The “Debasement Trade” Is Here

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This is Porter & Co.’s Sunday Investment Chronicles. Every week, the Porter & Co. research team pores over thousands (and thousands) of articles, reports, social media posts, analyses, regulatory filings, and anything else we can get our hands (and eyes) on to understand what’s happening in the world of investing and finance – and to uncover the most original, compelling, and double-head-fake ideas…

… and we curate the best of those here. We do it all the old fashioned way: Hours of reading and brainpower (no AI curation here). We read everything – for you.

In Case You Missed It… What We Published Last Week

On Monday, Porter took Daily Journal readers back to the 1800s to trace the history of a super-successful railroad and coal-mining business that eventually let time pass it by. That is, until Warren Buffett mentor Benjamin Graham took it over and hired a man named Mickey Newman as CEO to pivot the company’s mission… and unlock unrealized capital. Porter explained it this way:

Mickey Newman was a master at unlocking shareholder value. He engineered tax-efficient asset sales, like transferring properties to subsidiary Reading Anthracite for equity and debt, enabling tax-free distributions to shareholders. And the acquisitions rolled on: clothing firms, toys, and in 1961, Fruit Of The Loom itself, saving $700,000 in royalties.”

Porter concluded by pointing out that this approach is the exact blueprint that Buffett would employ at Berkshire Hathaway. And it is the same blueprint Buffett is following now with his recent massive investments into several Japanese trading firms.

Today, huge Korean chaebols and Japanese keiretsu – large business conglomerates – are going through this same evolution, divesting non-core units amid massive economic transformation.”

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Porter continued that journey to Korea in Wednesday’s Daily Journal, when he told the story of a stock recommended by his investor friend Jim Grant. 

The company he referenced is SK Square (402340 on the Korea exchange). And as Grant’s analyst Evan Lorenz helpfully explained, SK Square is South Korea’s second-largest conglomerate (or chaebol as Koreans say) after Samsung Group. Since Grant’s Interest Rate Observer published this report a year ago, the stock is up about 2x. 

But this is far from the only opportunity in Asia to buy incredible assets at pennies on the dollar.”

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That conclusion flowed seamlessly into Friday’s Daily Journal, when Porter wrote about a Japanese company SBI Holdings, whose core financial services business (83% of revenue) spans securities brokerage, regional banking, asset management, and insurance. These lines synergize beautifully, Porter wrote: a brokerage client morphs into a bank borrower, then an insurance buyer. It’s a flywheel of cross-sells. 

He concluded:

If you think this investment idea sounds good, wait until you see what’s in our next issue of The Big Secret On Wall Street. It’s the largest opportunity in Japan… and it’s worth 5x to 10x its current market cap. Oh, it’s also the safest investment I’ve ever seen.”

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Finally, on Thursday, The Big Secret On Wall Street team released an exciting new recommendation on a company that most readers are familiar with, but that most investors have written off as a casualty of the emergence of artificial intelligence (“AI”). 

Despite its market-leading position, investors have abandoned this stock because they believe the business is fading – it is being viewed almost like an Old Economy company, even though it is actually a technological pioneer – particularly when it comes to AI.

This company is poised to flip that narrative, likely sending the stock higher as investors ultimately realize it is actually an AI winner.”

The Best Things We Read Last Week

Out of the hundreds of sources of investment, finance, and economics news and insight we regularly review – our Bloomberg terminal, hedge-fund letters, annual reports, the financial news media, Securities and Exchange Commission (“SEC”) filings, investment newsletters, newspapers, X (Twitter) threads, conferences, podcasts, and more – here’s what we’ve read that we think you might find interesting.