Asset Managers – OK, Time to Storm the Castle!

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% of AUM, absolute return, Ally Financial, asset managers, carried interest, catalyst, Colony Financial, de-leveraging, distressed assets, Fortress Investment Group, KKR, mortgage servicing rights, MSRs, Nationstar, Newcastle, Nomura, Oaktree Capital, Och-Ziff, Ocwen Financial, pension funds, PHH Corp, Price/Sales, private equity funds, special situations

Continued from here. As I’ve highlighted, (alternative) asset managers have an attractive business model, strong balance sheets, and are generally undervalued. On the other hand, they’re a geared market play. I see 2 ways to alleviate this risk:

i) Ration asset manager allocation in your portfolio. As I’ve discussed,  analyzing, ranking & selecting from the broadest universe of listed managers is the best way to achieve this.

ii) Look for a great story, a great stock, AND a great price. This can significantly transform your risk/reward. Make a poor decision on one attribute, and hopefully the others bail you out. Get them all right, and accelerate & increase your returns…

Asset Managers – Cash Hogs & What’s Hot, What’s Not

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% of AUM, 3i Group, Affiliated Managers, AHL, alternative assets, Altira, Argo Group, Artio Global, Ashmore Group, asset managers, carry trade, Charlemagne Capital, CIFC, Cowen Group, David Harding, FRM Holdings, GLG Partners, IFMI, Integrated Asset Management, Janus Capital, Man Group, MPC Capital, Polar Capital, Price/Cash, Ramius, Record plc, Volcker rule, Winton Capital

Continued from here. And plse ref. my (alternative) asset manager table here. Taking a look, I marvel again how conservative most managers are in terms of net cash/investments. Less than 1 in 10 has net debt, while the average manager’s on a 4.6 Price/Cash multiple – 22% of the average market cap. consists of net cash/investments! This has always puzzled me. In general, particularly now, I don’t believe shareholders are being properly rewarded for this asset/financial strength. You’d think managers would be a little savvier about shareholder value..?! And reasons for this surplus cash? I can think of three:

i) Management Nap Policy:  Ah diddums, management finds it hard to sleep, or even nap, unless they’ve a large chunk of cash lying ’round so they feel warm & cozy… Maybe they’re even hoping a lap dancer will be impressed at the size of their…balance sheet? A touch sarcastic? Don’t forget a company’s really just a collection of people – which can sometimes be wonderful…or terrible! [btw Here’s another collection of people]

Asset Managers – Another Look at Valuation

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% of AUM, activist investors, alternative assets, asset managers, catalyst, earnings growth, Goldman Sachs, hedge funds, P/B Ratio, P/E ratio, P/S Ratio, Price/Sales, REIT/MLP sector, short sellers, takeover offers

Continued from here. I was glad to see some comments/debate come back to me re my previous asset manager valuation statement:

‘Obviously each manager has their own unique story/valuation, but big picture these metrics really work: 2.25%-3.25% of AUM for traditional managers and 7.5%+ of AUM for alternative managers.‘

‘Big picture‘, of course, just means on average & over time, there will be plenty of exceptions to the rule..! Actually, readers were really just (smartly) anticipating something I wanted to highlight in my Part 2: I’ve highlighted the benefits/logic of using a % of AUM valuation approach, but how about related risks & questions? Like:

Good Show, Chaps!

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All the Devils Are Here, Altman Z-score, Bethany McLean, catalyst, Clinton Cards, How to Make Money in Value Stocks, Luddites, Margin of Safety, Oddball Stocks, Pink Floyd, Piotroski, stock screener, Stockopedia, Total Produce, value investing, value investing bloggers, Warren Buffett

I’m way behind a couple of other bloggers on this..! Stockopedia sent me a free copy of their new book, ‘How to Make Money in Value Stocks’, and invited me to look at their new website upgrades.

How could I resist taking a look when the book mentions Wexboy twice?! Maybe it will divert attention from my last book reference(s)… OK, Jeez, I’m kidding! At least I think so, bit hazy on some adventures! 😉 Quoting a Pink Floyd lyric was nice too – somewhat cancelled out by following up with a 50 Cent (sorry, Fiddy Cent) quote…

AGI Therapeutics – Anatomy of a Takeover (IV)

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AGI Therapeutics, AIM stocks, compulsory acquisition, delisting risk, EUR/USD, Event Driven, Expected Value, Gross IRR, Irish shares, market-makers, Recommended Cash Offer, Risk Arbitrage, takeover offers, technical analysis

Continued from here.

OK, to recap the latter part of my previous article, I put forward 2 (hopefully strong) arguments why you should embrace (unhedged) FX risk in your event-driven investing (and, of course, elsewhere in your portfolio). With AGI Therapeutics (AGI:ID/LN), however, I essentially faced no FX risk on the deal in the end.

