like 2011, my 2012 is another year of two halves. i was up about 30% in 1H -- some lucky trading (LCAV, ESL, CTRN, RUE), dogs of 2011 rebounding strongly (BAC, GM). i was mostly cash and flattish for much of 2H (some modest small position winners offset by ill-timed S&P puts, expiring one month too early), and finished the year in the low 30's. not bad all things considered. Entering 2012, I thought financials were grossly under-valued. At 0.5x book, the BAC/C’s of the world are not priced off normalized earnings, but more of whether they are viable/solvent entities. I think part of technology sector is the same as financials this time last year. You know the usual suspects. Everybody believes strongly they are value traps. For whatever reason, I am never too concerned about risk of “value traps” – there are worse things than dead money. i am still embarrassingly under-invested entering 2013. My top 5 positions are almost my only 5 positions, and they make up less than 20% of my portfolio. A basket of PC bodies: value is there. demise is great exaggerated, especially when the non-PC business is arguably worth more than current EV. not looking for debates. i guess you either believe or u don't. Chanos made a great call, but everything has a price in my mind.QLGC: tech orphan. i love the set-up and risk/reward.CGI: discussed on the board before. a FCF machine run by a strong CEO ready to turn around a big/under-performing asset recently acquired. AEO: Strong momentum at reasonable multiples. hope for a 2004-2006 repeat.
The USD.....and a big maybe it is time for Japan....EWJ.....Dave
Some of my best ideas for 2013...MWA: Mueller Water is the market leader in a number of segments in the water infrastructure market. They sell pipes, valves, leak detection systems, meters, hydrants, and other products. The company historically had three divisions -- Mueller, Anvil, and US Pipe -- with the first two solidly profitable and the third a perennial money loser. They sold US Pipe about a year ago, which delevered the balance sheet and swung the company to an operating profit at a stroke.The company has two massive tailwinds propelling the business: the construction cycle in the US, which is at its early stages, and the replacement cycle of municipal water systems, which has nowhere to go but up from here. EPS estimates for next year are $0.27, which is a high teens ROE and isn't anywhere near a cyclical high. As the business creeps back up to historical revenue and EBITDA levels, MWA could be more than a double from here on a 1-3 year time frame.VRTS: Virtus Investment Partners is my largest position, and has been for nearly four years now. The business and the stock have just been a beast since the spinoff, and I regret every share I've sold to "trim" my oversize position. I've been reading my Thomas Phelps and coming to the conclusion that when you have a long term winner like this, you just want to hold on. The thesis is simple. VRTS is the fastest growing, best run asset manager that's publicly traded. Their product is differentiated, and manager risk is mitigated by the multi-manager boutique structure of the firm. AUM flows have been relentlessly strong for years. At the takeout price for EPHC, VRTS would be worth around $175 per share on my estimate of December 31 AUM & BV. A takeout, however, is not my preferred outcome. I'd love for VRTS to grow and compound on the public markets for as long as possible.SND.V: I have gone cold turkey on any company whose business model is to dig stuff out of the ground. That said, my time analyzing the E&P sector wasn't wasted, since I learned about the royalty streaming business. Sandstorm Metals and Energy is attempting to bring this financing structure from the backwaters of the gold and silver industry to the much larger energy and metals space. The company already has a handful of streaming deals in diversified products like coal, natural gas, oil, copper, and palladium. Cash flow from these projects will begin in earnest in 2013, and management will then be in a position to recycle cash into new deals. The CEO, Nolan Watson, is a large part of the appeal of this company. Watson was CFO of SLW, which has gone from $3 to $36 since coming public, and he is also CEO of Sandstorm Gold, which has gone from $4 to $12 since going public in 2008. It should be noted that Watson is only 33 years old, so the various Sandstorm enterprises could be long term compounding machines. I would be a buyer of Sandstorm Gold at the right price, too. Best,C9
Like the MWA idea.
thanks for the ideas. all are very interesting. i dread pulling up the VRTS chart. i owned it for a brief while at much much lower prices, and every time i see the annoying Terronova on CNBC, it is a bitter reminder of how stupid the sale was. we all know price anchoring is a big no no, but some stocks are just too painful to re-evaluate...
i dread pulling up the VRTS chart. i owned it for a brief while at much much lower prices, and every time i see the annoying Terronova on CNBC, it is a bitter reminder of how stupid the sale was. we all know price anchoring is a big no no, but some stocks are just too painful to re-evaluate... ditto [bangs head against wall.]
