2012 – Aaah, How Was It For You..?

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alternative assets, Argentina, Argo Group, Avangardco, Baker's Dozen, diversification, dividend yield, EIIB, frontier markets, hedge funds, home bias investing, Irish shares, JPMorgan Russian Securities, NAV discount, Petroneft Resources, portfolio allocation, portfolio performance, Renaissance Russia Infrastructure Equities, Richland Resources, Russia, Sirius Real Estate

[Here’s my last performance report, for reference].

OK, just in time, my performance analysis got a bit more sophisticated. It now includes dividends, and is calculated on a weighted average gain basis, so now the impact of larger & smaller portfolio stakes is recognized. I think I’ve tracked any increase/decrease in portfolio holdings pretty well during the year, via Twitter (so plse sign up as a follower!) & blog comments. [No point in having interested readers if I don’t post such relevant info on a timely basis]. This allowed me to calculate an average portfolio stake for each holding, which I think is the best metric to use.

I did, however, stick with my original yr-end 2011 or 2012 write-up prices as a cost base – I didn’t want to drive myself crazy calculating average net purchase prices! However, I know I’ve subsequently added to portfolio holdings at higher & lower prices, so I think that pretty much cancels itself out. It also means I’ve omitted partial profits harvested on certain holdings, so my total return may be marginally understated.

Overall, eyeballing my respective analyses, dividends & portfolio weightings have in total (on a pretty even split) added about 2-3% to my annual return. The pretty low contribution from dividends may surprise you, but don’t forget I’m none too enamoured with them… See here, here & here. As far as I’m concerned, if you’re impressed enough with a stock’s valuation & prospects to actually buy it, surely you’d prefer to see it compound its earnings?! Only a third of my holdings pay a dividend.

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FBD Holdings – COR Blimey, Mate!

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Andrew Langford, Baker's Dozen, Berkshire Hathaway, catalyst, Combined Operating Ratio, Fairfax Financial, FBD, FBD Holdings, Greenlight Capital, insurance, Ireland, ISEQ, New Ireland Fund, portfolio allocation, portfolio performance, property & casualty, Quinn Insurance, Return on Equity, TGISVP, underwriting

Insurance companies are intriguing! Maybe it’s my inner value investor, but I suspect it’s really the mathematician in me… They’re like giant Rube Goldberg contraptions – it’s fascinating to contemplate the interaction & logic that dictates the inner workings of the machine. Trouble is, you’re never quite sure it won’t blow up in your face! Investment portfolios can be full of land mines, and debt can fatally exacerbate risk. Underwriting risk may present the most dangerous risk. A company can write far too much insurance, at far too low a price, and nobody might be any the wiser for years to come…

The first line of defence is industry & government regulation. As I highlighted here, the regulators have generally done a better job (than, for example, bank regulators!). But good investors need to be self-reliant – S&P and Moody’s reminded us of that! Your choice of company can lower risk substantially. Focus on those with i) low(er) risk/plain vanilla investment portfolios, ii) low/zero levels of debt, iii) consistent & profitable underwriting records, and iv) less exposure to tail risk & the tyranny of discount rates (go for property & casualty (P&C) insurers, not life or re-insurers!). Of course, lower risk might just equate with boring – we’d like something more exceptional…

At this point (um, damn title!), you’d probably have expected me to home in on an insurance company CEO and/or CIO who’s an exceptional investor: Berkshire Hathaway (BRK/A:US), Fairfax Financial (FFH:CN), and Greenlight Capital Re (GLRE:US) are classic examples, and all look attractive from a value perspective. But there’s a much less flashy/newsworthy way to run an insurance company: Exceptional underwriting.

2012 Baker’s Dozen – More Pie!

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Argo Group, Baker's Dozen, binary outcomes, catalyst, Foo Fighters, FTSE 100, FTSE Eurotop 100, Granville, Hamlet, hedge funds, inflation, ISEQ, junior resource stocks, Livermore Investments, performance appraisal, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, risk management, S&P 500

Righto, another quarter’s done, time to check in on performance again. First, my Q1 and H1 performance reviews will provide you with some handy background & context. Second, it’s always fun to pose some questions before hitting the stats:

– Of the US/Europe/UK/Ireland, which do you think has had the worst year to date?

– And the best?

– So, did you predict your best stock winner year to date?

– Ever notice how much easier it is to predict your worst stock loser?

– Is there any lesson, or story, attached to your losses?

– Why has the average hedge fund under-performed so badly this year?

Well, hopefully I cover some/all of those questions here..!

