Friday, December 31, 2021

2021 Portfolio Update

It's been another tumultuous year on the health & well-being side. But the financial markets have been on a tear since the March 2020 lows. After a lot of navel-gazing on Twitter, I felt left out since no one asked for my portfolio update? 🤣 

Wednesday, June 16, 2021

Update on Africa Opportunity Fund $AOF.L

 * Disclaimer, as a Canadian Investor I am no longer able to add to my position via the OTC market. As a result, I buy into the current NAV discount opportunity. I had accumulated a small position in 2018 with the average price of $.60

Quick update:

This closed-end fund is winding down in a year. The current book value per share (as of June 04, 2021) is $1.099 (USD) and the stock is trading for $0.57 (USD). 

The NAV discount opportunity just got even better since the last posting of the topic. It is important to highlight the fund owns a lot of illiquid African public and private companies. These stocks should benefit from a reflation/reopening trade that is currently the active theme within the market. 

The management is significant shareholder in the fund and the incentive aligned is shareholder friendly for a winding down process. 

May Monthly Report 

Friday, June 4, 2021

Africa Opportunity Fund Limited $AOF.L

*Disclaimer, I have a very small position in this fund. Been a shareholder since 2018 and the average cost per share $.60 (USD).

Quick Takes
1. This stock is illiquid and trade at the London Stock exchange.
2. The book value is $0.821 (As of May 21, 2021) and the stock price trades at $0.52 (last trade)
3. The fund is liquidating its positions and returning cash by June 2022
4. The fund holds illiquid African equities (frontier market)
5. Great Capital Allocator (Fund manager: Francis Daniel
6. Expected Return of 57% CAGR (By June 2022)

Quote from 2020 Annual report "The shareholders of Africa Opportunity Fund (the "Fund" or "AOF") held an extraordinary general meeting in June 2019 to decide on the future of the Fund. They voted to realize the assets of the Fund over a three-year period ending on 30 June 2022 and for those realized assets to be returned to shareholders, whether by intermittent compulsory redemptions or other forms of shareholder distributions"

Friday, May 7, 2021

Senvest Capital $SEC $SVCTF

Deep Value Stock Alert

*Disclaimer I have been a Senvest Shareholder since December 2018. My average holding cost is $194 (CAD) and recently double my position in 2020. Making it 44% of my overall portfolio. 

 Company Overview

This TSX-listed company has increased threefold since the depths of 2020 market correction has yet to fully price in 2021 Q1 book value increase. As a North American investor, you can be forgiven for never having heard of this obscure company before. 

Based in Montreal, it had spent the first two decades of its life as an electronic firm before the current management switching to investments in 1997. The quarterly filing doesn't seem to get much fanfare even as the book value increased 17% over the course of its time. Most of the days, there are less than 100 shares traded and with insiders holding more than 50% of outstanding shares, I often wonder why the company even tries to stay public?

As of May 7th, 2021 the shares are listed at $320 (CAD) with a book value of $646. This discount to book value is incredible when investors seem to be piling into growth stocks at 20 times revenue multiples. With such a high book value discount, you might expect this firm to be holding stakes with level III pricing (i.e junk bonds, CDOs, or private firms). Instead, the largest holdings are public traded equities such as eBay (EBAY), Tower Semiconductors (TSEM), Marriot Vacations (VAC), Capri Holdings (CPRI), Paramount Resources (POU), Silvergate Capital (SI), and Seven Generations Energy (VII), which merged with Arc Resources (ARX) in April 2021. The full list of stock can be estimated from 13 filings they have to publish with the SEC. 

While I content the holdings are concentrated with Top 20 stocks exposed to 75-80% of the portfolio. This is far crying to ask for a 51% discount to book value ($646), in other words, if the firm became private or sold all their equities and have the proceeds to investors they would double from the current price of $320. 

I personally doubt this illiquid premium would last for much longer as Canadian investors figure out that the asset management is similar to ONEX, KKR, or Brookfield. Although as an investor, you won't get all the profits, even at 60% that's enough to move the price well above book value.

For example AUM (outside capital) increased from 1,477,779 (2020) to 2,580,334 (2021/Q1). Historically the firm has charged 1.5% in management fees that would equate to $38.7 in annual management fees. Senvest investors would receive 60% of that final amount but it would advisable to add a 10-15X multiple on this amount and add it to book value. This number isn't pulled out of thin air, since KKR merged with Oaktree with 20X multiple on their management fee stream. The asset management business is quite sticky and Senvest's 17% YoY performance is a brand worthy in institutional investor circles. 

The key takeaway is the deep discount to book value. It would be noteworthy to point out the key man risk and the high concentration of insiders within the fund. The fund also uses leverage to enhance its returns. 

These were just my quick thoughts on Senvest. I will keep you posted on other obscure Canadian-listed companies. 

