annual review, benchmarking, blockchain, bubbles, bull market, cryptocurrencies, Fortress Investment Group, GARP investing, Kryptonite 1 plc, Newmark Security, portfolio performance, relative performance, Zamano
Hello. Why yes, it’s me…
Happy New Year!
Admit it: You thought I’d bloody well scarpered, to become the Wild Eyed Crypto-Boy from Freecloud – didn’t you?!
Well, not quite…
Though I did a mini-grand tour of Xmas dinners & meetings, and was bemused how often the conversation ended up in crypto-territory. Ha, so it’s not just me!? And even though I enjoyed some lighthearted crypto debate (best to avoid people who get too emotional about investing), I’m also left wondering how high #CryptoFOMO levels are running out there right now?! My new portfolio mantra may be dead on target:
Doesn’t everybody deserve a little crypto pixie dust?!
But anyway: I was actually 100% committed to an incredibly brutal training regime – preparing for my first naked solo New Year’s Day Iron Man Triathlon. Yeah, I know, just about anything to get out of the house…
Haha…again, not quite.
In reality, life simply got in the way, as it has a habit of doing…albeit, sometimes in great ways! But after all, isn’t that precisely what my life’s designed for & supposed to accommodate? Next time you fear dying chained to your office desk, keep your eyes on the prize & remember money isn’t really about buying things – which is just another form of indenture – what it really buys you is freedom!
And more recently, I’ve taken advantage of that freedom to meditate on doing…absolutely nothing! To explain: Over the last couple of years, I’ve executed a sloowww but steady transformation of my entire portfolio: Far less value, far more GARP. [The nay-sayers will insist this is simply an excuse to pay up]. And in 2017, I finally felt like this huge effort had come together beautifully…
[Though I’m frustrated this transformation still isn’t fully apparent in my disclosed portfolio – a combo of write-ups still to come & undisclosed holdings which literally ‘got away’ from me in terms of price/valuation (not a bad complaint to have!). Not to mention, seeing such a wide & unexpected gap in my disclosed vs. actual underlying portfolio performance. Then again, I’m very pleased with last year’s write-ups: Alphabet (GOOGL:US), Record (REC:LN), Applegreen (APGN:ID) & Kryptonite 1 (KR1:PZ) – all excellent examples of long term growth holdings, and each acquired at a reasonable price. And big picture, I’ve consistently developed/shared my larger macro investment thesis with readers, one which still drives this portfolio evolution – it’s worth revisiting the series of links in the middle of this post, not least because of their relevance to debating whether the market’s now in a bubble, and if/when it might ultimately end.]
Unfortunately, that’s often where the real trouble, doubts & second-guessing begins… Some readers here may not realise I’ve been a GARP investor, off & on, throughout my entire investing career – think of any well-known growth stock & there’s a good chance I’ve bought it along the way, at the right price. Except buying at the right price isn’t the problem – that merely requires patience & a value mind-set. Looking back, my big regrets were never my buys…it was my sales. Because in reality, a strict value mind-set may stop you from ever truly enjoying a genuine multi-bagger growth stock – first big jump in the share price, your price target’s triggered and/or your allocation gets too big, and you’re out…
Sure, you can boast a nice pay-off, but does that really justify all the damn work you put into finding & understanding a true high quality growth stock? Not to mention, that pay-off may appear ludicrously small down the road, when you look back & marvel how the company’s continued to compound its business & share price over the years. Truth is, as investors most of us are forced to spend years (& decades) reading, learning & enduring expensive/even catastrophic mistakes before we ever know how to buy stocks well.
Whereas selling well is an art we never quite learn, not least because there’s no obvious body of work out there which teaches us how to sell…or should I say, how not to sell. Incredibly, that’s a classic that still needs to be written, if anyone’s up to the challenge? For me, I now try to meditate far more on what I own, and why I actually own it. All to hopefully realise selling isn’t the obvious objective, nor is researching & buying new holdings (for the sake of it)…almost inevitably, it’s doing nothing! As usual, Jesse Livermore said it best:
‘Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.’
