Tim Eriksen

I periodically do revisit it. My thoughts have not changed. I still see tiny operating margins. Modest sales growth. High valuation. I can't even use PE multiple since there are no earnings (until March quarter). It is almost 4x sales. They have taken longer to be profitable than I originally thought. I have them at 20x 2024 earnings. That is not exciting in my book. Hardware sales are flat. Monitoring is growing nicely.

He meant in reference to Boswell's water rights. They really down played them at the meeting.

My meeting notes from last year From Feb to May 2019 cotton exports were high due to expected tariffs. Then demand fell off. They expected recovery in early 2020, then COVID hit. End result large operational losses and inventory build up. Added to that severe drought in Australia meant planting was only 25% of normal. Note was coming due in June 2020 forced their hand in terms of asset sales. 2020 results include $10 million in severance. They expect $13 million in annual savings. In 2018 they froze their pension plan and switched to 401k. Per mgmt. every $1 per hour increase in minimum wage costs company $5 million. They planted 3200 acres of pistachios in 2019, bringing total to 14,588 acres since 2015. Total cost of $180 million. Pistachios start harvesting in year 5, become profitable in year 7. They produce heavy one year then lighter then next. One attendee said a nearby pistachio farm at 10 years plus sold for $45K per acre and he thought it was too low. They have contracted with Nichols and Wonderful (Reznick) to buy their pistachios. They see pistachios as highest and best use of land/water rights. Midkin (Australia) sale used to pay down debt then increase dividend to $4 per share quarterly. Didn’t say what they would do after that with excess cash. In response to questions they insisted they were not a water play. “We have to sell the land to sell the water” and “we can’t sell our water to Los Angeles” “it is illegal.” A few attendees including farmers did not believe them. They are either getting bad legal advise or talking down the stock. Also said they won’t do solar because it changes land use designation to industrial and can lose water rights. A farmer who has done solar elsewhere wasn’t buying that. One person said he had been attending for six years and never seen management present things in this manner.

During the crash in 08-09, there were conservative funds who bought SPACs at 10-20% discounts with the sole purpose of voting no on any acquisition. They saw it as a guaranteed return. If I recall correctly, Santa Monica Partners did this. Cash in trust is held in an account separate from the management company / sponsor. JP Morgan is very big in the management of these trusts, and Continental acts as custodian for the vast majority of cases. These agreements are backed by formal investment management agreement contracts etc., they are a very iron clad thing. No SPAC has ever defaulted on its trust. The S1/offering prospectus explicitly lays out what the company can or cannot do with their trust money and under what circumstances they can access. It is market that the company has ability to take out a very small amount of cash to pay some taxes / working capital, usually no more than $0.03 per share. The market self regulates itself on this matter as its such a serious risk for someone to try and game. For your second question, no there isn't a mechanism by which you can put your shares back to the company ahead of a formal redemption event. But you are free to call the company and always ask...this works if you hold 2-4% of the shares and threaten to vote against their deal AND redeem for cash. Theyd rather pay you NAV for your shares so they can vote it themselves. Sort of a scummy thing to do but :)

I still don't see why anyone would pay anywhere near the current price for this. The press release is absurdly promotional - record gross profits. https://www.sec.gov/Archives/edgar/data/65312/000117494720000947/ex99-1.htm

What Robert Alpert and Clark Webb have done in a short time is impressive. They also control P10 Holdings (PIOE) which has been a ten bagger for them in about three years. Good guys too.

What is the evidence for this? Historical studies have shown the opposite to be true. Has that changed recently?

It is a bit weird but PIF3 has different setup than PIF2 and PIF4. PIF3 says year end allocation while PIF2 and PIF4 have valuation dates triggered by redemptions or contributions.

Can I quibble here? Most growth stocks are overvalued since growth will not materialize to level the stock price is implying; however, for the growth stocks that do grow over the long term they are undervalued because they not only meet expectations but likely surpass them. Subsequent returns in the short term are often due to changes in expectations not improvements in long term prospects.

From the annual report, if more than $25,000 comes into or out of the partnership, incentive fees are assessed whether or not it is the end of the year. To be fair what they would have to do is pro-rate the 6% hurdle for a partial year and assess incentive fees if any were earned. That way everyone is treated equally and the NAV can be the same for all. Thus it would be impossible to come in above the HWM since the new addition would trigger assessment of incentive fees.

This is a bold accusation. My understanding is that new investors come in at all time high water mark - NOT from purchase price. IF I'm correct in this understanding, would you agree that your scheme above would not be accurate? GP doesn't get paid until they've made 6% compounded annually from all time high water mark. Thus, if someone buys in today, NAV would have to compound at 6% annually from Dec 2017 high. Maybe some funds do it that way, but I have never seen it. Since incentive fees are usually charged at year end, it is the year end high water mark (not all time) that matters. Typically new investors come in at the current NAV which is that investor's high water mark. Even new money for existing investors is blended so that once the dollar difference between current value and the high water mark for incentive fees is hit they are charged incentive fees.

What was PWC's estimate of Midkin sale price versus actual?

They explain why in the 10-Q During the fourth quarter of 2019, we updated our analysis of economic lives of customer relationships and extended the amortization period to 10 years to better reflect the estimated economic lives of our billboard customers. It is a non-cash change and will improve reportable earnings whether or not they make additional acquisitions since it impacts the remaining balance from prior deals as well. If it better corresponds to reality it makes sense to do it.

DHIL

For 2020 first quarter: PIF2 -33.7%. PIF3 -27.7%. PIF4 -40.4%. S&P 500 was -19.6%, NASDAQ -13.9%. PIF2 Annualized return NET since October 2000 is 9.6%. S&P 500 is 5.1%, NASDAQ 4.9%. (even with market since June 2002) PIF3 Annualized return NET since February 2002 is 8.2% S&P 500 is 6.8%, NASDAQ 9.1% PIF4 Annualized return NET since October 2003 is 5.0% S&P 500 is 8.1%, NASDAQ 10.5%. For informational purposes. I am not trying to pick on the guy.