Recommendation: Vote AGAINST the Argo Group Share Buyback Proposal


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Here’s the recent RNS from Argo Group (ARGO:LN), notifying shareholders of a March-3rd EGM seeking authorisation for a £2 Million Share Buyback & Rule 9 Waiver. [Here’s the actual EGM Circular]:

– Argo Group’s AUM has now declined by a cumulative 85% (to $166 million), the $3.5 million Argo Local Markets Fund remains its only new fund-raising (since the credit crisis), it continues to write-off virtually all the management fees accrued & owed (now totaling $6.2 million) by the Argo Real Estate Opportunities Fund, and it’s also tied up a majority of shareholder funds in illiquid loan & fund investments. Management’s obvious inability to stabilise & increase AUM, plus its wilful neglect of shareholder value, are clearly to blame here for the 50% collapse in Argo’s share price just in the last 3 years.

– Judging by local press reports (for example, here & here), Andreas Rialas originally received a substantially higher offer for Argo’s Indonesian refinery investment (TPPI), but ended up spending another couple of years negotiating (or refusing to negotiate) with Pertamina…to ultimately realise a far lower exit price for fund/shareholders. [Which is consistent with a near-25% write-down (in the last interims) of Argo’s stake in The Argo Fund].

– Pursuant to this letter, in 2014/2015 I introduced and/or referred to Andreas Rialas a number of trade & financial buyers who were interested in potentially acquiring Argo Group, its asset management business, or its fund investments. Since then, I’ve had no meaningful feedback or reason to believe he/Argo have seriously engaged with any of these potential buyers.

– The EGM Notice process was both unprofessional & inappropriate: While most investors learned of the Share Buyback from Argo’s RNS (released after close-of-business on Mon, Feb-8th), the Notice was actually posted the prior week & received by some shareholders on Sat, Feb-6th.

– The Indonesian sale & proposed return of capital is Argo’s first major value-creation event in a number of years. Some level of (prior) consultation with a representative group of external shareholders, plus some additional time to adequately consider & discuss the proposal, would have been appropriate.

Kenneth Watterson is a director since Argo’s original 2008 Admission. As is David Fisher, who’s also been an AREOF director since 2010. While Michael Kloter has a much longer history with Andreas & Kyriakos Rialas, Absolute Capital Management (which acquired Argo back in early 2007), not to mention Florian Homm (also, see here & here)…and received a post-Admission bonus, while billing Argo for legal services over the years. In aggregate, these directors have earned an estimated $1.4 million in total remuneration from Argo. I must say, I struggle to understand how they still qualify as Independent Directors..?!

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The Celtic Phoenix…Five Consecutive Years of Market Gains & 6.6% GDP Growth!?


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A picture’s worth a thousand words – here’s a 5 year chart of the ISEQ:


Truly, a thing of beauty…

And over the life of the blog, the Irish market has delivered four consecutive years of gains:

2012:   +17.1%

2013:   +33.6%

2014:   +15.1%

2015:   +30.0%

Cumulative Gain:   +134%

[And yes, the title of the post’s correct…the ISEQ also managed to eke out a small gain in 2011: +0.6%.]

And here’s the cumulative gains (over the same period) of the other major indices I use as portfolio benchmarks:

S&P 500:   +63%

FTSE 100:   +12%

Bloomberg European 500:   +46%

Wow, even the S&P’s performance looks positively pedestrian…

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Wexboy – Top 14 Tips for 2016!


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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:

Wexboy Top 10 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!’

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So, Just Average Is Best…


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It’s New Year’s Eve…and in the end, it’s been a pretty tough & frustrating year for many investors out there. [‘Less you’re Irish & stuck close to home – just look at this friggin’ chart!] And while the holiday season’s all about celebrating the year gone by & ahead, it can be tough (as the booze kicks in) not to get a little disheartened and experience some real doubt about your portfolio & your stock-picking prowess.

