Portfolio Update and Weekend Reading Links

Portfolio Update – Sold Vivendi.  Now Portfolios Are 69% Cash.

I made a transaction for the first time in more than a year in the portfolios that I manage and wanted to update where those stand as of today.  I sold out of Vivendi today up 50% in the nearly 2 years that I held the company.  My reasons for selling were simple: 1) Vivendi was one of the first companies I bought into after I started doing actual company analysis and the thesis played out exactly as I had hoped it would.  They sold assets, paid down debt, and are in a much healthier position now going forward.  2) Going forward there is now too much uncertainty for me on what their plans are with their massive amount of cash they will soon be getting and I do not want to see a repeat of the early 2000’s acquisition spree that went horribly wrong.  3)  MOST IMPORTANT POINT.  I am now much more confident in my abilities to analyze companies for potential investment then I was two plus years ago when I bought Vivendi and think that I can do much better buying microcaps and/or special situations companies and want to be ready for any kind of market crash with a lot of cash in the portfolios.

The percentages below are the percentages (rounded) that make up the current portfolios.  Also, until the market drops significantly the make up of the portfolio below will likely remain intact until more companies become undervalued again and I can start buying again.

Cash – 69%

BOBS – 13%

PARF – 12%

CMT – 6%

Weekend Reading Links

The New York Times – Cocaine Incorporated.

A Wealth of Common Sense – Buffett’s Fourth Law of Motion; Your Behavior.

The Daily Galaxy – An absolutely amazing site if you love science, astronomy, exoplanets, and anything else having to do with space.

Financial Times – Rafael Nadal’s Key To Winning.

The Sova Group – Xoom Company Analysis.

East Asia Student – 10 Best Mandarin Learning Resources.

Walrus Value – Investment Booklist and Borrowing Hard To Find Books for Free.

Valuewalk – The Classic Shelby Davis Double Play.

JLCollinsnh – The Worst Possible Investment you Can Construct (Practicing Inversion).

MIT Technology Review – Scientific Thinking In Business.

 

2013 Portfolio Review: Cumulative Two Year Gain of 98.13%!

“Investing is where you find a few great companies and then sit on your ass.” Charlie Munger

Last year I did an entire write-up on my 2012 portfolio review going over how well or poorly all the companies I wrote articles on did after I wrote those articles.  I wrote 15 total articles last year and the companies I bought led the portfolios I manage to a gain of 26.20% last year. I thought it was a pretty good first year after truly dedicating myself to value investing but I knew I could do better after eliminating some of the many mistakes I made in that year and purging the few remaining companies I still owned in those portfolios from when I bought into them when I didn’t know what I was doing.

With the help of the rising market, eliminating some of my mistakes, doing a lot of other stuff instead of investing, and getting some tips from other value investors on companies to buy, the portfolios that I manage have gained 71.93% this year as of today.

% Gain YTD
Core Molding Technologies (CMT) 88.67%
Vivendi (VIVHY) 12.39%
Paradise Inc (PARF) 42.86%
Calloway Nursery (CLWY) 100%
Brazil Fast Food Company (BOBS) 112.63%
Strattec Security (STRT) 75%
Average Gain 71.93%

 

Core Molding Technologies – I bought into this company too early last year when I gave into my impatience after months of not being able to find a company to buy into.  At the end of last year I as sitting on an 8% point loss on my investment.  With the rising market and good continued developments at the company this year it gained 88.67%  I still own CMT.

Vivendi – At year’s end last year I was sitting on a 27% gain.  This year with all the spin offs/sales at the company YTD it has gained another 12.39%.  I still plan to hold onto this company while it continues its transition to a purely media driven company.

Paradise Inc – I bought this company in March (one of only two companies I bought this year) and in that time it has had almost no news either positive or negative so I guess this companies gains of 42.86% are chalked up to the overall rise in the market.  I still own Paradise Inc.

Calloway Nursery – The other company I bought in the calendar year of 2013.  Originally I saw other value investors like OTC Adventures writing about the company and paid no mind to it.  Luckily after talking with Jeff from the Ragnar is a Pirate blog, DTEJD1997,  them sharing some information about how much the companies properties were worth, and doing my own research into the company, I decided to buy into them and I am glad that I finally paid attention to these other investors.  I have sold out of most of my position in this company at an exact double of 100%.  So far it has taken me four months to sell out of that position and it will likely take another two to sell out of the rest of it.  I still like this company and if the price goes back down substantially, all else remaining the same, I may buy back into it again.

Brazil Fast Food Company – I bought into this company last December after Red from the Red Corner Blog recommend that I take a look into them.  Again, I am thankful that Red mentioned them to me.  After a year where the company was gaining a lot after continued good results, the companies owners wanted to take it private at a ridiculous offer, which was then voted down, and the company has continued to rise after that.  The company YTD has gained 112.63%, I still own them, and plan to hold them for the long-term.

