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Monthly Archives: May 2015

One Fifty One? No, It’s Worth Far More…

25 Monday May 2015

Posted by Wexboy in Uncategorized

≈ 3 Comments

Tags

Alan Walsh, hazardous waste, IAWS, metals recycling, NTR plc, One Fifty One plc, One51, Pageant Holdings, Philip Lynch, plastics, Straight plc, Sum-of-the-Parts Analysis

A One Fifty One plc investment write-up has long been outstanding from me now, as certain readers have reminded me! It’s high time now I rectify this – especially since I’ve already highlighted One51 & its CEO, Alan Walsh, play an integral role in the unfolding NTR plc story. Of course, One51’s also another classic example of Celtic Tiger hubris & near-collapse – but its future definitely looks far more promising…

Let’s rewind:  In 2005, members of the Irish Agricultural Wholesale Society Ltd. approved the creation of One51. In bygone years, it would probably have remained just a sub. of the Society, conservatively managing its investment properties & portfolio. But the Celtic Tiger demanded something more ambitious, so it became a stand-alone company: a) When Society members became direct shareholders in One51, via a Feb-2007 share exchange, and b) grey market trading commenced in One51’s shares at the end of Oct-2007.

[NB: Irish grey market shares are unlisted – akin to unlisted UK shares (which trade via matched bargain), or US OTC/Pink Sheet stocks (but without the benefit necessarily of market-makers). One51 now has a quarter billion dollar market cap, and its standards of reporting, corporate governance & investor relations equal any of its listed peers, but it’s still a grey market share…so be aware of the usual investor health warnings. But if you’re still interested, you can discuss and/or trade One51 with these brokers.]

This independence was something of an illusion though, as One51’s board and management was populated mostly with continuing (& former) directors and management of the Society & IAWS Group plc. [IAWS Group was a listed sub. of the Society, which has now become Aryzta (YZA:ID) & Origin Enterprises (OGN:ID)]. The company’s shareholder base also overlapped with those of the private & public IAWS entities. But those were heady times – brokers & punters weren’t too worried about potential grey market illiquidity, or governance issues. All they really cared for was the mesmerising strategic vision painted by Philip Lynch, One51’s CEO. [Who was still CEO of the Society, and a former CEO & Chairman of IAWS Group]. Unlike everybody else at the time, Lynch wasn’t actually focused on property investment & development…instead, his real ambition was to become a genuine mover & shaker in the Irish (& even the UK) corporate world.

Unfortunately, looking back, his vision doesn’t look so compelling (or even that strategic). During 2006-08, operating & financial acquisitions were occurring at the frantic pace of almost one a month – and well over EUR 500 million (gross) was actually spent during this period. As a result, the balance sheet almost quadrupled within a two year period (peaking at EUR 900 million+ by end-2007), funded by an easy combo. of bank debt & fresh equity. [Plus EUR 168 million of Convertible Loan Note (CLN) issuance, most of which was quickly converted to equity also.]

Buoyant business & investment confidence, optimistic growth expectations, and the intoxicating availability of cheap funding, all conspired to jack up prices paid (& goodwill recorded) at the time. And management’s lack of financial discipline was clearly evident in the minimal (low single-digit) net profits & return on equity recorded in 2006-07. But judging by One51’s opening share price, investors didn’t much care – they were too focused on their prospective gains, and the touted ‘integration and synergies’ to be extracted from the company’s sprawling portfolio.

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The Inherent Contradictions of My Portfolio (or Who’s The Greater Fool..?)

13 Wednesday May 2015

Posted by Wexboy in Uncategorized

≈ 6 Comments

Tags

blue chips, bubbles, bullish, diversification, floating world, growth vs. value, negative yields, Nifty Fifty, price of money, quantitative easing

My last post (‘Welcome to the Floating World…’) talked about some of my habitual concerns regarding the markets & my portfolio…and consequently, I couldn’t help but highlight an inherent contradiction of my portfolio:

If I worry so much, how come my entire portfolio’s invested in stocks..?!

The answer’s simple: I have been & continue to be resoundingly bullish on the markets. Except it’s really not that simple…because this immediately highlights another obvious contradiction of my portfolio:

If I’m so bullish, how come my portfolio’s invested so defensively..?!

To illustrate, let’s revisit my Top Tips for 2015 post – which actually listed my Top 10 portfolio holdings (as of year-end 2014). Here they are:

Wexboy Yr-End 2014 Top 10 Holdings

I’d classify eight of these holdings into three (overlapping) categories: Deep value, special situations & (mostly) uncorrelated stocks (vs. the economy, or even the market). Which leaves just two holdings that can be described as growth (or high beta) stocks/funds: Fortress Investment Group (FIG:US) & VinaCapital Vietnam Opportunity Fund (VOF:LN). Granted, a defensive portfolio mix helps me sleep at night, as I’ve boasted before – but in light of my bullish market view, I have to ask if this is really an unnecessary luxury…or maybe even a bloody hindrance?

And in reality, my market view shouldn’t necessarily be that relevant anyway – return to my recent Stock Picking…Art, or Science?! series (esp. Part IV), and we’re reminded that consistent portfolio diversification isn’t just about geographical & asset allocation. Take another look at my Top 10 holdings table – again we see an inherent contradiction of my portfolio:

If I’m so concerned about diversification, how come my portfolio’s so lacking in large cap/growth stocks..?!

[Interestingly, the two growth stocks/funds I identified are actually my largest market cap holdings. My other holdings’ average market cap is just $84 million.]

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