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2010 Biggest Hits, Top Flops and 2011 Top Idea


Myth465
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As the title says.

 

For me my biggest hit in 2010 was ATSG. It went from $2 to $8, and I was adding along the way.

My biggest flop was easily KSP. Very obvious situation overlooked with them.

 

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Going forward my top idea for 2011 is probably ATPG. I also feel good about ATSG, SD, and WDC.

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Interesting topic.  My biggest position flops and hist can from the same industries.  Hits SGA and ACME up 93% and 124%, respectively and flops LNET -27% and SALM -43%, respectively.  I averaged down on the flops so am above cost basis on both.  On a % basis, 100% loss on a small position in Takefuji (when will I ever learn about leverage financials at least it was a small position) and 124% gain in ACME and 117% in a small position in Contact Exploration.

 

Top 2011 pick don't know but cheapeast stocks in order include LNET, SSW, SURW, NRG, SALM, MGAM and SGA.  All under 4.5x FCF.

 

Packer

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This last year was good to me... I didn't have a single stock that was down. Best performer was CTHR, which, I started buying in late 09, averaging in at ~60 cents/shr... Sold it at various times, with an average sale of something like 2.60? "Worst" performer was VIFL, which I bought and sold 2 separate times in the year. Both times I netted something like 25% in a very short period of time.

 

I am pretty sure that this is about the best year that I will ever have. I was very lucky.

 

Since I love nano-caps (and so far, try to not do much with companies over $25 million in market cap)...

 

As far as top ideas, I have been harping on International Baler (IBAL); a nano-cap which is more or less a net net, with no debt, they effectively have a p/e of 8. I love the business that they are in, and think that they are a decent bet in the face of inflation OR deflation (deflation, their cash is more valuable, inflation, they can export more, plus, they make things that help people scrap commodities). I look for them to be rid of their NOLs soon, and won't be shocked if they put their dividend back into effect in the near future.

 

Another company that I have been harping about is Nevada Gold (UWN)- a small casino operator; they are trying to lever themselves up to the hilt, but, it seems to be on terms that are pretty favorable to them. I don't see them going bust, and the up side seems to be huge. They report earnings and have a conference call on Tuesday, and their new acquisition will be included in the results for the first time. Since this company is changing so quickly, I am pretty excited to hear what is going on with them!

 

There are a lot of others that I find interesting, but, these are the 2 I find to be the most intellectually stimulating (which probably says a lot about me!).

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Our biggest hit with > 100% APR was: (Drum roll please) BRK!

 

We were in it with most of our available cash just before it became official that BRK would become part of the S&P500, and then out quickly.  We did an encore just before their admission to the Russell indexes with another quick exit.

 

Our biggest flop was selling Delticom too early for a small, quick gain by failing to understand it fully.  This is especially regrettable because I did understand their business.  The problem was failing to understand what a private buyer (Amazon) might be willing to pay to take them out.  I sold based on conventional value investing metrics getting a little out of the margin of safety zone.  However,  Amazon's acquisition of diapers.com should have trumped that.  That type of possible interest should have allowed for a wider margin of safety.

 

Our potentially best idea for 2011 is also the potentially worst idea: a potential ten bagger that could also be a big loser, even a zero.  In my subjective opinion, the probability of a big gain is greater than a big loss, but the probability of a big loss is not insignificant.  It's slow to accumulate, so we'll announce what the prize (or the booby prize) is in about two or three weeks.  It 's not a microcap or even a smallcap, so there should still be enough available then for some of the smaller portfolios that may be interested because it seems to be off the radar.

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Our biggest hit with > 100% APR was: (Drum roll please) BRK!

 

We were in it with most of our available cash just before it became official that BRK would become part of the S&P500, and then out quickly.  We did an encore just before their admission to the Russell indexes with another quick exit.

 

Isn't APR kind of meaningless here? Imagine that I bought BRK and sold it one day later for a 1% real gain. The effective APR gain is 3678%

 

Perhaps you did not mean to refer to APR?

 

 

 

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Hit: +215% in Fortress Paper (FTP/TSX). Sold out at $30/sh, bought at avg cost of ~$7 in 2008.

 

Flop: -50% in China 3C Group (CHCG/OTC). Still holding at $0.225/sh, bought this year at avg cost of $0.48. Trading at half of net cash per share but I didn't learn until later that the stockholders only have an economic interest in the earnings of the underlying business, not the net assets.

