Dividends, Discounts, Diamonds in the Rough
An Inflecting Pawn Shop at 7x Earnings, a Japanese Software Developer at 12x, a Newly Restructured Bank with a Soon-To-Be 9% Dividend, and a 8.3% Bank Preferred
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Introduction
Trades
Final Thoughts
Introduction
I’ve written up some wild trades before. A crypto Closed End Fund trading with 100% upside to Net Asset Value, a Jordanian Insurer at 4x Earnings, a Georgian Financial Conglomerate with 70% upside to Net Asset Value repurchasing 15% of shares a year, and a Japanese Publisher with a concealed securities portfolio repurchasing 15% of the float every year.
I don’t seek out these setups just because they are crazy or niche, rather, I’ve learned some of the best risk-to-reward setups lie in names that are off limits to larger Institutional Investors.
As a Retail Investor you have two distinct edges, no investment mandate and a significant execution advantage. Unlike Institutional Investors who have risk, liquidity, and portfolio constraints, as a Retail Investor you can trade whatever you want, whenever you want. One day you can be an AI Expert and the next day you can specialize in Women’s Jeans. I’m not saying this is the best approach to take, but the freedom to trade anything is an advantage as it allows you to pursue the most favorable risk-to-reward setups.
Secondly, and more importantly, Retail Traders have a massive execution advantage. Kenneth Griffin and Douglas Cifu are your friends. Allow me to explain.
For Institutional Traders, the price and quantity they see on the exchange is the price and quantity they get. If a market is 200x15.05 to 100x15.10 and they want to buy 100 shares, 100 shares fill at $15.10 and then the ask evaporates, making it more difficult to buy shares (hence why Institutional Investors gravitate towards large caps with plentiful liquidity).
It’s an entirely different setup for Retail Traders.
A slew of market makers, Jane Street, Citadel Securities, Virtu Financial, gleefully pay your broker for the opportunity to fill your order at a better price at near unlimited quantity, because in general Retail Traders are wrong on a short-term timeframe. In the same market (200x15.05 to 100x15.10) where an Institutional Trader struggles to buy more than 100 shares, you might be able to buy 1,500 or even 3,600 at $15.0879. The market maker is happy to sell at $15.0879 because their model thinks the true price is $15.075, but you got a great deal and were able to execute significantly more efficiently than a larger a Institutional Investor.
What this means is if you cast a wide enough net and wait patiently for attractive entries, you can dance in and out of excellent risk-to-reward setups that are simply off-limits to Institutional Investors due to execution constraints.
I’m changing things up for this article. I’m focusing on four new names I’ve been buying starter positions in this week, and following the “early-stage” format of the 2023 IGI Pitch. Maybe they’ll go on to become larger positions, maybe the stories fall apart and they don’t.
All of them seem to be rapidly inflecting and have significant 2026 tailwinds, yet are priced as if everyone is skeptical, or more likely, unaware of the stories. Of course it’s possible the narratives fizzle out, but at the valuations they are trading at I think they are too compelling to ignore.