I made the third purchase for the 10foot portfolio on Friday. It’s a small company with a fair chunk of debt and low returns on invested capital, but looks to have minimal competition (so far) and a good chance of becoming several times bigger in the next 5-10 years. It’ll be the first growth-style investment for the portfolio, which is an exciting if somewhat banal milestone. You’ll be able to read about that one next weekend. I have a couple of other promising prospects in my sights, but after this I expect the pace of purchases to slow somewhat.
A red-hot tip
I’ve also received my first ‘whisper stock’! Somebody contacted me privately to pitch me on a listed company in the lending industry.
This business is reportedly writing large amounts of low-doc loans with cheap, guaranteed funds sourced from blue chip businesses. My first gut instinct is to run away as far as possible, as my source reckons this business could be poised to grow its market share rapidly over the next couple of years.
Hey, no surprises there, if you’re lending to anybody with a heartbeat and a bank account of course you will write a lot of loans, but the tipper also reckons this lender is quite sophisticated and suspects that the loan risk might actually be carried by the provider of the funds, not the business which actually writes the loans (which I guess would make them a kind of mortgage broker, not a lender per se).
Is it because I just finished re-reading The Big Short, or does this sound mighty similar to GFC-style shenanigans? Either way I’m intrigued, and if I turn up anything you’ll read about it in a future article.
By the way, if you want to suggest a company, either to buy or avoid, or hear my thoughts on a business, you can shoot me an email at email@example.com. I’m not a licensed investment advisor and can’t provide you with advice or recommendations, but if I’m intrigued then I may investigate and write about it in a future blog post!