Livermore Investments (I)

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activist investors, Baker's Dozen, CLOs, closed-end funds, delisting risk, Everest Capital, intrinsic value, investment companies, Leverage, Livermore Investments, NAV discount, Net LTV, Owner-Operator, principal-agent problem, private equity funds, real estate, safe-havens, share buyback, TER

Livermore Investments Group Ltd. (LIV:LN) is one of my 2012 Baker’s Dozen stock picks. And doing v nicely too…up +79% YTD! This post isn’t just specifically about Livermore – LIV also offers great perspective on owner-operators, share buybacks & shareholder value. Oh, and – shhh, draw the blinds – I’ll whisper it: De-listings...

LIV is a London-listed (closed-end) investment company. Its portfolio is focused on 3 different investment areas:

i) Real Estate:   The major holding is $38.2 mio (net of related debt) invested in Wyler Park, a commercial/residential Swiss property. It’s fully let, on a gross 5.1% rental yield, with development potential for another 37% of floor space. The other significant investment is $14.7 mio of convertible debt in SRS Charminar, an Indian real estate company. Unfortunately, the stake’s been subject to long-running litigation. But with ample initial over-collateralization, and an agreed settlement this year, continuing uncertainty’s now hopefully related to timing & expenses, rather than recovery value. Net of interest rate swaps, total net property investment is $45.9 mio, or about 32% of NAV.

H1 2012 Performance!

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Argo Group, Avangardco, Baker's Dozen, Irish Stock Exchange, Irish value investing, natural resource stocks, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, Russia, The Office

OK, it’s performance time. For reference, here’s a link back to my Q1 2012 review.

If I told you European markets were actually positive in the first half of 2012, would you believe me?! Actually, it’s true. Wow, doesn’t feel like it, eh..? Hmm, I think we all know that’s just the tip of the iceberg in terms of the tricks the media & your own mind/emotions play on you. Say what you like about Microsoft & Excel, spreadsheets are your only hope of separating fact from fiction, and analysis from emotion (as for Powerpoint, sigh…).

Some notes first: For simplicity, an equal weighting is assumed for all stocks. No attempt’s made to calculate any FX gains/losses either – which would depend on your base currency anyway. If a stock wasn’t held/written-up as of year-end 2011, the price noted at the time of my investment writeup is used instead. Similarly, if a stock was sold (marked**) before end-June, the price noted when I reported the sale (via blog post, comment and/or tweet) is used. Right, so how did we do in H1 2012?

Q1 2012 – Stock Recommendations (plus 2012 Baker’s Dozen) Outperform!

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Baker's Dozen, foreign stock listings, FTSE 100, ISEQ, Market Vectors Gold Miners ETF, Petroneft Resources, portfolio performance, S&P 500, TGISVP

Right, now we’ve had a peek at TGISVP Q1 performance, let’s also look at performance for stocks I actually own & have recommended. First, a few notes:

This is the performance that really matters! As I browse the web daily, I’m slightly disappointed to read about so many shares where the writer doesn’t own/disclose a holding. I’m far more interested in, and put a far greater weighting on, somebody writing about a share they actually own! Well, unless they’re a ‘PI‘ writing absolute bollocks on a message board..! And if they disclose their % portfolio stake, in many cases I think that tells you a lot about their conviction & risk perception regarding the stock. All too few writers share this, and I’m perplexed as to why? Yes, I’d like to see their pretty panties, but I don’t need (or want!) to see inside them... This info. gives no clue as to the absolute value of a writer’s position or portfolio (in my case, I might make a rare exception for a v thinly traded stock).

Avangardco – Eggsotic But Eggcellent!

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agri-business, Avangardco, Baker's Dozen, Big Bird, Black Earth region, Cal-Maine Foods, Cherkizovo, Cresud, eggs, Eurobond, hryvnia, MHP, Oleg Bakhmatyuk, Sprott Resource Corp, Ukraine, Ukrlandfarming

Avangardco (AVGR:LN)

I’ve recommended Avangardco in my Baker’s Dozen for 2012, but with their recent results and share price acceleration it’s time for a complete write-up. My Black Earth articles, here and here, are helpful background also. This Black Earth interest came about when I began i) seeking agricultural plays on the increasing global demand for protein as living standards improve around the world, which evolved into ii) identifying the most fertile farmland, generally accepted to be the Black Earth region of Ukraine & Russia and the Pampas of Argentina (followed by the Canadian Prairies), and iii) finding the cheapest (but acceptably fertile) farmland globally.

I was delighted to discover the most fertile farmland coincided with some of the cheapest farmland globally, a happy accident of history! I discarded Canada due to its higher cost (and the only farmland opp. I found was Sprott Resource Corp (SCP:CN), which is more of a commodity play). In Argentina, however, I discovered the perfect farmland (and property) company to invest in! Please read here, I now have a 2.8% portfolio stake in Cresud (CRESY:US). This left me with Russia & Ukraine: Farmland companies here have v large (and cheap) land holdings, but suffer from negative cashflows and the obvious need to raise cash from investors…