Fortunately, meditating while the market levitated has proved a pleasant experience! But to misquote the commentators, last year was actually a game of two different sides…on average, performance depended entirely on your side of the Atlantic. Here’s a look at my 2017 Benchmark Return – again, a simple average of the four main indices which overlap most of my portfolio (& readers’ portfolios, I suspect):
On the other side of the pond, the average US investor enjoyed a +19.4% S&P return. And if they loaded up on well-known stocks, or tech names (i.e. they were all FAANGed up), both the Dow & Nasdaq delivered 25%+ returns. While chasing hot stocks/sectors would probably have added some extra juice…momentum was everybody’s friend last year. Which left the average investor on this side of the pond feeling pretty useless, earning what would otherwise have seemed quite respectable – an +8.0% return (or a bit less), with the ISEQ, Bloomberg European 500 & FTSE 100 delivering remarkably similar returns.
In reality, this trans-Atlantic performance gap was somewhat deceptive. The US market enjoyed nice tailwinds from (potentially) once-off factors – Trump/GOP tax cuts & a significantly weaker currency (dollar down almost 10%). While in Europe, Brexit was the obnoxious fart that lingered for most of the year, with the region’s net gains mostly arising late in the year, as the UK’s weak & illogical negotiating position became increasingly obvious. [Since confirmed by May’s hapless surrender re the Northern Irish border issue. I stick with my long-stated conviction that Brexit will be far softer & less of a threat for Ireland than many of the dire initial predictions]. Absent this trifecta of factors, I suspect trans-Atlantic returns would have been very similar…and again I’d have asked, in all seriousness (as I did here), so where’s the bull market?!
Except the numbers that count are those on the board…so I’m sure many European investors feel pretty disappointed with their returns. Which is unfair – again, I blame a financial media that’s obsessively US-centric (& FAANG-centric), so by year-end there was an inescapable assumption only complete losers hadn’t clocked a +20-30% return. A drum-beat which only gets worse as the market boasts momentum – the media just can’t help fetishising the biggest winners of the month/year, both the stocks & the stock-pickers. Something you’ll see echoed in every corner of the internet…after all, who cares or wants to talk about the losers?
And adding insult to injury, for unhedged investors, currency was also a slap in the face. Euro-based investors with significant US exposure failed to reap the benefit – the weak dollar (EUR/USD up +14.1%) obliterated most of their return, reducing it to +4.6% in euro terms. Sterling-based investors fared a little better (GBP/USD up +9.5%), but their US returns were still slashed in half, reduced to +9.1% in sterling terms. And for every FX loser, there’s always a winner… [Um, banksters!?] While the average US investor stays (insanely) close to home, those with European exposure (again, presuming they were unhedged) were doubly rewarded – with currency boosting their returns to +18-23% (in dollar terms) across the region (& actually besting their S&P return!).
Regardless, investors should stay focused on stock returns, rather than fret over currency risk (whose impact, longer-term, tends to be diluted away). Last year is a good example – investors exposed to both emerging markets (+37.3% return) & frontier markets (+32.3% return), particularly in Asia, enjoyed the icing on the cake! [Granted, the weak dollar added a nice tailwind]. Frankly, I’m surprised: My default view posited that emerging & frontier markets offer investors some of the cheapest growth opportunities globally…but as long as they enjoyed local bull markets, home bias would deter them from re-allocating/rushing into more exotic markets. Judging by emerging market fund flows, which improved in 2017 but saw no huge step-change in growth, that thesis still seems valid – so while local demand helped, I suspect a significant portion of emerging & frontier market returns simply came from price mark-ups, rather than incremental foreign demand. Which clearly bears watching… Fortunately, I enjoy a 14% Emerging & Frontier Markets portfolio allocation, and with much of the incremental growth in Luxury & even Mobile* coming from these markets, arguably my overall exposure exceeds a third of my portfolio. [See here for my latest portfolio allocation post].
So c’mon, where did all this leave me in 2017?!
Well, here’s my Benchmark Return again, as a reminder…so a +10.7% return is the goal to beat:
And now me…
Here’s the Wexboy FY-2017 Portfolio Performance, in terms of individual winners & losers:
[**Exited holdings (FIG:US sale price adjusted for incremental dividends included in SoftBank offer). *RMA:LN year-end price adjusted (marginally) to reflect part sale in 150p tender offer. Other holdings: Gains are based on average stake size & sale/end-2017 prices.]
