Your focus on Goodheart-Willcox (GWOX) is a great lesson in “asset-light” business transformations. It illustrates how shifting from physical goods to digital e-books creates high-margin free cash flow that markets often miss due to illiquidity or obscure accounting (like the deferred revenue liability you noted). This demonstrates that significant alpha can be found in companies that don't even appear on standard stock screeners.
For the Otello Corp (OTEC) thesis, what specific catalyst do you believe will finally close the valuation gap between the holding company and its underlying stake in Bemobi, and how do you account for potential tax friction or a permanent conglomerate discount”?
Thanks for your posts and insights. Very helpful! Was curious what your background is and full time job?
Also, if there were a major markey pull back due to either AI bubble, economic wars, etc... Do you think these microcap positions will be affected (or mostly immune)? Have any backtests been done?
I am currently in school for my MBA + CFA. Mostly self taught up until this point.
As for the other point. I think its expected that most illiquid and special situation portfolios (like mine) tend to have a beta of zero and are uncorrelated to the market because they are idiosyncratic.
Havent seen research on it though. Basically all the research I read eliminates illiquid stocks because they are not "actionable"
Awesome, thanks for the reply! I was quite interested in CHCI, as I come from more of a RE PE background.
When I screened the stock, it didn’t seem particularly cheap or attractive, especially for a microcap / more illiquid name. Are there strong catalysts for future growth? I know you mentioned more SF under management and additional management fees coming in. Are there meaningful acquisition targets to drive additional AUM so they can scale fee income? In your mind, is this more of a ~20% IRR-type deal (i.e., you’d be happy if you earned returns in that range)?
Why not just buy NVR or GRBK (a long-time favorite of mine)? They seem to exhibit similar ROIC and EV/EBIT metrics. I do like that CHCI management owns a large stake, so incentives are clearly aligned. Also, in my experience, property management is usually a very low-margin business, so it’s interesting to see margins here that are meaningfully higher and healthier.
I think most of the upside/additional AUM will come as rates come down, real estate becomes a bit more investible. They will be positioned well for that.
I like NVR and GRBK as well. However, I think this is priced better today, and has a longer runway ahead of it (earlier in the company lifecycle). NVR/GRBK are more mature and NVR is certainly facing (now) stronger competitiors who are copying their model.
Basically, it's reasonably priced today, but they are guaranteed:
The doubling of square footage they are earning fees on in 5 years.
They are bringing online additional fees (parking, etc) as well.
Modest operating leverage that benefits from the above
Additional upside from bringing in additional (external) properties. Something that their scale should help attract.
Basically, it is not as much a real estate company as a servcies company in a very fragmented market.
I'm curious, from your experience in RE, PE have you seen a company like this with this approach? Any words of caution for things I am not considering there.
Thanks! I'll need to do more research on this company to provide more insightful feedback.
I work on the multifamily side exclusively. And we manage in-house. When we model performa management company margin it's usually around 13%. I remember past partner even wanting to get out of the property management business because it's not a high margin business. So I wonder if that margin is sustainable. If it is, thats great.
I'm not sure if AI is right but it says about 4.6mm sf now, and additional 690k sf coming. The future 4.2mm of "pipeline" is not under construction yet. I wonder how fast those can be delivered. From my experience it can take a while maybe 3-4 years to get land ready and for a project to get built and another year or two to get leased up.
Thanks for sharing. For Medical Facilities Corp - how come did you end up with 15% FCF yield? Cash available for distribution was around $21m at the end of 2025, with market cap of around $ 210,6m at the time of your writing which gives around 10% FCF yield (still good though). Did you use another metric than non-IFRS one company uses? How do you account for exchangable interest? If realised, that amounts to 14% of Sioux Falls Hospitals and 5% of ASH, meaningful part of NAV. Accounting used at MFC makes me puzzled. Using consolidated numbers doesn't make sense to me, as almost half of income goes to physician partners. I have read Daniel Smoak's 2025 letter and he mentions that company trades at EV/EBIT of 4,7x and this is even more baffling. From my own calculations EBIT for SFSH and ASH is together $54,2m and only 51% goes to MFC, so it's more like $27,6m. With EV at around $264m I get 9,6x multiple. Considering that shares are up 10% from beginning of the year it's still almost twice the difference. Does he use consolidated EBIT and if yes, do you know why? This thesis that MFC is significantly undervalued does not make a lot of sense to me if the real multiple is between 9 to 10, as this would suggest that MFC is fairly valued.
See the pinned post on my philosophy. Basically I am looking for improved or exit liquidity in any form. Sometimes that includes a clear catalyst. Sometimes it does not.
Your focus on Goodheart-Willcox (GWOX) is a great lesson in “asset-light” business transformations. It illustrates how shifting from physical goods to digital e-books creates high-margin free cash flow that markets often miss due to illiquidity or obscure accounting (like the deferred revenue liability you noted). This demonstrates that significant alpha can be found in companies that don't even appear on standard stock screeners.
