Tags
Alternative Asset Opportunities, Argo Group, Donegal Investment Group, favourite stock, Fortress Investment Group, KWG Kommunale Wohnen, luxury goods, Newmark Security, portfolio allocation, Saga Furs, smartphone revolution, stock tips, Tetragon Financial Group, VinaCapital Vietnam Opportunity Fund, Zamano
This ain’t no party, this ain’t no disco, this ain’t no fooling around…
Yeah, it’s January, the most miserable time of the year. And already half of us regret we made no New Year’s resolutions…while the other half regrets they did. The market’s no help either, with many investors ending a frustrating 2015 in the red, and greeted in 2016 by another global dump. [Let’s discard the odd notion the Chinese market’s global impact is simply due to its hyper-volatility. It’s not…the market’s only the tip of the spear for the entire Chinese economy, which has obviously evolved into the key marginal driver now of the global economy. So for 2016, a great resolution is to pay far less attention to the US & far more attention to China!]. But still, there’s a whole bunch of new tips out there to inspire us… 🙂
Trouble is, I don’t necessarily have much faith in them, ‘less I know the tipster’s got his money where his mouth is. Which offers no guarantees, but it means I’ll tackle the 2016 tips season just like I did last year – inevitably, my top holdings are also my top tips! [And judging by my traffic, people definitely want tips first & performance later…so I bow to the vox populi, my FY-2015 performance post will have to wait a little longer!] And so, without further ado, here’s my Top Holdings as of Year-End 2015:
Hang on a minute, isn’t this s’posed to be a Top 14 Tips? You’re bloody well short-changing us here, mate!? Well, sort of, I’ll explain later… 😉 Now, let’s start pulling together a few different elements here… First, you might want to check out this July post, which includes my last (brief) updates on most of these stocks (& hopefully offers a taste of my upcoming performance post!):
‘Smokin’ the S&P…H1-2015 Wexboy Portfolio Performance!’
Next, let’s tackle each stock individually – I’ll provide website & Bloomberg links, links to relevant posts/write-ups (remember, good investment theses tend to evolve slowly), the closing share price & market cap, and a fresh (& relatively brief) update for each company:
i) Zamano (ZMNO:ID, or ZMNO:LN) (11.3% Portfolio Holding):
‘Zamano…So, What Now?!’ (NB: First link = most recent post/write-up)
Share Price: EUR 0.15
Market Cap: EUR 14.9 Million
The begrudgers will have you believe Zamano’s a value trap… If so, it’s a bloody impressive one, offering attractive exposure to the UK & Irish consumer, revenue (now at €23.3 million) growth of 24% in 2014 & a likely repeat for 2015, an annual €2.7 million of free cash flow, and net cash of €5.4 million…all priced on a 3.1 EV/EBITDA multiple. Unfortunately, management’s obviously neglected shareholder value to date, but this will change as: i) inevitably, its three major shareholders (who own 52%) become increasingly frustrated & seek (new) buyers for the company, and/or ii) management wises up (self-preservation’s as good a reason as any), starts talking up the stock, and gets serious about enhancing & realising shareholder value (a tender offer is the ideal solution, while a dividend’s an obvious first step, as I recently proposed). Meanwhile, based on its current market cap, ZMNO offers new investors an effective 18% RoE (escalating to a 35% RoE, on an ex-net cash basis).
ii) Alternative Asset Opportunities (TLI:LN) (7.5%):
Share Price: GBP 42p
Market Cap: GBP 30.2 Million (USD 43.9 Million)
Sometimes I wake at night & I see dead people…but I just smile & drift right off to sleep again. ‘Cos what’s more comforting & uncorrelated an investment than a bunch of codgers popping their clogs?! Especially one trading at a 17% discount to NAV (adjusting the Nov-2015 NAV for today’s £/$ rate, all else being equal). Granted, over the years, TLI had to revise up its LE estimates significantly (as did the industry), but it’s had none of the legal risks/issues we’ve seen elsewhere. And its portfolio is far older, with a weighted average age of 92 yrs & a 4 yr LE, leaving the old dears with v little room for error… After a $10 million policy windfall in just 5 months, TLI’s got another $122 million (£84 million) of maturities ahead (primarily, within 1.5-5.5 yrs) – albeit, premiums will cost $8.8 million pa. Meanwhile, shareholders enjoy a 12% IRR (embedded in TLI’s valuation) & some inevitable discount compression. And as in FY-2015, potentially we’ll see another 4p in distributions (an effective 9.5% yield)…of course, the board will cite ongoing premium payments, but net cash already stands at $8.2 million (i.e. 7.8p cash per share).
iii) Newmark Security (NWT:LN) (5.4%):
‘Newmark Security…A Real Steal!’
