May was a month of big changes in the Tailwinds Select Portfolio. During the month, we added four new names to the portfolio and removed two others.
It was also a rather painful month as several of our holdings were under significant pressure. Some of this selling was justified, and some of it was misplaced (in our opinion), but equally painful to bear. I mean, how many buying opportunities do you need? Just go up already, right???
But, seriously, with the changes in the portfolio, it appears that we are well positioned in a number of names that have not only great long term prospects, but many have near term catalysts that should help drive performance.
Before launching into a discussion of the current holdings, let’s discuss what we don’t own any more and eat a little humble pie. First off, Midwest Energy Emissions (MEEC) left the portfolio after blowing up on an earnings guidance disaster. This company had only a few weeks beforehand reiterated guidance for, like, the twentieth time. Then, they have a come to Jesus moment and realize overnight that their business sucks? Yeah, screwed by lying management. Which means that we didn’t do our homework properly. This is the first realized loss in the portfolio and, although it likely isn’t the last loss, it hurts.
Next up, we removed Earthstone from the portfolio with a decent gain of 27% since it was added last fall. Earthstone is a quality small cap energy company with a bright future. However, as Tailwinds matures, it is obvious that we are looking for long term, disruptive opportunities and an E&P company operating in Texas just doesn’t fit the model. There’s only so many stocks we can follow and this one just doesn’t have the huge upside of the others, forgetting about commodity risk which I hate, so c’ya ESTE.
Now, that the bookkeeping is done, here’s where we stand in the portfolio, by date of purchase, with a little something to say on each one.
AQMS: Down 28% for the month. Buying opportunity. Shorts will get screwed. Read this article if you want all the details, I’ve written enough about it already.
BTI.V: Down 18% on the month, the Company is in a self-imposed quiet period as the new CEO gets up to speed. I expect big things for biOasis this year, so buying opportunity and stay tuned.
VUZI: Another company, like AQMS, that the shorts are leaning on. This one was only down 3%, however, and now that it is starting to hit revenues, I think the shorts are getting nervous. Hiring Paul Boris from GE to run manufacturing was a coup. Well positioned, there should be big partnerships and bigger growth in the not too distant future.
RESN: Not much to say here. The stock was off 10%, but it just appears to be in a wait-and-see mode until revenues start to kick in. There are rumors that a RESN filter design will be in a couple cell-phone teardowns soon. Should this happen, analysts will start putting more meat on their earnings models’ bones.
CYRX: Up 33% for the month and acting like it wants to go higher. Their clients will be getting FDA approvals (we hope) soon, which should be the catalyst for the next move up. Business is rocking and it’s just getting started up the hockey stick curve.
DXD.V: The quietest down 26% in history. This company is sooo cheap and yet, until they can complete a financing, it is for sale. This is a great buying opportunity as, when they get a deal done, it will be off to the races.
FSNN: Added this month, Fusion is a cloud services provider with decent growth and a great valuation. Two drivers going forward: acquisitions and organic growth. If we just get the first, we’ll do well…both and it’s a home run. At this P/EBITDA it’s tough to see much downside.
UGE.V: Another new name in the Select Portfolio. Reported a huge quarter and the sky’s the limit for this commercial solar installer. Business is rocking and the valuation is rock bottom.
POLA: Polar Power was added in May as well, and timing is everything as it was up 9%. They are a DC generator manufacturer and DC power is really starting to gain traction. Business is growing and (gotta love this), the company is run like a private company…meaning FOR PROFITS! If they can achieve the growth expected, the P/E is really low and this company will be off to the races.
PTOTF: Did we bottom pick, or is Tailwinds starting to move stocks? Not sure, but Patriot One has rallied 14% since added last week. With the dearth of other options for securing facilities and detecting terrorists, PTOTF is very well positioned to make huge sales in a nascent market.
And, that’s a wrap on the portfolio for the month of May. We look forward to companies hitting catalysts and helping right this ship sooner rather than later. The portfolio is still up 14% since inception, so not a disaster, but let’s get it going north again is what I say!