End of the World (Again), Smart Money and Dinner Bells

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The world is ending.

I am sure you have heard the news. It has been in all the papers.

Oh wait. I forgot. No one reads papers anymore.

The news has been all over the Internet.

Real estate is worthless.

Housing values are going to implode and create a horrible crisis any day now.

That is not even the bad part.

Commercial real estate is basically worthless.

No one is ever going back to work again, especially in downtown office buildings.

No one goes to malls anymore. How 1990s.

Malls are dead.

After COVID we built too many warehouses.

There are way too many apartments. They will be as worthless as homes and skyscrapers before too long.

I have been hearing this for a few years.

Homebuyers will be wiped out.

All the banks, especially the smaller ones, have too much commercial real estate debt on the books and will collapse amid fire and financial storms.

Somehow, in the midst of all this epic collapse of the very fabric of society, Bitcoin, nuclear power plants, and AI stocks will be fine.

Just ask the Instant Experts of the Internet.

Just do not ask them today. They are too busy showing off all their new knowledge about the inner workings of the Bureau of Labor and Statistics and the inner failings of Erika McEntarfer as a leader, a person, and an American.

Leave a message. They will text you as soon as they are done dropping knowledge and cashing checks (or checking their CashApp balance).

Real estate gets so much bad publicity I keep expecting to see Snake Plissken and Max Rockatansky trudging through the rubble of lower Manhattan in an attempt to rescue Stephen Schwarzman and Stephen Ross from the rubble of their empires.

The problem with all of these dire forecasts is that they have very little basis in reality. Even office is getting better as more companies implement back-to-work policies. Class A and trophy properties are close to full even in the hardest-hit cities.

Thanks to the housing affordability semi-crisis, apartments are full, and demand is high.
Warehouse space is filling up as supply is absorbed by the market. High-end malls and grocery-anchored retail spaces are doing just fine with high occupancy rates. Stand-alone triple net retail properties are doing fine as well.

Medical office buildings and stand-alone outpatient facilities are full and demand is growing as the population ages. If commercial real estate was a disaster the CRE firms would be suffering.

They are not.

CBRE Group $CBRE ( ▲ 1.36% ) , the world’s largest commercial real estate services and investment firm, exceeded all expectations with a surge in both revenues and profits in the second quarter. Earnings surged 71% to $0.72, and on a trailing 12-month basis, CBRE generated $1.4 billion in operating cash flow and nearly $1.3 billion in free cash flow.

That is not a company in a distressed business.

Jones Lang LaSalle $JLL ( ▲ 2.16% ) is another leading global commercial real estate and investment management company that crushed the estimates this quarter. JLL reported that it had “notched its fifth consecutive quarter of double-digit revenue growth and achieved a 32% increase in diluted earnings per share.”

Both companies were aggressively buying back stock.

Newmark $NMRK ( ▲ 1.02% ) is another company active in different phases of commercial real estate including capital markets, brokerage, and property management. Its stock is hitting new highs as earnings rise 40% year over year.

If this is distress, please distress me.

13F season is underway and it is one of my favorite times of the year. I have been combing through these filings from investors, hedge funds, family offices, and other investment managers for decades.

I remember printing these off on the dot matrix printer after hours and then comparing current filings to the previous ones to see what the best investors were buying and selling.

If we could not find the filing, we had to send off to the SEC and have it mailed.
The mailman on our route hated me.

Between SEC filings and S&P stock guides, our office went through yellow highlighters like candy bars.

Between this, the reams of dot matrix ink and paper, and the ashtrays shattered by the brokers trying to trade the relatively new S&P 100 (OEX) options, our supply budget was rarely in compliance with guidelines issued by our New York overlords.

Today it is all online and there are services that have the buying and trading activity separated out in seconds after the filing hits the SEC servers.

Most people will not pay attention to 13F filings until the last day and then it will just be the same handful of famous investors they talked about last quarter.

Tracking those filings is another case of doing what everyone else is doing. It is tough to gain an edge rushing to buy the same stocks a few million other folks are trying to buy at the same time.

I am looking for these investors who are piling up returns that no one is talking about or has heard of yet. These folks are rarely on CNBC, the Instant Experts of the Internet have no idea they exist, and they are investors not PR people with a securities license.
I track the private equity fund and distressed folks. Reading their filings and studying what they own has more information about the economy and the markets than any report ever written by a Wall Street economist.

