Friday File: Restaurants, Energy Drinks, Berkshire and more…

Hold your nose. Whitney Tilson can be nauseating!

I've often thought investors were a bit nuts to be piling into Atkore, which I think of as an electric nuts and bolts company. Sour grapes, I suppose, after selling at about 110 over two years ago. Now it looks like a steal. Don't wait too long to pile in (again).

And according to Twitter, Porter Stansberry has again resigned as Marketwise Chair and CEO as of today (though I think he's still the largest shareholder, and still on the Board), this time because he couldn't close the deal to sell his Porter & Co. business to MKTW for ~$40 million.Hard to find many SPAC deals that blew up worse than MKTW. And oooof, the investment newsletter business is clearly still in the post-2021 doldrums.

Thanks, Travis, for the updates!

I wonder about this "… but it is worth nothing that Celsius outsources most of its manufacturing and distribution, " ... should that be "… but it is worth noting that Celsius outsources most of its manufacturing and distribution, "

Trade Note: Cashing out some PreferredsI've been pondering this for a little while, but today the news from the Real Money Portfolio is that I decided to sell my Qurate Preferreds (QRTEP) at ~$40.This is more of a sentiment change on my part than it is a real fundamental change at the company -- Qurate, whose largest business is QVC, is not doing well... but we never really expected it to do well, we just thought it might survive, and the preferred shares were priced as if they definitely won't make it through to maturity (2032).That's all arguably still true, they're still priced pretty close to where they were when we bought, in the $40 neighborhood (I started buying at $45), and they're still paying the dividend at $2 per quarter, for a 20% annual yield at $40, and it might well work out OK as the continuing dividends de-risk the position by gradually returning our capital.I did get a little more optimistic about Qurate's turnaround plans bearing fruit more quickly, when the new leadership was excited about their plans in January, but that optimism has all bled off as inflation has remained high, retail sales have been under pressure, and the core customers have not been spending heavily.In terms of risk, if we take our cues from the QVC debt that trades today, it's essentially the same as it was -- the yields on those bonds have not gone up meaningfully in the last six months or so, which indicates that investors are not more worried about bankruptcy than they were in January... but in terms of the company surviving to do anything real, not just paying their debt service and hopefully their preferred dividends but growing again and making money, the investor sentiment has swung pretty wildly back to negative again. The common stock spiked from 90 cents early this year to almost $2 for a minute, but the real progress has been slow and it drifted back down, most recently following the last earnings update by falling back to about 60 cents.I don't think there's a clear indicator now that things are going to fall apart, but I've now held the preferreds for about 18 months, and I don't see any sign of the company really turning things around and getting back to profitable operations (or growth), which makes me assign a somewhat lower probability to the best outcome, which is "will survive until 2032 to redeem those preferreds for $100 and pay $8/year in dividends for those remaining (now 8) years," which would still provide a total return of about 200% from here.Things at QVC, the main economic engine here, are going a little less well than I had hoped, and I do think that QVC faces some meaningful risk of failure if we do happen to have a real economic downturn/recession in the next year or two. They probably won't actually collapse into bankruptcy unless things get genuinely terrible, they do still have some credit lines open and there's not an imminent cliff of bond maturities in the next year... but without more operational improvement, I would guess that investors will get gradually more worried about that potential in the coming years. As, perhaps, is indicated by the weak price of both the common stock (QRTEA) and the QRTEP preferreds.So, like I said, this is more of a marginal sentiment change on my part -- I think the odds of success at Qurate have dropped a bit, so the best scenario is less likely now, and I think they're going to be very sensitive to any potential crisis in the economy, which increases the probability of a terrible outcome. Those are both small movements in the probabilities, in my mind... but for what was always a fairly risky position, at a time when risk sensitivity seems higher in the markets, it's enough for me to take my profits and go home -- the Qurate Preferreds position exits the Real Money Portfolio today with roughly a 20% total return over a year and a half, including the dividends. I'm always pretty fully invested, but this is about as big as my cash position has been in a few years... hopefully we'll get some opportunities to deploy that cash at better prices.FYI, I do still like the potential for my other preferred position(s), the DigitalBridge (DBRG) preferreds (I own series H and I), and I'd consider bumping up those holdings when they get below about $22.50 -- that's enough to provide a yield of roughly 8% plus the kicker of a ~10% boost if they are redeemed at $25 (as seems very likely, though neither certain nor predictable in timing). Not nearly as sexy as the Qurate Preferreds, since the yield is less than half as high, but I think there's a much lower probability of failure.

A bit confused that QRTEA is a profitable company, yet trashed by most investors. Granted junk status in very suspect sector is scary, but should it be a penny stock if profitable? I don't know.............

I've been accumulating DBRG preferreds and via Schwab I learned they are considered LP's so they will issue K1's. This was a surprise since the parent is not an MLP. Therefore, not a good idea to hold these preferreds in a retirement account (IRA/ 401K). Also, according to the same Schwab rep the distributions are a return of capital so they will not be taxed until the stock is sold or called (by reducing the basis). I'm driving my tax person crazy with K1's. Suggest everyone do their own due diligence!

Thanks for the detailed explanation. I agree with your sentiment. While they have improved the flow of new customers into the file the existing, most profitable, segment is shedding. They are likely not getting anywhere near the value from recent acquisition to replace highly profitable older customers. I think the odds of revitalizing the company are very low. It is more of a question of how long they can last being so dependent on traditional TV distribution subscribers. Younger customers don't age into QVC shopping. They shop they way they grew up.Another big challenge is the way they manage their networks. But that presents another stem of opportunity in cutting future costs and adding a few years of existence to keep paying debt/dividends. They don't need as many channels as they have and the operations to support them. They also don't need separate QVC and HSN teams to support the same business profile.