This chart is not too unusual. Lots of companies that went public in the frothy 2020/2021 time-frame are trading far below their initial offering price and we are likely to see a few more of these types of take-out transactions.

And some very interesting news on the DIRTT Environmental Solutions’ bonds that I’ve been mentioning lately (and own). From the company on February 15:

“DIRTT Environmental Solutions Ltd.'s board of directors has approved a substantial issuer bid and tender offer, under which the company will offer to repurchase for cancellation (i) up to $6-million principal amount of its issued and outstanding 6.00 per cent convertible unsecured subordinated debentures due Jan. 31, 2026 (or such larger principal amount as the company, in its sole discretion, may determine it is willing to take up and pay for, subject to applicable law), at a purchase price of $720 per $1,000 principal amount of January debentures; and (ii) up to $9-million principal amount of its issued and outstanding 6.25 per cent convertible unsecured subordinated debentures due Dec. 31, 2026 (or such larger principal amount as the company, in its sole discretion, may determine it is willing to take up and pay for, subject to applicable law), at a purchase price of $600 per $1,000 principal amount of December debentures. Holders of Debentures who validly tender and do not withdraw their Debentures will receive the applicable purchase price, plus a cash payment for all accrued and unpaid interest up to, but excluding, the date on which such Debentures are taken up by the Company. The applicable purchase price will be denominated in Canadian dollars and payments of amounts owed to holders of deposited Debentures, including for interest, will be made in Canadian dollars.”

While this has put a bid under the debentures it feels woefully inadequate and I’ll be holding out for higher prices and/or maturity. 

Long time SCD favourite, BeWhere Holdings (BEW.V), had a big bunch of warrants expire this week. The warrant overhang is now gone and should the stock start to move higher there won’t be these warrants to slow down any rise in share price. I’ve been suggesting waiting for these warrants to expire before looking at adding to our positions. It’s one that is currently back on my watch list for potential purchase.

Other Stuff

I’m always on the lookout for some new company to buy or opportunities to add to one of my existing positions. As I’ve matured as an investor I say “no” much more often than I used to. I’m trying to be much more critical of my opportunities, more selective to the point where sometimes I feel lazy. Back when I was younger and less experienced there was rarely a stock I didn’t like. It felt like there was always something shiny and new to buy. I now ask myself would I invest the bulk of my funds in this new idea, or, if I could only buy one stock for the next 5 years would this be the one? It’s not to say that if the answer is no that I wouldn’t still consider a smaller position, but it is a healthy exercise to help determine how to handle the opportunity.

Warren Buffett advises investors to think of their portfolio as a 20-slot punch card, with only 20 companies available over your lifetime. I like this type of thinking. This kind of thinking should help crystallize your due diligence and your approach to selecting investments.

I sometimes ask investors that if they had $1 million, and that was all of their money, would they put it all in this investment? If not, why not? Again, this type of question sharpens the focus and makes you think the way most really good investors think. The downside becomes much more important, the level of due diligence likely becomes deeper, then opportunity cost becomes a factor. If it’s not easy to change your mind things get more serious, you become much more critical.

Investing is such a mental and emotional exercise. High liquidity and low transaction costs, give investors the perception that they can make quick decisions, heck if I’m wrong I can just sell it and move on to the next one. But of course once we own it we succumb to the mental and emotional gymnastics of not selling when we should for fear of the stock moving up and missing it, or because we can’t admit we were wrong. When you buy illiquid stocks, buying and selling is not as easy so due diligence and knowing what you are buying becomes a higher stakes affair, and here, mistakes can be very deadly for your portfolio.

You might get a lot of “good” investing opportunities per year but it’s been my experience that you typically only get one or two really “great” investing ideas per year. It’s the great ones that we need to focus the bulk of our energy on. We need to be financially and mentally ready for them. Much easier said than done.

Of course the more rocks you flip over the more opportunities but there are times where it feels like that big fat pitch isn’t coming so you take swings at lesser companies or pay too much for something. There’s nothing wrong with taking small swings while you wait for the fat pitch but sometimes it just makes sense to watch the game from the bench and let the others play ball for a while.

It feels like now is one of those times. I’m happy to keep looking and we are turning over all the rocks we can right now but while we look we’re happy to sit back and watch from the bench, happy in holding what we own.

To your wealth,

Paul and Trevor