Portfolio Allocation (XIV – Emerging & Frontier Markets)

Tags

agri-business, correlation, corruption, developed markets, Donegal Creameries, emerging markets, Europe, financial crisis, frontier markets, German property, Japan, portfolio allocation, portfolio performance, QE, US, volatility

Continued from here. Wow, it’s been a leisurely journey – spanning a full year – is this really my last post of the series?! Hmmm, we’ll see… Here’s my portfolio allocation pie chart one more time:

[NB: This is from Jun-2012, but since then the only major changes (funded mostly from my Hedge Fund allocation) are: a) an increase in Property from 10% to 13%, as I continue to scale up my German property exposure (see Parts I to V – also here), and b) a large jump in Agri from 5% to 11%, due to my purchase of Donegal Creameries (DCP:ID) & its subsequent hefty appreciation. Note I don’t classify DCP as an Irish stock – after all, the company feeds people (potatoes, mushrooms & yogurt) and animals, what could offer a more ideal uncorrelated exposure?!]

Advertisement

Xmas Trimmings, etc.

Tags

ASFI, Asta Funding, BIW, CLNY, Colony Financial, Conwert, correlation, CWI, distressed assets, FIG, financial crisis, Fortress Investment Group, intrinsic value, Karl Ehlerding, KWG Kommunale Wohnen, Leverage, majority control, Merry Xmas, Price/Book, Stavros Efremidis, TRIB, Trinity Biotech

Asta Funding (ASFI:US) $9.37:   I’ve marginally trimmed my stake from 3.8% to 3.6% – consider this to be purely risk ‘house-keeping‘. This realizes a +22% gain vs. my write-up price on this small slice, and a +31% gain vs. my actual net entry price (which inc. the impact of dividends). I never got around to an Asta follow-up, as the share price (& NAV) just steadily chugged higher. Despite the rising share price, I’ve been bemused (even encouraged) by the general air of neglect still attached to this stock. Even ASFI shareholders have expressed a distinct lack of enthusiasm for the company’s progress in the past year! This is particularly in reaction to the company’s diversification into personal injury & divorce financing. Which puzzles me…

I’d counter this distaste in a number of ways: i) This new direction was prompted by Asta’s reluctance to pay up to acquire new distressed consumer receivable portfolios*. Personally, I’m delighted – how often do you see management take an absolute, rather than a relative, approach to value? [Picking up distressed debt at 9 cts on the dollar, while everybody else pays 10 cts, doesn’t mean you’ve bagged an actual bargain!] And to resist pissing away idle cash burning a hole in their pockets is quite admirable too. Of course, returning capital (via share buybacks) is a great alternative – Asta’s pursued this to a limited degree during the year. However, considering current metrics, I consider the short term return/attraction of a buyback is fairly even balanced against the potentially higher returns on offer from a (gradual) investment of their cash into distressed assets.

German Residential Property (Part III)

Tags

absolute return, Austria, dividend yield, financial crisis, financial derivatives, German bunds, German property, Germany, home ownership, income/dividend bubble, intrinsic value, land grab, Leverage, Margin of Safety, Mr. Market, NAV discount, Net LTV, Price/Book, REIT/MLP sector, relative value, rental yield, residential property, safe-havens, special situations

Continued from here.

OK, now we’ve looked at German residential property fundamentals. The current supply/demand & home ownership rate, rental yields, safe-haven status, and particularly the low valuations, certainly appear to offer a persuasive investment case. So, how do we exploit it?!

As I’ve said, I’m perplexed by the general investor obsession over direct property investment. What a hassle! And let’s correct a key misconception: People say they prefer direct investment as they can leverage it up – something you can’t, or shouldn’t, do with an equity investment! Yeah, sounds logical…but it’s complete rubbish! That coveted (?!) leverage is already embedded in listed companies (and far more efficiently/cheaply than you could obtain).

Let’s say you’ve a spare 300 K knockin’ around. You could buy a 1 mio property, with the help of a 70% mortgage (and years/decades of property/tenant headaches to come!). Or you could invest in the equity of a listed property company that owns 1 mio of property (with the same 70% leverage). All at the click of a button & an occasional read of their financial reports. What an easy choice… OK, but who knows where the hell the share price might trade?!

So, Where’s The Bloody Inflation..?!

Tags

baby boomers, banks, Bernanke, budget deficit, capital ratios, de-leveraging, debt monetization, Debt/GDP Ratio, ECB, Europe, European sovereign debt crisis, Fed, financial crisis, fiscal deficits, Flub-Med, GDP growth, Hunt brothers, income/dividend bubble, inflation, Japan, multiplier effect, Occupy Wall Street, politicians, quantitative easing, real assets, risk aversion, savings rate, stagflation, US, Volcker

I was beginning a new post in my recent Hitting the Century series (and here), and realized my next 3 investment allocations were to real assets – Natural Resources, Agri & Property. This v quickly got me thinking about inflation, enough to devote myself to this post instead:

Along the way, dear reader, you may have noticed my pronounced distaste for fiscal & monetary policy in the developed world. Particularly in the US... That’s not intended to be a US slap-down…and certainly not praise for Europe either! It’s simply a pretty inescapable conclusion if you compare the US & (the hard-core of) Europe over the past 4 decades. Jesus, I struggle to think of somebody with any real power in the US who truly gives a flying f**k about their accelerating debt burden, debt monetization, or the long-term external value of the dollar. In contrast, the ECB & certain Eurozone countries still actually exhibit a painful reluctance to take that road to monetary & fiscal oblivion – even in the face of a European sovereign debt crisis!