2022 is a year of 2 halves. In the first half, I was still walking around wearing masks. My lack of changing masks on a daily basis caused me to rear pimples on my cheeks and chin. In the second half, I can breathe the way a human is supposed to breathe; without having a piece of filter covering your mouth and nose. It felt liberating and the feeling where you smell your own bad breath every time you inhale is finally gone.
At the start of 2022, I surely did not expect to see a war, 7% inflation, numerous rate hikes, crypto crash, electricity prices going through the roof and most importantly, I finally sat on an airplane after more than 2 years.
I did not really make any money this year. I managed to eek out a 2% return for 2022. My investment in commodities and oil paid off but I got cut trying to catch the tech knives. Uranium also had a bad year. Overall, I made too many dumb moves and I end up with nothing.
I guess I kept falling back to my old habits whenever I make a profit; which is to be greedy. This year, I realised that I have placed less emphasis on valuations and instead, I focused on the story and the macro outlook behind the stock. This backfired on me a few times. Cash flow is still very important and evaluating the financial health of a company is still very important. In the later months of 2022, I focused on being patient with my investments and not dive into anything rashly.
I had an emergency halfway through the year and had to cash out all my holdings. I’ve only started building my positions again in 4Q22 and this is what I have so far. I am still holding about 60% cash. It is probably the only time since I started investing that I have so much cash on hand. With banks paying me to be patient, I think it is prudent to adopt a wait and see approach for 2023.
Activision Blizzard ($ATVI)
I’ve mentioned about ATVI in my previous post “Five Interesting Earnings Reports At a Pivotal Point For The Market“. It is basically a merger arbitrage play. In short, Microsoft wanted to acquire Activision Blizzard at $95/share and they are trying to make it happen. From what I see, the most worrying issue is getting the nod from UK’s Competition and Markets Authority, which is the competition regulator in United Kingdom
Energy Fuels ($UUUU), Sprott Uranium Miners ($URNM), Uranium Royalty Corp ($UROY)
As mentioned earlier, I had a cash crunch and had to sell most of my stocks. These are what’s left of my uranium portfolio. I think there is a chance I will build up from here. The market is kind of disappointed with what Uranium is doing so far. I might continue to build up my position in time to come, during peak pessimism in Uranium, also known as the other yellow metal.
First Majestic Silver Corp ($AG)
Investing in silver is a very interesting play for me. Silver has been neglected by investors, which is why it has a lot of potential at current price levels. Silver should benefit from the eventual end of the Fed’s interest rate hikes and the speculation on interest rate cuts that will start thereafter. With the easing of Covid restrictions in China, silver demand should receive a further boost, as China is the largest consumer of silver.
Industrial demand should continue to benefit from electrification of the vehicle fleet, 5G technology, and the government-driven rollout of green infrastructure such as photovoltaics. Physical investment demand should be buoyed unabated by fears of high inflation.
Geo Group ($GEO)
This is also one of Michael Burry’s stocks in his portfolio, GEO runs private prisons. On face value, it looks like a stable company that profits from criminals. The interesting part of GEO is that they have a subsidiary called BI, which owns and supplies electronic monitoring device with 80% yoy growth. Revenue for BI has grown 10x from $40mil in 2011 to over $400mil is 2022. In short, prisons are the bread and butter for GEO and BI is their high growth segment.
GEO also looks attractive on a valuation perspective.
Medpace Holdings ($MEDP)
There’s a lot to like for MEDP. MEDP is a contract research organization [CRO] that provides clinical development services to the biotechnology, pharmaceutical, and medical device segments of the market in the Asian, European and North American markets.
What attracted me to MEDP is their large insider buying which was followed by their monster quarterly earnings. In Q322, they came in with upsides versus consensus at the top and bottom lines. They have one of the better results I’ve seen this earnings season. Basically, they beat all expectations, increased backlog and raised guidance.
From the latest quarterly report, MEDP looks like a company that is growing. They gave a rather healthy guidance and here is what their CFO, Kevin Brady, replied when asked about that guidance.
Here is my piece on MEDP.
