Sportgamma
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Posts posted by Sportgamma
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Bank Nordik
http://www.euroland.com/omx_attachments/2012-08/493647-0-is.pdf
Market price (DKK) = 69
Book value = 200
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Sportgamma,
Do you have recommended local broker who handels US citizens accounts. Thx.
Packer
I'd say HF Verðbréf, they are independent (not one of the big banks), especially if you're considering participating in on of the currency auctions.
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We've only been over once so far & that was in summer. Holed up in Reykjavic to do the DD & sign-offs, then a self drive tour along the South & West Coast. Rather not say who we talked to - as Iceland is a VERY small place! The plan is to return/vacation every 18 months or so, over summer & winter.
We x-country ski in Southern Ontario, Algonquin NP, & Quebec. Occasional dog-sledding as well around Thunder Bay & Whitehorse.
I thought that you had gone x-skiing in Iceland, so I was wandering who your ski-guide was as I know a few (and as you say, its a very small place). I'd definitely recommend Jökull Bergmann (he's the only IFMGA Internationally certified mountain guide in Iceland and he is a member of the Association of Canadian Mountain Guides ACMG):
http://www.arcticheliskiing.com/en/media/videos
http://www.arcticheliskiing.com/en/media/photo-gallery/best-of-arctic-heli-skiing
And Arctic Adventures:
Well, if/when you're heading over, you're more than welcome to drop me a line if you want to catch a beer/coffee.
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Oddly we actually did use the central bank auction, & also hold some Marel.
As at Friday the FX rate was 126 ISK to the $C (around 150 ISK using the central bank auction), & Marel was at 135 ISK - or $C 0.90. OK, so you have to hold for a minimum 5 years - but we don't see any similar quality juniors about at comparable prices - even if the market falls off the fiscal cliff. Iceland is not that far away, the people are very friendly, & x-country skiing under the northern lights is pretty special.
Agreed on the Real Estate, but players who haven't failed by now are most likely not going to. We're on the property management side, & one of our partners has deep experience in the business.
With Marel the currency is not that much of an issue as the revenue streams are for most parts in foreign. Also the operational leverage mean that minor improvements in efficiency and/margins will have a big impact on the equity value.
Where did you ski and who was your guide?
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is there a moody's manual one can look at ?
What are the hassle that you are talking about ?
I have no idea if there is a moody's manual .
Hassle was not the right phrasing. I meant the extra research, dd and general involvement one has to put in when investing in a private company as opposed to buying shares in a publicly traded entity.
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http://www.bloomberg.com/quote/ICEXI:IND
You need to do your own dig, as the main limitation is where the very small universe is listed; trade scale/transaction cost is an issue as well. New investment is not subject to capital control, & it is possible to do Icelandic Kroner deals at better than the official exchange rate.
We hold a modest investment in fish, oil, & property management via a limited term partnership. When capital controls are eventually relaxed we will do very well.
There is also an article on Iceland in this months CFA magazine."Necessary Adjustments"
The central bank regularly holds a Króna auction (every two months or so) in which you can get Krona for a 20-25% discount:
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/disney-dollar-special-situation-(quiz-investment-idea)/msg84140/#msg84140
I´d recommend looking at Össur and Marel as those two are operating in global markets with 4-5 major players. If one is willing to go through all the hassle, there is also value to be had in private companies.
Fisheries are in a very uncertain state at the moment, due to government policies. Properties I think are still very irrationally valued, except maybe some unique/prime locations with very solid cash flows.
Gísli
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What I think truly makes Buffett unique (and this is a view that many others have expressed here on this board already on numerous occasions) are:
1. The robustness of his approach. He has been able to adapt his style/strategy each particular environment during his career. I think this is truly difficult because people in general are ignorant about how the environments effect when making decisions (Kahneman & Tversky, the basketball and gorilla test, etc. etc.).
