German Residential Property (IV)

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Adjusted NAV, Austria, Berlin, catalyst, Colonia, commercial property, Conwert, Deutsche Wohnen, distressed assets, diversification, Estavis, Fortress Investment Group, Gagfah, German property, Germany, goodwill, Google Translate, Grand City Properties, GSW Immobilien, JK Wohnbau, MPC Capital, NAV discount, Net LTV, Patrizia, Peach Property Group, Petrus Advisers, Pretty Woman, residential property, risk management, Rolf Elgeti, Sirius Real Estate, Speymill, Strabag, student housing, TAG Immobilien, Taliesin, Unite Group, Youniq

Continued from here.

[btw The residential focus here doesn’t imply a commercial property aversion. Sure, it may be more economically sensitive than residential, but many of the positive factors I’ve highlighted equally apply. In fact, I’ve only one complaint about German commercial property – my exposure to it unfortunately limits my exposure to residential property!

I track listed commercial property companies also – but not as closely, and I’ve no plans to write a similar series. For me, Sirius Real Estate (SRE:LN) (a 3.3% portfolio holding) stands head & shoulders above its peers in terms of its risk vs. reward proposition. Its current property valuation & yield, occupancy rate, colossal 66% discount to NAV, plus the presence of multiple activist investors on its board/register, all offer significant operational & share price upside potential. SRE does have significant debt maturing in the next year, but its latest Net LTV of 61.3% equals the peer average & doesn’t appear to present any real re-financing (or other) threat to shareholders. Fresh news of property sales would quickly push Net LTV to sub-60%, highlight the current NAV discount & attract new investor attention.]

OK, first, it’s goes without saying: Keep an eye on the headlines! As the German land grab continues, and rising property share prices attract increased investor & media attention, you’ll see more companies keen to list. Peach Property Group (Deutschland) AG is currently pricing up its IPO. This is a spin-out from Peach Property Group (PEAN:SW) – Immofinanz (IIA:AV) has talked about something similar. Other stand-alone IPOs (mostly from financial sponsors) are rumoured also – such as Deutsche Annington & LEG.

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How About Another Catalyst? (Part X)

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Adrian Williams, Alphameric, alternative assets, Argo Group, asset managers, Avangardco, Bear Stearns, binary outcomes, capital expenditure, catalyst, delisting risk, DM plc, Dresden, emerging markets, Expected Value, Fair Value, Fortress Investment Group, Gagfah, government regulation, intrinsic value, IRR, Joe Lewis, litigation, major sale, Net LTV, P/E ratio, P/S Ratio, risk aversion, risk management, share buyback, share repurchase, takeover offers, Timeweave

Continued from here, & here’s the first post in the series.

vi) Litigation/Regulation is the final catalyst on my list. It’s also, without a doubt, the most difficult to exploit & to write about (note I’ve tackled this series in reverse order)! In fact, if it doesn’t (immediately) appeal to you, I might perhaps discourage you from ever bothering with this catalyst? To some extent it suffers from the same issues/perceptions I highlighted with v) the Major Sale catalyst.

First, most litigation/regulation risk/events are simply part & parcel of normal corporate operating activity. For example, certain sectors are almost permanently marked down due to their increased risk level (perhaps something politicians like to mouth off about?!). These risks usually aren’t of any fresh/major significance to a company’s business model or valuation, and/or they’re routinely priced in anyway – they are not catalysts.

But occasionally a real game changer comes along… A lawsuit, or a regulatory change/threat/action/approval, that could prompt a major change in a company’s future intrinsic value. It may also cause a rapid/significant adjustment in the company’s current market cap. So how exactly do we separate out & identify such a catalyst vs. the merely hum-drum? A similar approach, like v), seems sensible – something like:

TGISVP – Hot? Not?!

