Yearly Archives: 2023

Always worry about your edge

I was reading “Stop worrying about your edge” on the excellent Turtles all the way down! blog, and couldn’t resist writing the oppositely titled post. Not because I disagree with the post. Maybe on some details, but I think he makes some good points. But the truth is that every intelligent sounding investment quote breaks down at some level. People for example love to quote Buffett – and you could certainly catch me doing it from time to time – but it is important to realize that nothing is universally true. Or some types of advice sound good, but simply don’t work in real-life.

Consider the famous poker quote, “If you can’t spot the sucker in your first half hour at the table, then you are the sucker.” Hard to disagree with, right? But the thing is, that usually, the sucker is also convinced that he has spotted some players that he can beat. Perhaps he has seen some excellent pro’s involved in a big bluf, and thinks that they are spewing money away. He is wrong of course, but without the knowledge to recognize what is going on, he doesn’t have the tools to evaluate his own position at the table. And it is not like you need to be a total fool to not recognize your own place at the table. Many mediocre poker professionals – that objectively are miles ahead of the total amateur – can’t recognize better playing professionals. Their perspective is limited to what they know, and from their vantage point, the better players seem to be making errors. So, in reality, usually only the best poker players at the table can accurately estimate the skill level of everyone else. However, merely advising people to be one of the best players at the table is not a practical tip.

But to circle back to worrying about having an edge in investing. I agree that it is incredible hard to know if you have an edge in a specific investment or in investing in general. And because it is hard to know, you should always be worried that you don’t have an edge. I think this idea should be constantly on the back of your mind, shaping your investment strategy. Everything you do should be with the assumption that you could have no edge.

So, how can you invest while holding that belief? I personally think that the following three guidelines can keep you out of trouble.

  1. Diversify: Never bet big on a single name. If you invest in a sufficiently big basket of random names your expected return should be close to the expected return of the market. If you lack an edge, this approach minimizes potential harm from an expected value perspective.
  2. Minimize costs: When your investments have a neutral expected value compared to the market, the main source of underperformance comes from frictional costs associated with your strategy. Therefore, make sure you avoid incurring excessive trading fees or unnecessarily high taxes.
  3. Stay away from risky corners: Acquiring an edge is difficult, but losing money is easy. Avoid stocks with high short interest and/or no borrow, as they are almost certain to decline. Also, be cautious with recent IPOs, SPACs, or any other investment fads.

There will be times to break the guidelines above, but I think this should be a healthy starting point for most investors. I will not claim this would have saved every investor who blew up in recent times, but it would probably have come close. The downside is, of course, that you are also not getting lucky by betting it all on one stock and making it big. To actually make money like this, you absolutely need a  consistent edge. Bet after bet. Stock after stock. You will not know in advance if you have an edge, but after enough years, you should get an idea.

So you heard it. Stop worrying about your edge, but also, always worry about your edge!

ALJ Regional Holdings merger completed

A bit less than two months ago I wrote about the ALJ Regional Holdings going private transaction. The merger closed at the end of last month, but because of some confusing language in the merger documents people where not totally sure if accredited investors would get cash, or would be forced to accept the stock option. I thought it would basically impossible for the company to take this route, because issuing unregistered shares to non-accredited investors could get them in a lot of trouble. Today my broker put the corporate action in their system, and that makes it crystal clear that, if you do nothing, you indeed get the cash option:

Holders electing for the Stock election, Option 2, must complete the Verification Request Form and send back to IBKR for submission to the agent. Once the Verification Request Form has been received by the Information Agent, New ALJ will instruct a third-party accredited investor verification service,, to initiate the verification process. Holders will receive an electronic communication from the Verification Provider at the email address provided on the Verification Request Form containing instructions to follow in order to complete the verification process. In addition, the Verification Provider or New ALJ’s other representatives or agents may further reach out to confirm whether such investor would qualify as a sophisticated investor in New ALJ’s sole discretion.

Once the verification process is complete, and you receive the confirmation to move forward with the stock election, IBKR will be able to submit the tender electronically via DTC. IBKR cannot tender the shares without receiving the approval from the verification process.

It will probably take till the end of this month for the merger payout to hit my account, but I think we can safely call this trade a success.


Author has no idea if he is still long or not. The shares are still visible in my account, but since the merger closed I guess I technically don’t own them anymore?

Switch from Feedburner to

At the end of 2021 Google decided to put Feedburner in maintenance mode which caused the email subscription feature to stop working. After getting some comments from readers I decided to fix this issue, and after a quick look on Google I ended up at as Feedburner replacement. All existing e-mail subscribers have been migrated to, and should once again receive e-mail updates when new content is posted. Besides offering a RSS-feed with e-mail subscriptions there are now some additional features available as well such as the option to use filters or a Chrome extension for notifications. Let me know in the comments if everything is now working again as expected.

PDL Biopharma liquidation making progress

At the end of 2020 I wrote enthusiastically about the PDL Biopharma liquidation. At the time the stock was trading at $2.35/share while I estimated approximately $3.35 in liquidation distributions. Last Friday the company paid a third distribution to shareholders, bringing the total amount distributed to shareholders to $2.05/share. While I’m close to recovering my initial investment, I think it’s clear that my 27% IRR estimate was way too optimistic. Based on the third quarter ’22 update remaining net assets are approximately $1.61/share. Even if the remainder of the liquidation is now quickly concluded, and we get that amount in one year time, the IRR is “just” 19%. If we have to wait another full 3 years, which might be more realistic, the IRR drops to 14.5%. While PDL Biopharma seems to follow the golden rule that liquidations always take more time than you expect, I think the end result will be nonetheless quite satisfactory.

Balance sheet before taking 2nd ($24.1 million) and 3rd ($95.9 million) liquidation distributions into account


Author is long PDL Biopharma

Conduril releases 2022 annual results

I have been a shareholder of Conduril for over a decade now, but unfortunately, it hasn’t been a real successful investment so far. I bought my initial stake at €22/share and the stock is currently trading marginally higher at €26.20/share. Although there have been some dividends along the way, they haven’t been enough to compensate for the opportunity cost of holding this position. I believe in buying cheap companies without a catalyst, having faith that something will eventually happen to unlock the value that is there. But assuming I’m right about the value being there in there first place (a big if!), there is still no guarantee that something will happen.

With a more than 10 year holding period I think you can make a good case for throwing the proverbial towel in the ring, but I’m not quite ready to do that. Conduril is still cheap, trading at a 62% discount to NCAV, a 0.20x P/B-ratio and a 5.86x P/E-ratio, but there are also some signs of change on the horizon. In 2022 the company bought back, for the first time in its existence, 10% of the outstanding shares. Given the price the stock trades at I think this is quite accretive to intrinsic value (sadly there is no plan to continue the buybacks this year). Secondly, the chairman of the board recently passed away. He was a major shareholder of the company with a 28.60% ownership stake, and a large transition in the ownership of the company could potentially pave the way for some (hopefully positive) change.

The results for 2022 itself look promising, with earning per share at €4.47, the highest it’s been in the past 8 years. The order backlog is at a healthy level as well, slightly higher than the previous year, and it appears that some of the financial assets on the balance sheet (Angolan government bonds) have been converted to cash. According to the footnotes of the financial statements the remaining bonds have maturity dates in 2023, 2024 and 2026. The majority only matures in 2026, so some patience may be required. Fortunately, I’m a patient investor…


Author is long Conduril