Regis Corporation ($RGS)
Also one of the stocks mentioned in my previous piece, RGS is a turnaround play and that means this is a risky play. Over the past several quarters, the company has been trying to complete the transition to a fully franchised model, and winding down our legacy businesses. They have came a long way. In the latest quarter, RGS generated more EBITDA than all of fiscal 2022, and RGS recorded positive operating income for the first time since the quarter ended September 30, 2018.
I’m looking out for RGS to turn FCF positive. To do this, They must reduce the cash used in operations and improve sales and customer traffic. What I like about the company is that the management has a well thought out plan to improve the balance sheet. They are also focused in their execution. With a more simplified business model, all RGS have to do is to attract and retain talent, improve traffic and revenue growth should follow.
Uniqure N.V + Volition Rx
I have written pieces about these 2 companies recently, You can find the links below;
uniQure N.V. (NASDAQ:QURE) – World’s Most Expensive Medicine
uniQure NV (NASDAQ:QURE) – A Prognosis
VolitionRx Limited (NYSE: VNRX) – Enters Commercial Stage for Nu.Q Vet Cancer Test
Both companies are on the verge of receiving royalties from the sales of their products. Uniquire has Hemegenix, which was recently listed as the world’s most expensive medicine. Volition Rx has their Nu.Q cancer diagnostic test for dogs.
Both companies has entered the commercial stage and is expected to receive royalties from sales. On top of that, they will be receiving upfront payments from partnerships with other companies involved with the sale and development of their products.
The risk of investing in these companies lies in the quantum of cash flow that they will be receiving. As both companies are development companies, they have a high cash burn rate. The best scenario for both companies will be turning cash flow positive and not relying on any other forms of financing.
There are 3 other stocks that are on my watchlist but I will be doing a more in depth research before making any moves.
Theses companies have similar characteristics –
- beaten the last earnings outlook
- raised guidance
- increased backlog
The companies are Celestica Inc (CLS), Greenbrier Cos Inc (GBX) and Wabash National Corp (WNC).
Do note that this is not financial advice to buy or sell. Please do your own due diligence. Don’t be stupid and buy just because you see other people buying.
What is Next
In 2022, The Moss Piglet published 29 articles. Out of which, 7 were stock ideas. I think I can do better, considering it is less than 1 stock idea a month for 2022.
For 2023 I want to increase the high quality content and research on this blog. Here are some high level goals I have for 2023:
- Continue to uncover and research value opportunities in the public markets: With 2022 being a horrendous year for equities and with a large cash hoard, now is the right time to be buying stocks. I don’t know when the market turns around, but you usually end up pretty ok buying stocks in a down market. I’m seeing a lot of good opportunities in public markets and I am excited to share them with everyone over the coming weeks and months.
- Focus on specific companies and less on macro: I’ll be spending a significant amount of time in 2023 focusing on individual stocks instead of looking at the inflation data and fed rates. There is good money to be made in public markets exclusively focusing on these winners and I want to start sharing them with my readers. I’m thinking a monthly article highlighting interesting opportunities.
- Following insider transactions: I already started tracking major insider transactions on equities and it is starting to payoff. I’ve found a lot of unique undervalued opportunities where CEOs, CFOs and Directors are buying their own stock hand over fist. Buying their own stock implies there could be significant upside. Insider transactions will also be a monthly edition to The Moss Piglet and should provide high quality value to any reader.
I’m not very optimistic about the stock market in 2023, I’m not very optimistic about the market outlook in 2023, I’m not very optimistic about the economy in 2023. Also, I wouldn’t want to get ahead of myself and make some prediction of how the markets will move in 2023. I think I will be focusing on individual stock picks.
Anyway, here’s to a better 2023 and hope that everyone make some profits in their investments this year.
2 thoughts on “2022 Portfolio Review -A Quick Look Back, Then Start Looking Forward”
Hey man, I hope what is clouding you is not clouding you anymore. All the best for 2023.
Thanks man! I’m alright now and can’t wait to start the new year. I enjoyed reading your stuff and I wish I can write as well as you haha.