I also sort through filings somewhat randomly every quarter. I am stunned by how much money is being charged fees without even an attempt to escape the comforting arms of mediocrity.

I am not even talking about those matching the index. The majority of the folks lag the index and do not seem to care.

I am flabbergasted by the number of people charging a fee to shuffle money around between ETFs.

You are paying for something every year when you probably would have been better served with a trend-based asset allocation model like those developed by Wes Gray at Alpha Architect, Gary Antonacci in his book Dual Momentum or Meb Faber in his book on Global Asset Allocation.

I also like to look at the best performers over the long runs and find the ones no one is talking about.

One thing you notice when you study a lot of these is the best-performing institutional managers and hedge funds have long holding periods and embrace volatility.

I am a huge fan of idea piracy and it has more than paid off over the years.

As is the case in most things associated with investing, the trick is not to do what everyone else is doing.

The deadline is still over a week away, but the ideas are starting to trickle in so I have hoisted my imaginary Jolly Roger, adjusted my eye patch, and started flipping through the filings every day.

Here are a few tidbits from this week’s early filings.

Amazon actually has to file a 13F. Their biggest holding is Rivian Automotive $RIVN ( ▼ 1.29% ) . They have owned it since 2021 and not sold any.

Amazon bought $36 million worth of IonQ $IONQ ( ▼ 8.53% ) in the quarter. The quantum computer company was the only one they purchased in the second quarter.

Value Holdings is a great example of an unknown firm that is not trying to be the biggest or the most popular. They focus on making money for investors and based on their track record the firm is really good at meeting their goal.

The firm bought six stocks in the quarter.

Devon Energy Corp. $DVN ( ▲ 0.09% ) is an independent oil and gas exploration and production company headquartered in Oklahoma City, with a diversified portfolio concentrated in the Permian Basin, Eagle Ford, Anadarko Basin, Williston Basin, and Powder River Basin.

The company focuses on disciplined capital allocation, maintaining low-cost operations, and returning excess cash to shareholders through dividends and buybacks. Its performance is closely tied to commodity prices, but its strong balance sheet and operational efficiencies position it well for sustained free cash flow generation.

Tidewater Inc. $TDW ( ▼ 3.32% ) is a global leader in the offshore support vessel industry, providing marine transportation and logistical services to offshore oil and gas exploration, development, and production operations. The company operates one of the largest fleets of offshore service vessels in the world, with a focus on deepwater and harsh-environment markets. Benefiting from rising offshore activity and tight vessel supply, Tidewater is positioned to capture higher day rates and improved utilization in the current energy cycle.

Tennant Company $TNC ( ▲ 1.32% ) designs, manufactures, and markets cleaning equipment and solutions for industrial, commercial, and outdoor environments, serving customers worldwide. Its product lineup includes floor scrubbers, sweepers, carpet extractors, and autonomous cleaning machines, complemented by a growing consumables and aftermarket parts business. With a focus on innovation, sustainability, and automation, Tennant is well positioned to benefit from global demand for efficient and environmentally responsible cleaning solutions.

Juniper Networks $JNPR ( ▲ 0.05% ) designs, develops, and sells high-performance networking products, including routers, switches, and security solutions, targeting telecom carriers, cloud providers, and large enterprises. The company has expanded its offerings into artificial intelligence-driven networking and automation, aiming to improve efficiency and security for its customers. With a strong brand reputation and deep penetration in carrier markets, Juniper benefits from long-term trends in data traffic growth and network modernization.

Onto Innovation $ONTO ( ▼ 1.02% ) provides process control, metrology, and inspection equipment essential for semiconductor manufacturing, advanced packaging, and related high-tech industries. The company’s technology supports chipmakers in improving yields, reducing defects, and enabling advanced node production. Positioned at the intersection of semiconductor growth and increasingly complex manufacturing processes, Onto benefits from secular demand in electronics, AI, and 5G.

Global Payments Inc. $GPN ( ▲ 0.29% ) is a leading provider of payment technology and software solutions to merchants, financial institutions, and consumers worldwide. The company’s integrated platforms support in-person, online, and omnichannel commerce, with offerings that include merchant acquiring, payment processing, and software-enabled business solutions. Its scale, technology integration, and global reach position it to benefit from the ongoing shift to digital and cashless payments.

That is all for me.

I have what smells like an incredible dinner to eat, a book to read, and some dogs to walk.