Strattec Security Corp – Another company I bought into last December.  This company had very good continued results, had some new positive developments, the stock went up very quickly and I sold out of the entire position up 75% in May.  Since then the company’s stock price has hovered around where I sold it.  Like Calloway, if STRT drops substantially, all else remaining the same, I will buy back into them because I think they are an excellent company.

Last years 26.20% gain + this years 71.93% gain means that the portfolios that I manage have cumulatively gained 98.13% (49.06% on an annual basisin two years since I started to take this seriously.  The portfolios I manage were in 40%-55% cash the entire year and are at the higher end of that range now.  Frankly I was shocked when I saw this years gain and the two-year cumulative gain since I only do an entire portfolio review once a year.

What Does The Above Mean To Me?

Not much honestly.  A two-year track record doesn’t mean much to me since I am a long-term investor.  I was also helped a lot by two recommended companies from other value investors and the overall rise in the market.  Am I glad and excited about this great start yes, but I still have a lot of work to do and at this point I think that I am only an average to above average stock picker as I have a lot of room to improve and was helped a lot by short term luck of the stock market rising a lot.

Some of the Lessons Learned This Year

  1. My extreme patience and discipline gained from dealing with my health issues helps greatly as a long-term, very strict value investor.  I did a lot of stuff not directly related to investing this year because I could only find two companies that I could buy into all year.
  2. You need to keep a record of what you do.  This was such a long year filled with great and not so great things for me that I have recently been telling everyone I only bought one company this year.  I completely forgot about the PARF and BABB articles I wrote at the beginning of this year and that I actually bought into PARF back in March along with CLWY.  Memories are not always what they seem to be.
  3. Sometimes it pays to “steal” investing ideas from others, but you still must do your own research into the company.
  4. Turn over as many rocks as possible.  While I only invested in two companies this year I have researched hundreds if not thousands of other companies and have built up a watch list of around 20 companies.  When those companies stock prices go down I will be ready to potentially buy some of them with the cash I have built up and the knowledge I have gained of those companies.
  5. Starting a business is very hard.  This is my biggest failure of the year by far and one that I hope to rectify at some point in the future.  The business my brother and I started was a complete failure from the point of gaining customers and revenue.  At this point we are not doing anything at all with the company as we overestimated the demand in our area for our product.  We learned a lot of lessons from this and we hope to start a successful business in the future.
  6. Writing a book is very hard.  Most of my year (the better part of 10 months) was spent writing, editing, researching, etc for the book.  It was well worth it as it has provided some for my family, for two needy families Christmas presents, I learned an enormous amount, and it has hopefully helped newer investors learn this craft faster.
  7. It obviously pays to buy into a few great companies and then sit on your ass and be patient.

Goals For This Year

  1. Continue to learn something every day.
  2. Improve in some way every day.
  3. Turn over more rocks.
  4. Read more.
  5. Write more.

I hope you all had a great year, thank you all so much for all the conversations, reading this blog, buying my book, and I look forward to talking with you all more and getting back to writing more articles for the blog in this coming new year.

 

Tying Up Loose Ends Part 2: Site Updates, Portfolio Update, and Updates On Companies I Own

Tying Up Loose Ends Part 2: Site Updates, Portfolio Update, and Updates On Companies I Own

I have updated the site for the first time in months and today it is the portfolios turn. Over the weekend I updated the Translation Page/Traducción de página/صفحة ترجمة/翻译页面/Übersetzung Seite/翻訳ページ/번역 페이지, and the Recommended Value Investment Reading and Viewing with updated information and sites.  I also combined, and then deleted, the Helpful Links page with the Recommended Value Investment Reading and Viewing page because a lot of the information was redundant.

For the time being the portfolio below is based on the portfolios that I manage.  Earlier this year I liquidated my personal account to fund the start-up of me and my brothers business, pay off some bills, go on a trip for the first time in 10 years, and save money for me and my wife’s baby that is due in late October.  I am going to start building the funds in my personal portfolio back up again as soon as possible

092313_0142_1.png

Cash – Approximately 40% of portfolio.

Calloway Nursery, CLWY – Approximately 19% of portfolio.  I have a sell order pending for this company now due to it rising close to my estimate of its intrinsic value so the above chart could change if my sell orders are filled.  Up 90% as of today since I bought them in March.

Brazil Fast Food Company, BOBS – Approximately 14% of portfolio. First article I wrote about them can be viewed here, second article can be viewed here.  As of today up 109% since buying them in December.

Vivendi, VIVHY – Approximately 11% of porftolio. First article I wrote about them can be viewed here.  As of today up 32% since buying into them in June of 2012.  The following two links are recent updates about the company and its plans.  Vivendi is still thinking about splitting the company further after the sale of Activision Blizzard goes through.  The sale of Activision Blizzard has been put on hold by court in Delaware.