Remember, AGI traded in EUR (or GBP) but the takeover price was $0.1171 per share (and holders could opt for equiv. EUR proceeds). My solution was to round-trip surplus USD I had available. Yes, I’d incur a small FX spread to convert USD for my EUR share purchases, but by opting to receive USD takeover proceeds I’d eliminate subsequent FX risk, and end up back in USD cash.

Asset Managers – A First Look at the Alternatives

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% of AUM, 3i Group, alternative assets, Apollo Global, Argo Group, Blackstone, Carlyle Group, Cowen, developed markets, distressed assets, emerging markets, Fortress, Janus Capital, KKR, Mr. Market, Oaktree Capital, Och-Ziff, Record plc, special situations, Tetragon Financial

We’ve just witnessed the rather limp launches of Oaktree Capital & Carlyle Group (reflecting the current malaise in asset manager valuations), so it’s a good time to look more closely at the asset manager universe. But where to start? Well, the boring end of the spectrum, I guess:

Traditional managers are dime a dozen, with little to distinguish them. Most focus on developed markets (reflecting a rather timid clientele), and demonstrate no particular ability to outperform the market over time. They now face relentless competition from an ever-expanding ETF universe which, on average, easily matches them on performance and wallops them on fees.

Whither the US, Europe & the EUR/USD..?

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activist investors, austerity, Bundesbank, catalyst, CNBC, distressed assets, Edward Gibbon, emerging markets, EUR/USD, Europe, Event Driven, Fed, frontier markets, idiots, Japan, Japanese debt crisis, NAV discount, private equity funds, Red Bull, student debt, US

OK, I confess, this isn’t really about the EUR/USD FX rate. I was beginning another article, and my despair over the developed markets & their prospects just kept interfering..! But let’s try keep this somewhat brief – maybe I’ll return again after reading my Gibbon – and hopefully it will prove a good lead-in for my other article.

Despite the dismal performance in the US & Europe (why even talk about Japan..?) over the past decade, I just can’t get too hopeful from here. I sighed, and resolved again to just ignore the news, when I heard the growing swell of anti-austerity political dissent in Europe (and even fresh mutterings about EUR exit, and devaluation).

Wexboy Readers Around the World!

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Africa, BVI, China, Falkland Islands, Greece, Ireland, Malvinas, North Korea, Singapore, South African Property Opps, Tanzania, UK, Ukraine, USA

WordPress Stats. have been getting better & better – I’m impressed! Thought it would be fun to share some random info. on my Wexboy readership:

– Smallest:  British Virgin Islands. OK, shared with 13 other countries. Aren’t all the investment co/hedge fund managers in BVI? Surely more than a few would have come across my blog by now? What? Oh, you’re really in London (or NY) – the taxes are just dandy, but you don’t like the restaurants in BVI – ah, I see!

– Most Politically Correct:  Falkland Islands – yes, it’s also labeled as Malvinas! Yes, this was WordPress’ idea.

Avon Products – All Pig, No Lipstick…

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Andrea Jung, Avon Products, bad debt, Brink's, capital expenditure, Coty, debt, free cash flow, intrinsic value, Johnson & Johnson, JP Morgan, M&A, offshore cash, Pension Deficit, Risk Arbitrage, share repurchase, Silpada, Venezuela, Wal-Mart

– Avon Products (AVP:US) has high quality beauty products, a long/distinguished history and a premier reputation in direct sales. It offers its 6.4 million direct sales reps. (‘Avon ladies‘) a compelling income/empowerment opportunity, while offering investors attractive global/emerging markets exposure (83% non-US revenues)

– Sounds like the start of an interesting investment write-up?! But what on earth’s happened to Avon in the past several years? Good God, it’s like hearing your dear old maiden aunt’s been raped by Somalian pirates..!

Sailing on the Good Ship Argo

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% of AUM, Argo Group, Ashmore Group, distressed assets, Ex-Cash Ratios, hedge funds, Margin of Safety, Price/Cash, private equity funds, Rialas brothers, The Argo Fund

Argo Group Ltd. (ARGO:LN)

• Mkt Price:  GBP 13.375p
• Mkt Cap:  GBP 9.0 mio
• % of AUM:  4.5%  (of $325.4 mio)
• P/C:  0.6
• P/S:  1.3
• P/E:  10.0  (Pre-Amortisation/One-off Fee)
• Div Yield:  9.7%      

Please read my previous investment write-up here & here. Wow, it was December when I last wrote about Argo! But not so surprising – the pace of news from the company is astonishingly low… In fact, we’ve only had one news item since, their Final Results. Shouldn’t complain though, I guess this contributes to the market’s neglect of the stock. Anyway, it’s a pleasure to write about Argo again…and marvel at just how bloody cheap this stock is!? If you haven’t read my prior posts (which provide plenty of useful background, some of which has contributed to ARGO’s cheapness), I think you’re in for a treat!