[NB: ALL dividends & FX gains/losses are excluded.]
And ranked by size of individual portfolio holdings:
And again, merging the two together – in terms of individual portfolio return:
So yeah, it’s been a good year…maybe even a great year!
At the half-year mark, my return was almost double my benchmark – in the end, I finished out last year with a much improved +26.3% portfolio gain – that’s +15.6% ahead of/two & a half times my +10.7% benchmark return!
OK, let me just take another minute to savour that…
Right, this would be a good place to analyse my winners & losers. Except…as I start working my way through each stock, it’s nigh on impossible to comment on the underlying driver(s) of its 2017 gain/loss, without actually circling back ’round to focus on its valuation & prospects today. Which is ultimately far more interesting…and deserves, I think, its own/separate post to come (pretty) soon? [And helps ensure I’m well & truly back in the posting saddle here!]. Leaving me free to tackle some housekeeping & a couple of important buts/questions.
First, we need to bid farewell to two stocks, one fond & one bitter…let’s start with the medicine:
Newmark Security (NWT:LN): 36% Loss. NB: Sold. Per above, you may have noted I’ve now sold this holding. More fool me…even in my original write-up, I identified Newmark’s fatal weakness – its Electronic division, which in the last decade has proved incapable of generating revenue growth (despite reporting numerous new contract wins), has consumed ridiculous amounts of balance sheet capital, and has allowed a 23% adjusted EBIT margin to steadily erode & turn into losses. I’d presumed this would ultimately force CEO Marie-Claire Dwek to sell/aggressively restructure the business, but she appears more attached to it than ever…and with her family’s controlling stake, an activist campaign is basically a non-runner, while an acquirer would probably require an invitation (not likely at today’s market cap).
Arguably, Newmark’s intrinsic/sale value remains significantly higher than its current market valuation, but noting its current management & governance, cash consumption & net losses, it seems obvious this value gap won’t close anytime soon. In the end, a near-75% rally in November on the back of yet more contract wins (I see no evidence they’ll move the needle any more than previous wins) prompted me to sell off my stake – even if NWT ultimately bounces back here, the funds are best deployed elsewhere.
Fortress Investment Group (FIG:US): 68% Gain. NB: Sold. And is covered already in my H1-2017 performance review. I’m still not fully convinced of the strategic logic of this deal, but thanks again to Softbank for the welcome surprise! While I marveled (regularly) at how cheap FIG was, I didn’t expect it to be acquired. Granted, some shareholders speculated whether a buyout might occur, but I suspected management would remain focused on buying ‘on the cheap’ via share buybacks.
Unfortunately, takeovers are rare in my portfolio* – I tend to avoid chasing potential takeover candidates. [With my portfolio split between value/special situation stocks, which in reality are acquired far less often than value investors would hope, and growth stocks with little desire to be acquired ‘less something starts going horribly wrong]. But I don’t think that’s a foolish strategy – there’s plenty of investors who can boast greater takeover success, but many tend to pay up for the privilege, especially when you factor in dud rumours & deteriorating businesses which nobody ends up buying ’til the share price actually collapses.
[*But 2017 was otherwise a bumper year in terms of returns of capital:
i) Rasmala (RMA:LN), Tetragon Financial Group (TFG:NA) & Record (REC:LN) all completed tender offers,
ii) Two of my undisclosed holdings also completed a tender offer & share buyback,
iii) Alternative Asset Opportunities & Altas Investments (NB: I stopped tracking both at end-2016 for performance purposes) paid out interim/final distributions (Altas dividend was almost 150% of the grey market price at the time!),
iv) Both Donegal Investment Group (DCP:ID) & Zamano (ZMNO:ID) committed to returns of capital, which I’d now expect to see finalised in Q1-2018, and
v) Both VinaCapital Vietnam Opportunity Fund (VOF:LN) & Record (REC:LN) announced new/increased dividend policies.]