And the financial media’s no help – the talking heads & market strategists chatter about the biggest winners of the past year, and opine on the stocks & trends to focus on in 2016. How on earth are they be so confident & so prescient? It’s simple…’cos that’s how they get paid & promoted! Just like CEOs, just like politicians, just like your boss, the big bucks are paid almost inevitably to the big swinging dick. Not the fidgety little guy in the corner, analysing stacks of data & second-guessing himself to death. Truth is, they don’t need to be right, that’s irrelevant. Because they’re looking to attract attention, earn fees, increase AUM, etc…and ultimately, confidence sells.

Trouble is, you need to be right.

But you don’t feel confident, like they do. And so the dance continues… They go on TV, and dish out all the confident narrative & commentary you crave. Except the only obvious market truism (‘stocks go up, over time…’) isn’t a good soundbite. Instead, they analyse monthly data points. And speculate about a possible Asian pandemic. And worry over an escalating Middle East war. And hyperventilate about a junk bond-induced economic melt-down. Or a terrorist attack, or maybe even an assassination, if they get lucky. And so on, ad infinitum.

But almost inevitably, it’s all just noise…

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Zamano…So, What Now?!


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It’s 18 months since my original Zamano (ZMNO:ID, or ZMNO:LN) write-up:

‘Zoom, Zoom…Zamano!’

Maybe I should kick off with an update…but if you’re a current (or potential) shareholder, how can we avoid the elephant in the room? Yeah, I’m talking about the early-Aug announcement of a possible EUR 0.20 per share offer for Zamano. The one where investors were subsequently left in the dark for nearly three months, only to learn in late-Oct bid discussions had actually been terminated (no further details were provided). I’m sure plenty of shareholders have been experiencing the five stages of grief since, and who can blame ’em really…it must feel a lot like getting jilted at the altar!

So, What Now..?!

Well, less than a fortnight later, the company released news of the Chairman’s upcoming resignation, plus a 9 month trading update which (while excellent) consisted of a single sentence… This appears to draw a line under the failed bid, and signals it’s business as usual, which I really don’t find acceptable. Shareholders deserve better. Whatever the merits/likelihood of the bid, it’s a frustrating reminder of the obvious value gap between ZMNO’s share price & its intrinsic value. I’m quite sure a majority of the company’s shareholders (i.e. its bloody owners!) now feel like they’re owed at least a strategic review, laying out in detail how the board intends to close the current value gap & grow shareholder value. Let’s map out the available strategies (and forgive a more jaundiced view):

Organic Growth

My last post relied on FY-2013 figures – since then, the company’s enjoyed consistent revenue momentum of +24% in FY-2014, +19% yoy in H1-2015 & an accelerated +37% yoy in Q3-2015, while net cash increased over 150% to 5.4 million. The recent trading update now pegs the revenue run-rate at 23.3 million, a 45% increase in less than two years! Maybe ZMNO finally deserves a growth stock re-rating?! Let’s hope so… Here’s updated financials to end-June 2015, focusing (again) on cash flow:

Zamano - Decade of Financials

It’s encouraging to note recent (& historical) growth clearly doesn’t require increased cash investment. But let’s not fool ourselves, management’s enjoyed some attractive tail winds here. With 80% of the business now coming from the UK, sterling strength is a significant top-line contributor. The EUR/GBP rate averaged 0.8491 in 2013, and now it’s 0.7046 – that probably accounts for 25-30% of the post FY-2013 revenue increase. And with the UK & Ireland being two of the best economies in Europe (in terms of GDP growth/recovery & declining unemployment), increased consumer spending is another substantial tailwind. Plus, there’s a renewed emphasis on B2B – and while that delivers a more stable/durable revenue stream, it also means lower margins & a lagging EBITDA (which increased 19%, to €3.1 million) over the same period.