Thursday, October 23, 2014

Current Portfolio Construction


We are all "LONG TERM" Investors and I have yet to met a person who would claim otherwise. So let's do ourselves a favour and stop reading and watching financial news that involves market commentary and strategy.

2014 Portfolio
Berkshire Hathaway  (25%)
Yahoo                       (9.4%)
Canada TSX              (0.6%)
MSCI EAFE (Europe and Far East Asia)    (19.2%)
Emerging Market                                         (4.8%)
Vale                                                              (9%)
Lukoil                                                           (19.5%)
VT (Vanguard Total World Stock)              (1.69%)
Cash                                                             (10 %)

Since I am a Canadian with Canadian Investment Account I ended up using the Norbert's Gambit to avoid the 1.5% foreign exchange fee when converting to USD .

May 2015 (update)

The cash is slowly being deployed since most major sectors from technology to big pharma seems to be frothy due to the low price for debt. Bought more Vale stock as it approached $ 5.91  and it has since dropped in value.

Went all in  and bought Apple for the first time at $94 a share in Feb 2016.
On April 2016, I have bought my first batch of position in Valeant pharmaceuticals stock for $42.65 CAD.  Sold Lukoil when oil prices stabilized above the $50 dollar mark for $52 dollars a share (bought for $46).  Bought Twitter for $26 (first batch) and bought again when stock hit $16 dollars share.

Sold off my winners as it approached my fair value estimate. Limit sold Apple Shares for $140 and sold positions in Vale, a Brazilian iron ore company which caused a lot of pain in my portfolio for the past 2 years.  To give some context, adjusted buy price per share was $8.61 but the shares cratered to $2.30 during the China hard landing scare in Feb 2016.  Although I had a meager profit of 18% (dividends included), I had learned a valuable lesson when it comes especially for commodities companies which is macro risk plays a bigger role in its valuation.

Sold Twitter stock partially for a small gain during the takeover rumors in late 2016 for $20 ($16). Doubled double and tripled down on Valeant has the stock kept going down from $30 (USD) to $8 (USD) becoming one of my biggest holdings/liability. I still consider the company undervalued but fell for the same trap as Vale, which is the macro risk overshadows all other risks. To give the readers, a brief introduction to Valeant before 2016, the company was famous of buying small drug companies selling niche market drugs and then hiking up the price of the drug 10X, 100X the original price. The moral aspects aside this strategy ruptured in 2016 when it became a 20 billion dollar company had started to buy more high profile competitors such as Salix for $14 Billion.  There was U.S political scrutiny on its business practices and short seller issuing Enron like manifestos because of its complex 10K annual reports which averaged 400 pages. I had never considered buying Valeant during it's high  points when it was using debt to buy off bigger takeover targets but in 2016 when the stock plunged from $200 (USD) a share to $30, I started to buy my first batch of stock in the company.  My investment thesis was that this company would go back to becoming a boring Pharmaceutical company which lower growth and higher R&D spending but I failed to see how much corporate reputation damage the firm did because of its prior strategy. For example, it has trouble hiring researchers to ramp up the R&D Department, none of the competitors trust the accounting numbers Valeant its providing as it tried to sell of is assets to reduce debt obligations. I a still holding the stock but it has been quite a ride so far.

2017 Portfolio Composition %

Mosaic (MOS)                                          2.41%
Dollar General (DG)                                 2.37%
SOIL ETF                                                  0.55%
Twitter                                                       2.29%
Chipotle Mexican Grill (CMG)                 3.35%
Deutsche Bank  (DB)                                13.15%
Fairfax Africa Holding                              7.84%
 Potash Corporation                                   12.13%
Valeant Pharmaceuticals (VRX)                 21.14%
Yahoo   (yhoo)                                            10.59%
Berkshire Hathaway (brk.b)                       24.18%

TENBaggers MUNCHIES (Reading List)

My Reading List for 2015 is as follows:

1. Investment Philosophies by Aswath Damodaran
2  Investment Valuation by Aswath Damodaran
3. Applied Corporate Finance By Aswath Damodaran
4. Flash Boys by Micheal Lewis

I realize that the following books are all from the same author but  the"Man" offers one of the most sought after MBA courses for free and his books are just the cherry on the top.

Recommended Reading for Investing Novice:
1. Winning the Loser's game by Charlies D. Ellis
2. The Value Investor (Light Read) by Ronald Chan
3. Think + Act like Warren Buffer by Larry Swedroe (any of his other books will do)
4. Element of Investing (Highly Recommended Light Reads) by Charles D. Ellis & Burton Malkiel
5. The 3 Simple rule of Investing by Michael Edesess
6. Life Cycle Investing  by Ian Ayres and Barry Nalebuff
7. Why Smart people make Big Mistakes and How to Correct them By Gary Belsky
8.  Berkshire Beyond Buffet By Lawrence A.

2021 Portfolio Update

It's been another tumultuous year on the health & well-being side. But the financial markets have been on a tear since the March 202...