Rajiv Jain of Virtus Emerging Market Opportunities has just won Morningstar Fund Manager of the Year for his category: http://news.morningstar.com/articlenet/article.aspx?id=57965...This should be good for inflows.I'd love to hear best ideas for 2013 from other folks on the board.Best,C9
Sorry to the 95% of the board who have no interest in Canadian ideas.Most of what I have been buying and really like heading into 2013 are small (sub-$5 million market cap) illiquid and neglected, and probably not suitable to post on this forum. Moving up the market cap spectrum slightly,I doubled my RLGT-A position on recent weakness (non-asset based logistics/freight forwarding network in the mold of EXPD and CHRW), but it has moved up on recent positive news of litigation settlement and acquisition. Still below my initial entry price, so I think it's still attractive. There is a decent write-up on Seeking Alpha by Adam Wyden, and there was another write-up on Above Average Odds Investing, so I won't rehash the thesis, although I am not quite as optimistic as the 2 authors, I do like it. I like EQI-T and have owned this one since 2004, and have recently added to this for the first time in 8 years. Not sure there'd be much appetite for this one on this forum, as they are a subprime mortgage lender in a country that many are saying has a real estate bubble about to pop. But if you look a little deeper, there is some interesting value here, imho. There are 2 parts to this one. The legacy business provides transfer agency, corporate trust and FX services to clients. It is a lumpy business, but has had decent ROEs over time. The other division is an alternative mortgage lender. This business is much different than U.S. subprime lending, in that 1/2 the alt market is made up of self employed borrowers with little verifiable income, but positive net worth. The other half of the business is new immigrants with no credit history in the country, as well as borrowers with bruised credit from things out of their control like past health issues etc. There are no ninja loans here. The average loan to value in their mortgage book is currently around 70%, and the average credit score on new loans is improving, due to the big banks pulling out of this niche. They have access to low cost deposits, the average duration of loans is 1 year, and the president of mortgage ops was instrumental in HCG-T 40 bagger status over the last 15 years with 15 years of +20% ROEs. He was in the business in the early 90's during the last Toronto real estate crash, and learned the principals of making low risk loans, and has taken the best from HCG and applied it to EQI mortgage ops. Anyways, the mortgage div has reached an inflection point where it has turned profitable, and they could potentially ramp up the loan book to $0.8-$1 billion by the end of 2015 from current $200 million. At $1 billion level, they should be able to earn $1.30-$1.40 EPS with an ROA of 1.2% (HCG was earning 1.5% ROA at a similar level). And the T.A., corporate trust and FX businesses had peak earnings in 2011 of over $1 per share - if capital markets improve and interest rates increase, this division can mint money. Obviously, there is some risk here, but there is a very large cushion built in to absorb any major real estate shocks in the mortgage div. It is currently a 3% position for me, and there might be a better entry point if there is a RE shock. EQI is one that if they continue to lend conservatively, barring a black swan type of real estate shock, imho is the type of compounding machine C9 referred to when discussing VRTS and has an extremely long runway of growth ahead of it. Chip
Chip, thanks for sharing.I like EQI-T and have owned this one since 2004, and have recently added to this for the first time in 8 years. Not sure there'd be much appetite for this one on this forum, as they are a subprime mortgage lender in a country that many are saying has a real estate bubble about to pop.Interesting, and thank you, I will take a look.In the same (but opposite) vein, what financials in Canada do you think are exposed to a real estate bust? MEQ-t? The big banks (I know the gov holds most of the mortgage risk, but they seem likely to be drift from large premiums to book in a bust). Any other names?--My ideas haven't changed much recently, so I'll simply share a snapshot of my portfolio with some commentary since I guess my portfolio should be my favorite ideas for 2013. * ;-) Fairfax Financial (19.14%) -- Honest, long tenured management. Historical excellence in bond / stock portfolio management. Fully hedged equity portfolio. Insurance market prices (finally) are gradually increasing. Fairfax equity portfolio outperformed hedges by ~17% in Q4 which seems to not be getting much play in the market. Trading just under current book. My cost is lower. Jefferies Group (12.86%) -- Growing IB with excellent historical shareholder returns. Basically a play on management (Handler). In the process of getting "acquired" by LUK so this is basically now Leucadia stock in a few months. Trading around pro-forma book value. My cost is much lower. Wells Fargo (12.63%) -- Well run bank. Will likely see increasing business momentum from housing recovery, and continued runoff of bad mortgages. Will benefit from continued high level of refi's as long as they last. Trading for ~9x forward earnings and I believe will see a fear discount erode from investors as time goes by. My cost is lower Sears (Debt, Common) (12.39%) -- Almost all of this is debt, but did buy some common for new clients recently under $39. SSRAP debt seems very likely money good to me due to real estate backing; housing market should help provide some optionality / profitably to legacy retail as well which may be a catalyst for appreciation. SSRAP debt trades at 14.5% current yield, and 50% discount to par (massively illiquid as well and I can't really trade it with my current broker). Similar (underlying) 7's of '32 trade for 60% of par. My cost is lower. Cash (11.44%) -- A function of short position primarily. Berkshire Hathaway (10.93%) -- Housing and insurance business should be getting a nice tailwind. Index puts seem likely incur no loss, and buyback has arguably put a soft floor under the stock. New managers hired by Buffett appear to be much better than folks realize and are another sign that Mr. B has a golden touch. Trading for about 1.18-1.2x my estimate of current book. My cost is lower Interactive Brokers (10.18%) -- Cheap on P/B (small premium) basis. Shareholder friendly management with huge ownership stake. Market Maker division still struggling, but Global brokerage continues to grow in relevance for the company. I think their value proposition for customers is a amazingly strong. SCHW just announced a global brokerage platform with higher commissions and 1% fees for Forex conversions. IB takes the cake. My basis is around the current price adjusted for dividends. Nicholas Financial (8.83%) -- Covered recently on the board. Well run sub prime auto loan purchases / lender. High insider ownership, but aging CEO. Very cheap on earnings basis, but business model is straight finance and hold as opposed to securitize and is run with low leverage. Questions abound in the competitive environment (very hot right now) and impact is showing up a bit in NICK's numbers already. Just ~1.25x book, 7x earnings. My cost is lower. Bank of America (Common, Warrants) (6.80%) -- Good retail bank, Merrill assets performing well, Countrywide is a legal problem child. Big upsides for the stock are expense reduction in servicing as problem loans runoff, a realization from the market that BAC isn't doing acquisitions (a historical problem area to say the least) and that Moynihan may not be a great bank executive but he can execute on a plan to trim BAC down, and get them back to basics. Trading for a discount to TBV, and 60% of stated book, and has huge NOLs making earnings of $2 / share possible by end 2014 (run rate). My cost is lower. NRG Group (4.03%) -- Discount to Book, mostly unregulated utility. Tied to natural gas prices. My cost is lower. Misc. Long Holdings (4.02%) -- 3-4 minor holdings. Lancashire (3.03%) -- Well run insurer. Good (amazing?) history of underwriting by management, very low risk investing philosophy. Consistently experiences lower losses than competition. Trading up toward 2x book now and paying large dividends most years. Bought a few years ago at 1x P/B, wish I would have bought more. Misc. Shorts (-16.27%) -- A few individual names, but mostly broader hedges that I think should do very well.* (% are weighted across all client and personal portfolios. Weightings vary due to account size and cash flow timing. Not necessarily adding to all these ideas today, some may be reducing. Not a recommendation to buy, etc)
I need to look into IB some more.Can you tell me a little about FFH's drop in the past year? Weak pricing in their markets, other?
