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Opinions on TSE:AAB?


Bastida
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Hello Gentlemen, I usually don't post much because I'm basically in learning mode about investing, but I have a long term commitment towards getting to really grasp this stuff :-)

 

I've made some good investments (FFH @260USD, UNH @22USD, AAPL@91USD) and a few not so good (BAM @35USD, GE @21USD).

 

I usually employ filters (FT, Finviz) to find companies for further research. In spring last year I found KS (formerly KPPC) at around $2.45. I finally decided not to invest on it, not because I thought it was a bad idea, but out of a lack of confidence in the analysis I made. It now trades above $9.

 

Right now I'm studying Aberdeen International (TSE:AAB). It seems, at first sight, deeply undervalued. Does someone here have an opinion on this stock?

 

I'd like to thank Mr. Parsad for the privilege of being member of such an enlightening forum.

 

Best regards,

Bidatzi M. Bastida.

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Keep in mind that this is effectively a mining mutual fund, with a good chunk of its investments in the more illiquid warrant market. Nothing wrong in that; but be very sure that 1) you understand why the business model pushes towards warrants, 2) you fully understand how warrants work, 3) you know the emperical data surrounding warrants, & 4) you've looked at a time series of expected payoffs. 

 

When learning most folk are better served by buying the highest quality possible, as the primary risk is that you overpaid relative to the near-term prospects. The solution is often 'patience', & simply holding for a longer period. Your 'moat' is a liquid market to sell into should you need to, & a reasonable expectation that an investment error could cause you to lose no more than X% of your investment.

 

Long term you've probably selected well, but this is not something for the faint-hearted.

 

Best of luck to you

SD

 

 

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  • 2 weeks later...

 

Keep in mind that this is effectively a mining mutual fund, with a good chunk of its investments in the more illiquid warrant market. Nothing wrong in that; but be very sure that 1) you understand why the business model pushes towards warrants, 2) you fully understand how warrants work, 3) you know the emperical data surrounding warrants, & 4) you've looked at a time series of expected payoffs. 

 

When learning most folk are better served by buying the highest quality possible, as the primary risk is that you overpaid relative to the near-term prospects. The solution is often 'patience', & simply holding for a longer period. Your 'moat' is a liquid market to sell into should you need to, & a reasonable expectation that an investment error could cause you to lose no more than X% of your investment.

 

Long term you've probably selected well, but this is not something for the faint-hearted.

 

Best of luck to you

SD

 

 

 

I happen to own AAB for quite a while. It is true this is a closed-end pool of investments. However, it has very little resemblance to a mutual fund. To understand AAB, you have to have an idea on the economics of their deals. A majority of AAB's investments are in the junior sector and it is out of most people's circle of competence to invest in individual names. It takes enormous knowledge and 'connections' to identify the right ones and that makes it an ideal vehicle for individual investors who are interested in this sector, although the service is not cheap.

 

The ultimate concern of this stock is the sale of the royalty. If a asset takes 18 years to realize its full value, you can count that a lot will happen in those years and in fact, the argument between AAB and Simmers is a major below to the 'book value' of the royalty. I have never felt comfortable with the valuation of the royalty BUT the outcome can be favorable to AAB, albeit the probability is low IMHO. There are a lot of information on the Stockhouse AAB board and you can throw me a message and I will see what info I have about AAB on hand.

 

SD, I have a high respect for your words and opinions on this board. But AAB does not fit into traditional class of investments and deserve a closer look.

 

Best,

 

BXD

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Looks like a quasi private equity/venture capital fund company.

They are an early stage investor in commodities and resources companies, which means alot of the things they are investing in are 'exploratory' and speculative. There are hardly any producing assets. If you look at the investment portfolio it should show you this ... so what you're seeing on the balance sheet probably isn't 50M in investment assets at all. It's their valuation of it.

 

At the end of the day you're going to have to trust management with their judgment in picking the right resources - whether they are of any quality and whether they have the potential to be scaled up to production.

 

Having good resource assets is one thing, but getting contracts and getting it up to the stage of production and producing revenue is another. There are a multitude of hurdles to get natural resource assets to the stage of production; unforseen production problems, delays, financing issues, farmout agreements, lease expirations etc.

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