Moving on, FinTwit Schadenfreude this week was pretty loud & unavoidable…clearly, I should address the crypto-begrudgers here. Presumably, they’ll dismiss/discount my performance last year as being driven by one lucky crypto-bet on Kryptonite 1 (KR1:PZ), which yielded a massive +148% gain in just three months. [Hence, the (bad) pun in this post’s title!] Obviously, I disagree… I won’t start debating crypto/blockchain potential here, but I’d urge you to evaluate my investment thesis again, noting the KR1 share price more than doubled in the week after my post…investing really can’t get more active than that, eh!? I certainly wouldn’t classify it as simply some lucky bet. In fact, I specifically identified Kryptonite as a non-Bitcoin ‘bet’…and was subsequently frustrated how badly its (otherwise magnificent) performance trailed many of its (clearly inferior) listed crypto/blockchain peers* which soared along with Bitcoin.
[*But then again, who could ever possibly compete with Clem Chambers..!?]
And let’s not forget, my 2016 performance was (conversely) hammered by a single stock, Zamano, which transformed an otherwise benchmark-beating return into a loss – after sucking that up, I’ll definitely take the glory this year! But yeah, I specifically flagged my ex-Zamano performance at the time, so I should do the same here: Eliminating Kryptonite 1 from my disclosed holdings, my ex-Kryptonite 2017 performance would actually have been a +15.0% gain…again, a pretty respectable outcome vs. my +10.7% benchmark return. And personally, it’s academic – in reality, my actual/underlying portfolio return all-in (i.e. all disclosed & undisclosed holdings, FX gains & losses, dividends, withholding taxes, fees, etc.) was actually a multiple of both my disclosed 2017 performance & ex-Kryptonite 2017 performance here. [I didn’t even own KR1 in my top-performing brokerage account last year]. Hey, like I said…it was a great year! But that just prompts a final terrifying question for us all:
Ulp, so what happens this year..?!
But frankly, that’s a good question to hear. I think many of us have gotten a little cocky in the last year, but I guarantee the first 2-3% pullback we see – and it’s inevitable – we’ll immediately be quaking in our boots all over again, while CNBC talking heads lose their goddamn minds. But that’s good too…in the end, we continue to climb a wall of worry.
The trouble is, we’re always fighting the last bloody battle. We’re all so scarred by the memory of the Global Financial Crisis (just to properly capitalise it), we forget the US market (for example) has only suffered four major collapses in the last century. [And arguably it’s just three, as the Fed’s handling of the Tech Bubble bust literally spawned the GFC just seven years later]. [Forget Black Monday, it’s merely a blip on the long-term chart!] Which, for the average investor, are ridiculously long odds to be agonising over…so in reality, we waste years & decades sabotaging our returns, fighting a rising tide as we try (fearfully & unsuccessfully) to duck & weave in/out of the market. I mean, how many short-sellers have actually survived & thrived for decades? Not to mention, successful market-timers – long-term – do they even exist?! Truth is, most of us believe we’re brilliant market-timers…but only because: i) Somehow, we’ve decided mental market calls count – we don’t actually need to buy/sell our entire portfolio, and ii) anyway, we only ever remember the one big call that would have worked (with hindsight), and forget the fifteen other times we were dying to exit a raging bull market. So let me repeat:
Market-timing is a fool’s game…
Personally, I still operate with the same macro investment thesis I’ve detailed here for some years now. Well, it’s more of a question (e.g. revisit ‘Welcome to the Floating World…’):
Globally, we’re still conducting a truly unprecedented monetary experiment…couldn’t we ultimately end up inflating the most incredible bubble ever?