hacker, thanks for sharing as always.dumb/lazy question on Fairfax. Fairfax equity portfolio outperformed hedges by ~17% in Q4 which seems to not be getting much play in the market. Trading just under current book. My cost is lower.how big is the equity portfolio relative to the overall book? when you say the equity portfolio ran up 17%, how big would book go up by?thanks.
top 4:AppleGoogleExxonAIGCan and does change at any time. Exxon has been a more or less permanent holding in my top 3.
Naj,Can you tell me a little about FFH's drop in the past year? Weak pricing in their markets, other?Two big things:1) There has been some rumblings of an old tax issue from 2006 (?) regarding an old Fairfax sub (Odyssey Re). Fairfax did some shenanigans that were on the edge of what the IRS was ok with to effectively increase ownership of ORH and allow the profitable sub to use Fairfax's (parent) NOLs. The method in which they "increased ownership" was questioned at the time by several hedge funds. Fairfax stated that they received a ruling from the IRS, and the IRS later (2010 I believed) closed the books on that tax year. The issue has been raised every 12 months or so by Gretchen Morgenstern (sp?) I believe in various writings in what is frankly a pretty odd show of diligence on an old (and relatively minor and arcane tax issue).However, just this year Gretchen had a little more meat as it appears the IRS has specifically put into a ruling that certain transactions (looking remarkably similar to the one FFH / ORH did) are *NOT* allowed for consolidation.So there is an open question as to whether the IRS is going to go back and open the books, or if it's just said "yeah, we shouldn't have allowed that, let's make it clear". It's a ~5% of book value issue if it's opened up. I trust Fairfax, but it's not a a huge deal.2) Equity portfolio has been an absolute dog. Their hedges have moved against them (market is up) and their portfolio sucked wind. So both legs went against them. That has mostly reversed in Q4 (RIMM is up big, IRE is up big, OSTK is up big, BRK-t / BRK-t.ws up big.... etc) but I think especially with RIMM, many folks are asking themselves if FFH is really a solid investor, or just a buy the dips 'pretender'.GC, per your question, I should clarify. The 17% encompasses most of the public portfolio that I am aware of (which is US, Canada (most of it) and some other international stuff) but not everything. This is about $3B (that I personally track), A 17% differential corresponds to $500m here. Their overall equity port (depending on how you define; preferred, converts, >20% ownership, etc) is probably $5.5 - 6.0B per the 10-Q. I'm really just looking at around $500m pre-tax bonus and assuming a wash on the rest of the portfolio and hedges (conservative I think) for Q4, however, this $500m while not a homerun may help to cause a sentiment change (along with insurance pricing improvements and combined ratio improvements).Hope that helps.
Given the large number of recs ClientNine received I thought there may be some interest in this interview with Sandstone's CEO from a couple of weeks ago.http://seekingalpha.com/article/1077661-sandstorm-ceo-nolan-...B
Sorry to the 95% of the board who have no interest in Canadian ideas.this is like saying 'sorry to the 95% of the board who are morons'(sorry, I'm not supposed to post on the weekdays but it is after 4:00pm Friday and my eyes bugged out when I saw this)Pls, pls, pls, pls keep posting money making ideas period. Please....(did I say please? I've been kept afloat by CAD issues lately - lately meaning the last few YEARS....)--nobody cares, but I finished above 3 year vs. SP500. 4 year not so much, and 2012 wasn't the finest hour...--back to lurk
top 5JNJMOATPLB-t ESL-tORCLcan and does change on a moment's notice.......by the way, i wish roark would look at PLB-t and tell me what I own, cause the more posts on WF the more I feel....well....like I'm glad I don't try to own WF. i mean, i'm not completely dumb (relative to a doorstop at least), but thank goodness I'm looking at mostly things like PETS most of the time (and even then don't ask me too much)......course, I'm assuming that roark know for what he speaks (I've had no reason to disbelieve!) but he could make stuff up and I wouldn't know the difference. martian, scatch and sniff thru and thru and not having a clue about almost any of this but it is interesting reading regardless....>......I just wish roark would do one of those Fisher books on understanding banks. I'd buy it! At full mark-up too.
