Heading Into 2013…

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Alternative Asset Opportunities, Argo Group, Asta Funding, Avangardco, correlation, EIIB, FBD Holdings, Fortress Investment Group, JPMorgan Russian Securities, KWG Kommunale Wohnen, Livermore Investments, Margin of Safety, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, shareholder activism, Sirius Real Estate, Total Produce, Trinity Biotech, Universe Group, Vietnam Opportunity Fund

There was a gratifyingly large surge of page views yesterday checking in on my 2012 Portfolio Performance! I’m suitably humbled by the attention – gulp, makes me wonder what challenges 2013 will throw up?! Hopefully the blog’s sparked a few decent ideas & stock picks for you in the last year or so, and you’re pleased with the progress of your own portfolio in 2012. It’s certainly been rewarding for me – most obviously in terms of improving my investment focus & analysis, but also in terms of the constant stream of questions, challenges, feedback, gossip, ideas, etc. from blog readers.

As a result, I now feel somewhat honour-bound to cough up some kind of 2013 Portfolio. I should immediately flag that some of you may find this a bit of a cop-out… 😦 But, in my defence, let me say:

– The start of a new year really means little to me, I don’t suddenly discover I have whole new batches of stocks to buy & sell!

– I rarely write about stocks I don’t own. This is pretty deliberate – my intention was never to simply fill up blank space with an idea each day/each week. I think people can really only judge your level of analysis & conviction against whether you actually own a stock – and, of course, by how much stock you own!

– I also don’t write about stocks I track, or discard, very much. First, mostly because they’re far too numerous! Second, I’m not sure I’d always manage a proper (in-depth) write-up about such stock(s). And third, I’ve sometimes tracked stocks every single day for literally years on end before buying – how often do you want to hear about them?!

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Argo – Escape from an Evil State!

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% of AUM, activist investors, alternative assets, AREO, ARGO, Argo Group, Argo Real Estate Opportunities Fund, Colony Financial, distressed assets, emerging markets, European sovereign debt crisis, Fortress Investment Group, intrinsic value, Investor Relations, Kyriakos Rialas, Livermore Investments, Mello Central, Price/Cash, Rialas brothers, share buyback, special situations, sub-advisory, The Argo Fund, Universe Group

OK, sorry to disappoint… This definitely isn’t a review of Ben Affleck’s new movie ‘Argo’! [I haven’t seen it yet, but it’s on my list – the reviews are uniformly good, and Affleck displayed a sure hand with ‘The Town’.]

No, this post is about Argo Group Ltd. (ARGO:LN), whose share price is also trapped in a rather evil state… Specifically, the price has steadily declined 35% in recent months to GBP 10.125p – when the company is profitable & has net cash/investments on hand of GBP 20.9p per share! Operational execution & performance ultimately offer the best escape route for Argo. [I’m delighted to see Argo has now launched a new liquid emerging market debt fund. This offers attractive exposure, I’m sure it will clock up a good performance, but real success will come down to the level of fund-raising that’s achieved.] But there a number of additional actions & strategies that may offer considerable assistance in making this escape. Here’s a copy of a recent letter I sent to Kyriakos Rialas, CEO of Argo:

‘November 07, 2012

FAO:    Kyriakos Rialas, CEO

Cc:       Andreas Rialas, CIO

Cc:       Michael Kloter, Chairman

Argo Group Limited

33-37 Athol Street

Douglas

Isle of Man

IM1 1LB

Wexboy – A Birthday Post!

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Argo Group, birthday, blog traffic, bloggers, Blogroll, Fifty Shades of Grey, German property, Google, Hitler video, Interactive Investor, Kim Kardashian, Livermore Investments, meme, Millenials, pdosullivan, Petroneft Resources, pretty panties, Richard Beddard, sincere thanks, Sirius Real Estate, TGISVP, The Great Irish Share Valuation Project, Trinity Biotech, UK Value Investor, US Oil & Gas, USOP, valueandopportunity

Wexboy reached the grand old age of one last Friday! I’m so excited I might just sick up over your shoulder! So – where were the birthday wishes? The birthday cards (c’mon, they need the biz)? The birthday gifts? Most of all, where was my bloody birthday stripper?!