Share Price: GBP 3.08p
Market Cap: GBP 14.4 Million
NWT’s a classic dirt-cheap UK micro-cap. Which is undeserved…it spends heavily on R&D, it’s carved out a valuable niche with its electronic & physical security systems, it punches above its weight with customers, and has a globetrotting sales-oriented CEO. [See this recent interview – interesting to see Dwek’s subtle criticism of the company’s previous sales effort (under her father)]. More importantly, revenue’s grown 75% in just three years (& the dividend’s tripled in just two years). Not surprisingly, the shares rallied 50%+ since my write-up 15 months ago, but are now being held back by Newmark’s FY-2016 (ending April) outlook…a transition year, as longer-term sales & development projects gestate. Based on her record to date, the CEO deserves our trust & shareholders should look ahead to the ‘rewards’ to come in FY-2017 & later years. [And historically, the company’s tended to be overly-conservative in its outlook]. Fortunately, NWT has £3.9 million of net cash on hand, and it trades on a historic 7.2 P/E ratio, a 3.0 EV/EBITDA multiple, and a 0.6 P/S ratio (vs. a 10% operating margin), which should offer useful support as FY-2016 figures are reported (end-Jan & early-Aug).
iv) Saga Furs (SAGCV:FH) (4.9%):
Share Price: EUR 16.64
Market Cap: EUR 60 Million
Saga’s a perfect quad-play…on fur, luxury goods, China & Russia! Sweet Jesus, can you imagine anything worse? Yeah, but buried in that kind of reaction’s where you find the real bargains. In the last decade, fur’s again become integral to fashion & luxury collections. And the industry’s unique – Europe has a controlled & vastly superior product to China, in terms of quality & animal welfare, and Saga Furs & Kopenhagen Fur (its unlisted rival) are the primary auction house conduit between breeders & global luxury/fashion buyers. [A moat & a toll-bridge..!?] Despite its own premium luxury Saga Furs brand, trade buyers make for an inherently volatile business model. Which makes Saga a cyclical growth company, with auction sales last peaking at €889 million in FY-2013 (almost 120% higher vs. the prior FY-2006 peak). Coupled with economic/anti-corruption issues in Russia & China, for example, this obviously presents a real investing challenge. [Though longer-term, I still anticipate relatively untapped demand for fur, esp. in emerging markets]. But the stock’s priced accordingly: Trading on an 8.1 P/E ratio, a 1.0 P/S ratio (vs. a 26% long-term average adj. operating margin), a 6.0% yield (a €1.00 dividend is proposed), and a 0.6 P/B multiple (for the pessimistic, I’m confident this would be more than realised in a wind-down/liquidation scenario).
v) Donegal Investment Group (DCP:ID) (4.8%):
‘Donegal Investment Group (DCP:ID)’
‘Donegal Creameries – Low Fat Diet’
Share Price: EUR 5.902
Market Cap: EUR 59 Million
2016 should be a make or break year: The key event’s an April court date to appeal the €26.2 million valuation (pretty substantial vs. DCP’s current market cap) of its 30% stake in Monaghan Middlebrook Mushrooms. Presuming this approx. valuation is determined to be reasonable (& I think it is), MMM/Ronnie Wilson will need to comply with the court order to buy out Donegal. Resulting proceeds should obviously be returned to shareholders via a tender offer (debt pay-down’s no longer necessary, or sensible). The logic of the strategy is compelling, noting DCP’s NAV & earnings have stagnated for 5 years now. And with earnings averaging an adjusted 50 cents pa, the current share price (at 1.0 times Book) makes sense. But ultimately, Donegal’s value isn’t found in its earnings, its diversification, or even its core Produce division (whose operating margin has declined from 10% five years ago, to losses today) – it’s found in its intrinsic value (a EUR 9.46 Base Case NAV still looks reasonable on a Sum-of-the-Parts basis), and more importantly, it’s in the potential to wind-down its entire portfolio & progressively cannibalise its outstanding shares (thereby transforming DCP into a multi-bagger investment).
