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Chris DeMuth Jr.
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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Prior to founding Rangeley Capital, Mr. DeMuth spent his career as a securities analyst for several hedge funds and proprietary trading... More
My blog:
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  • On This Day In 1859

    Thus, from the war of nature, from famine and death, the most exalted object which we are capable of conceiving, namely, the production of the higher animals, directly follows. There is grandeur in this view of life, with its several powers, having been originally breathed into a few forms or into one; and that, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.

    ― Charles Darwin, The Origin of Species, November 24, 1859

    Nov 24 4:49 PM | Link | 5 Comments
  • 4 New Changes To Sifting The World

    What's new on Sifting the World?

    As the end of 2015 approaches, here are four major changes ahead of us at Sifting the World that impact members and future members.

    1. Andrew Walker

    The first and best change at Sifting the World is that we joined forces with my friend and colleague Andrew Walker. It is a natural fit - Andrew is a fellow portfolio manager at Rangeley Capital, working side-by-side on our flagship fund while he also launches our special opportunities fund in January. In the time that I have followed his investment ideas, he has had a 70% success rate and an average return of over 30% in the 24-months following each idea. This places him in the top 1% of investors who have blogged about their ideas. But this measure understates the case. Put simply, he was always my first round draft pick and I am thrilled that we are not only working together but are also collaborating on StW. We are approaching the week of Thanksgiving and high on my list of what I am thankful for is our work together on our funds, our podcast, and StW.

    2. Position Tracker

    The new Seeking Alpha position tracker will go live by the end of this month. With over eighty posts to date on StW, the number of ideas is a lot for new members to keep track of. Which ideas should you focus on? Are there any that you should buy today? Have they already worked or is there still money to be made? The position tracker will answer such questions. As of today, the position tracker features fourteen live ideas. At least one more will be added by month end. All are priced at substantial discounts to their expected value.

    3. Annual Idea

    Our best idea for 2016 will be added to our new position tracker on December 1. We own the position, know the management well, have specific reasons to believe that it is massively mispriced, and can explain the catalysts that will unlock its value.

    4. Founding Membership

    Everyone who becomes a StW member by New Year's Eve will become a founding member. Such members have three distinctions that will last as long as they remain members in good standing.

    First, they will get first priority for StW subjects, communication, and events. They will get priority access to any conferences or speaking events. If we can accommodate members, we will always try. That being said, we will first attend to our founding members.

    Secondly, we intend to close our membership within the foreseeable future. However, founding members will uniquely be able to transfer their memberships or nominate additional members among their family and friends.

    Finally, our dues are not going to stay the same in the future. Based on the substantial resources that we devote to our research as well as the demand for membership in our community of investors, the price is going to be raised to $2,500. That is the price that makes the most sense given the circumstances. While that price is a better reflection of StW's cost and its worth, founding memberships will be locked in at the current price.


    Akron (NASDAQ:AKRX) has bounced over 50% from its recent low.

    This is our favorite mid-cap pick for this month. Even after a strong month, it remains undervalued. It is the kind of idea that you can expect to read on StW. This idea has outperformed the winners of SA's recent mid-cap stick picking contest by over 35%. I mention it here because it has something to do with each of the four changes at StW. It was originated by Andrew Walker. It is one of the fourteen ideas on our new portfolio tracker. It is the runner up to idea selected as our best idea for 2016. The research costs and investing value of such ideas is why prices are about to go up.

    AKRX hit a 52-week low on October 22. For background reading on this opportunity, StW members should start with this post by Rich Townsend published within a week of that low in which he lays out their accounting and disclosure issues. As a former CFO of a large publicly traded company, Townsend had to approve many SEC filings and is familiar with what the new AKRX CFO will have to do to get their filings back on track. Based on his analysis of the company, the equity could be worth around $60 per share and that valuation could be unlocked by a resolution of their solvable accounting issues followed by a sale of the company to a strategic acquirer. Even without such a strategic deal, AKRX is worth between $40 and $50 as a standalone company.

    For further background reading, StW members should continue with this update by Andrew Walker. He breaks down the downside, base case, and takeout scenarios for AKRX. It is worth around the high fifties to low sixties in a deal. On November 8, this update indicated that the underlying business performance is strong. Both earnings and revenue are consistent with or at the high end of earlier guidance. AKRX is generating substantial cash flow. The market reacted to the company's release by sending shares up about ten percent. As of early November, the probability of the downside scenario has been substantially reduced since our earlier analysis.

