Hitting The Century (IV – UK)

Tags

alternative assets, benchmarking, currency allocation, emerging markets, Eurogeddon, Europe, frontier markets, home bias investing, portfolio allocation, rationing, thematic investing, UK

Hitting my 100th blog post (hence the title!) in late June, I thought I’d celebrate with a more in-depth series looking at my portfolio construction (i.e. approach to stock-picking), allocation & valuation metrics. Part I briefly revisited (plenty of other commentary recently) my stock-picking approach, and then tackled currency allocation – a surprising introduction for some readers, perhaps!? I suspect it was also my most footnoted post ever…aah, those were fun! Part II touched on the risk of home-bias, and then reviewed my portfolio investment allocations from an overhead perspective.

Part III would logically have continued with a drill-down into these allocations… But I’d just updated a few missing figures in my valuation & analysis file(s), so I opted to first share some detailed portfolio valuation (& performance) metrics. I was actually surprised not to see greater feedback on this post – I don’t think I’ve seen many (any?) analyses of this sort across the web. Anybody out there fancy doing something similar? – I’d love to see it 🙂

Advertisement

Hitting The Century: It’s Pretty Panties Time..! (II)

Tags

absolute return, alternative assets, closed-end funds, currency allocation, distressed assets, emerging markets, frontier markets, FX rates, home bias investing, NAV discount, portfolio allocation, quantitative easing, real assets, special situations, value investing

Continued from here – we examined the true underlying currency allocation in my portfolio (incorporating other financial/investment assets & liabilities). I encourage you to perform a similar exercise (on an ongoing basis). Some will discover unexpected allocations, but more will discover how concentrated they are in a single currency! Of course, I’ve written about home bias before, but that was in relation to equities: I beg your indulgence as I take another brief look from a currency perspective.

If you suffer from single currency concentration (ouch…I think about the EUR/Eurozone so much it bloody hurts! ;-)), presumably it’s in your home currency? Think about the fact your job, your house, (much of) your wealth, the level of your taxes, even your (assumed) social order is already inextricably linked to that currency & country. How much do you want to keep adding to that bet? But the majority of readers live in developed markets, and may ask: ‘How seriously could my home currency decline?‘. Well, say you live in Japan: The USD/JPY‘s 80.53 right now – how outlandish is it to picture it at 120+, or even 150+, in 5-7 years?!

AGI Therapeutics – Anatomy of a Takeover (III)

Tags

AGI Therapeutics, currency allocation, denarii, Event Driven, Expected Value, FX rates, Gross IRR, Gross Return, home bias investing, probabilities, Recommended Cash Offer, takeover offers

Continued from here.

Expected Return‘s probably the most important, and most difficult, return to calculate & focus on. In its simplest form, it’s binary (deal success or failure), but by all means incorporate multiple outcomes into your analysis, if appropriate. In fact, if you’re contemplating other types of Event Driven investing, this multiple outcome approach will prove essential. However many outcomes, you calculate a Gross Return and a likely probability (which must sum to 1.00, of course) for each, and then combine these to arrive at an Expected Return. This will give you a much more accurate (and lower) deal return. Of course, you won’t actually see this return on any single deal – but over time, this is the best risk/reward measure to employ to evaluate deals & your potential average return. Of course, you can calculate an Expected IRR also, if you wish, but let’s not go crazy here..!