, , , , , , , , , , , , , , , , ,

Damn WordPress! If you viewed/received a similar Century (Part III) post (since deleted), please ignore it – it was just a draft & I’ve updated/revised figures across the board since. Not quite sure how WordPress managed to publish it for me..!

Right, continued from here. In my last post I promised: ‘OK, next I’ll take you through each of my investment allocations – and try to give a flavour of my thinking, and some underlying stocks/funds, in each instance‘. However, I’ve just completed a detailed quarter-end portfolio update/review, so let’s flip things ’round – perhaps you’d be interested in a timely look at some portfolio metrics¹, and we’ll return to investment allocations in my next post?

Yes, really? So you like the pretty panties, but you still want to know the damn cost..?! Sigh, value investors..! OK:

21.1% – Top 3 Stakes:   European Islamic Investment Bank (EIIB:LN) (8.3%), Trinity Biotech (TRIB:US) (7.4%) & Total Produce (TOT:ID) (5.5%).

0.5% – Smallest Stake:   Undisclosed – a v small/cheap UK stock in which I’m building a stake. Market treats it like a hardware company, but in reality it’s an attractive software/services provider.

50% – Top 10 Stakes:   Looks about right – I’ve noticed a lot of (reasonably) high conviction fund managers tend to have around half their portfolio in their Top 10 favourite ideas.

2.7% – Average Stake:   Ideally, the size of my average holding will increase in the future. Previously, I preferred a single stock holding to range between 1-5%. Now, I prefer a 2% min., and to accumulate up to a 7.5% max. holding for my highest conviction ideas. Of course, that 7.5% max. is more comfortable with an investment fund, because of the underlying diversification. In fact, I might even contemplate a 10% max. in the unlikely event I buy a fund of funds. On the other hand, I tend to scale in & out of positions more now, so that probably offsets the whole sizing up effort!

8.7% – Weighted Avg. YTD Gain:   Note this is simply a weighted average of the YTD share price gains/losses on all portfolio stakes. For a variety of reasons, this may be quite different from my actual portfolio return, or any return analyses I include on this blog about disclosed stakes.

73% – Highest YTD Gain:   Undisclosed – but it’s a fish farming company! 

(62)% – Highest YTD Loss:   Petroneft bloody Resources (PTR:LN). At least it’s a sub-1% stake, not so bad… Doesn’t alleviate the f**k-up of actually buying it in the first place. Just goes to prove how far companies with cash burn/funding issues (or that are simply over-leveraged) can collapse. A good rule of thumb: Think of the worst price the shares could possibly sink to…and then slash another 75% off that!

I should have exercised better control… But PTR’s got an (easily verifiable) intrinsic value that’s vastly higher, I was afraid I’d miss out! But with companies like this (esp. over-leveraged ones), it’s always better to wait for definitive news they’re off the danger list. Sure, the stock may enjoy a significant pop, but you’ll still have plenty of upside and now it’s actually safe! Remember: Safe, AND cheap! Oh well, I’ve avoided plenty of other resource stock disasters – I found a bundle during my TGISVP project. I pity their investors – they face the same cash issues, but with sweet f**k-all asset backing (yes, a technical term!) to rely on.

50% – Weighted Avg. Unrealized Gain:   The weighted average unrealized gain on all current portfolio stakes (vs. original avg. net entry price). Again, this is not necessarily representative of actual returns.

354% – Highest Unrealized Gain:   Trinity Biotech (TRIB:US).

Highest Unrealized Loss:   Sigh, let’s not do this again – please see above…

For the following metrics, note I may only calculate averages based on a subset of my stock holdings. This is not cherry picking – I simply don’t track a metric if it’s irrelevant to the stock, or my intrinsic valuation analysis. For example, a P/B ratio’s irrelevant for many companies these days, while a P/E ratio’s usually meaningless for most fund/asset based investments. Also note any individual stock metric may include certain adjustments to better reflect underlying figures. Prices and data can also change quickly – so please be sure to research & confirm all individual stock ratios yourself!

0.63 – Avg. Price/Book²:   This is based on stated NAVs, or my own adjusted NAVs if these can be calculated on a reasonably reliable basis.

1.28 – Highest P/B:   FBD Holdings (FBD:ID, FBH:LN).