Right there with Martian on realizing how little I know. My top 5 as of today. Surprising to me that I have no position over 10%. I usually have 1 or 2 and max out around 16 usually, but I am at 24 and I sold a few names in the past two weeks.DISMATUALXIDESPLS Very surprising and unique list for me as I generally don't have a lot of consumer names and my names are smaller in nature (not megacaps). In the energy space I also own a little of XOM and but my major play in this sector is a speculative play, Iona Energy. My cost basis is $.40. I like investing in small cap O&G plays with successful mgmt and especially when they are recompleting, reworking and bringing back to life shut in wells with infrastructure already in place.
you mind a brief share on your thesis for MAT? I owned it for a while but sold 4 points or so ago April last year so would be interested in your opinion...
by the way, many thousand pardons for that particular word which isn't that nice when used in the wrong context - I meant, obviously, that we all cherish all ideas, CAD or USD or from where-ever any wish to seek.......back in my hole.
Ben,I think Genworth MI Canada (MIC-T) is one that is probably not getting paid properly for the risk it is taking on. They are the only private mortgage insurer in Canada that is publicly traded, so a competitor to CMHC. As of the last year, the average LTV ratio of properties insured was 91%. The gov't of Canada provides a guarantee of 90% of property value to the banks that hold the loans that are insured by MIC, but that kicks in only after MIC becomes insolvent and is wound down, I believe. I am not sure about the gross exposure that they have to Canadian property - I don't think they disclose it - but I think it is a lot compared to the sliver of equity on the gross loans insured. On MEQ-T, I would take the long side of MEQ well before the short side. I have followed MEQ for 10 years, and passed on it at $2 in 2002, and again at $5 in 2009, when they announced a tender offer for 40% of the shares for $6 and change if I remember correctly. It was a lay-up, and if the tender was cancelled, I would have been happy to hold the shares, but there were too many other bargains laying around so I passed. Bob Dhillon has built this business with a total of $10 million in invested capital in the history of the business. His business acumen and capital allocation skills are top notch. I mean how many CEOs had the balls to buy back 40% of their massively undervalued shares in 2009 - I think one could count on one hand. He is the Benjamin Graham of Canadian real estate - he buys neglected properties, fixes them up, raises the rents to increase NOI, and then sells them. Supply and demand fundamentals in MEQ markets are improving, for example Calgary rental market is at 1.5% vacancy rate, and improving. That bodes well for net operating income increases, as a function of rental rate increases, lower vacancies and less incentives to get renters into your building. MEQ is still trading at a discount to NAV, which is based on IFRS which fair values real estate, and independent appraisals are required. Sure these appraisals may be fudged a little (agency biases) but 5.72% average cap rates don't seem outrageous for this market. Maybe in the future, 8% is the more likely cap rate for multi-family RE, but at 52% mortgage debt to fair value, this ship is not sinking anytime soon, and NOI should continue to increase in the meantime. Plus their debt is long term low cost CMHC insured mortgage debt, and they will benefit from locking in lower rates on the mortgages that will mature over the next few years. They also have $100 million in 21 properties that are unencumbered that they could lever up to draw capital from. Also, MEQ is paying less than $100,000 per door for acquisitions, which doesn't sound that ridiculous to me. There are some related party transactions, like Dhillon paying himself commissions for company real estate transactions (purchases and sales), but most of the REITS do this as well through management companies. If he just paid himself $2 million instead of $1.5 million and $.5 million in commissions, nobody would complain. He has also issued himself a lot of options, and lent himself a small amount of debt for personal share purchases. But I can look past these things with the value he has created. MEQ will enter the U.S. market soon, and they are setting up a sidecar fund to invest alongside MEQ, and Dhillon should be able to apply his recipe down south as well. In short, it doesn't sound like the kind of company you'd make a lot of money taking a short position, but I could be wrong - maybe if you can time a sentiment shift, but I don't see this one going to zero anytime soon.MEQ is one of the largest holdings of Vision Capital, which imho the best real estate investors that I am aware of in Canada. Jeffrey Olin is a regular on BNN, and his interviews can be found here:http://www.visioncap.ca/vision-resources/ As far as REITS, I don't follow them, but the guys at Vision Capital say that the Canadian REITS are more attractive than the U.S. Maybe they are talking up their book, but I believe them. As far as banks, I think their mortgage portfolios are pretty solid, as they have pulled out of the alt market and are mostly CMHC insured. You'd be betting on a sentiment shift more than anything affecting book value multiples if there was a real estate correction, although Canadian Western Bank does have an alt mortgage portfolio, but it is small in comparison to it's total assets. I have also heard some investors say a way to play a Canadian RE correction is through HCG-T. I disagree, as 55% of their mortgage assets are CMHC and securitized, and I think the only way they could lose in a default scenario, is if it can be proven that the mortgage was not underwritten properly by HCG (faulty income verification etc.). I don't see this happening to any degree. The other 45% is alt mortgages similar to EQI-T that I mentioned, and they are currently writing below 70% LTV, and credit profiles of borrowers are improving as big banks leave this area, and as mortgage rules have tightened up. They are disciplined underwriters, and aggressive at pursuing collections on defaulted mortgages. The company has run risk scenarios (if you believe there is any value in risk models - see the Atlantic thread) where real estate corrects 30-45%, interest rates spike, and unemployment rates increase. In that scenario, capital ratios are affected to some extent, and earnings go to zero for a period, but they don't post material earnings losses. Again, a sentiment shift might take place in a correction, causing a temporary loss in share value, but most likely not a permanent impairmanent of capital. I think it would probably be an attractive buying opportunity of HCG shares.Those are my thoughts fwiw.Chip
"Those are my thoughts fwiw."Chip, it was worth a lot... thank you.Ben
Longs:AIG - story's been covered plenty, dividend reinstatement, etc. They sure are proud of the profits they returned to the guvment in their new commercials. Sometimes I think the world is a joke, then I see this AIG commercial on TV and I know it is. Joseph Heller couldn't have written the last five years any better than the way it happened.LULU - this isn't a just yoga play. Not worried about top line margins (famous last words). Most concerned about execution - ie will they be able to manage the supply chain and quality as they grow. Apparently they have hired experienced people from Nike et al. Watch for overreaching on the fashion side. Clean lines are important for their customer (my opinion), but some recent products have incorporated complex zipper and stitching schemes that don't flatter. Could this be considered a Canadian company? Is the founder a cultist?KORS - most nervous about this one. Numbers are there, but I just feel like their product is really tacky. Coach, despite ferocious growth, has managed to avoid the patina of trashiness. Can KORS do the same? Feel like I need to ride it but not really enjoying owning this name.LINE - thinking of dipping in. They lost a few points end of year. Yield will be popular again this year, methinks.Would like to learn more about FRMO - really like the way they sound in their Q&As. Coming up with new indices seems like fun. Can it be profitable as well?
