A Blanket Reply on TNDM

I have gotten a slew of emails today about Neutral Tandem’s latest earnings report, as well as a few comments on my last TNDM post here. Apologies I don’t have the time to respond to everyone individually, but, in short, my thoughts on the company have not significantly changed. Its valuation may now be a touch lower, but it would seem uncertainty and risk are both less now, too.

Not sure what else I can say that I haven’t already said about the company. There was noise in adjusted EBITDA. Wren’s tone on the call today was, finally, positive. The company’s main competitor, Peerless, appears desperate. Any company trading at five times cash flow is worthy of your attention. This one, doubly so. I continue to be okay waiting and averaging down.

It hasn’t even been near a full year that we’ve owned Tandem shares in Tarpon. I’m looking at two Post-It notes that have been stuck to my screen for longer. Some time ago, back when men were men and before boys ran hedge funds, it used to take time to make money when investing. TNDM will probably be no exception. I believe the wait will be worth it.

Investors can view this market’s casino mentality as the curse of our age, or treat certain days as if they were made to be taken advantage of. I basically did the latter today. I bought a ton of new TNDM shares in Tarpon, and I unloaded a ton that were at a higher cost basis, too. Fortunately, I can do this pretty efficiently and at zero cost through my custodian. So though our position size is the same, Tarpon investors now own a bushel of TNDM shares priced at all-time lows.

I can only hope it happens again tomorrow.

Where’s a good sovereign debt crisis when you need one?

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Cale Smith

About Cale Smith

Portfolio Manager at Islamorada Investment Management.
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