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Philip O’Sullivan kicked us all off here with his list of picks for 2012, and so far I’ve seen John Kingham and Mark Carter join in with their contributions here. Note John can only win half of the (non-existent!) prize since he came up with 2 lists…

I struggled with the idea a little myself – I’d far prefer to write 1,200 words about 1 stock than to write 1 list, haha! I also dread seeing shoot-for-the-moon lists (congrats so far, chaps) stuffed full of triple leverage ETFs and penny dreadfuls – not much use to any of us in the real world.

The solution for me is to compile the best list of stocks I actually own – so people know I’m putting (at least some of) my money where my mouth is. The bulk of the list will obviously be composed of stocks I’ve written about to date, since they represent some of my highest conviction holdings. That should still leave some room to have a bit of fun (after all that stuffiness!) and throw in a few (more) speculative holdings to round out the list. So here goes:

1. Sirius Real Estate (SRE:LN) :   Please read here. Since then, SRE released its semi-annual results. The big surprise was DTZ’s (2.7%) downward valuation of their portfolio. This doesn’t make too much sense to me, and I don’t see it confirmed elsewhere in the sector. With the rally in Bund yields, already cheap German property valuations and an increase in SRE’s average rent per sqm from EUR 4.13 to EUR 4.18 I’d expect the valuation to remain at least steady. The average EUR 5.18 per sqm achieved on new lettings also points to the latent potential of the portfolio. Management shares this view…clearly expressing their disagreement with DTZ in the interim report. This negative revaluation bumps the Net LTV up to 60.8%, still in my (reasonable) comfort zone, while NAV and EPRA NAV edge down to EUR 61.55 cts and EUR 66.63 cts, respectively. On the same basis, my Fair Value estimate drops to EUR 64.1 cts. I hold a 3.6% portfolio stake.

Mkt Price:  EUR 0.21,  Tgt Price:  EUR 0.641,  Upside Potential:  205% 

2. Cresud (CRESY:US) :   Please read here. CRESY subsequently issued their Q1 2012 report, which shows Debt/(Underlying) Assets nudging up to a still v low 14.5%. No fundamental change to valuation, but I’ve included some minor tweaks.  I hold a 2.6% portfolio stake.

Mkt Price:  $11.39,  Tgt Price:  $31.77,  Upside Potential:  179% 

3. Total Produce (TOT:ID) :   Please read here. I hold a 3.6% portfolio stake.

Mkt Price:  EUR 0.37,  Tgt Price:  EUR 0.939,  Upside Potential:  154%

4. European Islamic Investment Bank (EIIB:LN) :   Please read here. In the past month, HBG Holdings have continued to take more active control of the EIIB board and strategy. One of their Non-Executive Directors, Zulfi Hydari, has now been appointed CEO, and Abdallah Al-Mouallimi has been appointed Chairman. Al-Mouallimi’s the current Saudi Ambassador to the UN, and also the Co-Founder & Chairman of HBG, in which he holds a 15% stake. EIIB has also confirmed it’s in advanced talks to acquire a newly issued 30% stake in Rasmala Investment Bank, a Dubai-based investment bank specializing in Asset Management (plus Corporate Finance & Brokerage). With the Dubai market trading at 7 year lows, and Rasmala cutting back on its Brokerage unit, this could prove to be a bargain purchase (and likely to be less than 10% of EIIB’s Assets). It also looks like a potentially attractive development of EIIB’s new focus on private equity/asset management, as I previously highlighted. I hold a 5.8% portfolio stake.

Mkt Price:  GBP 3.6p,  Tgt Price:  GBP 8.07p,  Upside Potential:  124%

5. Trinity Biotech (TRIB:US) :   Please read here.  In December, TRIB confirmed approval of their Premier diabetes instrument by the FDA, as they had been expecting. They’ll now market Premier in the US directly and in partnership with Fisher Healthcare. I hold a 7.9% portfolio stake.

Mkt Price:  $10.18,  Tgt Price:  $13.25,  Upside Potential:  30%

6. Colony Financial (CLNY:US) :    Please read here. I hold a 2.0% portfolio stake.

Mkt Price:  $15.71,  Tgt Price:  $22.49,  Upside Potential:  43%

7. Argo Group (ARGO:LN) :    Please read here. I hold a 4.9% portfolio stake.

Mkt Price:  GBP 14.5p,  Tgt Price:  GBP 38p,  Upside Potential:  162%

8. Asta Funding (ASFI:US) :    Please read here. I hold a 3.8% portfolio stake.

Mkt Price:  $7.98,  Tgt Price:  $11.82,  Upside Potential:  48%

Note:  I’ve written about Dhir India (DHIR:LN)  here, but I didn’t include it for 2012 as it’s now the subject of a GBP 42p Cash Offer from Alok Dhir, the Investment Manager. The current Mkt Price is GBP 37.5p, which is 134% higher  than the price at which I recommended DHIR.

The following stocks are still on my to-do list, so I won’t venture to include Tgt Prices at this point. I do plan on covering them thoroughly  as soon as I can in a series of articles. Meanwhile, if you have any specific questions about them, please don’t hesitate to email me. Please note, some (but not all) of these are a bit more speculative – but just the thing to add a little extra spice to your portfolio!:

9. FBD Holdings (FBD:ID) :   FBDs an Irish general insurer, with a rather amazing long term average (10 years) Combined Operating Ratio of 86%. This is the key to FBD’s premium RoE, which has been obscured in the past few years by a series of investment write-downs. But now we finally have an ultra-clean B/S, with minimal write-downs in the latest results, a spin-out of their hotel/property assets and major holdings in German Bunds. Thus, we have a low risk B/S, exposure to an Irish economy/consumer that’s near its nadir and an underlying RoE of 19.5%. Despite this, the shares are priced at a 1.1 P/B, a 9.6 P/E (LTM, and P/E should drop significantly on FY results), and offer a 5.0% yield. Also, we’ve seen takeover interest in FBD before, and perhaps in 2012 we’ll see a revival of that interest. I hold a 2.2% portfolio stake.

