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Lee Kuan Yew

March 23, 2015 1 comment

Lee Kuan Yew, the great leader of Singapore, recently passed away. He not only lead Singapore from the time it became independent from Malaysia, but he also was one of the sharpest minds about world politics. His views and advice was thought after not only in Asia but in the Western hemisphere. His practical approach to some of the most complicated issues helped put Singapore on the map and make it one of the top economies in the world.

I highly recommend people read any and all books about Lee Kuan Yew. I highly recommend From Third World to First, in which he discusses his many policy decisions.

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Categories: Uncategorized

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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Renters

February 17, 2012 Leave a comment

A great quote from Bob Benmosche, CEO of AIG, on his view on ‘renters’ and ‘owners’ of companies. The quote comes from a recent analyst presentation.

One thing that I did learn from Wall Street, it is a simple rule, all of you in this room [referring to the analysts] are not looking for great companies. You may find one and that would be wonderful, but it has nothing to do with your decisions. You are looking for a great stock. You want to buy that stock, you want it to go up, and when you have gotten enough you want to get out of it. You are renters. You are not owners. Some of you are, but mostly you are an owner because you are trapped. So I’m looking as owners and thinking about the fact that I want to have a great company and I have got to have a good stock that you are all interested in.

I for one agree that even though I call myself a value investor there is more of a bias towards renting. Infact most value investors are ‘renters’ even though they might claim to be owners of companies. The approach that you believe a company is worth X and once the stock, or valuation, gets to 90% of X then you get out is an approach of a ‘renter’ not ‘owner’. Any investment with a bias towards getting out of the stock at a certain valuation is a ‘renter’ approach. Very few individuals have access to capital in a similar way as Berkshire Hathaway, or have investors that will give you the freedom to be true owners of the company.

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Q&A with Vito Maida

January 21, 2012 Leave a comment

Vito is one of the most renowned value investors out of Canada. A great opportunity to do a live Q&A with him on Jan 23rd.

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Ultimate Value Finder Newsletter

January 8, 2012 Leave a comment

I have known Mariusz at Classic Value Investors for a while now. His ability to find small-cap catalyst driven investment ideas has shown an amazing investment return over the past 3 years. When he decided to start a newsletter focused on these small-cap gems, I was intrigued. I’ve discussed with him some of the ideas he presented on his January 2012 and the upcoming February 2012 newsletter. Infact, if you have received his January newsletter and acted on one of his ideas, you would be up over 20% in less than a week on that one recommendation. That gain would have more than made up for the investment into the newsletter.

His February newsletter includes another similar gem. One of the recommendation will be a strong return in a short period. I’m fairly certain that one investment alone will repay for the annual fee for the newsletter.

I highly recommend the investment into the Ultimate Value Finder newsletter.

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US loses its AAA rating

August 5, 2011 Leave a comment

We thought this week was bad. Monday will be even interesting. On Friday, S&P downgraded US debt rating.

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Weekend reading

April 29, 2011 Leave a comment

Top Marginal Tax Rates: To understand the actual tax rate paid by top income earners you really need to understand how marginal tax rates impact the top earners

Discount rates in calculating pension liability: The big impact on pension liability based on judgmental discount rate used

Security Analysis, 6th Editon: The bible for value investors

Buffett’s bodyguard: Even people 30 years younger have a hard time keeping up with Buffett

Commodities: No Bubble Here: GMO’s Grantham believes that we are at ‘giant inflection points’ that could lead to higher prices for commodities

Categories: Uncategorized