[And yes, that question does upset & enrage some people…]
And it’s a wide-open question – I seek no hill to die on here – in fact, for my own sake, it’s a question/thesis I constantly want to refute just as much as confirm. Meanwhile, it encourages me to remain fully invested, and to (increasingly) focus on high quality growth stocks in my portfolio – that’s my skin in the game, so I can certainly encourage you to do the same. And as for the recent crypto bubble, and/or wobble, the doubters & begrudgers should get down on their knees & thank their lucky stars…seriously! For fits & giggles, just look at this 2017 Crypto Performance:
For investors worldwide, starting a new year & looking at these kind of returns, their #CryptoFOMO levels are fast becoming excruciating. And while a significant fraction will dive into the cryptocurrency market (bubble?) for the first time, regardless of price, ultimately I believe the far bigger & less obvious impact will be seen elsewhere…in the equity market. More & more investors will feel like they’re desperately missing out, but can’t necessarily bring themselves to buy crypto…there’s the fear! And they’ll convince themselves they deserve much higher returns in the equity markets (I mean, look at those lucky fools earning bloody fortunes in crypto!?)…and there’s the greed! And an increased appetite for risk will pour fuel on the fire central banks have already ignited in the equity market…so ironically, the crypto-doubters & begrudgers will benefit regardless (well, unless they’re whack-job gold-bugs!).
And think about it…the crypto-wobble this week will only serve to reinforce this equity risk preference/appetite. Not to mention, an actual/potential crypto-bubble presents a compelling asymmetry – in terms of global GDP/money supply/financial assets, the popping of a sub-$600 billion asset class (or even a multiple of that total market cap) probably isn’t all that relevant (esp. as it’s mostly ‘house money’ at this point), whereas the spillover/escalation of risk appetite in a global $80 trillion global equity market is potentially massive in its scale & impact.
Something to digest, eh..?!
Stay invested, but stay safe out there…and the best of luck in 2018!
Pingback: H1-2018 Wexboy Portfolio Performance | Wexboy
REC:LN Increased my Record plc portfolio allocation frm 7.1% to 7.5% – a Top 3 holding.
Fundamentals remain compelling: https://wexboy.wordpress.com/2017/04/28/love-that-record-give-it-a-spin/ …
Pingback: Wexboy Portfolio Prospects – Part I | Wexboy
Darragh Kinsella said:
Great write up and really like the consistent portfolio updates. I’ve been following since 2012 – kicking myself I only started putting money to work mid 2016! Wondering what your views are on Tetragon. They looked to have established a stronger price >13.50 end December but seems the air has been let out of the tyres in a big way this year.
Sorry, never replied to this comment – I guess I presumed you saw my new post a week later. Just in case you didn’t, I covered Tetragon here:
No change in my TFG perspective or holding since, and I see no particular reason for the YTD share price reversal, except for maybe the usual post-tender offer effect as short term investors lose interest/exit.
Longer term, patient shareholders will hopefully continue to enjoy the compounding & payouts I highlighted in my post…but a substantial/decisive re-rating of the stock might well require a new asset management acquisition (that would ideally create a fresh asset class/investment platform for TFG), which in turn might provide a spark for the long-touted potential asset management spin-out/IPO.
thanks voor Donegal, one of the best risk-rewards around. started at 6,20 to average up all the way to 7,50
i’m gonna keep holding on to them, in current markets, i just don’t see find better low risk options.
Thanks kirmich – yep, I can’t disagree, Donegal’s underlying biz is pretty steady (& obviously not economically sensitive), so it remains very much an event-driven story/stock & management continues to travel down the road I originally mapped out here: https://wexboy.wordpress.com/2013/05/05/donegal-creameries-low-fat-diet/
One more from me. I’ve spent a fair amount of time thinking about how to deal with the currency issue in my portfolio, and I just don’t agree with the way you report IRR by effectively ignoring all currency effects. If GOOGL doubled it’s stock price while the dollar dropped 99% vs the Euro, you’d be reporting a 100% IRR rather than the 2% more Guinness you can afford with that investment gain.
The reality is that for a cross currency investor IRR is a relativistic concept tied to the investor’s spending mix between different currencies. Ignoring the currency effect ends up with an IRR that is not relevant for that investor. In an ideal world, you would exactly know your spending mix in all the currencies you consume, and would then report your portfolio’s value against that currency mix – for you let’s call it the Wex. This still isn’t ideal in that with the current level of currency volatility of 5-15%, changes in IRR can be as much due to changes in the Wex than the underlying value generated by the investments.
