I came across SK Square reading Dan Loeb’s Q4 investor letter over the weekend. The thesis was compelling and straightforward enough to be distilled down to less than 20 words:
Investor letters can be a great source of investment ideas but you always have to do your own work (no matter the investment hero).
Let’s breakdown the thesis before running some numbers on potential outcomes.
Layers of discount
As I alluded to in my X post I am usually wary of one dimensional NAV discount stories. There are countless listed HoldCos, REITS, closed-end funds and more that languish in sideways price action with no real catalyst or momentum.
What made SK Square immediately interesting to me is that there are 3 embedded layers of discount here and each one has a plausible potential to re-rate:
SK Hynix: memory cycle re-rate
SK Hynix: Korea discount
SK Square: HoldCo (+ Korea) discount
Memory cycle re-rate
SK Hynix is one of three key players in DRAM memory alongside Samsung and Micron in what has historica…