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Archive for April, 2012

Weekend reading

April 27, 2012 Leave a comment

The Great California Exodus: The problem with affordability with California and the implications

Notes from Biglari Holding shareholder meeting: Good to hear what Mr. Biglari is up to.

Patagonia has followers: One of few companies that has built an incredibly loyal fan base is now getting copied

Problems with Japan: Always enjoyable to read anything by Jared Diamond

Interview with Steve Miller: Great interview w/ a turnaround specialist. Talks about his experience at turning around Chrysler and AIG

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Categories: Reading

Weekend reading

April 20, 2012 Leave a comment

The Global Economy: Great presentation from Richard Koo

Europe’s deleveraging: It was clear that this was coming

Chesapeake’s Andrew McClendon’s loans: Some shady stuff that McClendon has been doing.

Longleaf partners: Q1 letter discusses how they manage risk

Peter Theil’s ‘Startup’ class notes: Great notes from Theil’s class at Stanford on ‘Startups’

Categories: Reading

Weekend reading

April 13, 2012 Leave a comment

Manual of Ideas Superinvestor Issue: Latest issue from MOI. Great place to go idea hunting

$1B Dick-swinging war: Peterme is a well know web design expert. He chimes in on the Instagram deal

Leucadia Letter to Shareholders: Great read

Categories: Reading

Portfolio Update

April 10, 2012 2 comments

I sold out of GSL and HNR recently. My thoughts …

GSL has been a great ride. It was a 80% return in less than 3 months of holding. The position to begin with was a small position, so even with it up 80% it wasn’t a huge size. More importantly, GSL is a distressed situation opportunity. The price we bought it was very cheap compared to the long-term contracts and potential of restarting dividends in 12-24 months. Anyways, the main reason for selling was in this market there are many opportunities to buy great businesses that can provide very good long-term results. GSL is a distressed situation with a business model that is not that great. I would rather be owning a good business.

A few weeks ago, HNR announced they were filing for potential dilution of upto $75M. More importantly this is a clear sign that their sale of Venezuela assets is unlikely to get approval from government. After this announcement, I decided to sell out of the investment.

The investment thesis was dependent on monetization of assets or production from prospects outside Venezuela. The lack of dividend and what looks to me like a potential difficulty getting the VZ gov’t to approve the sale of assets has put the company in a cash hungry position. As for production from prospects, it is likely to happen but the cash required will mean much dilution.

In the end, the HNR investment was a 32% loss. Although this doesn’t represent the whole picture. HNR was a much bigger mistake and a huge loss. I held the shares for about 4 years. In the past 4 years, I have nothing to show but a loss. Also, in these 4 years I had plenty of amazing investment opportunities. I invested in many and the portfolio benefited from it. Although having capital invested in HNR meant I had less capital to invest in these ideas. So the opportunity lost by being invested in HNR will show how much bigger the loss was.

Hugh Henry said one of the biggest mistakes investors make is procrastination. HNR was a definite mistake from this laziness. There were many signs in the past few years that HNR was a bad investment. Although I gave management too much credit to stick with this investment. In 2011 when HNR sold its US assets, my gut feeling was to get out of the investment. Although I gave the management credit of doubt and stuck with the investment. In hindsight it was a sign that the company was stuck in a situation where it had to sell valuable assets to turn prospective assets into something worthwhile.

Berkowitz mentioned one of his checklist items is whether the company depends on the kindness of others. HNR is clearly dependent on the kindness of a government that most individuals wouldn’t want to be associated with. When a company can’t have access to its own cash flow, it is best to not count on the cash. It is like a guy who is behind bar for life but is married to the most beautiful woman in the world. You might have the best assets in the world but in a situation where you can’t enjoy it.

 

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Weekend reading

April 6, 2012 Leave a comment

Graham and Doddsville Newsletter: Latest issue. I enjoyed reading about Sam Zell’s path to success and his contrarian investing approach.

Investing in BAC Warrants: Nice post on some of the hidden gems in the BAC TARP Warrants

Jamie Dimon’s 2011 Letter to Shareholders: Great read

Categories: Reading