Not a bad little milestone to reach. I’ve heard the average blog never makes it past the first post or two, let alone hurdle that major 3-4 month hump. Welcome to the Millenial generation, I guess. Investment (& finance) blogs appear to last a little longer, but it seems like a majority of them still go dark within a year. Blogging is definitely a pretty relentless pursuit:

It demands time, sometimes a lot of it… But most people have an actual life. Blogging will ultimately fall by the wayside, unless you figure out how to embed it into your life in a way that’s personally useful, interesting & (most of all) rewarding. Of course, most web blogs offer nothing of the sort! But that’s the beauty of investment blogs (and likely explains their longer lifespan) – they actually possess the potential to be genuinely rewarding for both writer & readers.

An investment blog also demands brain power, or at least brain engagement. If you want to do it seriously, it requires copious amounts of research, fact-checking, persuasion, debate, cognitive dissonance, and contemplation. A bit like investing itself, really! Most other blogs appear to require the opposite – but perhaps that’s just my jaundiced eye? 😉 I’d certainly be desperate to disengage my brain if I was writing about the likes of Kim Kardashian, and her bikini waxing habits…

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 (II)

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catalyst, delisting risk, intrinsic value, investment companies, Livermore Investments, MBO, NAV discount, Oddball Stocks, Owner-Operator, portfolio allocation, principal-agent problem, Richard Beddard, risk management, share buyback

Continued from here.

…We also have the elephant in the room – insider ownership! With the share buybacks, insiders now own 84.6% of Livermore! Gulp…

Jesus! Investors would normally be diving for the exits, at any price, based on the potential de-listing threat this represents… LIV’s actually defied this by marching ever higher. So much so, LIV was recently forced to announce they knew of no non-public reason for the sharp price increase (22% in a single day!). Was this sharp jump the drying up of supply in the face of share buybacks, an abrupt switch in market-maker/investor sentiment, or on the back of a genuine market rumour? Well, the takeover of an investment company by management is relatively rare… And an actual de-listing rumour usually seems to prompt selling, not buying, as it appears to terrify most investors…

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.

Chasing Some Dividend Tail (III)..?

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Autozone, Bernie Madoff, Big Ang, Character Group, dividend coverage, dividend yield, enhanced EPS/NAV, gold, income/dividend bubble, investment companies, JAKKS Pacific, Liquidations, Livermore Investments, M&A, share buyback, tender offer, trading sardines, wind-down

Continued from here. OK, so dividends kinda suck…but what’s the alternative? Well, let’s tackle that from the corporate perspective first:

– Obviously, share buybacks (and/or tenders & capital returns) are generally a far more tax-efficient means of distribution to shareholders. They enhance earnings, or significantly increase NAV/book value. [Just look at the amazing run on Autozone (AZO:US) – yes, they’ve had great execution, but much of its performance is down to aggressive/sustained stock buybacks]. It also permits management to be far smarter & more opportunistic in their distributions, and their response to share price volatility.

– Just as important, it frees management of the potentially absurd strait-jacket of maintaining an inappropriate dividend – which, in extremis, leads to management idiotically borrowing just to fund a (tax-inefficient) dividend. On occasion, this is exactly the point where management tips over from ‘gently deceiving‘ shareholders into downright criminal/accounting fraud…

Happy New Year! – A (Baker’s) Dozen for 2012

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Argo Group, Asta Funding, Avangardco, Colony Financial, Cresud, Dhir India, EIIB, FBD Holdings, Livermore Investments, pdosullivan, Petroneft Resources, Sirius Real Estate, Total Produce, Trinity Biotech, Vietnam Opportunity Fund

Philip O’Sullivan kicked us all off here with his list of picks for 2012, and so far I’ve seen John Kingham and Mark Carter join in with their contributions here. Note John can only win half of the (non-existent!) prize since he came up with 2 lists…

I struggled with the idea a little myself – I’d far prefer to write 1,200 words about 1 stock than to write 1 list, haha! I also dread seeing shoot-for-the-moon lists (congrats so far, chaps) stuffed full of triple leverage ETFs and penny dreadfuls – not much use to any of us in the real world.