vi) VinaCapital Vietnam Opportunity Fund (VOF:LN) (4.1%):
‘Happy New Year! – A (Baker’s) Dozen for 2012′
Share Price: USD 2.38
Market Cap: USD 511 Million
The long-term logic of investing in frontier markets hasn’t changed, in terms of growth or value, but I can’t deny it’s a tough proposition these days for investors..! For me, cherry-picking markets is the best solution, and Vietnam offers one of the more compelling country bets in the world. I could quote you all the fundamentals, but I won’t…because I prefer to look back to the last 30-40 years of history. And based on that perspective, I believe Vietnam’s now ideally positioned to leap-frog ahead & become the Next China. Now, Vietnam Holding (VNH:LN) might be the more obvious (listed) equity play, and it’s out-performed more recently. But in frontier markets, investors have little clue how the major asset classes might perform in relative terms, so VOF’s more diversified equity, real estate & unlisted/private equity portfolio is attractive & it’s actually delivered a superior long-term performance. VOF also offers a 26% discount to NAV & a board that’s committed to closing this discount (they’ve already spent $227 million on buybacks, in just over 4 years).
vii) Tetragon Financial Group (TFG:NA, or TFG:LN) (4.0%):
‘Tetragon – Ready To Be A Star’
Share Price: USD 9.61
Market Cap: USD 999 Million
Mention Tetragon, and somebody inevitably complains what greedy bastards management are… Perhaps, but if you’re a shareholder, I’d argue they’re now your greedy bastards! When you look at the company today, it seems obvious chiseling shareholders is ultimately worth far less than the accretive impact of continued buybacks & the potential average/peak valuations which can be attained if/when TFG transforms itself into a top tier/global alternative asset manager. [Granted, US hedge fund/private equity valuations are collapsing…so if they’re the canary in the coal mine, we may have a much bigger S&P collapse on our hands! Otherwise, the sector should manage to stabilise/rebound]. TFG has a strong balance sheet, its portfolio is increasingly diversified (while the core CLO portfolio remains a substantial cash generator), a tougher market makes it a more attractive ‘home’ for potential hedge fund stars, it pays a 6.8% yield (which can be reinvested via a DRIP), and after the recent $60 million tender offer it now trades for about 50 cents on the dollar.
viii) KWG Kommunale Wohnen (BIW:GR) (3.6%):
‘German Residential Property V – A Buy!’
Assorted: German Residential Property
Share Price: EUR 10.03
Market Cap: EUR 161 Million
KWG Kommunale’s become a bit of an orphan company since Conwert Immobilien (CWI:AV) became its majority (80%) stakeholder – its website’s now German-only, and its two former key executives have both departed. And with CWI’s share price now climbing slowly but surely, and nearing a premium to book value, its interest in potentially obtaining a higher valuation for its German property portfolio via KWG diminishes accordingly. On the other hand, German residential property remains a compelling investment theme, esp. in the current European environment, and KWG still offers investors one of the cheapest high quality residential portfolios available. Vacancies continue to decline, rents are rising steadily, its 54% Loan-to-Value ratio is very reasonable, and despite a significant revaluation to date the company still trades on a 0.9 P/B ratio (& a 17% discount to NNNAV). By comparison, KWG’s largest peers now trade on an average 1.4 P/B ratio.
ix) Argo Group (ARGO:LN) (3.5%):
‘Argo Group…Time For A Sale And/Or A Wind-Down?’
‘Argo Group – 2013 Interim Results’
‘UK Asset Managers & Argo Group’
Share Price: GBP 9p
Market Cap: GBP 6.1 Million (USD 8.8 Million)
Management has right-sized the business again to match Argo’s declining revenue, but has had zero success raising new AUM, while wilfully continuing to neglect the stock price & shareholder value. And personally, I’ve seen little willingness on management’s part to engage with & advance any kind of serious discussion with potentially interested acquirers (of its business, or assets). On the other hand, I believe my ongoing activist pressure has helped push management to finally reach an agreement & dispose of its major fund(s) stake in TPPI. This frees up cash to settle $5.8 million in outstanding management fees (in addition to $1 million of net cash on hand), and should permit a significant redemption from its $14 million of fund investments. [For now, let’s ignore any incremental value in other net loans/receivables & the asset management business itself]. Which leaves Argo trading on a near-60% discount to net cash & investments (& a mere 30% premium to net cash), with management finally committed to considering an annual dividend, and/or a return of capital via a buyback. Unfortunately, we mightn’t hear anything further ’til March (or even June), when final results are reported – at that point, a strategic review/sale is obviously up for consideration again.