Ahhhhh! It looks like you meant to private email me but it went to the boards.I'll go ahead and just answer what I think I know, and that is not much - the way I read it, they chose points on AUM for the Paradigm fund (.0012) which should compensate any lowball of actual ownership (.47%).But I'm still trying to parse this as I've just become aware of these guys in the last couple of weeks.It could also be that Stahl and Bergman's interests won't align with shareholders. We have to be cognizant of that possibility.I can't really remember how I landed on one of their Shareholder Minutes. It might've been in another board on the fool, but sometimes I right click on so many links to read later that I can't remember where they originated.Probably too small to have come from a Barry Ritholz link or John Mauldin.
LINE - thinking of dipping in. They lost a few points end of year. Yield will be popular again this year, methinks.I have LNCO for tax reasons and assuming it helps them with funding side. Where do you see asset growth? I could not imaging the assets growing like in the past.
CM001,On LINE/LNCO - It is hard to imagine acquiring as much as they did in 2012. However, assuming they manage their own balance sheet, I would not be surprised if they are presented with juicy opportunities. Low natural gas prices might help. There is urgency to drill, yet prices don't make it very rewarding. A driller might be willing to give up a proven field in order to fund their next pad. The ticking clock on those leases comes in to play.Many are saying that NG prices have nowhere to go but up. That certainly seemed to be the case in 2002 when they were stagnating at similar levels. However, I think the landscape is much different now. Perhaps we will have low prices for awhile. Exogenous events can might shoot us up to the $14 range again, but I think those will be short lived.At any rate, the best we can do is monitor their balance sheet and just hope for some asset opportunities to come their way. We can try to understand the reasons for BP to sell the Hugoton and Green River properties but we'd just drive ourselves crazy looking for those same possible situations to set up possible opportunities. I don't think we'd ever come close to recognizing anything like that unless we were deep in the industry and I am not (jeez, am I talking myself out of this thing?). We just have to trust management and verify by watching the balance sheet.
My top 5 positions at year end...1.) VRTS. Why did I sell some at $65 and $90 for position sizing reasons again? 2.) EPHC. This one is about to become cash, so it's really cash3.) WINA - discussed quite a bit on this board.. I've sold enough, as long as Morgan is bluffing people off quads in WSOP events, I'll keep holding.4.) HDLM. What can I say, this was up 1000% in on day on December, I'd written it off so that was a nice surprise. I love non correlated liquidations.5.) CASH. Discussed quite a bit.So those have all grown into my top positions, here are my most recent purchases...FBC - local bank, has almost doubled since I bought in October, I still think there's upside, but gocanucks would have sold by now! Approaching top 5 position size.MYRX - Liquidation. Close to top 5 positions since there is little downside and most of the cash will be coming back in Q1, I paid about current price.NXST - I bought on the secondary sell off, about to start a 4% dividend yield. Local TV Station owner. Not a huge position.HTA - 6% yielding Medical REIT. I bought on the sell off around the 180 days since going public. I know of this one since my parents owned it as a private REIT (martian and I share similar feelings for private reits). But now that it's public and there was a big sell off combined with insider buying and a big yield, I bought some. Will likely sell as it gets to 11, this is more of a trade based on my suspicion of unwarranted selling pressure.
you mind a brief share on your thesis for MAT? I owned it for a while but sold 4 points or so ago April last year so would be interested in your opinion... Sorry for the delay on this. I'm very very bad a picking retailers. I mean horrific. The two I own are KSS and SPLS. See what I mean. I have generally avoided this area in the past but I have young kids now and I realized in the summer of 2011 that the consumer was still doing pretty well but the market hadn't realized it. Last September/October we were at the local Babies-R-Us and there was this huge display for the new Leapfrog tablet. My three year old checked it out and hated it. Talked to local mgmt and was told the thing was selling like crazy. Did some research and bought some LF. Watched the stock run from my cost basis of 3.46 to where I took half off in Feb at 7.10 and sold the rest May when it dropped under $10. Our daycare had one that the kids ignored, if anyone played with it you would see it sucked and I thought the forward guidance was wrong and it was going to disappoint. That investment however got me to start looking at other kids stuff. Spending time with kids taught me the value of branding. My 3 YO knows what McDonalds is yet he has never been there. He loves Batman and Spiderman yet not having a toy or seeing a show. Going to enough birthday parties I've learned that Grandma's get girls an American Girl doll and boys get HotWheels and Thomas the Train. I like the new CEO, I believe the new GM over 50% is not peak but a new shift. They have a demographic tailwind as their brands are universal, they translate and as the world gets richer its a good tailwind. As I've gotten older, my biggest regrets have been not buying solid growing compounding companies as fair prices. My portfolio has a bunch of smaller, more volatile ideas but at the end of the day the stock never gets too expensive that tells me I have to sell and it just stays in my portfolio. Nothing sexy about the pick but mgmt keeps hitting singles.
