Brook Reef

Buying KRBN @ $45.21 2% position It's no secret that I'm a believer in a carbon-free future full of electrified everything. One of the ways to achieve that future is to put a price on carbon emissions - which is what this fund attempts to achieve. As carbon limits are lowered, the value of these carbon credits will increase. This is a long-term investment that could have some big trading opportunities this winter if Europe experiences a cold winter - and next summer if Europe has another hot summer.

Selling 1/2 of EVGO position @ $17.24 Realized gain of $6.04 (53.93%) EVGO has been down from where I bought and is rallying now. So I'll take it as a way to lock in a decent gain on part of the position and keep the 2nd half for the long-term. I'll re-add this portion on weakness, but don't plan to actively manage the remaining 1% position.

Buying NWL @ $22.65 2% position NWL is a stock that I've always had bad luck trading. I like the story and the products - and the valuation is always tempting - but something about the business tends to underperform and underachieve. So the attractive valuation persists. That said, the underlying business has performed at least as well as others in the category - but the stock price hasn't. So we get to buy NWL today with a hefty 4.1% dividend yield and only 13.1x P/E. Using the formula I introduced here - when I bought (more) CAG - NWL shows me a 9.3% total, long-term return vs. the S&P 500 at ~7.1%. I'll dig more into NWL and the strengths and weaknesses of this valuation formula in the coming weeks, but for now I'm continuing to move slowly in the market as it continues to rise.

Buying (more) CAG @ $33.39 Adding 2% 4% position After more watching CAG and analyzing some financials and thinking, I've decided to buy another slug of this position.  ConAgra is a major food packager/producer that we all know and love. Their major brands include SlimJim, Gardein, Vlasic, Duncan Hines, Birds Eye, and more! The stock trades at 12.6x next year's earnings - which is an 8% earnings yield. That's a pretty solid return if earnings never grow - but they will. Additionally, CAG pays a 3.7% yield - which means the payout ratio is under 50% of earnings. A very sustainable and safe level. One way that I simply value stocks is looking at their earnings yield, payout ratio, and GDP growth. Basically, find an adjusted growth rate and add it to earnings yield. Here's how that works for ConAgra: Earnings Yield: 8.0% Payout Ratio: 46.8% Long-Term GDP Growth: 3.5% Payout-Adjusted Growth: 3.5% x (1 - 46.8%) = 1.9% Total Return (Long-Term): 8.0% + 1.9% = 9.9% As compared...

Buying PNW @ $68.46 2% position PNW's main utility subsidiary, APS, had a rate case decision come out today and shares are down about 8% because the rate case was "value destructive" and "draconion" due to an allowed return of 8.7% vs. the historical average of ~10%-ish. However, most analysts who use a cost of equity in their valuations would use something between 7-8%. So "value" can still be created with an allowed return of 8.7% and a cost of equity below that. With PNW shares trading at ~14x next year's earnings, the stock is a total buy on this weakness - both on a relative and absolute basis.  If ROEs come down across the country (as they should) PNW will not fall given it has taken the first step down. This would be a great pair trade against XLU too!

Buying STEM @ $23.68 1% position Adding another lottery ticket sort of company to my EVGo holdings. Via a long-term contact, I got in touch with Stem and learned a bit about them. It's a battery play for industrial customers and possibly grid-scale. While the company sells hardware (batteries), the real secret sauce is their software. Earnings are a bit tough so here's a quick rundown and example: For a $100 sale, only $40 shows up as revenues in Year 1. The remaining "revenues" show up over 40 years despite Stem taking in $100 of cash. However, ALL of the costs show up in Year 1. Say the margin is 25% for illustration. This means, Stem shows a loss of $35 on this sale in the first year DESPITE bringing in $100 of cash. Since STEM is a growth company, this accounting loss problem will continue. So the company won't be "profitable" for a long, long time. But unlike many other similar stories of earnings losses, the economics are CASH positive today! If I ...

Selling OGE @ $33.60 Realized loss of $1.80 (5.08%) Taking a loss here on OGE. It hasn't worked and after more digging and research on the thesis I had for buying it - energy transition (shut down of dirty power plants replaced with clean) - is going to be more full of glitches and pushback than I thought. Utility execs in oil country are dinosaurs! I'd stick with the idea if it was working, but nothing about this trade is going well.