So in my portfolio, I track IRR against my own personal currency that I made up – this is a 25/25/25/25 mix of GBP/USD/EUR/CNY back when I started investing in 2008. (I am a UK investor investing globally). Not ideal but seems a hell of a lot better than anything else I can think of. Even then the GBP rally has been a strong headwind in 2017 (I managed 12% in my own currency), but the effect is somewhat (rightly IMHO) moderated by the “overperformance” of the euro.
In any event, thanks for a great read and may you have a repeat performance in 2018.
Hello again s445203,
I’ve actually addressed this a number of times in previous performance posts (& comments) if you look back. I should highlight I’m not cherry-picking here – I’ve consistently excluded FX gains/losses from my performance posts since inception, so obviously that’s both helped & hindered my disclosed performance over the years. And second, I should stress I do actually focus (of course) on FX allocation & gains/losses in my underlying portfolio – and while it’s not a primary focus of the blog, I comment on currency trends/prospects regularly, and have written about my tracking of/approach to FX allocation:
[And I would agree with your base basket approach, rather than a single/default base currency approach (with all the ‘home bias’ risk that it encourages/implies) – in today’s mobile world, in terms of career/marriage/retirement, we certainly shouldn’t assume our home currency will always necessarily be our base currency.]
But while I do have target FX allocations, an adverse currency view would never deter me from buying a specific market or stock, because FX gains/losses will almost inevitably turn out to be a small component of the total return you enjoy from a long-term holding. [Of course, (potentially) bankrupt/highly inflationary economies would be the big exception here – they obviously require a currency adjusted return perspective].
And at the end of the day, the blog’s primarily focused on stock-picking – when evaluating the success/failure of my investment write-ups & disclosed portfolio, little is added really by analysing the resulting currency gains/losses. Not to mention, it’s a potential nightmare for readers – they don’t know my base currency, I don’t know their base currency, and I actually have readers from literally nearly every country in the world – so currency adjusted returns quickly become meaningless (because they’re entirely dependent on assuming a single base currency), whereas actual share price gains/losses are something all readers can understand & agree/focus on.
But anyway, thank you, and here’s to a great 2018…may the currencies rise to meet you!
Congrats on a fantastic year and a great read too. I can’t help but wonder how much capital are you doing this with? Is it 10s, 100s or m’s? And how much of your time do you spend on managing the portfolio?
Many thanks, s445203 – I have the best ‘job’ in the world – yes, this is how I make my living, and how I do my living! So in terms of capital, I think you can draw your own conclusions from that… 🙂
Congrats on a good year. Agree with you on the crypto, I think crypto may usher in the euphoric last stage of a bull market as it makes equity investing and all its concerns seem tame by comparison.
One question: what emerging/frontier market funds do you find interesting? Vietnam? I’m looking to diversify my US exposure.
Thanks vanckzhu – exactly – whether investors buy/refuse to buy crypto is irrelevant, ‘cos #CryptoFOMO is pretty real now for everybody!
For emerging markets, I do think it’s worth devoting time & research to cherry-picking the best markets, whereas for frontier markets most investors can still comfortably focus on finding a decent frontier markets fund or two to invest in. I opt mostly for the cherry-picking approach – and yes, I’m especially keen on Vietnam, which I specifically access via the VinaCapital Vietnam Opportunity Fund (VOF:LN). You can search for previous VOF commentary on the blog, and I’ll be reviewing it again here shortly. And hopefully I’ll also get around to writing up another emerging/frontier market/stock pick (or two) in due course.
Minoe (@minoe) said:
Thanks for this article Wexboy. Read them all. Got a small amount of Crypto last Oct. to learn it and very happy so far. It’s only “House money” so happy days. Keep the stuff coming. Very enjoyable reads. Charlie
Thanks Charlie – more to come – glad you have some ‘house money’ to sit on in a bumpy Jan crypto market!
Great read again Wexboy thanks for that.
Any interest in Lithium/Cobalt?
Thanks Garth – yes, lithium/cobalt are interesting, but like all commodities it’s really hard to figure out when & how to bet on them – if you’re mad keen to buy them, that often proves in reality to be a great sell indicator, so may be worth considering buying shunned & neglected commodities instead?