A few interesting companies a bit higher than when I looked at them 4 to 6 weeks agoTronox was a messy company to look through. Post BK, recently listed, changed year-end, 1:5 reverse split and only a few years of filings. But it has been sent down on weakness in TiO2 as the big boyz lived off the hoarding they did when prices escalated for TiO2. So Sherwin and PPG are going strong and reaching 52-week highs and the TiO2 companies are sinking on destocking. What makes Tronox more interesting than its peers is the management push to gain credibility with shareholders by paying a decent 5% dividend and share repurchases. The track record is short so we can't know if they will continue to raise or whether they will let it slide and disappear when needs must. Tronox also recently acquired part of Exarro and the vertical integration of this mining operation should help with costs and Exxaro has much better margins creating the opportunity for better net and EPS. It was at $15 in November/early December but Barrons highlighted it and I think there were a couple of upgrades so it's up about 30% since my initial look. I think the Barron's halo may disappear and business does not look great through the first half of 2013. A housing recovery that looks in progress and restocking should help. SHW and PPG continue to do well this should rub off on the TiO2 producers eventually. Meanwhile there is the dividendhttp://boards.fool.com/trox-stox-rox-in-2014-30409082.aspxProsafe PRSEY OTC is another sort of obscure company. Because of the lousy search engine, my research at the fool is lost. But in an encapsulated nutshell, they own floating hotels that are leased to deep water drillers when extra accommodations are needed. They do not spend recklessly on building a fleet that will be underutilized. The demand is not that strong even though deepwater is booming. Most rigs house enough workers on rig. They grow but reasonably. One new vessel will join the fleet and a rig that has been in drydock maintenance is back in service providing a bit more income now. The stock does not trade much. It is Norwegian based. Lists OTC over here. It's another one Barron's picked on last summer that helped share price appreciation. PRSEY pays shareholders when they have net income and they usually do. They are committed to up to 75% of net income paid out. Because capex is generally held in check with slow growth of newbuilds, the payout from free cash flow is somewhat secure but does get based on net.They have appreciated 15% or so which I was not expecting. The dividend and the near term catalyst of two rigs adding to the revenue and higher utilization; the ongoing activity in deepwater all make this one interesting. not to be self-promoting but this is a bliggity blog post from last fall http://beta.fool.com/lekitkat/2012/09/15/big-dividend-hiding...Linn Energy is the last. I tend to gravitate towards companies paying dividends these days and hope to see price appreciation but if not I collect somethingLinn as an LLC pays out like an MLP but there is no general partner. Linn has been a whirling dervish of acquisition activity and the debt ratios are high==65% debt/capital. But they do not stray much above that. The strategy is to buy producing properties that are not strong E&P candidates and get whatever's left out at a profit. They do NGLs and dry gas and oil. Acquisitions and debt look out of control but thus far, the strategy is paying its way and shareholders too. The distribution keeps going up.The distribution coverage ratio dipped below 1X in Q2 but was back to 1.4X last Q which is good and above their usual 1.2X-1.3X. They are brilliantly hedged several years out almost 100%. Gas is around $5 IIRC and oil in the mid-$90s. I thought the oil would prove to be too low and thought they were idiots, but it has been right on and of course is a cheaper hedge than going above $100.Three that pay you to play and I like that. Some capital appreciation likely for TROX not so much for PRSEY although it has gone up more than I thought it wouldLINE is down after the distribution. Not much reason to see for it to take off but the distribution is very good.
So these are ideas that hit my radar late December1. Reeds Inc (REED) is a very tiny market cap that manufactures naturally brewed sodas. Productavailable at Trader Joe's. Not saying REED will be the next Monster Beverage (MNST), but I still recall buying Hansen's from Trader Joe's when the product was a low volume item. REED had a terrific run in 2012. Well, at least through early Nov 2012, then a brief pullback. Initiateda starter position in late December 2012.2. Amyris (AMRS), synthetic biology + renewable specialty products and fuel market- most of its operations currently in Brazil. Stock price got pummeled in 2012. Formerly had an Ethanol and Ethanol gas blending line-of-business, but exited that business in 2012. Company completed a private placement of shares in late December 2012 (with insider participation) and looks ready to ramp up Biofene production in Brazil. That's for adhesives, plastics, packaging,fragrances, etc. The company is still involved in the renewable fuel side, but as best as Ican tell, more on the R&D side. Shot out the gate in 2013. No position currently, waiting for a pull-back.3. GSV Capital Corp (GSVC)- Funding pre-IPO ideas on the tech side, funding megatrends.Has a Business Development Company (BDC) flavor to their business model, except I think GSVC takes equity slices rather than repayments. Portfolio investments include Facebook, Spotify, Bloom Energy, Twitter, etc. IPO about 2 years ago at $13-$14, but currently trades at around $9/sh. Most recent NAV indicated around $13+/sh. Some busted ideas e.g. Groupon, Zynga, but that's to be expected on the leading edge of technology. Started a position this week, butexpect this one might require some patience- allow time for GSVC portfolio companies tobuild their businesses/brands.The shipping sector started 2013 with a bounce. I'm more of a tanker shipping company guyso my bets depend more on outlook, company developments and price, and market developments.Right now, LNG tanker companies look to be well positioned, but the four publicly-tradedentities- Teekay LNG partners (TGP), Gaslog Ltd (GLOG), Golar LNG (GLNG) and Golar Partners (GMLP), all seem to be trading at premiums. Any of the four on an appropriate pullback.
