My 2019 Seeking Alpha Year In Review

Summary

• 2019 was my first year writing for Seeking Alpha.
• Introspection and reflection are key tenets to invest by.
• To that end, here is a review of my Seeking Alpha write-ups and how the companies assessed have performed.

Introduction:

Over the course of 2019, I published 12 Seeking Alpha articles highlighting aspects of how we invest here at Contra the Heard. Of those 12 write-ups, nine were detailed company or ETF assessments. Appropriate questions at this time of year are: How did they do? Do you still own them? What are their prospects now? This article will attempt to answer these questions.

Alacer Gold:

Alacer Gold (OTCPK:ALIAF), my first write-up, was published February 11, and can be read here: Alacer Gold: Sulphide Project Completed On Time And Under Budget. The name is up 91.67% since then versus the Toronto Stock Exchange Total Return Index which has rallied 12.31%. According to Seeking Alpha contributor BOOX Research, Alacer was one of the best performing year-to-date gold and silver stocks as of September 16. As of December 19, Alacer was also one of the top three performers in Canada.

The timing of the article was good. Despite persistent geopolitical flare-ups in and around Turkey, Alacer has produced fantastic earnings after completing its sulphide project on time and under budget. Exploration results at Ardich and Çöpler’s Saddle Shear Zone have been decent as well. Last but not least, gold’s rally helped too. Although we remain invested in Alacer and think it could continue to run, we have reduced our holdings by a third to a half depending on the portfolio.

Hammond Power Solutions:

Hammond Power Solutions (OTCPK:HMDPF) is the only company mentioned here that is not included in either portfolio at Contra the Heard. Instead, I own it personally because it’s a micro-cap and volumes are thin. This article was published February 15 and can be found here: Hammond Power Solutions: An Investment Thesis. HMDPF has improved by 30.52% while the Toronto Stock Exchange Total Return Index is up 10.32%. It has also distributed quarterly dividends and currently yields 3.55% on a go forward basis.

Since the February article, the organization has increased its dividend 16.7%. Sales and net income have improved year-to-date, and metrics such as backlog and bookings have generally been positive. Still, the latest quarter produced ugly operating cash flow and free cash flow losses. In my estimation, the valuations remain low and I continue to hold. No shares have been added or subtracted this year.

Major Drilling:

An analysis and outlook for Major Drilling (OTCPK:MJDLF) was published March 4, and was called Major Drilling: The Turnaround Gains Traction. Major has rallied 12.11% while the Toronto Stock Exchange Total Return Index has climbed 8.84%.

The article argued a turnaround was likely under way and suggested that this would be confirmed if the organization returned to profitability. Since then, it has recorded material increases in revenues and net income in its last two quarters ending July 31 and October 31. If precious and base metal prices continue to do well – or even flatten – I anticipate Major’s profits will continue to chug higher. In other news, Major acquired Norex Drilling Ltd. The transaction should give the driller a significant foothold in the resource-rich Timmins area of Ontario. Contra continues to own the enterprise in the Vice-President’s Portfolio.

Hibbett:

Turning to American markets, Hibbett Sports (HIBB) was published April 25; here is the analysis for those who are interested: Hibbett Sports: Thesis, Results, & Outlook. The shares did poorly through the summer, but have rallied since September on strong quarterly results and improved projections. The name jumped 38.34% since April, versus the S&P at 10.05%.

Source: Philip MacKellar's Seeking Alpha Coverage.

We continue to own HIBB, think that it has low valuations, and are pleased by the results. This said, the company briefly fell into NASDAQ non-compliance for the late filing of a 10-Q. Hibbett has also struggled to find a permanent CFO following the resignation of Scott Bowman in April. Since then the organization has had two interim CFOs – Christine Skold, and now Scott Humphrey. Add on a new Independent Chairman, who was appointed in May, and Hibbett continues to be in flux.

Fortunately, after a period of uncertainty, longstanding CEO Jeff Rosenthal has now been replaced by Michael Longo. This CEO transition looks logical given that Michael was the former CEO at City Gear – an organization acquired by Hibbett in 2018. Hopefully when a permanent CFO is found, the retailer’s strategy will continue to adapt to the ever-changing retail environment while still sticking to its anti-debt and dilution roots.

TransAlta:

An article on TransAlta (TAC) was one of the more widely read assessments I have written so far, but oddly it only generated one comment. It was published on May 8 and can be found here: TransAlta: The Shareholders Have Spoken & TransAlta Closes On Initial Investment From Brookfield Renewable Partners. During the summer, TAC drifted lower before bouncing, following strong third quarter results which beat Street expectations. It has climbed 5.56% versus the Toronto Stock Exchange Total Return Index, which has rallied 5.99%. TransAlta also pays a modest 1.8% forward yield which means the total return has edged out the benchmark.

