critical systems.

In other words, if our systems fail, it’s a very bad day. It’s this idea of performance really matters that translates to the idea that the cost of failure is far higher than the cost of acquisition.

That cost of failure could be life or it could be just very expensive…the Mars example is interesting.

I’ll give you my story on that from a few years ago when we had some products on the Mars lander.

The way I describe it is, it was a 10-year development program, and it was a 10-month flight to Mars.

And the Moog products had to work for about 10 seconds, but they had to work the moment that vehicle was landing on Mars.”

Marc Bell, Co-Founder, Chairman, and Chief Executive Officer of Terran Orbital Corp (LLAP)

Marc Bell is a real estate developer turned space tech exec as the Co-Founder, Chairman, and Chief Executive Officer of Terran Orbital Corp., (NYSE:LLAP), a leading manufacturer of satellites primarily serving the United States and Allied aerospace and defense industries.

“We’ve carved out a niche with satellites 500 kilograms and under and we’re also the folks that invented the CubeSat, so we started the SmallSat revolution over a decade ago.

All the SmallSats you see today were based on our initial technology…

What used to cost $1 billion, we can now do for $10 million. What used to take a decade to build, we can now do in months.

We have shown the world how you can do big things in a very small package.

At the end of the day, it’s cheaper to get there from a ride perspective.

The downside is you have to replenish them every five years. The plus side is the cost is a fraction.

Even if you have to replace the satellite every five years, it’s still phenomenally cheaper than building one geosynchronous satellite, and you continue to refresh your technology.

We can design, build, and launch a satellite while the current model iPhone is still being made.

And geosynchronous satellites, you know these things could be the size of houses and they take a decade to build and launch.”

Get the complete picture from all of these Space Tech execs by reading their complete interviews, only in the Wall Street Transcript.