Mkt Price:  EUR 6.50,  Mkt Cap:  EUR 216.4 mio

10. Vinacapital Vietnam Opportunity Fund (VOF:LN) :   Vietnam’s long been a top interest market for me. It has a hard-working/literate labour force (which is definitely lusting after the finer things in life!) that’s far cheaper than China. I’ve held back on investing more aggressively as the VNI index keeps breaking lower (down a cumulative 75% at this point), and CPI’s been problematic (peaking at 23%) leading to further VND weakness. CPI’s now sub-20% and looks to be moving lower. Foreigners have been avoiding the market, while the locals have been buying gold, leaving the market on a trailing 8 P/E ratio and primed to explode higher when/if buyers return. The VNI recently broke 380, which may lead to 330 or even 290 in the New Year, but this will offer an opportunity to add to my position. VOF’s the best investment vehicle to gain exposure to Vietnam. It has a good long term relative investment record, and it invests in property and (some) private equity in addition to listed/OTC stocks. You might shy away from this type of exposure, but I believe this kind of portfolio flexibility/diversity is actually a benefit in frontier and/or high inflation economies. VOF currently trades on a 43% discount to NAV, and is executing an active share buyback programme.  I hold a 1.6% portfolio stake.

Mkt Price:  $1.27,  Mkt Cap:  $412.3 mio

11. Livermore Investments (LIV:LN) :   Livermores an investment company run by Israeli management, based out of Switzerland. The fund appears to be under the radar for most people, perhaps because of its eclectic mix of real estate and private equity (focused on Switzerland and Asia), plus fixed income and hedge funds. It also has financial leverage, which is still at reasonably acceptable levels (68% for property assets, 25% for non-property assets) but I’d prefer to see some asset sales and debt paydown. With the bulk of its property in Switzerland, and fully let, 2012 could be a good time to sell. I like the geographical exposure of the fund’s assets, but what I really like is the 64% discount to NAV! Directors and management have a 66% stake, which is reassuring but also slightly unnerving. The risks associated with this would limit the degree I would possibly add to my stake. However, management’s been shareholder-friendly to date (also prompted by activist Everest’s 3.4% stake), particularly with a v aggressive share buyback programme which has significantly enhanced NAV.  I hold a 1.6% portfolio stake.

Mkt Price:  GBP 14p,  Mkt Cap:  GBP 35.7 mio

12. Avangardco (AVGR:LN) :   Based in the Ukraine, and specializing in the production and distribution of eggs and egg products. It’s now the 2nd largest producer in the world, with a 24.5 mio flock of hens producing over 5.9 billion eggs a year! Eggs are sold domestically and into the Middle East & Asia. Here are some pics of management…yes, of an egg company…there has to be a joke in there somewhere, but I’m not making it! I should note the CEO is a sister of Oleg Bakhmatyuk, who owns 77.5% of the company. He’s actually just flipped his stake into Ukrlandfarming, which has been a long-rumoured IPO candidate, so we may see further corporate activity in 2012. There’s more ‘hairiness’ I could highlight, but hey that’s pretty much a given with any Ukrainian/Russian company..! On the other hand, growth and margins are phenomenal:  In the latest 6 months, Revenues increased 35% to $224 mio, which is corroborated by a 31% flock increase and a 51% increase in egg production. Despite this, the share price has crashed 70%, and with Pre-Biological LTM Underlying Net Profit at $147.0 mio AVGR’s now on a 2.9 P/E ratio. The company’s now hoping to receive export approval from Russia and the EU – if this is granted, the company’s growth could accelerate even further. The main (other) risk, of course, is to monitor the impact of future capex spending and working capital requirements on the company’s cash flow and Debt levels. I hold a 1.6% portfolio stake.

Mkt Price:  $6.64,  Mkt Cap:  $424.1 mio

13. Petroneft Resources (PTR:LN) :   Petroneft’s a Dublin based oil and gas exploration and production company, focused on Western Siberia. Production only began this year, and has been beset with problems and disappointment, significantly impacting  the share price (down about 75% now in the past year). I don’t consider this a serious problem myself, all it needs is more money, time and brains… I’d be more concerned about their cash burn rate – the real negative for the share price was the fact the company strongly hinted they’d become cashflow positive this year. This hasn’t happened due to the production problems to date, and the company’s down to about 0.9 years of cash burn left (unfortunately funded by drawing down on a debt facility). They’ve really missed their chance on another placing, which would now be terribly dilutive, so offering a farm-in/sale of some of their assets might be a potentially better solution. You have to balance this though with the fact that they have almost 100 mio boe of Proved/Probable Reserves (to be increased at year-end, plus much larger Resources) on hand, and an experienced, straight-shooting management team (led by Dennis Francis) despite the recent issues.  This will also be a good stock for stake building, if appropriate, as news/events occur in 2012. I hold a 1.2% portfolio stake.

Mkt Price:  GBP 18.125p,  Mkt Cap:  GBP 74.4 mio ($115.5 mio)

OK, so we’re off to the races! I’d be delighted to hear if you own any of these stocks also, or are in violent disagreement with any of these picks?! And please feel free to comment  and add your own list for 2012. The very best of luck folks, personally and in your portfolios in 2012.

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