In September, the corporation held its annual Investor Day. There management reiterated their goal of a C$250 million buyback over the next three years, and the repayment of a C$400 million bond maturity without turning to capital markets. Key priorities remain in place too. These priorities include successfully converting from coal to gas, growing renewables, and expanding in the American renewables market. Then in December, the utility increased its 2019 guidance. Contra’s position in TransAlta remains the same. From this perspective, it is steady as she goes.

Gold Resource Corp.:

An analysis focused on Gold Resource Corp. (GORO) was published August 16, titled Gold Resource Corp: Commercial Production Pending At Isabella Pearl. GORO has done well and is up 68.31% versus the S&P at 12.52%. The monthly dividend was recently increased by roughly 100% too, but the forward yield remains low.

Source: Philip MacKellar's Seeking Alpha Coverage.

Fortunately for the sake of my article’s title, the mine did hit commercial production in October. Mine life, contractor costs at Isabella, and commodity prices continue to present risks to investors. Contra’s stake in Gold Resources remains unchanged, and we are comfortable with these risks. Furthermore, we are encouraged by the third quarter and recent expansion results out of the Mirador Mine in Mexico.

Diana Shipping:

An article on Diana Shipping (DSX) was published August 22, titled Diana Shipping: Expect More Tender Offers And Buybacks. This was a particularly fun article to write as the analysis pertained to a specific aspect of the company’s strategy: its tender offers. Since August, Diana has declined 12.64% but the S&P is up 9.98%.

Source: Philip MacKellar's Seeking Alpha Coverage.

Although DSX hasn’t performed well, and industry conditions remain challenging, this may be a good thing, because low valuations will allow management to continue the tender strategy. Indeed, since August, the company has completed two more tenders – one for 2.82 million shares at $3.55, and another for 2.74 million shares at $3.65. In 2020, I would not be surprised to see more tenders given where it is trading today. Over time, this should help long-term owners who will see their position in DSX increase without laying out more capital. Contra has not changed the size of its holdings in Diana.

GREK:

Global X MSCI Greece ETF (GREK) is the only ETF held at Contra the Heard. I wrote about the article October 24, and those who are interested can read about it here: GREK: Greece Summons Hercules. I think it provides investors with a decent summary of the challenges and opportunities facing the Greek economy. The ETF has generated a return of 2.75% versus the S&P at 6.92%.

Source: Philip MacKellar's Seeking Alpha Coverage.

The outlook has not changed since the write-up was published. Investing in Greece is a bet on its valuations, which rank among the lowest in the world. The country is ugly, unloved, and full of risk, but it is cheap. As value investors, we like cheap, and have tried to balance the risks with a modest portfolio weight. Contra’s position in GREK remains unchanged.

Sprott:

On November 20, I published an overview of Sprott Inc, (SPOXF): Sprott Inc.: Waiting to Rally. The ticker has bounced 1.39% versus the Toronto Stock Exchange Total Return Index at 0.93%. Personally, I don’t think much can be read into this performance, however, given it has only been a month. On a side note, I don’t think even three months is a good time horizon on which to judge performance versus the market.

Nevertheless, the thesis, with all the identified risks and rewards, remains in place. Sprott’s weighting in Contra’s Vice-President’s Portfolio remains unchanged. Though you never know, I expect we will own the same number of shares in another year’s time.

Conclusion:

2019 was my first year writing for Seeking Alpha. Of the 12 articles published, nine were company or ETF specific. Introspection and reflection are key tenets to invest by, because assessing past performance may fine-tune one’s investment process, and hopefully improve future results. Moreover, at this time of year, some appropriate questions to ask are: How did they do? Do you still own them? What are their prospects now?

I hope this article has answered these questions. Upon reflection, eight of the nine firms covered are higher than they were when the articles were published. Furthermore, all five Canadian specific write-ups have beat the Toronto Stock Exchange Total Return Index and two of the four American companies have outperformed the S&P 500. Therefore, in total, seven of the nine have beat their respective benchmarks.

A big thanks to everyone who has subscribed or read my articles this year. Your support, questions, and feedback are much appreciated. Next year, I hope to write more here at Seeking Alpha, but that will depend on the workload here at Contra the Heard. All the best in 2020.

All amounts are in USD unless otherwise stated.

Analyst’s Disclosure: I am/we are long ALIAF, HMDPF, MJDLF, HIBB, TAC, GORO, DSX, GREK, SPOXF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions expressed – imperfect and often subject to change – are not intended nor should be taken as advice or guidance. Contra the Heard Investment Newsletter is not an investment advisor or financial advisor. Contra the Heard Investment Newsletter provides research, it does not advise. The information enclosed in this article is deemed to be accurate and reliable, but is not guaranteed by the author.