    Last week, we disclosed that AKRX would be a component of the initial StW portfolio tracker. Out of 81 exclusive research posts, it would be one of only around thirteen in our initial tracked portfolio. It is one of our largest and highest conviction ideas. There are many issues to sort through in order to understand its valuation; however, one is well rewarded for the bother of understanding AKRX's complex issues.

    Thank you

    We have much to be thankful for this year. Thank you to Eli Hoffman and his team for coming up with the idea of StW and for developing our new position tracker. Thank you to my colleagues including Rich Townsend, Andrew Walker, Rob Sterner, Jayne Meythaler, and Elizabeth DeMuth as well as to the other fund managers for helping originate ideas. Most importantly, thank you to each and every one of our founding members. This is for you. Anyone else interested in joining you can do so here for another 39 days.


    Nov 23 4:42 PM | Link | 12 Comments
  • Apple Vs. Adele

    Technology and fiction

    Technology has ruined two of fiction's most reliable plot devices: the simple logistical hurdle with massive ill consequence and the content provider who has to make it past the distributor in order to fulfill his/her dreams. Look how much things have changed:

    The simple logistical hurdle with massive ill consequence circa 2015

    The whole resolution of Shakespeare's Romeo and Juliet with Apple iPhones:

    Juliet, via text: Supposed to marry other guy. S***. Let's get out of here. -J

    Romeo, via text: K. ¯\_(ツ)_/¯

    The content provider who has to make it past the distributor in order to fulfill his/her dreams circa 2015

    The starving artist meets Mr. Big with Apple iTunes:

    Mr. Big: Nice to meet you, content. I seem to recall from pretty much every story of the 20th century that you must be a starving artist who must beg from/sleep with/impress me or the world will never know what you could become.

    Writer/singer/etc.: Yeah but now the problem is that I have so many channels to choose from that I forget why I need you. So, instead of sleeping with you, why don't you beg in person, beg on Twitter (NYSE:TWTR) some more, then clean my pool.

    Adele dictates terms; Apple surrenders to new reality

    The commercial appeal of singer Adele is that she appeals to every major demography including the young and old, males and females. She has let Apple (NASDAQ:AAPL) know that Apple Music and Spotify will both have to wait in line, just like her fans, for her new album, "25". Adele and Sony (NYSE:SNE) are making the bet that they can initially make more money selling than streaming her music. They sold it for pre-order on Apple iTunes while offering an extended addition for sale in Target (NYSE:TGT). Next comes Pandora (NYSE:P) a few days later. Then Apple Music and Spotify if and when she is good and ready. This year, streaming has risen to 32% of US music sales. But with an expectation to sell around two and a half million units of "25", Adele and SNE think that they have enough market power to bypass Apple Music. If their bet pays off, it will represent a major realignment in the music industry power structure.

    All of this is potentially terrific news for content providers. As long as someone is able to produce content that customers want to pay for, there is little that can stop them. Singers can launch an album that gets directly to fans. Writers can publish on Amazon's (NASDAQ:AMZN) Kindle Direct Publishing. There are so many quick and easy options that the intermediaries have less and less control.

    John Malone switches focus from distribution to content

    John Malone made billions of dollars on distribution as the greatest cable operator and investor of all time.

    Malone's Liberty Broadband (LBRDA/LBRDK/OTCQB:LBRDB) would be the largest shareholder in a combined Charter (NASDAQ:CHTR)-Time Warner Cable (NYSE:TWC) which is currently winding its way through a lengthy FCC review. Both interveners and staff have concerns that this control would increase integration with Malone's programming assets such as Discovery (DISCA/DISCK/DISCB) and Starz (STRZA/STRZB). In response, Malone committed to fixing the problem. He is willing to give up the overlapping control. That willingness is a material aid to the completion of this deal. The $17.83 net arbitrage spread offers a 26% annual return if it can close by next April. With Malone's willingness to remedy the control issues, it probably can.

    But what is interesting about Malone's response is that to fix the perceived problem, he prefers to give up influence over Charter than to give up influence over Discovery and Starz. It is a huge new development that a cable pioneer and visionary would dump control over a massive cable company in favor of programming.


    From music to programming, content owners including Adele and John Malone are exerting increasing negotiating leverage over the behemoths of distribution. This economic and cultural upheaval will go beyond the further enrichment of superstars. If the superstars can make changes to their distribution relationships stick, then many others will try to follow.

    Nov 23 9:12 AM | Link | 1 Comment
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