x) Fortress Investment Group (FIG:US) (3.4%):
‘Asset Managers – OK, Time to Storm the Castle!‘
Share Price: USD 4.65
Market Cap: USD 1,844 Million (post-Novogratz buyback)
Again, the alternative asset management sector’s proved how volatile it can be…who’d have predicted Fortress, for example, would collapse almost 50% in just 9 months?! And the lack of bad news was particularly dangerous – FIG’s a stock I might have added all the way down. Except sentiment was lousy all the way down too… Fortunately, I chose to limit/reduce my position substantially, a useful reminder even value purists should pay close attention to the technicals! After a v accretive Novogratz buyback, I calculate FIG has a little over $1.1 billion, or $2.85 per share of net cash & investments. Which implies you’re actually getting FIG’s $71 billion of AUM (exc. the Macro Funds, and ignoring $9 billion of ‘dry powder’) for 1.0% of AUM, ex-net cash & investments – even when you factor in $33 billion of Logan Circle fixed income AUM (which investors may be under-estimating as a potential natural hedge in the current environment), that’s an incredibly cheap valuation for an alternative asset manager. And on a P/S basis, it looks even more ridiculous…ex-net cash & investments, FIG trades on a 0.7 P/S ratio (or a 1.2 P/S ratio, if you choose to assume zero incentive income). Obviously it’s a real love/hate stock now – time to start betting big, or going home…
[NB: As of year-end, I increased my Fortress Investment Group holding from 2.8% to 3.4% of my portfolio.]
And finally, I really did intend to offer a Top 14 here…’cept for the fact it inconveniently included four new holdings, which must remain undisclosed for the moment (but should hopefully make for some interesting reading in 2016). So, apologies, that’s why it became a Top 10 Tips in the end…
But you know what – as a final teaser – why don’t we wrap up with a few tantalisingly brief summaries of these new holdings:
Undisclosed Company A:
Shared a little whisper about this one already on Twitter – it’s a luxury goods company with a 20-30% (current) growth rate, a sub-15 P/E ratio, and a minimal (but fast-growing) exposure to China.
Undisclosed Company B:
A large-cap company which boasts a leading/dominant local market position & offers investors a high growth economic pure-play – based on core/underlying earnings, it only trades on a 10.2 P/E ratio (or an even lower 9.6 P/E ratio, on an IFRS basis).
Undisclosed Company C:
A mid-cap European company – presumed by many to be a classic cyclical stock, but is in fact a classic secular growth stock which also offers attractive contra-cyclical characteristics. Has actually enjoyed a (primarily organic) 20%+ CAGR in revenue for 15 years+ now, but currently trades on an ex-net cash 12.8 P/E ratio.
Undisclosed Company D:
A small hat-tip here – while I consider Zamano a deep value/special situation investment, it also provided me with the original inspiration for an in-depth investigation of a particularly compelling secular investment theme. I’m talking about the global smartphone revolution – which may now be even more exciting in the far larger emerging/frontier market populations, where people are leap-frogging the personal computer age…they simply aspire to owning a smartphone instead. Equally exciting is the global transition of advertising, commerce, media, etc. to mobile, as they frantically chase this revolution. [Check out a16z’s ‘Mobile Is Eating The World’].
Moving on from the last portfolio allocation I shared with readers, I’m now occupied carving out two new sector/investment theme allocations (including stocks both old & new), which at this point already comprise nearly a third of my portfolio! [I’ll publish a new portfolio allocation in due course]. One of them is obviously MOBILE…and I specifically chose the word ‘Mobile’ because this investment theme’s far bigger than the smartphone revolution. It obviously includes wireless hardware/software/infrastructure/providers, communication, search, social networking, music & video streaming, mobile gaming, cloud computing, etc…and will ultimately move on to the Internet of Things (IoT) (which most people, in their daily lives, will experience primarily via wired homes & driver-less cars). [NB: I don’t necessarily like the competitive positioning, or the stratospheric valuations, in some of these areas!] In 2016, I hope I’ll have an opportunity to post more about this, and/or a relevant stock or two.
