Alta Fox Capital Management recently released its Q1 2019 Investor Letter reporting the quarterly return of 28.10%, outperforming the S&P 500, which returned 13.65% in the same period. If you are interested you can track down a copy of the letter here. Aside from reporting about its performance, the fund also shared its views on several companies in its equity portfolio, including PaySign, Inc. (NASDAQ:PAYS; previously TPNL), which was one of the biggest positive contributors to its quarterly performance.
“3Pea International Inc. (TPNL)— as of 4/29/19, the new name is “Paysign, Inc” with ticker “PAYS”
TPNL was highlighted in several of our previous quarterly letters including Q4-18 and was a large positive contributor to performance this quarter. I originally profiled the company at $2.45 and it was at one point the largest position in the fund. It has closed north of $9.00 in recent trading sessions. We continue to hold a long position given our fundamentally bullish view of a largely fixed cost payment processor and program manager attached to an extremely attractive and secularly growing market of plasma donations.
In many ways, TPNL is a perfect example of the type of company I look for on the long side. At $2.45, it was a ~$100M market cap company with little investor transparency and a confusing operating history. However, it had high insider ownership, rapid growth, and was beginning to leverage its fixed costs. I visited the company’s headquarters, conducted over 25 industry diligence calls, spoke to competitors and customers, and eventually built a strong fundamental view of the industry in which TPNL operated and the company’s advantageous position within that industry. At our peak position size, we owned about 1.5% of the company.
I was able to help introduce the company to a respected investor relations firm which the company eventually hired. The company’s investor relations efforts have improved considerably, which along with tremendous operating results, has helped bring the valuation to a level that more closely reflects the unique strengths of their business model. TPNL remains a meaningful position, though we have trimmed our position size in response to the stock roughly tripling from our cost basis. Our original investment thesis can be read here.”
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PaySign, Inc., formerly known as 3Pea International is a company that provides prepaid debit card payment solutions. Year-to-date, the company’s stock gained 9.29%, and on May 7th it had a closing price of $8.47. The company has a market cap of $385.07 million, and it is trading at a price-to-earnings ratio of 164.80. PaySign recently released Q1 2019 Financial Report in which it disclosed quarterly revenue of $7.27 million and fully diluted EPS of $0.02, compared to revenue of $4.68 million and fully diluted EPS of $0.01 in the same period of 2018.
Dislcosure: None.
This article is originally published at Insider Monkey.
The writing was kind of on the wall at the end of March. S&P 500 Index was near the 4600 level whereas inflation rate was close to 8% and the 10-year Treasury yield jumped to 2.7%. The probability of further increases in interest rates and sharp declines in the stock market was much larger than the probability of further gains in stock prices. So, we started telling our premium subscribers to short the market at the end of March. Most hedge funds interpreted the macro developments the same way we did and reduced their exposure. The total value of stock holdings in hedge funds’ portfolios went down from $3.1 trillion at the end of December to $2.8 trillion at the end of March.
This isn’t a terribly large reduction in market exposure, but it is still a reduction. It still shows that hedge funds have a slight edge in market timing.
Insider Monkey has long been a believer of imitating the top stock picks of hedge funds, and this approach has helped us beat the market on average over the last several years.
“A massive and surprising new transition could determine the next group of millionaires,” says Chaikin, who predicted the 2020 market crash. “While leaving 99% of the public worse off than before.”
“If you own regular stocks, you’re in for a big surprise,” he adds.
“I grew up in a world where you could do extremely well by investing in ordinary companies,” Chaikin says. “It’s how I spent the majority of my 50-year career on Wall Street.
