Model Portfolio Update
Adding A New, Tactical Position to the Value Sits Model Portfolio
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Value Situations is NOT investment advice and the author is not an investment advisor.
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“… We’d call them workouts… they’re securities … whose value depends not on what the market price does but whether a given corporate event occurs, an announced corporate event occurs…. At the point it becomes a different security.”
Warren Buffett, Berkshire Hathaway Annual Meeting, April 2022
(emphasis in bold above mine).
The above quote from Buffett at the recent Berkshire AGM captures much of my thinking regarding my newest addition to the Value Sits Model Portfolio. Given increased market and macro risks, I see niche special situation plays as offering attractive risk-adjusted returns without the assumption of wider market risk.
In this context, following a recent decline in the share price of Alphamin Resources Corporation (AFM) I’ve decided to add it to the Model Portfolio as a tactical special situation investment, on the basis of a much improved and highly asymmetric risk/reward profile, as I outline below.
Situation Overview
Following my previous analysis of the tin market opportunity here, and the follow up analysis on AFM specifically as a developing value situation here, I’ll start this revised analysis with a brief overview of the current situation.