2. His business acumen. Yeah sure, to do what he did you would "just" have to lever up for free and voilà. Is there any case ever of an insurance company that has been able to increase its business at that rate and to such a size without sacrificing profitability of its underwriting. Take Berkshire Re for example, Buffett actually had to spot the genius of Ajit Jain. Mr. Jain was someone who excelled at school, he didn't have his uniqueness written on his forehead.
Gísli
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Roger Lace
President, Hamblin Watsa Investment Counsel Ltd.
Mr. Lace is currently President of Hamblin Watsa Investment Counsel Ltd., a wholly-owned subsidiary of Fairfax Financial Holdings Limited, a publicly listed insurance holding company. In this capacity, he and his team are responsible for managing Fairfax’s global investment assets. He leads the equity management group in uncovering investment opportunities worldwide using the value investing approach.
He has served in the investment industry since 1975, initially receiving his training as a research analyst at Confederation Life under the tutelage of value investing specialist John H. Watson (cofounder of Sprucegrove Investment Management Ltd.) He subsequently worked in portfolio management at Scotia McLeod and has been a portfolio manager and principal at Hamblin Watsa since 1986.
He received his SB in management from the Alfred P. Sloan School, MIT in 1973, his MBA from Ivey in 1975, and CFA in 1979.
http://www.bengrahaminvesting.ca/About_Us/advisory_board.htm
2008 was another very good year for Hamblin Watsa’s investment results, even excluding our CDS position which is not included in the results shown above. These results are due to Hamblin Watsa’s outstanding investment team, led by Roger Lace, Brian Bradstreet, Chandran Ratnaswami, Sam Mitchell, Paul Rivett, Frances Burke and Enza La Selva.
http://advisoranalyst.com/glablog/2009/03/10/prem-watsa-letter-to-fairfax-financial-shareholders/
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As far as I know, Paul Rivett is managing the shop and B. Bradstreet is key member the team.
There is a former Mackenzie Cundill analyst working there:
"Wade Burton, a key fund manager in Mackenzie Financial Corp.'s Cundill Investment unit, is leaving to run money for Prem Watsa at Fairfax Financial Holdings Ltd.
"I'm leaving to take the [investment] craft to another level," the 37-year-old manager said yesterday. "If you get a chance to work with Prem in his prime, I don't think you have any choice but to do that."
As lead manager of Mackenzie Cundill Canadian Security and Mackenzie Cundill Canadian Balanced funds, Mr. Burton has been overseeing $2.4-billion in assets in addition to running other money at the Vancouver-based unit."
http://investdb2.theglobeandmail.com/servlet/ArticleNews/story/GAM/20090407/RFUND07ART1851
http://www.torontolife.com/features/2-billion-man/?pageno=3
I know from experience that they are extremely fast moving. I once made them aware of an investment opportunity outside of North America. Within the hour, Mr. Rivett had made contact and the same day I had a chat with a person at HWIC.
I've witnessed business managers have trouble deciding if they should take a cup of coffee, so this was truly amazing.
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Gio,
I believe they're hedged on both the up and downside (no net exposure) on equities. Can you help clarify on your statement that they will benefit from their investing wisdom?
The equity hedge is a short position on the S&P500 and the Russell2000. A very big chunk of their portfolio is in companies such as RFP, RIMM, LVLT and BOI. There is no reason that the market value of these particular investments will move in tandem with the broader market.
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No!!!
I have otherwise 100% of my money in BAC.
This isn't about guessing which company has a lower chance of dropping, this is about avoiding total armageddon in my portfolio if for some reason BAC goes towards zero.
Like you, I prefer to spread the downside.
Unlike you, I don't want to diversify the upside.
Man, have you got some cojones! With your protections, how much would you estimate the downside to be, given a worst case scenario?
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It is my experience that economic theory (at leas macro) is often aimed to fit a theory to explain some prior event and then test the "fit" with some econometric analysis. What I truly like about the Austrian school is (1) its emphasis of not knowing better (let the market decide) and (2) always be aware of perverse incentives. When I look at MMT discussion being cited on the thread, it just (1) seems risky (as Moore points out, when do you know when the deficit is to big? When it is to late? In that case your passing the bill to your children) and (2) it is only applicable in a leading economy with a strong currency (if the economy is to small a major risk would be a sudden stop situation).
