Yellow Corporation (YELLQ) — mrkt cap $234mm; Price $4.5; trailing P/E NA
EXIT. We have exited this speculative trade. We first entered Yellow Corporation at less than a dollar a share and our returns have been several hundred percent (we wrote about entering YELLQ originally on 7/19/2023 at $.99c). Clearly, this has worked out unbelievably well and we were fortunate with our timing. Our latest thesis was that asset sales would generate north of 1.5B which would more than offset balance sheet liabilities. However, the risk still remains, and one we were willing to underwrite, that large off-balance sheet liabilities could wipe out equity holders. We have taken gains and are looking to recycle proceeds into other opportunities. Generally, speculative trades are not something we go looking but something that arises naturally from the bottom-up research process.
Coursera (NAS:COUR) — mrkt cap $2.5B; Price $16.52; EV/EBITDA NA
PASS. COUR operates in the online education industry. This is an industry that has almost unlimited supply capacity and has platforms like youtube to udemy to universities having their own online courses. As a result, the only means to bring revenue through the door is with heavy marketing which is why COUR and UDMY spend almost half of their revenue here (this is an advantage that top universities will always have as they already have share of mind and social proof). Although COUR is well capitalized, unit economics will unlikely ever improve given these industry dynamics.
Select Water (NAS:WTTR) — mrkt cap $945mm; Price $7.85; EV/EBITDA 9
MORE RESEARCH NEEDED. WTTR is a water solutions provider for the O&G industry. A necessary input and byproduct of fracking is large amounts of water. It is estimated that almost 2T gallons of water has been used for fracking since 2011 with about 50% of current needs met by recycled water. These water amounts will only get larger as horizontal fracking methods continue. WTTR is building the infrastructure needed to supply and treat water for these players from the pipelines to treatment facilities to storage tanks. Although the trends of the industry are in WTTR’s favor, long term unit economics to be assessed as a large part of WTTR’s current expenses and capex are in building out their infrastructure.