0.16 – Lowest P/B:   Undisclosed – a property development company, and likely to be a controversial investment writeup. Considering the P/B discount, it has an amazingly low 14% Debt/Total Assets ratio.

8.3 – Avg. P/E

16.2 – Highest P/E:   Trinity Biotech (TRIB:US).

3.3 – Lowest P/E:   Avangardco (AVGR:LN), on a post-biological adjustment earnings basis (but it’s a relatively small component).

3.5 – Avg. ex-Cash P/E:   Calculated (Mkt Cap less Net Cash, divided by Net Earnings) for certain holdings where Net Cash is a significant % of market cap. By comparison, the regular avg. P/E is 10.9 for these holdings.

12.8 – Highest ex-Cash P/E:   Trinity Biotech (TRIB:US).

(7.7) – Lowest ex-Cash P/E:   Argo Group (ARGO:LN). Yes, that’s a negative P/E!

Price/Sales:   Of course, I embed P/S ratios within many of my intrinsic valuation analyses, but I don’t actually track current P/S ratios for holdings. An average P/S ratio is meaningless, anyway – respective ratios will be dramatically different depending on a company’s sector & margins (i.e. compare Tesco (TSCO:LN) to Burberry (BRBY:LN), for example).

5.9% – Avg. Dividend Yield:   This excludes all non-dividend paying stocks³. I don’t track track sub-5% yields closely, so I’ve just assumed a 3% yield for these particular holdings.

9.3 – Avg. Dividend Cash Coverage:   I only calculate this on 5%+ yield stocks. Dividend coverage’s normally calculated as net earnings vs. the dividend – my preferred measure is actually gross cash vs. the dividend. I believe management will usually do anything to avoid a dividend cut (unless earnings go into (semi) permanent decline, or they’re over-leveraged) – they’d far prefer to justify the current dividend, and fund it from available cash resources.

35% – Avg. Leverage:   I’ve only calculated this for asset-based companies/funds with net debt (unless it’s immaterial) outstanding. It’s an average of (slightly differing) leverage ratios (e.g. Liabilities/Assets, Debt/Assets, Net LTV etc.). With property companies, I may be comfortable with a Net LTV up to 55-65%. I’m amazed that one can still pick up plenty of companies at significant NAV discounts, despite much lower LTVs! With other asset-based companies, e.g. investment funds, I prefer to see leverage limited to 20-30% at most.

14.3% – Avg. Net Interest/Operating Profit:   Only calculated on a limited number of earnings based companies, where their net interest/operating profit ratio exceeds 10%. I normally prefer to avoid companies with a ratio above 15% – otherwise, I’ll add a specific/severe debt adjustment to my intrinsic valuation.

108% – Avg. Upside Potential4:   Based on my current intrinsic valuation for each holding vs. the current share price. This is skewed higher by a small number of 200%+ Upside Potential stocks, but is probably offset by limited upside on many investment funds (for which I anticipate NAV discount compression in my tracking, not NAV growth). However, let’s also provide:

77% – Median Upside Potential

OK, one more post to go – I hope this is proving an interesting deep dive into my portfolio construction, allocation & metrics. Don’t hesitate to contact me (wexboymail@yahoo.com), or comment, if you’ve any follow-up questions (or suggestions/criticisms) about this series of posts (or your own portfolio). Cheers!

¹ Only 0.5%+ portfolio stakes are included in my calculations.

² This average excludes certain holdings that always trade at NAV, and one other holding I peg at a rather extraordinary 0.06 P/B (based on my adjusted NAV)! However, if I included these, the average would a v similar 0.67 P/B.

³ If I include all non-dividend paying stocks, the avg. portfolio yield falls to 2.3%. I don’t particularly focus on dividends. If I believe a fund/company/management offers attractive upside, I’d prefer to skip dividends & improve the compounding on my investment. On the other hand, I’m a sucker for dividend receipts, they always brighten my day! Perhaps there’s a happy medium? At the other extreme, if all your/other investors’ focus is simply on extracting the maximum dividend from a company, does this really suggest a stock with great upside? 

4 This average excludes certain holdings that always trade at NAV, and a holding which I estimate has a 1,000%+ potential upside… If I include these, the average would be a much higher 140%.