I recently praised $AEP.V as one of my top holdings that I was comfortable leaving alone, despite the bleak economic forecasts.

The reasons I like $AEP.V are neatly summarized in the tweet below: secular tailwind, strong execution, and ultra-cheap valuation.

But I did trim my position, by half.

Not because of the economy, and not because of failed execution. In fact, they just had another monster 2022Q1 quarter (financials, MDA). And I have them trading at about ~3.5x EV/[EBIT - Leases].

So what gives?

In anticipation of the quarterly earnings, I was browsing the ceo forum as I sometimes do. I was curious to see if there was any insider buying happening at these low levels.

I found the share buybacks, as expected. But I also found something else. Something that somehow slipped under my radar for several months, I’m ashamed to admit.

Here it is:

aep-gurmit-1

In January of this year, Dhaliwal Gurmit (the COO) was gifted ~1.5M shares. For context, the company currently has 59.2M shares outstanding, and I believe the number was 57.7M as of Dec 31, 2021. It looks like she was also granted 225,000 options and 50,000 warrants.

Either way you slice it, this person was gifted 2.5%+ of the company. And I don’t think I’ve ever seen her buy on the open market before.

This rubbed me the wrong way, to say the least.

When I buy stocks, even I just buy one share, I consider that I just purchased a piece of a business. I am part-owner of the business.

To learn that 2.5% was GIVEN AWAY in one shot, I just can’t stomach it.

Confirmation bias is a bitch. I must have seen this information but my brain maybe blocked it or dismissed it. I am angry and ashamed that I paid no attention to it, for so long.

I truly believe the business will be fine long-term. But a good business is not the same thing as a good investment. When you give away 2.5% of MY investment, you might as well spit on my face, and I don’t care if it is the COO. It’s just ridiculous.

Meanwhile, both Jonathan Goodman and Samira Sakhia from Knight Therapeutics have been buying shares of $GUD.TO with their own hard earned cash.

gud

And while both businesses are buying back shares, let’s just say…not all buybacks are equal!

gud_vs_aep

So I cut $AEP.V in half and put the cash into Knight.

Update (2022-06-10)

I completely exited $AEP.V after the CEO announced he would be selling a fifth of his holdings or 2% of the outstanding. Not that he’s not allowed to, but the timing is just God awful and I’m not sure there’s enough liquidity here to support the price.

I’m out.


Until next time, stay cool & stay invested!