For the Otello Corp (OTEC) thesis, what specific catalyst do you believe will finally close the valuation gap between the holding company and its underlying stake in Bemobi, and how do you account for potential tax friction or a permanent conglomerate discount”?
For Otello, I have no defined catalyst. I see the ongoing buybacks as accretive and dont mind the undervaluation persisting.
See my philosophy post on illiquid securities. In this case, ongoing buybacks and growth go a long way even without a catalyst.
Thanks for the knowledge 👏
Boy, what a fantastic list. I hadn't heard of about half of these companies, and I've already added a couple to my watch/buy list. Great work
I have sold out of LCXEF as it ran up 200%, and HYNE after an email exchange with Derek Pilecki.
CHCI is up 80% so I have substatially trimmed that position.
I have a few new ideas I am cycling into that I will share within the month.
Was interested in HYNE. What was said that made you sell?
Pilecki is the best when it comes to this and he is not interested. Ill defer to him on this.
Thanks for your posts and insights. Very helpful! Was curious what your background is and full time job?
Also, if there were a major markey pull back due to either AI bubble, economic wars, etc... Do you think these microcap positions will be affected (or mostly immune)? Have any backtests been done?
I am currently in school for my MBA + CFA. Mostly self taught up until this point.
As for the other point. I think its expected that most illiquid and special situation portfolios (like mine) tend to have a beta of zero and are uncorrelated to the market because they are idiosyncratic.
Havent seen research on it though. Basically all the research I read eliminates illiquid stocks because they are not "actionable"
Awesome, thanks for the reply! I was quite interested in CHCI, as I come from more of a RE PE background.
When I screened the stock, it didn’t seem particularly cheap or attractive, especially for a microcap / more illiquid name. Are there strong catalysts for future growth? I know you mentioned more SF under management and additional management fees coming in. Are there meaningful acquisition targets to drive additional AUM so they can scale fee income? In your mind, is this more of a ~20% IRR-type deal (i.e., you’d be happy if you earned returns in that range)?
Why not just buy NVR or GRBK (a long-time favorite of mine)? They seem to exhibit similar ROIC and EV/EBIT metrics. I do like that CHCI management owns a large stake, so incentives are clearly aligned. Also, in my experience, property management is usually a very low-margin business, so it’s interesting to see margins here that are meaningfully higher and healthier.
I think most of the upside/additional AUM will come as rates come down, real estate becomes a bit more investible. They will be positioned well for that.
I like NVR and GRBK as well. However, I think this is priced better today, and has a longer runway ahead of it (earlier in the company lifecycle). NVR/GRBK are more mature and NVR is certainly facing (now) stronger competitiors who are copying their model.
I could expand more in a future article. There a number of good write ups out there like Will's, you could start there: https://harveycapital1.substack.com/p/comstock-holding-companies-inc-chci
Basically, it's reasonably priced today, but they are guaranteed:
The doubling of square footage they are earning fees on in 5 years.
They are bringing online additional fees (parking, etc) as well.
Modest operating leverage that benefits from the above
Additional upside from bringing in additional (external) properties. Something that their scale should help attract.
Basically, it is not as much a real estate company as a servcies company in a very fragmented market.
I'm curious, from your experience in RE, PE have you seen a company like this with this approach? Any words of caution for things I am not considering there.
Thanks! I'll need to do more research on this company to provide more insightful feedback.
I work on the multifamily side exclusively. And we manage in-house. When we model performa management company margin it's usually around 13%. I remember past partner even wanting to get out of the property management business because it's not a high margin business. So I wonder if that margin is sustainable. If it is, thats great.
I'm not sure if AI is right but it says about 4.6mm sf now, and additional 690k sf coming. The future 4.2mm of "pipeline" is not under construction yet. I wonder how fast those can be delivered. From my experience it can take a while maybe 3-4 years to get land ready and for a project to get built and another year or two to get leased up.
Thanks for sharing. For Medical Facilities Corp - how come did you end up with 15% FCF yield? Cash available for distribution was around $21m at the end of 2025, with market cap of around $ 210,6m at the time of your writing which gives around 10% FCF yield (still good though). Did you use another metric than non-IFRS one company uses? How do you account for exchangable interest? If realised, that amounts to 14% of Sioux Falls Hospitals and 5% of ASH, meaningful part of NAV. Accounting used at MFC makes me puzzled. Using consolidated numbers doesn't make sense to me, as almost half of income goes to physician partners. I have read Daniel Smoak's 2025 letter and he mentions that company trades at EV/EBIT of 4,7x and this is even more baffling. From my own calculations EBIT for SFSH and ASH is together $54,2m and only 51% goes to MFC, so it's more like $27,6m. With EV at around $264m I get 9,6x multiple. Considering that shares are up 10% from beginning of the year it's still almost twice the difference. Does he use consolidated EBIT and if yes, do you know why? This thesis that MFC is significantly undervalued does not make a lot of sense to me if the real multiple is between 9 to 10, as this would suggest that MFC is fairly valued.
Thanks for the comment.
See the pinned post on my philosophy. Basically I am looking for improved or exit liquidity in any form. Sometimes that includes a clear catalyst. Sometimes it does not.