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The Dirt Cheap Value Portfolio Encounters A Bloody Week

Dec. 18, 2021 2:02 PM ETBRID, CMG, CRM, F, FARM, META, GE, JVA, NFLX, NVDA, QID, QQQ, WPRT6 Comments
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  • Westport Fuel Sytems wins big.
  • Ford and Bridgford Foods win the dubious "dunce cap" honor.
  • Farmer Brothers Insiders come to the plate, and in a big way.
  • end of the year tax loss selling is excaberating the weakness.
  • WPRT files lawsuit against Ford, for patent infringement.

logoThe DJIA lost 2% during this past week, falling 606 points from 35,971 to 35,365. The "DCVP" fared much worse hemorrhaging a horrendous 8.2% from $144.10 to $135.89. That amounts to a crushing, four times the rate of the overall market.  Talk about getting punched in the gut. This one takes the cake.

The biggest loser, or as I usually to refer as the "dunce cap" winner was tied between both Ford and Bridgford Foods (they both endured an 8% markdown). The big winner was Westport Fuel Systems with a 2% markup. That might not seem like a lot, but I will address the significance of that later. All other components ended in the red.

the list:

(BRID): The stock fell from $12.16 to $11.43, on minimal volume of 3,700 shares for the entire week. That's a paltry daily average of 740 shares. We  could see some nice positive price movement soon, as the company is slated to report its 10-K report soon.

(JVA): Is JVA vulnerable to a hostile takeover attempt? it is, and the most logical suitor would be Joh. A. Benkiser. They are better known as JAB Holdings (a large German based conglomerate) and have been scooping up coffee companies, like there is no tomorrow. They have recently acquired KKD, Caribou, Peets, and Green Mountain. Will JVA be next? They have the resources to pay cash and at a substantial premium. The other possible suitor? (SJM) of course.

The Gordon Brother's likely don't have the resources (votes) to stop it from happening. Between the two of them, they own just 7.60% of JVA's 5,700,000 total shares outstanding. This figure does not include the options the CEO controls to purchase 349,000 shares at $5.43 and the CFO's 281,000 option shares, at the same price. The CEO owns a mere 2.90% (166,416 shares) while the CFO owns 4.70% (268,514 shares) when not adding in their option grants. Hardly controlling entities. If the enterprise doesn't get acquired in 2022, for a decent premium, I have a feeling that current management will attempt to take it private. Why wouldn't they? the company is currently selling at below book value.

(WPRT): the stock was absolutely bloodied on Wednesday, falling all the way to $2.03 before clearer minds prevailed. since then, the shares have rallied a whopping 16% to $2.36. This rally was likely linked to the press release issued on Thursday, touting their refinanced $20 million loan. Their interest rate was reduced and their loan period was extended. The rally also could be attributable to a capitulation scenario, as all weak hands finally threw in the towel. In addition, end of the year tax loss selling is finally waning down. 

Finally, there comes news that WPRT filed a lawsuit in a Texas court against Ford, for patent infringement. Will this be just another frivolous lawsuit, or does it have teeth? we shall see.

(FARM): The company passed all its proposals listed on its proxy statement, at this year's annual shareholder's meeting. This could have emboldened them (the Board) to hand out incentive stock grants to each other in the tune of 107,000 shares between all seven of them. These grants effectively dilute the share count by an additional .05%.  I would have rather seen, the Board granted stock options, rather than a pure giveaway.

The good news is, the CFO (Scott Drake) went into the open market and purchased $100,000 worth of shares with his own money. He actually purchased his shares on Monday, December 13th at an average price of $6.6638 (15,000 shares) That is indeed impressive and noteworthy. As you may recall, the CEO did the same thing too. On Tuesday, December 2nd, he bought 16,600 shares at $6.03.  On 12/17/21, we got even more good news. Mr. Ruben Inofuentes (Chief Supply Officer) used his hard earned cash to  buy shares in the open market too. It was reported via Form 13-F that he purchased 15,000 shares on Friday, Decemeber 17th at an average price of $6.63.  Always follow the smart money.

(GE) A drop from $96.95 to $91.45 was unexpected, to say the least.

(F) I was surprised the weakness this one exhibited, especially considering the company received two sell side analyst upgrades (Wells Fargo and Barclay's) and it was noted that Henry Ford's grandson, exercised options but didn't simultaneously sell them (which occurs most of the time).

As an insurance policy/hedge against my long positions, I have taken the following bearish positions: (1) long (QID) (2) short (QQQ) (3) short (CMG) (4) short (CRM) (5) short (FB) (6) short (NFLX) (7) short (NVDA).

we could see a meltdown in the overall market, sooner rather than later.

Analyst's Disclosure: I/we have a beneficial long position in the shares of ge, f,brid, jva,farm either through stock ownership, options, or other derivatives.

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