Wexboy Portfolio – H1-2014 Performance

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alternative assets, benchmarking, Bloomberg Euro 500, correlation, diversification, FTSE 100, FTSE AIM All-Share, Irish shares, ISEQ, portfolio allocation, portfolio performance, quantitative easing, S&P 500, stock ideas

OK, that’s enough TGISVP (though rubbing resource muppets’ noses in it is lots of fun) – time for the rubber to hit the road: So how did the Wexboy Portfolio make out in H1-2014?! Well, first you may want to reference my FY-2013 performance – now, let’s turn our attention to my benchmark indices:

[NB: I’ve dropped the FTSE Eurotop 100 – I can find it elsewhere, but I’m used to seeing it on Bloomberg.com & I can’t find it as a ticker any longer. I could use the EURO STOXX 50 (SX5E:IND), but that’s a ridiculously small universe of stocks, so I’ll opt for the Bloomberg Euro 500 (BE500:IND) instead – not as well known, but functionally it gets the job done.] [btw Bloomberg’s fantastic, but they have some annoying habits – on the one hand, they abruptly discard useful features, while they also add awesome new features which they barely ever highlight!? Check this out:  Bloomberg Industry Leaderboard].

A +3.4% benchmark gain isn’t too inspiring – quelle surprise, the S&P’s the only index which really makes the grade! And the individual indices don’t bode well for my own portfolio, since it’s particularly focused on the UK. In my case, that’s more about UK-listed stocks (& funds), rather than UK-exposed stocks – but in my experience, a poor FTSE performance usually weighs on both. As for the US, I suffer from the inverse – I have a decent allocation to US-exposed assets, but little exposure to US-listed assets! I also opted for the UK & Ireland as an attractive substitute for a European portfolio weighting – again, that focus may hurt me (though the ISEQ’s performance was only marginally worse). This is a fairly typical stock-picker problem:

Why make it so bloody complicated…when the simple & most obvious strategy is so often the winner?!

H1-2014 TGISVP, Portfolio Performance

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Alpha Portfolio, Beta Portfolio, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, portfolio performance, Smart Alpha Portfolio, Smart Beta Portfolio, TGISVP, The Great Irish Share Valuation Project

Now, let’s take a look at H1-2014 performance for The Great Irish Share Valuation Project. The valuation phase (covering 80 companies) ran from Feb to May, so the mid-point of these posts (March-30th) is the most appropriate start date for benchmarking purposes. Since then, the ISEQ is down 5.8% (as of end-June), so any TGISVP out-performance will be doubly welcome…

Actually, the ISEQ’s recent decline has been even more pronounced – since its end-Feb high, the index is down 9.5%. [And we have a similar pattern with the UK’s AIM All-Share, down a whopping 12.7% since its March high. Clearly, the major indices have been performing very differently…I expect to revisit this divergence in my next post]. Despite that, it’s worth highlighting the ISEQ still managed a 3.5% gain for the entire first half – a nice reminder the Irish market seems to enjoy disproportionate first quarter gains nearly every single year.

OK, before looking at overall performance, let’s have some fun – who were the individual winners & losers to date?! [Remember, for each stock, we’re only looking at gains/losses since its TGISVP evaluation date (i.e. Feb-May), so these tables don’t necessarily reflect full H1 performance…though I’m sure there’s plenty of overlap!]. Here’s the Sewer Shit:

This includes most of the usual suspects – junior resource stocks on their inevitable march to zero…

TGISVP – End-H1 2014 Snapshot

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Aer Lingus Group, Donegal Investment Group, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Kentz Corp, Norish, Petroneft Resources, Prime Active Capital, TGISVP, The Great Irish Share Valuation Project, Zamano

I expect to publish a performance-related post or two, but timeliness dictates I first take a closer look at what’s hot or not in The Great Irish Share Valuation Project. This year’s valuation phase was a 10 post epic stretching from Feb to May – so end-H1 presents a good opportunity to update share prices (plus some underlying valuation-related variables, primarily FX rates), and re-rank all 80 Irish shares in terms of their current upside potential. Obviously, I haven’t updated my underlying intrinsic valuations on the fly – that was never the intention – so pay close attention to any subsequent results & news flow for shares that might interest you. [But I generally find intrinsic valuations change slowly/incrementally]. I do have two last minute exceptions though:

Company:   Kentz Corp

Prior Post(s):   2012 & 2013 & 2014

Ticker:  KENZ:LN

Price:   GBP 926p

Well, this update’s pretty simple: Just a week ago, Kentz announced a recommended cash offer by SNC-Lavalin Group (SNC:CN) at GBP 935p per share. This seems to have taken the market by surprise, but it’s only an 18% premium vs. the 792p price target I published 3 months ago – arguably, one would expect such an additional control premium. I’ve even heard some PI mutterings about other potential bids… Yes, that’s always a possibility, but it doesn’t seem very realistic in this instance: With two other suitors rejected last year, I’m sure management explored all other possibilities before dropping their drawers for SNC-Lavalin.

Despite that, ideally I’d like to re-assess my valuation to determine whether a higher bid could be justified. But there’s been no subsequent results, except for a 10% increase in the company’s backlog (to $4.5 billion, plus a further $125 million contract announced in June). Which is clearly encouraging, but not much of a tangible basis for increasing my price target significantly. At this point, the most likely & logical price target is the recommended cash offer itself…

Price Target:   GBP 935p

Upside/(Downside):   1%

[NB: There are two other pending takeover offers to consider: i) A recommended share offer for Fyffes (FFY:ID) by Chiquita Brands International (CQB:US) – I expect this to close & already incorporated it into my 2014 FFY price target, and ii) a rejected share offer for Kenmare Resources (KMR:LN) by Iluka Resources (ILU:AU). I suspect KMR management (& shareholders?!) would prefer to go straight to hell, rather than accept this offer – unfortunately, the company’s current operating, cash & debt trajectory all suggest hell is actually a distinct possibility. I haven’t re-considered my much lower 2014 KMR price target at this point.]

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