Paradise Inc, PARF – Approximately 10% of portfolio.  First article I wrote about them can be viewed here, second article can be viewed here.  As of today the position is about even since buying in March.

Core Molding Technologies, CMT – Approximately 5% of portfolio. First article I wrote about them can be viewed here.  As of today up 27% since buying into them in August of 2012.  The company has won multiple awards in recent months for being an excellent supplier and has also added significant additional business with Volvo.

As you can see from the portfolio above I have made some changes in the portfolio since my last update adding Calloway Nursery and selling Strattec and Main Street Capital.  I sold Strattec up nearly 75% since buying into them in December because they rose very fast to the high-end of my estimated value for them.  Will possibly buy back into them again if their price falls because I still think they are an excellent company.  I sold Main Street Capital up 65% due to the liquidation of my personal portfolio, which is the only place I held it, due to the reasons listed above.

Vivendi Update

Vivendi CEO says that its future lies in its content and media businesses and that it may announce the sale of its telecom units at its next annual shareholder meeting in April.

Also of note from this article is that the CEO estimates SFR to be worth 20 billion Euros by itself, or approximately $26.22 billion.  That estimate is 5 billion Euros more than the 15 billion Euros I estimated SFR to be worth in my latest sum of the parts valuation on Vivendi.

I think the CEO’s estimate of what SFR is worth is a bit optimistic, but if true that means that with Vivendi’s current market cap at $28.2 billion that the market is currently recognizing that Vivendi’s other assets are only worth a combined $2 billion.  We know this cannot be true because Vivendi’s 60% stake in $ATVI is currently worth $7.44 billion just by itself.  If SFR is really worth 20 billion Euros that means that the market is massively undervaluing Vivendi as a whole.

If I were to apply the CEO’s estimate of SFR’s value to my sum of the parts valuation that brings the value per share of Vivendi up to $42.45 per share, or $28.66 per share after subtracting debt and still not including UMG.

Vivendi’s new CEO may think that SFR is worth 20 billion Euros and as a shareholder I hope they are able to sell it for that price, but I am not counting on it, and I still think Vivendi is undervalued.

An Updated Sum Of The Parts Valuation of Vivendi, Buying More Shares, Also a Brief Update on $CMT

An Updated Sum Of The Parts Valuation of Vivendi

While I am waiting for Dole’s next quarterly report to come out so I can finish my updated valuations and analysis of it, I have been researching some new companies and reanalyzing Vivendi and Core Molding Technologies since new information has come out about both.

After revaluing CMT with updated quarterly numbers it is still selling at a very good discount to my estimate of intrinsic value and I may buy more shares at any time after hearing specifics from CMT management about how Navistar’s problems are affecting it.

When I did my first sum of the parts valuation of Vivendi in July I had no information or very limited information about the values of its subsidiaries: GVT, Canal+, SFR, and Universal Music Group.  Since that time some information has come out about three of those, which has helped clarify the sum of the parts valuation quite a bit.

Vivendi is still seeking to spin off or sell some of the below companies to unlock value in its shares.

  • An estimated sale price for SFR if Vivendi were to find a buyer is at 15 billion Euros
  • Canal+ 20% estimated price that Vivendi does not own has a conservative estimated IPO price of $900 million.  Vivendi owns 80% of Canal+ meaning conservatively its estimated stake in Canal+ has a price of $3.6 billion.
  • Vivendi is seeking 5.5 billion Euros for its 53% stake in Maroc Telecom.  Vivendi’s current 53% stake market price in Maroc Telecom is worth 4.72 billion Euros or $6.02 billion.
  • Vivendi owns 60% of Activision Blizzard which is currently worth $7.44 billion at market.
  • Vivendi is seeking at minimum 7 billion Euros for GVT.
  • I still cannot find any reasonable estimate of value for Universal Music Group so at this point I will still leave this out of my estimates.

Adding all of the above together and converting everything to US Dollars gets us to a total estimated price of $46.13 billion.  Vivendi’s numbers of shares are still 1.242 billion.

  • $46.13/1.242=$37.14 per share.

For the sake of being conservative and assuming that Vivendi will not be able to get the prices it wants from some sales or spin offs of some of the subsidiaries, which is already the case in a couple instances, I will knock off $7.14 from the per share estimate which gets us to an extremely conservative, probably too conservative, value of Vivendi at $30 per share, which still does not even include UMG or Vivendi’s cash and debt.

Here is my original Vivendi article from June for a comparison of the values then and now.

The $30 per share price is an absolute worst case estimate of value.  Today I bought more shares at $19.22 per share for all portfolios that I manage, meaning there is still a 36% margin of safety to my absolute lowest case value of Vivendi, and an almost 50% discount to my more reasonable estimate of value.  Neither of the two estimates even take into account Universal Music Group, Vivendi’s cash, or debt.

Vivendi now makes up about 25% of my personal portfolio.