And meanwhile, my apologies, but all I’m revealing now about Company D is that…surprise, it’s a large-cap MOBILE play.
OK, that’s it. Now, let me just wish each reader the Best of Luck in 2016!
[What? OK, while we’re at it: The other new sector/investment theme is actually…da-dah, LUXURY GOODS! Again, I hope I’ll be able to return to this theme, and/or some relevant stock(s), in due course.]
Wexboy 
With BREXIT, I view there are good value investing opportunities especially in forex play and gold investments. UK property market will be badly hit too due to rising unemployment rate.
Hi Value Investing Singapore – yes, hopefully post-Brexit UK is a happy hunting ground for investors. My one proviso – think it more of an opportunity to perhaps acquire high quality companies (that you would have considered buying pre-Brexit anyway) at a better price, I wouldn’t necessarily rush to buy if it’s purely to take advantage of a cheaper market & currency.
Hello Wexboy. TLI plummetted more than 30% because of brutal and rather unexpected increases in premium from certain insurers. Time to cut : maybe other insurers will follow so NAV could drop massively-or time to add :only certain contracts targeted, like the ones with minimum guaranteed returns, and class actions ongoing….. very curious to get your thoughts!
Hi Chevalier – apologies, I think I mentally blocked out all TLI-related comments/questions at the time, I was so disgusted here with the board & investment manager! Considering their track record of unexpected & nasty surprises, my faith in their prudent management had completely evaporated – the only thing that stopped me selling, despite these qualitative reservations, was my quantitative evaluation that the (lower) share price was correctly pricing in all the bad news (& potential remaining risks). [And bearing in mind the continuing tailwind of an embedded 12% IRR valuation assumption]. But anyway, we now have news of the sale of the entire policy portfolio & an imminent wind-down of TLI to return 51p per share (subject to FX risk) to shareholders – considering my lack of faith in management at this point, this is the best job & end-result they could/should deliver. Regards, Wexboy
hi wexboy, one question: do you plan to accept the offer by conwert? i think at 10,8 € per share ( which means they are trading around NAV) kwg is still cheap, especially because germany is the cheapest real estate market world wide compaired to their income per capita. br stefan
Hi Stefan,
Contrary to my initial expectations, Conwert (whether intentionally, or unintentionally) has proved relatively unfriendly for KWG Kommunale shareholders…for example, key management/value creators have departed & haven’t been replaced, and English language IR has been abandoned. [Considering the valuation differential between German & Austrian property companies, I still consider this a short-sighted strategy by Conwert].
Tender offer price doesn’t surprise me, it’s pretty close to NAV & probably the best that can be expected here…in fact, if/when KWG ends up delisted, book value’s definitely the best a shareholder can hope for…and the same applies if this ends up in court at some point, as I suspect a judge won’t be too sympathetic to the logic of a large premium to book (even if larger peers are trading at that kind of market valuation).
Market price has been oscillating between EUR 10.40-60 – makes sense, as some shareholders are impatient & just want to exit/move on. Also reflects the fact that Conwert’s only tendering up to 93% of KWG’s shares – so there’s a chance you get pro-rata’d & end up with about a third of your holding trapped in a delisted company – this is likely encouraging some shareholders to sell also – although there may be a shareholder bloc which has indicated it intends to remain invested, so Conwert may expect to cash out all other shareholders fully.
But noting Conwert’s history here to date, I’m NOT interested in being a shareholder in KWG as a delisted company – I’m not suggesting anything egregious will happen, but there’s no reason to believe KWG will now be such an exceptional investment opportunity that it justifies staying invested here (& all the implied attendant risks) vs. investing elsewhere in the sector.
Trouble is, the sector large-caps now trade for an average 1.4 times book…so the market’s anticipating further capital gains to come, and a likely transition to a more dividend-driven/REIT proposition as the current acquisition/consolidation phase comes to an end. That kind of pricing means German residential property isn’t such an easy/no-brainer bet any longer – though if you’re bearish on the markets, it may be a premium worth paying for what I think is one of the ultimate ‘flight to safety’ assets. The alternative, of course, is to sit down & re-survey the listed German property sector, in the hopes of finding another KWG…i.e. a still relatively undiscovered stock/company that offers an attractive relative/absolute valuation and/or prospective NAV growth!?