 

Top idea: New Frontier Media (NOOF/Nasdaq). Trading below net tangible asset value. Decent business in adult film production and distribution (better than Playboy at least). Now trades at $1.80 but I think the shares are worth $5-6 when earnings normalize.

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Hit: +215% in Fortress Paper (FTP/TSX). Sold out at $30/sh, bought at avg cost of ~$7 in 2008.

 

What attracted you with Fortress Paper, I remember I read the prospectus and financial reports during 2008 and I could not find any compelling reasons to buy. It happened that the CEO made some very smart moves but how could you know in advance?

 

Top idea: New Frontier Media (NOOF/Nasdaq). Trading below net tangible asset value. Decent business in adult film production and distribution (better than Playboy at least). Now trades at $1.80 but I think the shares are worth $5-6 when earnings normalize.

 

Aren't you worried about their production business it seems to me like a potential cash drain. It's not in their core competencies and very volatile business.

 

BeerBaron

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Our biggest hit with > 100% APR was: (Drum roll please) BRK!

 

We were in it with most of our available cash just before it became official that BRK would become part of the S&P500, and then out quickly.  We did an encore just before their admission to the Russell indexes with another quick exit.

 

Isn't APR kind of meaningless here? Imagine that I bought BRK and sold it one day later for a 1% real gain. The effective APR gain is 3678%

 

Perhaps you did not mean to refer to APR?

 

 

 

 

 

Nope.  The total gain compounded for both round trips was a little less than 30%, but both holding periods added up to about a quarter. 

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Our biggest hit with > 100% APR was: (Drum roll please) BRK!

 

We were in it with most of our available cash just before it became official that BRK would become part of the S&P500, and then out quickly.  We did an encore just before their admission to the Russell indexes with another quick exit.

 

Our biggest flop was selling Delticom too early for a small, quick gain by failing to understand it fully.  This is especially regrettable because I did understand their business.  The problem was failing to understand what a private buyer (Amazon) might be willing to pay to take them out.  I sold based on conventional value investing metrics getting a little out of the margin of safety zone.  However,  Amazon's acquisition of diapers.com should have trumped that.  That type of possible interest should have allowed for a wider margin of safety.

 

Our potentially best idea for 2011 is also the potentially worst idea: a potential ten bagger that could also be a big loser, even a zero.  In my subjective opinion, the probability of a big gain is greater than a big loss, but the probability of a big loss is not insignificant.  It's slow to accumulate, so we'll announce what the prize (or the booby prize) is in about two or three weeks.  It 's not a microcap or even a smallcap, so there should still be enough available then for some of the smaller portfolios that may be interested because it seems to be off the radar.

 

 

Yep, I swung twice at the BRK hanging curveball over the past year and hit two singles.  I bought at about $3250/sh and again after the split at about $68/sh.  Still holding, but on an annualized basis, it has amounted to a couple of nice little additions.

 

SJ

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Our biggest hit with > 100% APR was: (Drum roll please) BRK!

 

We were in it with most of our available cash just before it became official that BRK would become part of the S&P500, and then out quickly.  We did an encore just before their admission to the Russell indexes with another quick exit.

 

Isn't APR kind of meaningless here? Imagine that I bought BRK and sold it one day later for a 1% real gain. The effective APR gain is 3678%

 

Perhaps you did not mean to refer to APR?

 

 

 

 

Talking about APR, just for fun thought, I bought AMA.ax @ less than 0.044 and now it is 0.013. All happened in 3 months. LOL

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Beerbaron: I was attracted to FTP after reading the prospectus and seeing their pro forma financials. It showed the insurance value of their two paper plants at the time. After doing further research, I had good reason to believe their property was significantly understated on the balance sheet. Also the stock was trading at a ridiculously low EV/EBITDA multiple relative to similar companies (less than 3x at one point). This analysis was prior to the announcement of the Thurso mill acquisition - which was a bonus and not factored into my intrinsic value estimates.

 

CHCG was a bone headed move. I bought it at a slight discount to net cash and thought I was getting a free call option on the reformed consumer electronics retail business. The company also bought a profitable logistics business that minimized cash erosion. However it doesn't matter as CHCG stock holders don't have any claim on the underlying assets. This was a lesson learned the hard way on investing in US traded Chinese companies.

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My best idea/investment in 2010 was either marrying up...