Deficits, come about when we spend more than we take in, both on a governmental level (budget deficits) and on a private level (trade deficits). When we print money to subsidize these structural flaws, there are three ways we get screwed down the line.1) Our productivity goes down as our debt load rises.
Moore, I am a bit confused by you connecting productivity and debt. As I see it, you could for example increase productivity by adding debt and reducing labor. Perhaps you are talking about household debt? Could you please elaborate?
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Any more clarity as to what you were talking about?
Sure, Disneyland is Iceland
Some info for those interested:
The prelude
http://en.wikipedia.org/wiki/2008%E2%80%932012_Icelandic_financial_crisis
http://www.imf.org/external/np/seminars/eng/2011/isl/pdf/jk.pdf
http://sedlabanki.is/lisalib/getfile.aspx?itemid=8715
http://www.imf.org/external/pubs/ft/scr/2012/cr1289.pdf
http://sic.althingi.is/pdf/RNAvefurKafli21Enska.pdf
http://eng.efnahagsraduneyti.is/media/Acrobat/Future-Structure.pdf
http://www.imf.org/external/pubs/ft/scr/2012/cr1289.pdf
The currency auctions
http://www.worldcommercereview.com/publications/article_pdf/601
http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=9487
Sample of companies with most of value creation in currency
http://www.marel.com/Investors/?source=marel-header
http://www.ossur.com/?PageID=12532
http://www.ccpgames.com/en/company/about-us
Other stuff
http://icelandicecon.blogspot.com/2012/03/historical-inflation-in-iceland.html
http://icelandicecon.blogspot.com/2011/11/icelandic-krona-and-icelandic-debt.html
http://www.rtbot.net/play.php?id=JDcDv4Vthbo
http://www.sedlabanki.is/uploads/files/mb001_8.pdf
http://www.invest.is/resources/Files/DoingBusinessInIceland_April_2011.pdf
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It's obvious that you are talking about how the coal companies used to issue script to their employees in their company towns. :D
muwahahaha.
I´m guessing that was sarcasm :D
Anyways, that would be a no.
By the way, I really enjoy your blog, especially the Syms stuff.
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The Arsenal manager speaks with the authority of one who has built and financed one of England’s finest stadiums, produced an immoderate harvest of outstanding players and qualified for the Champions League for the past 15 seasons while making his club a profit every year. And all without the intercession of a sheik or an oligarch, the kind of benefactors for whom money is not a limitation, nor even a consideration. Inevitably, his prudence renders him vulnerable to the shallow clamour of those who demand cups and trophies, short-term prizes delivered by the power of the purse.
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For the sake of entertainment I have decided to dress this investment idea up as a quiz. It is perhaps a bit far-fetched and it does not have a ticker symbol, therefore I will post it in the general discussions category.
So, without further ado:
In 1981, the residents of a small far away land, took up a brand new currency. We shall refer to this currency as the Disney dollar and therefore refer to this little land as Disneyland. There is a deliberate reason for calling it a Disney dollar. The fact is that the Disney dollars aren't really a currency, for one is not able to use Disney dollars anywhere else than in Disneyland, nobody would accept it elsewhere. So in fact, one could assume that the Disney dollar is more of a derivative or a function of (1) how well Disneyland conducts its business and the amount of Disney dollars in circulation. So, therein lies the predicament. A few years back the upper management of Disneyland thought of a brilliant marketing plan. In order to attract more people to Disneyland they started selling pre-payed Disneyland cards to potential customers. Tourist agencies stocked up on the cards and the upper management was all to keen on offering them preferable terms. In fact the campaign went so well that they even sold the cards to people who never even intended to go to Disneyland.