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The Saga Continues…


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‘Bout time I revisited Saga Furs (SAGCV:FH). Loyal readers will hopefully recall my original investment write-up, two years ago now:

‘Quite A Saga…’

And boy, that’s what it’s proved to be ever since… Wisely, I wrapped up my last post with a potential health warning for readers (& included a scary looking chart). At first, it seemed unnecessary, as Saga managed to rally 20%+ in the following two months (hitting almost EUR 50.00 a share, which was gratifying). I must admit, I certainly didn’t expect what came next…

Now, I should encourage you, please go back & read my original post – it provides useful background on the fur industry & Saga Furs, which I don’t plan on revisiting here. [And I’m ignoring an anti-fur movement that’s become increasingly irrelevant…but I should clearly highlight Saga isn’t a stock for everyone, though obviously it’s not a fur producer itself]. Let’s recap my positive investment thesis at the time:

  • Triple Threat:  Saga Furs offers attractive exposure to three of my favourite things: Emerging Markets, Luxury Goods & Auction Houses.
  • Supply:  European/N American fur production is highly regulated (& superior to Chinese fur), with supply constrained despite generally increasing prices.
  • Demand:  High-growth/secular fur market trend in the past decade or so, driven by Western fashion/luxury revival & new emerging market demand.
  • Resilience:  Despite a 39% post-crisis collapse in sales, Saga’s P&L stayed close to break-even. [Aided by inversely-correlated commission rates, which increase as sales decline]. Auction sales rebounded 78% the following year.
  • Investment:  Significant percentage of Saga’s annual turnover is ploughed into expanding capacity, European/global fur lobbying, and the promotion of Saga Furs as a luxury brand.
  • Market Share/Network Effect:  Now permanent agreement with American Legend & Fur Harvesters Auction to sell via Saga auction, thereby creating some of the largest fur auctions in the world & significantly improving Saga’s effective market share.
  • Valuation:  Stock cheap in absolute terms, vs. long term earnings growth & an average adjusted operating FCF margin of 28.0%. Also cheap in relative terms, vs. auction house & luxury goods sectors.

Unfortunately, the perfect storm was ready to hit: Dec-2013 auction sales collapsed 76%, as prices & the number of pelts sold dropped precipitously. Despite the about-face, initially this seemed like a bit of a buyers’ strike really…brought on by a mild winter, sticker shock (after pelt prices doubled in 3 years), higher retail inventories, and signs of slowing Russian & Chinese growth. Looking back, we know better now. It did prove to be a temporary buyers’ strike (as I’ll highlight below), but clearly the December auction heralded a more serious & sustained market disruption – the Chinese crackdown on luxury gifts was just gathering momentum at the time, and Putin was on the verge of sending the Russian economy (& ruble) over a cliff by backing military intervention in Ukraine.

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$DCEL: Denis’s Cash Extraction Lifeline


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NB: I should immediately note Denis O’Brien is not selling any of his shares in the upcoming Digicel IPO. And why should he…when the company’s already after paying him $1.1 billion in dividends over the last 3 years. Surely that will keep the home fires burning for quite some time to come!?

NB: And ‘Lifeline’ is simply a reference to ‘Who Wants to Be a Millionaire’ (or Billionaire?!) – nothing at all to do with lifeboats, or sinking, or drowning, or debt, or anything else even remotely like that…

So, ever since Denis O’Brien started popping up at regular intervals on CNBC & Bloomberg, maybe eighteen months ago now, I just knew in my gut he had a whopping great IPO in the works… Fast-forward, and Digicel’s now billed as the largest ‘Irish’ IPO ever, a revised F-1/A was just filed with an indicative $13-$16 per share price range, and its NYSE IPO is just about ready to drop. With everybody & their mother talking about it (well, except for Johnny Ronan’s fat mouth), how can I resist chipping in my two cents..?!

Let’s kick off with an introduction: Digicel Group is a leading provider of mobile communication services in the Caribbean & South Pacific regions. Its mobile subscriber base has grown from just 0.4 million in 2002 to a total of 13.6 million subscribers as of Jun-2015 (an impressive 31.7% CAGR). It now enjoys a number one position in 21 of the 31 markets in which it operates.

Digicel Glance

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Wexboy Portfolio Performance – Total Gain & CAGR (since Blog Inception)


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Crikey, the blog’s 4 years old soon! So this post’s been on my to-do list for quite some time now…as they say in the hedge fund world, you’re nothing ’til you’ve racked up a 3 year track record! And maybe it’s the perfect time for it, anyway – with an hysterical media insisting the market (& the global economy) are on the verge of collapse again, a reminder of the opportunity & rewards of medium/long term equity investment may offer some welcome relief.

