"If Paul Harvey's serialized radio program "The Rest of the Story" were applied to Wall Street, it would describe the sad denouement of many such "story" stocks. The unraveling of the virtuous circle of growth is not pretty, with earnings shortfalls, plunging share prices, employees with under-water options jumping ship, overzealous shareholders receiving margin calls, accounting chicanery exposed, lawsuits filed, and, to come full circle, the final insult of deletion from the relevant major market index. At this time, attractive valuation is not considered a good story. A slow growth or no growth company trading at one half or one third of its underlying value attracts no important constituency of investors. I sometimes joke about the new market valuation rules of thumb: stocks that fail to meet earnings expectations all seem to trade at 10 times reduced earnings, while formerly profitable companies that report losses all seem to trade at five dollars per share. Many investors avoid these stocks precisely because others are staying away. Why would those kind of stocks ever go up, they wonder. Even those of us with value investing in our DNA generally prefer situations with catalysts for the realization of underlying value.

Over time, this will change. At some unknowable future point, the undervaluation of small capitalization stocks lacking exciting growth characteristics will become so gaping that investors will once again be attracted. The point of investing, after all, is not to have a great story to tell; the point of investing is to make money with limited risk. At some point, investors will drop their Pulitzer prize winning story stocks and revisit their attention on the old classics, stocks that make you money because their undervaluation creates a compelling imbalance between risk and return."

“Of note, in our view, is that the company’s substantial product development cycle is slowing and management continues to expect material operating leverage as R&D spend moderates. Second, demand continues to be robust as EV sales grow in multiple geographies driving charging infrastructure buildout. Third, the company is well capitalized as it drives toward positive adjusted EBITDA in F2Y4 and manages working capital needs for growth. We remain constructive on shares as we anticipate the company will enjoy both top-line growth and margin expansion in coming quarters.”

“Commercially led by eye care veteran CCO Mottiwala (ex-VP Marketing Allergan Eye Care), TARS is well-positioned to develop a new category, eyelid health. We are particularly encouraged by market research revealing an intent to prescribe for demodex blepharitis (DB) of 93%. As awareness grows, our conviction in TP-03’s market potential is reinforced. Additionally, we believe TP-03 could benefit from key differences between DB and dry eye disease (DED) markets. Finally, although we currently don’t value TARS’ pipeline, we believe it should not be dismissed and see multiple opportunities for growth and monetization.”

“Given interest rates’ elevated state, it is perhaps unsurprising that our utility exposure has fared poorly for us this year. We should have hedged the exposure sooner with a Utility ETF short, but we did not do that until the third quarter, after much of the damage was already done. As noted above, our Utility exposure is second only to our materials exposure in terms of negative impact on the portfolio across both the third quarter and the YTD periods. This is primarily driven by our investment in The AES Corporation (NYSE:AES), which was down roughly 26% in the third quarter and 47% YTD. Our other utility exposure is up for the year, including our short position, which, as noted, was put on in the third quarter, and it is probably something we should have had on the books for the entire year.

We attribute, for right or wrong, the entirety of the sell-off in AES to the interest rate environment. Chart overlays are always tricky, so one should not read too much into them, but as a quick sense check of the claim, if one inverts the move-in rates for a generic 10-year US government bond and overlay it with AES stock price YTD, you get the following:..” (Click here to read the full text)

“Long-term holdings Charter and Comcast Corporation (NASDAQ:CMCSA) delivered strong second-quarter results relative to expectations; their stable recurring revenue streams and undemanding valuations were rewarded in the current environment. Cable multiples compressed over the past 24 months on fears of heightened competition in their core broadband business from fixed wireless and fiber providers. While fiber remains a competitive alternative to cable broadband over the long term, high upfront investments and a materially higher cost of capital are resulting in slower buildouts than previously expected. Fixed wireless also continues to gain traction, particularly in rural markets, but share gains also appear to be moderating. At the same time, both Comcast and Charter are expanding their footprints into rural and adjacent markets while gaining wireless market share, leveraging their mobile virtual network operator agreements with Verizon. We think both cable companies are well-positioned to continue to grow while generating substantial free cash flows. We added to Comcast during the quarter.”

“The magnificent seven, that underpin the S&P 500 performance, which includes Tesla, Inc. (NASDAQ:TSLA), now comprise almost 30% of the market capitalization of the S&P500. At least three of the seven stocks have heightened downside risk and suffer from already high penetration, weakening end markets, competitive risk, and lofty valuation. They have been remarkably resilient to increased interest rates and the potential for slowing growth. Small and midcap stocks, on the other hand, have been systemically penalized by fears of recession and continue to price that eventuality even as significantly better outcomes have become more probable. Today, it’s relatively easy to find attractive investments in this segment.”