For the people working in Disneyland this had drastic consequences. Since they effectively got payed in Disney dollars, the only way for them to spend their Disney dollars was to knock on the doors of the upper management and ask for currency in exchange for Disney dollars. During the boom, the upper management offices became flush with currencies as the sales of the pre-payed cards skyrocketed. The upper management was all to keen on buying Disney dollars from employees in exchange for currencies at rates previously unheard of. Some of the younger and more ambitious of management came up with a plan to pay employees a lump sum in advance, allowing them to invest in commercial slots or even just to upgrade their sleeping chambers at the employee residential campuses. The only catch was that the payment schedule of the advance payment was linked to the future exchange rate of the Disney dollar with outside currencies.
Needless to say, when it became clear that the people of Disneyland were in fact living inside a bubble, all hell broke loose. The tourist agencies lost their most of their advance payments but still there was an overhang of about about 500 billion Disney dollars. The treasurer of Disneyland had received requests from "off-shore" dollar owners to sell in exchange for currency. The treasurer´s predicament was that if he would exchange all those dollars at once the value of the Disney dollar would collapse. That by itself would not be all to bad, as Disneyland would become cheaper to its customers and gain competitive advantage. The catch was that (1) since most of the employees had already gotten payed in advance on a much higher exchange rate, they would have to pay back for investments that they bought for bubble prices with Disney dollar future exchange rates and (2) most of the necessities that the employees needed they had to buy outside of Disneyland.
From an operational standpoint Disneyland was doing well as its income statement was showing decent profits, but the Disneyland treasury simply did not have the currency it needed to pay out the so-called "snow-hang" of "off-shore" Disney dollars without a drastic devaluation. So the treasurer effectively split the Disney dollar into (1) the new Disney dollar and (2) the "off-shore" Disney dollar that was waiting to get out.
Now the treasurer had to solve three problems. First of all, he had to make sure that the "off-shore" dollars exchanged hands to parties who intended to keep them in Disneyland. Secondly, he had to make sure that other tourists agencies would not become afraid of dealing with Disneyland. The third problem was that he had to make sure that the employees would not participate in exchanging Disney dollars for currency in order to buy off-shore Disney dollars for a much lower exchange rate. So, the treasurer convinced the the rest of upper management to place two new rules. Disneyland employees were strictly forbidden to buy off-shore Disney dollars and would be held accountable if they were caught doing so. If an employee wanted to exchange his hard earned Disney dollar he would have to write a detailed description on how he was planning to use that currency. Employees from the reception where transferred to the treasury to evaluate each submission. The second rule was that every two months the treasurer would hold a Disney dollar auction (which it named "the investment route") in which employees and tourists alike would be able to bid for a minimum of €9.000 worth of Disney dollars if they would pledge to not exchange them for currency for at least five years. The treasury will review each bid and rule if it fits the criteria or not. What the investor receives when he bids in the Disney dollar auction is one half new Disney dollar for the official treasury rate and one half "off-shore" dollar which is priced roughly at half of the treasury rate. This would effectively give the investor a ~25% discount on the treasury rate (it is not possible to simply contact an owner of "off-shore" dollars, buy at the off-shore rate and bring to Disneyland, for it is stuck at the treasurer´s office).
The investment idea
Obviously the bidder in the auction is taking on considerable risks, because he does not know the real rate of the Disney dollar. He does know that there will be pressure on the exchange rate until the "snow-hang" is cleared, but he does not know how long it will take to clear it. A value oriented investor will likely conclude that it is too-difficult and potentially a value-trap. But once the eclectic value oriented investor digs a little deeper he will find that there are assets within Disneyland which value have no direct relationship to the Disney dollar. In those cases the Disney dollar is merely an manipulated exchange rate for an asset that has value measurable in real currency. For there are operations within Disneyland that have revenue streams that are mostly (+90%) in currency. Hell, there even is an operation that is a top 5 producer in an entrenched market in which Berkshire Hathaway recently bought into by acquiring a competitor.
The eclectic value investor would be able to buy an assets for 25% discount, knowing that if the Disney dollar devalues, the value of the assets will be unaffected. Of course, other risks will remain (business, management, industry etc.) but the exchange rate will not be one of them.
