Catalysts – A Summary (Part II of II)

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activist investors, Argo Group, Avangardco, binary outcomes, Carl Icahn, catalyst, Daniel Loeb, Expected Value, government regulation, Herbalife, IRR, junk bonds, litigation, major sale, NAV discount, Risk Arbitrage, Robert Chapman, share buyback, shareholder activism

Continued from here.

iv) Activist Investors are my next catalyst. Obviously, there’s no specific timetable here, but since most activists are performance-driven hedge funds, a 6 mth to 2 yr timeline is reasonable. Activists in the UK usually target asset discounts & realizations (so investment trusts/companies are ideal), while European/US activists are perhaps more biased towards operational change (which may require a longer investment horizon).

Most activists prefer to agitate for change behind the scenes, but some prefer to be more public: Carl Icahn (I read King Icahn at least once a year) is the king of the activists – he’s 77 now, but is more of top of his game today than he was 30 yrs ago! Other notorious activists (& 13D filers) are Dan Loeb of Third Point (and here, though he claims he’s mellowed now!) & Robert Chapman, who (presumably!?) introduced the first ‘fuck‘ in an SEC filing. More in-depth reading material includes ‘Risk Arbitrage‘ by Wyser-Pratte, ‘Extreme Value Hedging‘ by Orol, and certain chapters of ‘Free Capital‘ by Guy Thomas.

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2013 – The Great Irish Share Valuation Project (Part VI)

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Bank of Ireland, Grafton Group, Great Western Mining Corp, Irish shares, Irish value investing, Karelian Diamond Resources, Kentz Corp, Risk Weighted Assets, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas, USA Graphite Inc.

Continued from here.

Company:   Karelian Diamond Resources

Prior Post:   Here

Ticker:   KDR:LN

Price:   GBP 0.525p

Seriously, is this a company, or a joke?! It’s literally held together with spit & baling twine… I shouldn’t be surprised: It’s another Dick Conroy vehicle, and he runs it as tightly as John Teeling does his companies. The company had a mere EUR 10 K on hand at end-May 2012 (no results since!?), EUR 1.0 mio in loans, and EUR 0.8 mio in accrued director compensation. And it goes without saying the company has nothing tangible (in terms of reserves & resources) to show for its exploration efforts…

Catalysts – A Summary (Part I of II)

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Alternative Asset Opportunities, asset allocation, catalyst, correlation, dividend tax treatment, Event Driven, Expected Value, fighting the Fed, Investegate, IRR, Liquidations, Margin of Safety, offer premium, portfolio allocation, QE, Recommended Cash Offer, Risk Arbitrage, risk-on risk-off, takeover offers, Takeover Panel, VIX, volatility, wind-down

My 10-part series on catalysts last year (stretching from Jan to Dec!) was well received, judging by the readership & links. I vaguely promised a summary to wrap up the series – as we’re well into the new year (already?!), it now seems appropriate to deliver that post (& hopefully it proves useful).

By the end of last summer, I concluded there’s little point fighting the Fed… A fortunate decision, as the market’s been decidedly risk-on since then! Though I must say, the power of central bank liquidity still surprises me. If you recall, last summer, we appeared to face a pretty bleak outlook both sides of the Atlantic: The fiscal cliff in the US & the sovereign debt crisis in Europe. [Hmmph, different stories…same destination!] Personally, I considered the cliff to be just like those periodic kerfuffles over the US debt ceiling – no genuine threat, but divisive political rhetoric could certainly roil the markets (& perhaps prompt a rating-agency response). On the other hand, the European crisis…er, what happened, where the hell did that go..?!

This risk-on attitude’s left my portfolio light on investments with shorter-term/lower-risk catalysts (i.e. event-driven investments). However, I still strive to pick new investments which (ideally) possess at least one longer-term/higher-risk catalyst. That type of catalyst doesn’t necessarily mean you avoid downside risk, but hopefully it stacks the deck in your favour vs. what the average value investment (complete with margin of safety) might offer. It may also accelerate the time-line for a stock’s realization of its intrinsic value/upside potential. Anyway, much of my event-driven exposure was ultimately re-invested in Alternative Asset Opportunities (TLI:LN) – so I simply exchanged a low return/relatively uncorrelated risk for a cheap/high return/totally uncorrelated risk! Go on, you might want to give it a try..! 🙂

2013 – The Great Irish Share Valuation Project (Part V)

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Abbey plc, Better Capital, Big Pharma, CPL Resources, Gallaghers, Glanbia, ICON, Irish shares, Irish value investing, Jon Moulton, milk quotas, STV Group, TGISVP, The Great Irish Share Valuation Project, TVC Holdings, UTV Media

Continued from here. Let’s take the next batch:

Company:   ICON

Prior Post:   Here

Ticker:   ICLR:US

Price:   USD 28.43

ICON’s starting to fire on all cylinders again, as I correctly anticipated. Well, except for the share price…but I’m sure investors aren’t complaining! 😉 Last year, the company was squeezed between (virtually) zero growth in its existing contract revenues & the challenges/expenses of ramping up to meet some v large contract wins. Operating margins, even on a pre-exceptional basis, had fallen to near-zero – but valuing ICLR on that basis would clearly have been incorrect. It seemed reasonable to presume margins would return to 10%+ as new contract revenues/margins matured.