Best of luck,
Wexboy
hi wexboy, thanks a lot for your detailed reply.
on the one hand i understand the risks you describe (sitting on a delisted stock investment), on the other hand I really like the KWGs strategy (with their focus on B- and C-locations and very frugal criteria when the buy new assets) and the exposure to the german real estate market.
finding another kwg may take years (assuming a similar price I paid for kwg). at least I dont see any interesting alternatives at the moment.
i also own some Immofinanz stock, which is an Austrian real estate company. very cheap if you look at price to nav, but with lots of exposure to eastern europe and russia. so not the low risk you get with german real estate.
will probably stay in my kwg Position and wait what happens.
br
stefan
Hi Stefan,
– Yes, I always liked the KWG story/strategy & NAV performance. But with prior management gone, and presuming Conwert reach 93% & delist KWG, I wouldn’t necessarily that strategy to be repeated/sustained…I think it’s probably more likely KWG will be viewed by Conwert as a relatively static portfolio to be exploited. So if you think there’s a lot of unrecognised/embedded value here already, a continued investment may well be attractive, but otherwise I’m not sure we’ll see a lot of fresh value creation here…
– I hear you…there aren’t many/any obvious value alternatives to KWG that spring to mind here!? I think another full-scale research project might be required, at some point, much as I did before: https://wexboy.wordpress.com/2013/11/21/german-residential-property-an-update/ Trouble is, I’d generally expect a significant valuation differential will continue to exist between the large-caps & the rest of the sector…so if the current 1.4 P/B large-cap multiple starts to compress (and for me, it’s difficult to see it actually expanding further), that would likely put pressure on the rest of the sector also. Not suggesting we’ll necessarily see that happen near-term, but worth bearing in mind…
– For me, the Russia/E Europe focused Austrian property companies have always been tempting, but also disappointing… Always liked the Raven Russia (RUS:LN) story myself – in terms of logistics/infrastructure, I’d agree with management it offers an attractive secular opportunity. NAV history is crap, due to obvious/periodic Russian convulsions, but all Russian property companies have the same problem – but clearly the RUS:LN share price is pretty beaten down now (RUSP:LN is worth considering too – which I wrote up previously: https://wexboy.wordpress.com/2013/03/29/my-dirty-little-dividend-secret/). That being said, I’m in no rush to actually buy Russian property exposure right now!
Cheers,
Wexboy
it is getting interesting 🙂 petrus advisers just declined the offer and wants at least 13,5 euros per share:
http://mobile.reuters.com/article/idUSFWN17I0R3
they hold 4% according to the 2015 annual report
Hi Wexboy, the management of Tetragon has options to acquire 12.5 million shares at $10 . These options expire next year in April. I look for them to start pulling levers to get the share price up . Clearly they will have will have to be more share holder friendly. Kurt
Hi Kurt,
As I’ve said before, I think management’s now far more motivated & aligned with shareholders to concentrate on getting the share price higher. And I still like my fundamental investment thesis as much as ever, along with the slow & steady progress management keeps making here. The real challenge/problem here is still if/when market sentiment will finally change for the better & the shares enjoy a substantial re-rating. Unfortunately, the current market environment – and especially the beating regular & alternative asset managers are getting – doesn’t help at all…
So while I definitely like the long term outlook, for the moment Tetragon remains a share for those with patience & a tolerance for (possibly more) pain…but the huge NAV discount & the high dividend should certainly help!
Regards,
Wexboy
Hi Wexboy
TFG is not performing well. have you any thoughts on why this is so. Are investors worried by the loans not performing due to the global economy not doing so well. The dividence yield looks great is there a risk of this being cut. The PE looks very low. Nice blog by the way, keep up the good work.
Donal
Hi Donal,
Tetragon Financial Group $TFG:NA is a real waiting game, alright..
Not that surprising really for such a long-neglected stock, and considering management’s prior reputation. But obviously the portfolio & operational strategy have been changing slowly but steadily, as management seeks to transform TFG into a more diversified alternative asset & seeding platform/manager. Unfortunately, TFG’s now being impacted by the current market environment & sentiment, which has been particularly brutal for alternative asset management valuations (by comparison, TFG’s actually held up remarkably well).