Or an 8 acre piece of highway front land in a $90k income/household community in Ontario (purchased at $7k/acre). It's about the 2nd or 3rd best piece in the area and I'm not using it for it's highest utility, but it's still a 20-40 bagger. And very low risk. I got back 25% of my capital in 2 days work selling top soil from it to contractors.

The land is money in the bank...

 

Worst was a company that I won't mention (out of embarrassment) that's business continued to crater and their debt load is coming home to roost. I was lucky to get out at a 20% loss when I realized the '07-'08 period wasn't going to come back for them, even though they're in food and it should have!

 

Best idea for 2011? Haven't had it yet! Truthfully I have three but they hardly trade and I'm the bid! One is semi-private (sort of trades) and at 1x aftertax income, no debt.

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Guest dealraker

Biggest hit: Buying a reasonable amount of AIG- largest holding in my wife's IRA also at $25.

 

Biggest flop: Probably will be selling 80% of my Fairholme Fund at $35 per share after holding it since a month or so of its beginning.

 

Don't even ask why I did the combination of the two above.  I can't explain it.

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Biggest flop: Probably will be selling 80% of my Fairholme Fund at $35 per share after holding it since a month or so of its beginning.

 

I don't get it, how is it a flop if you held since around inception? Are you selling because of the size of the fund?

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Guest dealraker

Maybe I can explain it?  In today's world of being able to see what others do makes it somewhat less necessary to invest with them.  When Fairholme bought St. Joe at the prices they did I just found it revolting.  I have a friend who is roaming around Florida buying distressed real estate in first class developments at prices that (to me) indicate St. Joe and its land locations has value as timberland only for the next 20 years.   New developments at top dollar prices?  When?

 

All the media coverage of Berkowitz just sends me to the sell block just like it would with a stock.  I've sold most of my Berkshire stock that I've held for years also in 2007 and this year.  I believe very strongly that at Buffett's death, even before, that Berkshire is going to sell at a very wide discount to its value much like Loews.  I also expect Berkshire to begin having little blow ups in some of its operating divisions after Buffett and boy-oh-boy will the media love to cover these issues and it won't be as kind as the Net Jets stuff.  They will hammer them; just pound the hell out of them.

 

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Good point - time to buy BRK is when Buffett passes.  Pains me to say that.

 

Loews does have a nice discount!  Just wish it would narrow.

 

Wonder what a future BRK will look like?  Since it will be tougher to invest their capital when they are generating $20B in FCF per year at some point - dividend?

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some of its operating divisions after Buffett and boy-oh-boy will the media love to cover these issues and it won't be as kind as the Net Jets stuff.

 

The NetJets thing was made up by Alice Schroeder for the most part. I had a friend who used NetJets recently ( last few months ) and he said it was the best flying experience he ever had. And this guy flies a lot to Europe and Asia on business.

 

If BRK is able to reinvest its vast cash hoard in more acquisitions ( GE is paying back, Swiss Re is paying back and soon cash will be at 40B+ ), it could be a great buy. I have eliminated my BRK holdings in non taxable accounts but I won't bet against the best capital allocator there is.

 

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Largest flop of 2010 was GXDX.  In at $29 watched it go up to $38 then crash down to $17.50 where I sold.  I learned to never invest in a business model that can be copied easily (no moat). 

 

My entry point on BAX at $56 was pretty terrible.  But I had plenty of time to get my average down to $44 when it went to $40.  I am still holding BAX.

 

MFRI was my biggest winner with a cost average of $6.30. If the price of oil stays high this little company can earn a $1 per share and is still trading below a TBV of $11.50.  I am looking for this to return to $15 in early 2011.

 

My recommendation for 2011 is ESI.  If the government doesn't hurt them, ESI will be going back over $100 for a easy double.  If their bottom line is slashed I don't see much downside at the current market price. 

 

 

 

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While Lowes always trades at a discount to sum of parts, its operating businesses are far inferior to those owned by Berkshire. So, in some sense these are two different companies. Lowes is more a Ben Graham play whereas Berkshire is becoming more and more like a company Phil Fisher would invest.

 

Full disclosure: Long Berkshire and Lowes.

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While Lowes always trades at a discount to sum of parts, its operating businesses are far inferior to those owned by Berkshire. So, in some sense these are two different companies. Lowes is more a Ben Graham play whereas Berkshire is becoming more and more like a company Phil Fisher would invest.

 

Full disclosure: Long Berkshire and Lowes.

 

Careful with your spelling...Lowes is the home improvement retailer. I assume you're referring to Loews, the hotel & insurance, etc company.

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