Hitting The Century (X – Distressed)

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asset allocation, Asta Funding, ATM fees, Colony Financial, corporate-media-retail complex, correlation, credit card debt, debt collectors, distressed assets, distressed consumers, distressed investing, Fortress Investment Group, hire purchase, pawn stores, payday loans, pre-paid debit cards, Rent-A-Center, rent-to-own, Sex and the City, student loans, stupidity, Tetragon Financial Group, unbanked, vice stocks

Continued from here.

Remember this series? Yep, I’m spending an unconscionable amount of time getting through it. FFS, I started last June, promising a closer look at my portfolio construction, allocation & metrics. [‘Hitting The Century‘ as it was my 100th post. And ‘Pretty Panties‘ because I was so bemused by the prior response to the phrase]. Instead, you get a bloody epic – like The Hobbit. Oh well, blog rules…how ’bout I try finish by next June?! 🙂

Honestly, I expected it to turn out like this. But I’m delighted at the great reader response – I guess I’ve been trying (ad nauseam) to pound the message home that portfolio construction/asset allocation is just as important as stock-picking. [Studies suggesting asset allocation accounts for 90% of returns have been debunked, but more recent studies certainly confirm an average/minimum 50% of returns are derived from this source]. Unfortunately, this is forgotten/ignored by a lot of investors, even great stock-pickers… Admittedly, they may (occasionally) practice some kind of ex-post allocation – better than nothing, but an ex-ante approach is vital if you really want to end up with a safer, more diversified & higher return portfolio.

OK, let’s trot on – here’s a familiar pie-chart as a quick reminder (sure, it’s a little out of date – but have you noticed my portfolio turnover?!):

2013 – The Great Irish Share Valuation Project (Part IV)

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Conroy Gold & Natural Resources, DCC, FBD Holdings, Irish shares, Irish value investing, Kingspan, New Ireland Fund, Paddy Power, Pageant Holdings, Papua Mining, TGISVP, The Great Irish Share Valuation Project, Zamano

Continued from here. If you’re only joining the series now, I recommend you first read my first TGISVP post this year. And so, without further ado, let’s dive straight into my next (random) bunch of Irish stocks:

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Company:   New Ireland Fund

Prior Post:   Here

Ticker:   IRL:US

Price:   USD 9.919

The New Ireland Fund is the only closed-end fund now investing in Irish shares. [Hopefully, when general Irish sentiment is sufficiently improved, Gervais Williams might see fit to launch a new Irish investment trust]. The share’s made decent progress in the past year, slightly exceeding my price target. This was really due to NAV appreciation, however, as the NAV discount remained steady around 12%. With Phillip Goldstein, of Bulldog Investors, selling much of his 13% stake in the past year, that’s a pretty creditable performance.

Why I Write…

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blog readers, bloggers, blogging, Godzilla, message boards, tea ladies, trading, value investing

Most bloggers eventually get ’round to answering the question ‘Why do you write?‘. If I recall, I’ve made plenty of related asides & comments myself (damn, I wish I had ’em to hand!) over the past year – but high time for a proper post, eh?!

As I mulled over this post, I came to a surprising realization – I guess the origin of the Wexboy blog actually stretches waayyy back. At one point, I wrote a daily market commentary for a number of years. Seemed like a good idea at the outset – oh, what sweet & naive foolishness! If you’ve tried it, you’ll know writing a daily 7 am commentary becomes a rather daunting (& boring) prospect pretty quickly! But it wasn’t something I could quit once I’d started, and whining about writer’s block wasn’t a feasible option either. So – my solution?

The old Mae West – I quickly drifted… My commentaries began to include anything & everything that took my fancy: Stocks, dumb celebrities, current affairs, political lampoons, hangover cures, primers on technical analysis, etc. Anything to distract & entertain myself as I tried to nail down a picture of the market each day/week. Over time, I’d indulge myself with various series & running gags. I’d often anthropomorphize the markets in terms of movies, celebrities, farming, whatever..! USD/JPY moves & intervention were huge then – I vividly recall writing Godzilla mini-plots to explain exactly (?!) what was going on in the markets.

2013 – The Great Irish Share Valuation Project (Part III)

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Aer Lingus, Andor Technology, Botswana Diamonds, Clontarf Energy, Escher Group Holdings, Irish shares, Irish value investing, Merrion Pharmaceuticals, Ryanair Holdings, San Leon Energy, TGISVP, The Great Irish Share Valuation Project, US Oil & Gas, USOP

Continued from here. Right, here’s the next batch of TGISVP stocks!

Company:   Ryanair Holdings

Prior Post:   Here

Ticker:   RYA:ID

Price:   EUR 5.689

Last year, I was still mildly bullish on Ryanair, but also in the process of selling down an RYA position I held. Since then, the share’s out-performed my target price by just over 20%… But I don’t feel much regret: a) while RYA’s more defensive than most, airline stocks are inherently volatile – I demanded, quite rightly, a wide margin of safety to compensate, b) a year’s passed, I’m sure my current target will be that much higher, and c) I was generally pretty happy with the re-investment of any proceeds last year!

There’s little new to observe here – Ryanair remains a bloody awesome earnings machine! Current operating margin has been squeezed slightly by fuel costs, but at 14.2% it still deserves a 1.33 Price/Sales ratio. A positive debt adjustment is also appropriate, considering RYA’s currently sporting 10 times interest coverage & has a history of share buybacks & a special dividend in the past year. YTD earnings growth is at +12.5%, while last FY earnings growth was running at 25%+. Considering the potential for earnings volatility here, a 15 P/E is still pretty much the maximum I’m comfortable with (based on an estimated EUR 0.3875 EPS run-rate).