Top 5 (haven't changed much in the past 2 years, some adding and trimming)BRKLUKMKLWPOMHKLatest ideas (still small) - MEG
This is proving a really interesting thread thanks for getting it started and to all the contributors so far. Given my portfolio is ridiculously broad and made up of UK, US and Asian stocks and funds picking 3-5 holdings is really tough for me.Assuming we are looking for value and growth and not income yield or defensive qualities, I would throw out 5 important major trends or momentum plays for the mid to long term return on a short term entry.1) Mobile and the CloudI see content consumption and increasingly content creation, transaction and service fulfilment going mobile whilst reliant on exponential cloud hosting of data and service provision.This means continued shift from PC to mobile (chips, hardware and software) - witness ARM, Qualcom and Apple; as well as substantial increases in data storage, mining, hosting, Apps, traffic (supposed to be increasing 100x by 2025) and cyber security - witness Google, EMC, NTAP, Tibco, VMWare, Vodafone, Checkpoint, Fortinet, Palo Alto networks etc.2) Shift from Oil to GasAs we move through peak oil, increasingly the remaining energy left to consume is gas (gas fields and shale gas). I see exploration, transport and shipping, energy generation and infrastructure being increasingly gas in nature. LNG terminals and tankers, gas pipeline developments, gas fired power stations, gas refueling stations etc all make up this ecosystem; witness Golar LNG, BG, EPD, CLNE, WPRT.3) Emergence of 3D/Additive printingSupported by an amount of open source support and increasing digital innovation, 3D printing is now emerging. I don't think we have any idea what the limits of this influence will be but I hypothesise they will be significant. Witness DDD, SSYS, DASTY and Renishaw.4) Emerging MarketsIn particular China and Brazil or Asia and Latin America.4a) ChinaThe China story has only really got started. It has become the second biggest economy in the world and may overtake US in 10 years but on a per capita base it has only just got started and is 50 years behind the curve - which means a lot of catching up. It is very well managed and the growth is amazing. The country uses its weight to its advantage and it will wrestle the world for economic success. Other empires and hegemons sought political power, China is purely interested in economic power and success. China supply story maybe maturing but the demand story is just getting started. Witness the rise of chinese tourists, increasingly sophisticated products and services coming from China (hi-tech electronics, aeroplanes etc); CTRP, Huawei, Haier etc.4b) Other Mini-ChinasThe world is opening up throwing up ground zero mini China opportunities of the 1980s era enty point. The most notable I have found is Myanmar. As per any SE Asian country look for the most obvious ground zero thriving opportunities: 7/11 franchises, scooter distributors, petrol stations, retail malls, utility and healthcare infrastructure and power supply. I have identified TA Corporation, YOMA, MDR and Parkson of the listed Singapore entities (the largest FDI in Myanmar) and there are probably a load in Thailand which represents the largest trading partner with Myanmar. Other mini-Chinas in Asia could include: Cambodia, Laos, Vietnam and Indonesia. 4c) Rest of BRIC++Brazil, Turkey, India, Mexico, South Africa...5) Socio-DemographicsPopulation growth pressures - water and agriculture demand and soft commodity prices, land use, housing and transport Ageing population - heathcare, housing and social demands; (medical reits, cruise ship operators, retirement homes)Female participation in the work place (anything women spend their money on - P&G, Unilever, luxury goods...)Some other mega trends:Fertility crisisObesity epidemicDebt crisisGlobalisationRenewable/clean energy and EnvironmentalismAnt
4c) Rest of BRIC++Brazil, Turkey, India, Mexico, South Africa...Bangladesh, Romania, Indonesia, Colombia. Check out those CRIBs for the last 3 years.
Fairfax Financial (19.14%) -- Honest, long tenured management. Historical excellence in bond / stock portfolio management. Fully hedged equity portfolio. Insurance market prices (finally) are gradually increasing. Fairfax equity portfolio outperformed hedges by ~17% in Q4 which seems to not be getting much play in the market. Trading just under current book. My cost is lower.Regarding the bolded portion, I have updated my spreadsheet today and added a few additional holdings to the tracker (Imvescor on the TSE, and Thai Reinsurance which is a larger holding). It seems almost surreal but there appears to be some sort of upwards pressure on many FFH holdings... I've had to double check some of my numbers because my spreadsheet is spitting out #'s that don't seem possible.On the (now) $2.8B of 9/31/2012 portfolio value I track, the total gain (assuming no changes in holdings, etc) I now have the current value (as of close today) at $3.9B. Up ~40%. RIMM (up huge), IRE, OSTK, THRE.th, DELL, BRK.to, and many other small holdings outperforming the market substantially. So a $1.1B pre-tax gain.If you assume the remaining equity port I don't track just matches the market (nets against the Fairfax swaps / hedges 1:1) then you have a ~33-34% performance differential on that $2.8B net of hedging or about $900m gain, pre-tax all in on a "fully hedged" equity portfolio (!!).This doesn't account for insurance underwriting gain (or loss) due to Sandy etc. Doesn't measure their bond portfolio movement during the Quarter + 1 month either.Certainly a head-scratcher for me though. I know returns can come in lumps but this is really wild. A few investors are chattering about this, but it seems under the radar still. Hard to say what to make of the RIMM position. I'm skeptical in general, but it is now near their cost basis as best I can tell (some of their position was in TRS instead of straight common so can't estimate a perfect basis without triangulating SEC and NAIC filings which isn't worth my time). Also, I am very comfortable with their overall process and investing even if some of their holdings make me say "mmm...".At the end of the day I think many are uncomfortable with an insurance company with ~10-12% of their equity in RIMM stock... but I guess it's hedge-able if you feel strongly. Given the reasons I summarized for Naj about why the stock might be weak, general insurance market weakness, and also the recent MSCI index removal for FFH due to liquidity it may just be that the stock is not getting the love.I continue to let it run... I've also been adding still.Ben
Ben, i read a BMO report, and the analyst pegged quarter-end BV at $375/share.