I´m curious if anybody gets what I am referring to.
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The main benefit that I see in copying is if there is a good chance that the investor that you are copying is a successful activist as it could give you more certainty on how a worst case scenario would look like.
I also thought this quote might fit the discussion:
Neuroscientists have discovered an alarming aspect of our interactionwith “experts.” Using MRI technology, they busily recorded brain activity while study participants made simulated
financial decisions.1 During each round, the participants had to choose between receiving a risk-free payment and
trying their chances in a lottery. In some rounds they were presented with advice from an “expert economist” (surely
an oxymoron if ever one existed) as to which alternative was preferable.
The results of this experiment are worrying. Expert advice attenuated activity in areas of the brain that correlate with
valuation and probability weighting. In other words, the expert’s advice made the brain switch off some processes
required for financial decision making. The players’ behaviour simply echoed the expert’s advice. Unfortunately, the
expert advice given in the experiment was suboptimal, meaning that participant
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On the 1st of June 2011 I took a small position in Leading Brands (lbix) at $2,55 US a share.
http://lbix.com/company/investors/default.asp
What initially caught my attention was:
- They were trading well under book
- A month earlier they had announced an increase in their repurchase program by $1,000,000 (market cap was around $10 m.)
The Company’s Board of Directors has increased the amount of its share repurchase program as it believes the price of its shares remains undervalued. As at the date of this release the Company has $1,200,000 US remaining authorized in its share repurchase program. Since the fall of 2009 the Company has repurchased 445,000 common shares (calculated on a post consolidation basis), of which 32,000 repurchased shares have not yet been returned to treasury. As at quarter end, the Company had 3,579,000 shares outstanding.http://lbix.com/company/news/pressrelease.asp?id=176
- In the second quarter of 2010 they had taken a hit on earning with a one-time charge on a stock compensation plan
As explained in our July 1, 2010 Q1 news release, the Company vested certain stock options in order to dramatically reduce future SBC expenses and eliminate the volatility caused by the variable pricing formula mandated under GAAP using the Black Scholes model on those options. Consequently, the Company recorded a onetime SBC charge of $948,000 in Q2. Therefore, YTD net loss including SBC was $141,000 or $0.04 per share as compared to a net income including SBC of $1,012,000 or $0.25 last year.http://www.globenewswire.com/newsroom/news.html?d=202652
When I took a closer look at the compensation plan, it actually seemed reasonable as a good portion had an exercise price at $3 and above.
http://www.sec.gov/Archives/edgar/data/884247/000106299311002412/form20f.htm
My initial thesis:
Management´s incentive is to allocate capital in a way that increases per share value as safely as possible. At the current price, share buybacks will not only increase the likelihood of performance options getting in-the-money, but will also increase the % share of ownership of management.
What happened?
- Lbix has used its free cash flow to buy back shares and pay down almost its entire long term debt ($2,5M)
- In may 2012 the company (probably because of the illiquid nature of the stock) announced a dutch tender offer with an cash offer ranging between $4.10 and $5. The resulting offer came out at $4.10.
http://finance.yahoo.com/news/leading-brands-inc-announces-intention-123000551.html
http://finance.yahoo.com/news/leading-brands-inc-announces-final-231158876.html
- As of today, the stock is trading at $4.20 and book value per share is about $3.94. I get a conservative estimate of owner earnings between $0.4-0.5 on a per share basis.
My dilemma:
- The FCF has been way better than I anticipated, causing me to stay longer than I was planning (I had $3.5 as an exit point). However, the benefit of buybacks is gone at these prices.
- Today, the company issued an early warning report:
VANCOUVER, British Columbia, July 26, 2012 (GLOBE NEWSWIRE) -- Leading Brands, Inc. (LBIX), North America's only fully integrated healthy branded beverage company announces that its Chairman and CEO, Mr. Ralph McRae, has acquired ownership and control of an additional 2.2% of the issued and outstanding common shares of Leading Brands, Inc. (the "Company").Mr. McRae now has direct and indirect ownership and control of 180,847 common shares and 290,500 stock options that are vested or vest within the next 60 days. In total, this represents approximately 14.4% of the issued and outstanding common shares of the Company on a partially-diluted basis, assuming exercise of all of Mr. McRae's stock options.
