Selling Down Turning Point Brands

After a decent run up I sold a half position in TPB as it overshot my previously defined price target.

Due to the lack of better investment opportunities I am willing to hold on to half a position despite what I believe is now a fully valued price for the OTP company.

In my writeup of the company I claim TPB to be a compounder in the making, which I still consider true. However, the company as of late has been actively pursuing M&A opportunities in Vaping Products which I consider much riskier than further building their smokeless tobacco offerings. The vaping industry is relatively new, faces deep pocketed competition from incumbents such as Imperial Brands, Philip Morris but also upstarts such as Juul, while facing an uncertain regulatory future.

I am thus discounting growth in the vaping segment with a higher rate than growth in the smokeless segment and believe an EV/EBITDA in excess of 10x is a decent valuation to start exiting a successful investment.

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