First, I should remind readers of my approach since day one. When I started out here, there were some great investment blogs (some which I read to this day) that served as inspiration. Except many didn’t have any kind of portfolio tracking, or performance, which frustrated me… Now, don’t get me wrong, performance certainly isn’t the be-all & end-all of any blog. Quite obviously, the quality of the investment ideas & analysis is far more important.

Or is it..?

I mean, how on earth do you evaluate an investor’s conviction regarding a specific stock…when you don’t know whether he’s really putting his money where his mouth is (or even if he owns the stock at all)?! I’m not talking dollar/euros & cents here, disclosing the relative size of a position is more than enough. Call me crass & materialistic, but I tend to pay a hell of a lot more attention to someone telling me about their new 10% portfolio holding, rather than some 2% place-holder – how about you?! And then there’s the sad fact that investing isn’t just about investment ideas. As any hedge fund honcho will tell you, a great analyst doesn’t necessarily make a great fund manager…

‘Cos play money ain’t the same thing as real money!

[NB: And nope, I’m not (& have never been) a frustrated hedge fund analyst!]

So, when it comes to investment blogs, it’s natural to want a more holistic view of what an investor really brings to the table. Are they prepared to expose their portfolio to real-time public scrutiny? And if they are, can they actually live with that decision? For example: How do they perform under pressure, and how do they deal with the pernicious impact(s) of fear & greed? Do they insist on defending a failed investment thesis & going down with the ship, or can they bring themselves to admit they’re wrong…even when they secretly believe they’re still right? Or as any good trader might ask:

Do you wanna be right, or do you wanna make money..?!

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Smokin’ the S&P…H1-2015 Wexboy Portfolio Performance!


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Oh Lord, where did July go..?! I’d hoped to publish my H1-2015 portfolio performance report a week/ten days ago, but I guess the days kinda slipped away – who can fault a bit of fun in the sun, esp. when my portfolio holdings are slowly but surely marching higher (despite all the China volatility & the fact the US market’s totally sucking wind this year).

Now, if you’re a regular reader, I recently detailed my (still) developing bubble thesis (Parts I to IV), suggesting an increased focus on large cap stocks (a new global Nifty Fifty) might be more profitable. [Though I’m also v conscious of certain small/micro cap successes in the past 12-18 months – a bar-bell strategy, in terms of market cap, may ultimately prove more compelling]. But in terms of immediate portfolio changes, I hastened to add: ‘I don’t believe there’s any great rush here, necessarily’. Well, that being said…let’s first kick off with some (end-June) portfolio changes!

Portfolio Sales:

Alternative Asset Opportunities (TLI:LN):  TLI had a great H2-2014 run – gaining over 22% (inc. a 2p return of capital), making it my top holding at year-end (at 11.1%). Since then, the insured have enjoyed a real stroke of luck, with just one maturity announced. Not surprisingly, the shares are off YTD in sympathy (reducing my holding, in % terms). But I’d focus on TLI’s portfolio instead – adjusting for minor FX unfavourability, and an additional 2p ret. of capital, TLI’s underlying NAV decline was limited to just 3%.

And I see no change in prospects: We’re at the end of a long & painful life expectancy adjustment process (in fact, June NAV inc. a meaningful positive LE impact), and the insured are now 91.5 yrs old on average – maturities will inevitably accelerate (peaking in 2019-20). There’s little financial risk (with an available credit facility, zero debt & cash on hand), and TLI’s focused on regular returns of capital. Sure, we can debate valuations, but shouldn’t lose sight of the big picture – as per the latest results, the portfolio now consists of $132 million in death benefits vs. a current carrying value of $45 million.

But owning such a defensive & uncorrelated investment isn’t as compelling a requirement for me today, and I see equally attractive (albeit, more correlated) opportunities elsewhere. I’ve reduced my shareholding accordingly, from 9.1% to 7.0%. [NB: I normally don’t add to individual holdings beyond a 7.5% limit – TLI remains a substantial position for me].

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