Ralph D. McRae acquired the purchased shares for investment purposes and may in the future acquire or dispose of securities of the Company through the market, privately or otherwise, as circumstances or market conditions warrant.
http://finance.yahoo.com/news/leading-brands-announces-early-warning-123000313.html
I would be very interested to hear the opinions of the members of the board, as to which scenarios they see unfolding in the near future and which consequences those scenarios might have for me as a shareholder:
A few options
- Is management aiming at going dark? And if so, should I be worried that they might try to rip me off?
- Is management aiming at taking it private? And if so, should I be worried that they might try to rip me off?
- Are they beefing up their stake before a buy-out?
- Business as usual.
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One interesting perspective:
CEO Ralf McRae charges lbix $ 528,000 p.a. in "consulting fees" through a company of his. Lbix has a market cap of $10-13M and 17.78M in revenues.
Prem receives C$600,000 in annual salary as CEO and Chairman of Fairfax, with a market cap of 8.0B
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Hi Giofranchi,
Just curious, as you are from Italy: Do you have an opinion on Exor?
Best regards,
Gísli
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CEO letter with notice of annual general meeting (May 2012)
CEO letter with notice of extraordinary general meeting (October 2011)
Enclosed presentation:
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It is a mistake to talk about the problem as it is framed in the press. The problem is not about countries. During the boom some people got extremely rich and were able to guide government policy to their benefit. They are using that power now to get innocent people who happen to be taxpayers in countries like Spain and Ireland to pay higher taxes now and in the future to bail out the mistakes of these rich folk.
I disagree with you. I´m more of the Popper-ian perspective (http://lachlan.bluehaze.com.au/books/popper_open_society_vol1.html). Our brains are hardwired to look for cause-and-effect connections and therefore it is logical for us look for some protagonist with a bad motive if something bad happens. But bad things can happen even if the ones involved had good intentions.
I live in Iceland and after the collapse public debate has been severely distorted. A large part of the population simply assumes that if someone is wealthy he must be involved in something criminal or at least immoral. It is a strange atmosphere and one in which totalitarian views thrive in. It has come to a point that the authorities are allowed to wiretap people who accused of crimes against property (as opposed to wiretapping people who are under suspicion of committing a crime).
In this case, I am of the opinion that it is indeed about countries and a system put up for the wrong reason and without taking the possibility of very bad outcomes fully into account.
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In order to understand why EMU happened, we often turn to the familiar Mundell-Fleming monetary policy trilemma. Given intra-European capital mobility, the decision by a subset of EC members to move to EMU was a logical, if radical response to the challenges posed by this trilemma. However, the institutional framework of EMU is seriously flawed. For decades economists have argued that fiscal union was a desirable, and perhaps indispensable, complement to EMU. What we now know is that a common eurozone framework for regulating financial institutions, and dealing with the consequences of their failure, is equally important. We have a monetary union with neither of these complementary institutions, and it is clear that this architecture is not fit for purpose. How did we end up here, and what happens now?
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The downside of being so rhetorically aggressive is that wounded parties don't want to listen:
Paul McCulley held a similar viewpoint and received walking papers from PIMCO for his perspective. Every country can point to unique villains (Greenspan) so it takes a while to see common threads.
I think the central theme here is the mundel-fleming trilemma. As you do not have a floating currency, you have to look at the flow of funds between countries within the Euro.
This presentation from Richard Koo is very helpful (he talks about the Eurozone after 12 minutes):
Sardar Biglari: I'm calling some of you out on this guy.
in General Discussion
Posted
I fail to see how it changes the probability of a margin call, that sns operations are offered as a collateral rather than BH as I would think that what determines the margin call is the market price of CRBL. Could you elaborate?