"Ben, i read a BMO report, and the analyst pegged quarter-end BV at $375/share."This is inline with my thinking. A bit more than half of the gain I'm discussing is post Q4 report, so unclear how / when it will be valued by the market, or if it will even stay given their holdings' volatility.Ben
On the (now) $2.8B of 9/31/2012 portfolio value I track, the total gain (assuming no changes in holdings, etc) I now have the current value (as of close today) at $3.9B. Up ~40%. RIMM (up huge), IRE, OSTK, THRE.th, DELL, BRK.to, and many other small holdings outperforming the market substantially. So a $1.1B pre-tax gain....Certainly a head-scratcher for me though. I know returns can come in lumps but this is really wild. A few investors are chattering about this, but it seems under the radar still. The RIM position is pretty well known, and when your 52 million shares go from $7.50 (Sept 30) to $11.87 (Dec 31) to $17.90 (yesterday's close), you get half of the gain right there, over $500 million pre-tax, although most of it was since Jan 1 so we won't see that in the annual report.It's true that it's a bit spooky how when it rains, it pours. I mean, Bank of Ireland way up, The Brick taken out at a premium, Dell with maybe the same fate, even the dogs are up (OSTK)!Of course, what the Lord giveth, ...Regards, DTM
Ben,I found these stats from the Canadian Bankers Association that you might find helpful. It includes data from BMO, CIBC, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank, and TD Canada Trust. Canadian Western Bank, Manulife Bank (as of April 2004) and Laurentian Bank (as of October 2010)http://www.cba.ca/contents/files/statistics/stat_mortgage_db...According to the stats that the CBA has kept, mortgage arrears peaked in around '82 at 1% (Not in this document, I read an article last week quoting CBA, can't find the source now sorry). According to this document, (during the Toronto real estate crash of the early 90's which fell peak to trough 27% over 6 years), morgages in arrears peaked at 0.7% in 1992. Granted, Canadians are more leveraged now. However, in most provinces, mortgage loans are recourse to the borrower, so I am not sure we will see a large spike in defaults on residential housing if there is a real estate crash, using history as a guide. Chip
so I am not sure we will see a large spike in defaults on residential housing if there is a real estate crash, using history as a guide. :)
I probably should have rephrased that, I am not sure we will see a large spike in defaults because the conditions are different in Canada than the U.S. real estate market pre-crash. Maybe that doesn't sound any more convincing either:)
I have been wanting to reply to this message, but have been unable to for a variety of reasons. One, I am still trying to recover from the excellent Tepper interview the other day. I find the interviewer so hot! Not sure anyone posted the entire link, and here it is.http://www.bloomberg.com/video/appaloosa-s-tepper-equity-is-...I would love (oh no, this sounds like flirting too) Stuyvesantgrad's notes on this. IIRC, "love, kiss, tight, rise, meat, wet, etc etc). okay, lets get our thoughts out of the gutter ;-)The following are some quotes from Jamie Dimon, CEO of JPMorgan Chase, during January 2013 (If I transcribed correctly, and apologize if I messed up, but I think I got it correct.) "You can now buy American companies at really good prices.I'm comfortable owning stocks right now." 1/23/13 "Housing has totally bottomed, and is getting better." 1/23/13 "I've said the table is rather well set for the USA economy." 1/13/13 Lastly, and I hope to expand in the futureThe following are my top 10 holdings in order of largest (no flirting pun intended)to smallest.NATIONAL WESTN LIFE INS NWLIMICROSOFT CORP MSFTPFIZER INC PFEPUBLIC SVC ENTERPRISE GROUP PEGJP MORGAN CHASE & CO JPMEXELON CORPORATION EXCEXXON MOBIL CORPORATION XOMWAL-MART STORES WMTMERCK & CO INC. MRKINTEL CORP COM INTC I matched these to my 11/28/12 and the only company off the lists seems to be ETR and INTC (a new purchase) is number 10. FYI, ETR is a few thousand away from number 10, and that changes by the second. Peace you all!
NATIONAL WESTN LIFE INS NWLIMICROSOFT CORP MSFTPFIZER INC PFEPUBLIC SVC ENTERPRISE GROUP PEGJP MORGAN CHASE & CO JPMEXELON CORPORATION EXCEXXON MOBIL CORPORATION XOMWAL-MART STORES WMTMERCK & CO INC. MRKINTEL CORP COM INTC
I think part of technology sector is the same as financials this time last year. You know the usual suspects. Everybody believes strongly they are value traps. For whatever reason, I am never too concerned about risk of “value traps” – there are worse things than dead money6 of MOAT 20 holdings are in informtaion technology including MSFT, CSCO, INTC, ORCL, AMAT.It also holds Hacker's BAC and BRKB (as well as 10% more in financials - JOE and NTRS).Are you guys moonlighting for Morn*?
Fairfax announced the results after close y'day and the book value at the end of the quarter is $378. Kudos to the Ben.
"Kudos to the Ben."I don't know if I've earned the title...(the) Ben :)
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