If you look back to the credit crisis, CLO vehicles/values actually performed admirably, so that’s pretty reassuring. Also, the expected IRR & cashflow being thrown off by residual equity tranches is pretty attractive too, and will help offset any potential credit issues & mark-to-markets elsewhere in the portfolio (which, remember, is more diversified now). Therefore, I tend to think TFG’s NAV will hold up reasonably well in this market (and obviously shareholders have a large margin of safety in the current NAV discount)…so what we’re really facing here, I think, is the same old problem:
When will TFG finally bloody enjoy a substantial re-rating?!
That’s going to take time, so more patience is required, and now it will also require the market to stabilise… My holding is sized accordingly – and when I see an improved market, and particularly a step-change in TFG sentiment, I’d gladly increase my position even at a significantly higher price (I prefer to pay up for info/certainty!).
Cheers,
Wexboy
Very nice blog, visit my blog too
Ta – will take a look.
Pingback: Crushin’ It: FY-2015 Portfolio Performance | Wexboy
Thank you very much Wexboy for your excellent posts.
I am very interested in Alternative Asset Opportunities.
However in doing my own due diligence I just found a sentence in the annual report which alerted me. It says:
“Written into the contract for some policies is an expiry date after which no more premiums will be accepted by the life office and the death benefit will no longer be payable upon death. Where applicable, this usually coincides with the policy anniversary closest to the insured’s 100th birthday. There are 42 such policies in the portfolio. The earliest expiry date is May 2020.”
Does that really mean that the live insurance company will not have to pay the face value in case that a person still lives at the age of 100?
Do you know in which way this risk (if I understood this correctly – it is a huge risk) is reflected in the NAV calculation?
Thanks
Helmut
Helmut – ta muchly – see above re $TLI:LN – all’s well that ends well…I think! Cheers, Wexboy
There is a much more worrying development regarding this investment. This was well flagged for somebody interested in the asset class http://www.wsj.com/articles/surprise-your-life-insurance-rates-are-going-up-1449225000
But there are more specific recent developments http://www.lse.co.uk/AllNews.asp?code=iv70qtkk&headline=Alternative_Asset_Opportunities_Warns_On_Cost_Of_Insurance_Increases
What surprises me is not the recent premium increase but the magnitude of the increase. Here the new premiums are 800k for policies with a face value or less than 10m. Those are outrageous premium which would make those life insurance policies worthless. Insurers are probably counting on the fact that contract holders would not want to spend on legal fees.
Yo123 – see above re $TLI:LN – all’s well that ends well…I think! Cheers, Wexboy
Vietnam Opportunity Funds has a lot of dairy exposure. This is not diversification for all Irish farmers reading this blog trying to reinvest their millions from Kerry Group and GlanBia.
Yes, I can live with that kind of exposure. But otherwise, you’re correct – all the Irish dairy farmers who are dying to buy VOF hand over fist should first think carefully about adding that kind of exposure…
I’m guessing large-cap Mobile play is MTN?
Barry O’Callaghan CREDIT SUISSE (UK) LIMITED CREDIT SUISSE | PS4PB Client Services, SPCP 1 One Cabot Square | E14 4QJ London | United Kingdom Phone +44 20 7888 6567 barry.o’callaghan@credit-suisse.com | http://www.credit-suisse.com
Hmmm, MTN is just one of many possibilities…though obviously it’s a hell of a lot cheaper now after its whole Nigerian farce!
Hi Wexboy
I’m in ZAMBEEF – have a look, Zambian Kwacha worst performing currency of 2015 but underlying business is rock solid and super cheap – nice trend too – Protein consumption increasing in SSA – Insiders bought in more over Christmas and New Year and price is starting to move – still cheap I think and listed in London
(PA trade for me)
Barry
Barry O’Callaghan CREDIT SUISSE (UK) LIMITED CREDIT SUISSE | PS4PB Client Services, SPCP 1 One Cabot Square | E14 4QJ London | United Kingdom Phone +44 20 7888 6567 barry.o’callaghan@credit-suisse.com | http://www.credit-suisse.com
Thanks Barry – Zambeef on the radar. Great story & potential, but also one of those story stocks that investors always seem to love or hate – and at the moment it definitely seems to be hate! Hard to know where the turn might be, at this point…