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Alpha Portfolio, Barron's, Beta Portfolio, binary outcomes, Fastnet Oil & Gas, FBD Holdings, garbage stocks, intrinsic value, junior resource stocks, Leverage, Margin of Safety, Petroneft Resources, portfolio allocation, portfolio performance, risk management, Smart Alpha Portfolio, Smart Beta Portfolio, stock screener, TGISVP, Total Produce, Trinity Biotech, US Oil & Gas, value investing

In my last post, I was delighted to see the TGISVP Alpha & Beta Portfolios continue to expand their level of out-performance vs. their ISEQ benchmark. Particularly pleasing was the sight of my favourite, the Smart Alpha portfolio, far outpacing the others with a 21.1% YTD absolute return. But we’re still only 9 months into the experiment, so clearly we need a far longer horizon to confirm if this performance edge is sustainable.

It also makes me wonder if there’s a lesson to be learned here..? No, not whether value investing out-performs in the long run – I’m fully convinced of that already! [And if you’re not, please please read some of the numerous papers published on the topic]. But whether a mechanical approach is perhaps better?

Ha! No, I’m certainly not planning on becoming a stock screening convert..! But I wonder: Even if you’re a v competent & disciplined value analyst, even if you’ve conquered much of the fear & greed involved in investing, perhaps that demon mind still trips you up at that v last hurdle, or two..? When you’ve a nice stack of portfolio candidates lined up, why do you then take a shine to some & not to others? Why does one special stock really get your heart racing, far out of proportion to its obvious prospects? Why do you end up triple invested in one stock vs. another, when they both lined up pretty much even-stevens in terms of risk/reward?

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..!

Correlation…Schmorrelation!

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activist investors, agri-business, Asta Funding, beta, catalyst, Colony Financial, correlation, distressed assets, Europe, Event Driven, favourite stock, Fortress Investment Group, litigation funding, Margin of Safety, reading, Risk Arbitrage, risk management, stock ideas, umbrellas & ice cream, value investing, wind-down

Monday, I re-posted my appeal for your fave stock ideas, which was originally prompted by the dog days of summer. Those months when trading volume & news slows down, and you’re off for a relaxing holiday, are a perfect time to open your mind & embrace new ideas. Take along some good books for their historical perspective, magazines to dip into the current market/economy buzz, and (most importantly) stacks & stacks of annual reports. And just read, read, read..!

Personally, my focus over the summer’s been on correlation. Some investors are great at stock-picking, risk management & portfolio construction, while others are abysmal..! But, all too often, there’s precious little difference in respective performance. Because we’re all terribly correlated with the market, and with the economy – yep, we’re all making pretty much the same big bet! A preference for discounted assets, special situations & stocks with specific catalysts is my attempt to escape this correlation risk. Medium-longer term, I think this approach offers a genuine ‘edge‘ via lower beta stocks. Trouble is, shorter term, market correlation (especially in market setbacks) can simply trounce all other factors…

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…

Let’s Talk About Risk, Baby…

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portfolio allocation, portfolio performance, Richland Resources, risk management, Salt-n-Pepa, technical analysis, trader, value investing

(All props first to Salt-n-Pepa).

In early-Feb, I published my first write-up on Richland Resources (RLD:LN), flagging an Upside Potential of 137%. Three weeks later, I was looking at a 65% gain on the share price. This presented an interesting dilemma (would that we could all enjoy more of these..!). But it seemed strange to be contemplating a sale so soon after diving in. Aren’t I a long-term holder, like most value investors..?! Well, ideally…but I use price, technicals and risk management to scale in and out of my positions.

For example, picture a GBP 100p stock I recommend/hold, and which I believe has a 125% Upside Potential. Sweet! With this kind of upside, I might have something like a 5% portfolio allocation. Shortly after, the stock shoots up 75% – so what do I do?! Well, in value investing world this is entirely expected (value will out, etc…) and I should definitely just sit tight. And sure I’ve got another 50% of value to realize…buy and hold, baby! Of course, in the real world, the answer may be a little different…