I looked up the company. The CEO’s linkedin profile is a joke:
He has zero finance experience, why would you let him allocate capital? He’s just gambling.
And the Company secretary is not even on linkedin. Though apparently is ex-pWc
Personally, and as an investor, I couldn’t care less if somebody’s on LinkedIn…in fact, the more time I see people wasting on LinkedIn & polishing their profiles, the less impressed I get.
And if you assume finance experience is currently a primary attribute/requirement in the cryptocurrency/blockchain community, I can promise you’re going to be disappointed with a hell of lot more LinkedIn profiles…
How do you know the management of Krypnotie are honest and able? It’s obviously gambling on ICOs right, Do they charge a performance fee themselves? How much are they paying themselves on a $15M market cap company? When did it even IPO…was it always to do what they are doing now?
Hang on, you do know I published an in-depth investment write-up on Kryptonite 1 back in September? Here it is:
Hi wexboy. Thanks for your post. Very informative and interesting read as always. What are your thoughts on what Donegal PLC are likely to offer investors share price wise about market value in a share buyback scenario? Also are you in favour of accepting a buyback offer or do you think there will be better returns on rt he stock post the buyback scheme?
Noting Donegal’s usual volume, plus the fact that the share price is now trading at all-time highs, I wouldn’t anticipate them needing to pay an overly-generous premium vs. the current market price. And at this point, a share redemption/compulsory tender offer may be just as likely as a discretionary tender offer, so we’ll have to wait & see . [Arguably, the former would probably require less of a premium]. I hope/presume we’ll see a (more) definitive announcement in the next month or so.
If we presume a discretionary tender offer, the premium on offer will be important, but acceptance will also be just as dependent on your holding size, cost base, and investment time horizon. Many investors will be more than happy to realise a long-term gain, make a quick turn, and/or take advantage of an ideal exit opportunity. Personally, I believe Donegal Investment Group remains undervalued in terms of its current underlying intrinsic value – a value which can/will be boosted by potential margin expansion (in its remaining businesses) & ideally premium exit multiples for further portfolio/business sales, as well as anticipated share buyback accretion.
Therefore, I continue to view my DCP:ID stake as an attractive long-term holding, but once we have details of the board’s plan I’ll still be making a last minute decision based on all the facts & figures at the time.
Thanks for your reply Wexboy. Looks like April is pencilled in for the buyback scheme. Will await final number before deciding on an exit or hold. Very tempting to hold as I agree that there is still plenty of room for further upside with this one!
dr philip rosenau said:
Sir, Thanks for the enchanted read, and yet I would appreciate, if you don’t mind, a more detailed outlook on thy current holdings. For instance, how optimistic are you on tetragon and the Vietnam funds? hold, buy, strong buy? – I still remember very well thy note about GOOGL in SA, when you increased its holding to 10%. the glitter in thy eyes could be seen through the write-up! Merci.
Thank you, what a nice post…and what lovely language too! Yes, the glitter is still there in mine eyes.
I did want to review the 2017 performance of all my holdings here, but ultimately it didn’t make much sense if I didn’t also focus on their current valuations & prospects – therefore, my next post (or two) will take a fresh look at each of my current portfolio holdings & my current portfolio allocation.
However, I would note a ‘Hold’ classification is relatively rare in my portfolio (though obviously it’s somewhat dependent on holding size) – once a holding migrates into that category, replacing it with a compelling new strong buy will often become far more tempting!
dr philip rosenau said:
A CLOSED END FUND btem has come to my attention. would you care to share thy opinion about it also vs tetragon? thanks!
British Empire Trust (BTEM:LN)…what’s not to like?!
Click to access British-Empire-2018-APR.pdf
Long-established London-listed investment trust (with long-tenured managers over the years), focused on investing globally in investment companies, holding companies, property companies & other asset-backed situations which are trading at significant discounts to underlying net asset/intrinsic value. Also highly diversified on a look-through basis.
Probably the only real negative is that it’s obviously correlated to prevailing value (vs. growth) sentiment in the market, which can unfortunately present a (multi-) year performance headwind…but it has delivered excellent long-term performance & would definitely be a great core holding for most portfolios.