What are you buying today?

[oplia]

RCII trades at 12% spread to acquisition offer. Rejection by the board would indicate BoD's (controlled by activist investor) conviction in turnaround and far higher valuation. So hard to see reasons for such spread to exists.

More detailed discussion here:

https://www.specialsituationinvestments.com/2018/02/rent-a-center-rcii-expected-acquisition-60-upside/

 

I posted the above few days ago. Today's news RCII agreed to be acquired for $15/share - much more favorable outcome than expected.

[petec]

CTL & DC/A.

[CorpRaider]

VXUS, SPDW, IVAL, FNDF

[Dynamic]

I've sold my entire Apple (AAPL) position today at around $188.42 USD (£140.73 GBP) leaving me about 28.4% cash (previously 0.13%), 68.4% BRK.B, 2.2% my spouse's ShareSave employee option scheme, and a tiny few dribs and drabs in HPE, HPQ etc.

 

This is not a bearish move on AAPL, although I may have estimated that I was selling near a short-term high, hoping not to lose too much in the many days it may take to shift the proceeds to their new home and possibly reinvest at least some of it into AAPL.

 

I wanted to sell a small proportion of my BRK.B holding to add to the AAPL proceeds I want to shift to its new home, hopefully repurchasing most or all of that BRK.B in a few days within this new account. I decided I'd hold out until BRK.B was a little higher before doing so, as it seems particularly cheap right now.

 

So I figured I'd take a bit of a short-term punt and put the AAPL proceeds into BRK.B while it was so cheap and maybe gain a couple of percent with luck without too much downside risk and no tax consequences, before I aim to make the sale and transfer the proceeds to their new home.

 

Uncharacteristically, just this once, I'm acting like a day-trader! I won't make a habit of it!

 

I sold that short-term BRK.B over a week ago at a bit over $194, roughly break-even measured in GBP (the exchange rate has moved quite a bit though). I then waited for it to settle, withdrew the money in GBP, and transferred it to the alternative investment I mentioned and also have some in our new, more flexible, but not tax-sheltered joint investment account where I can hold currencies like USD, use limit orders etc., file a W-8BEN to reduce my withholding tax and even employ margin if I wish. The currency moved against me a little at the time.

 

Today I restored much of my BRK.B position at an effective price of about $189.84, reducing my cash to essentially zero.

I made some losses in the GBP:USD exchange but offset them by the drop in BRK.B stock price, so my brief time out of the market having to withdraw and transfer cash is pretty much a wash, maybe fractionally in my favour.

 

Effectively over about 2-3 weeks (ignoring the initial money taken out of the picture for my alternative investment), the weightings among my discretionary stock portfolio have changed as follows:

 

WAS: about 26% AAPL & 70% BRK.B + 4% others

NOW: exactly 0% AAPL & 96% BRK.B + 4% others

[SafetyinNumbers]

Added some PIF.TO today.

 

The stock has recently been weak based on unrest in Nicaragua. There are a multitude of reasons why there is unlikely to be a nationalization or impairment of the asset but uncertainty often provides opportunity.

 

Ironically, the company's financial and operating performance is currently the best it's ever been and the stock is trading around 4.3x EV/EBITDA 2019E EBITDA. which is pretty low for a renewable asset with a PPA. Every multiple point increase is worth about C$5/share.

 

I attended the AGM today and management seems to be considering all of their options for their extra cash, including a NCIB/SIB and investing in projects outside of Nicaragua (this is something they have talked about for years so it's not a reaction to the events in Nicaragua).

 

They also maintained that they will keep a 40-50% payout ratio and move towards a US$1.00 dividend from US$0.60 currently within the next 12-18 months which is about a 10% yield at the current share price/exchange rates.

 

They are reporting earnings in the second week of August so expect updates on all of these initiatives at that point.

[John Hjorth]

I added a bit to BRK.B today - not much though.

 

- - - o 0 o - - -

 

Dynamic, congratulations on your very nice gain on AAPL. I have tried to understand your recent moves of capital between your taxable sphere and your tax deferred sphere. I simply don't understand it yet, despite I have tried to read up on the available UK schemes for you and your wife. I would really appreciate, if you would take the time - when possible, and when it fits for you - to elaborate a bit on your line of thinking on this move of capital you have done.

 

It could be in a separate topic in the Personal Finance forum.

 

I'm just curious here, and eager to learn some more from you about it. Personally, during the years, I have spent enormous amounts of time on thinking about taxes related to investing, and I think reading such a post from you could be inspirational, at least for me, and perhaps also for other board members.

[libor.plus1]

Added some PIF.TO today.

 

The stock has recently been weak based on unrest in Nicaragua. There are a multitude of reasons why there is unlikely to be a nationalization or impairment of the asset but uncertainty often provides opportunity.

 

Ironically, the company's financial and operating performance is currently the best it's ever been and the stock is trading around 4.3x EV/EBITDA 2019E EBITDA. which is pretty low for a renewable asset with a PPA. Every multiple point increase is worth about C$5/share.

 

I attended the AGM today and management seems to be considering all of their options for their extra cash, including a NCIB/SIB and investing in projects outside of Nicaragua (this is something they have talked about for years so it's not a reaction to the events in Nicaragua).

 

They also maintained that they will keep a 40-50% payout ratio and move towards a US$1.00 dividend from US$0.60 currently within the next 12-18 months which is about a 10% yield at the current share price/exchange rates.

 

They are reporting earnings in the second week of August so expect updates on all of these initiatives at that point.

 

wow. How did this company go from $500/share to a microcap in five years?

[SafetyinNumbers]

Added some PIF.TO today.

 

The stock has recently been weak based on unrest in Nicaragua. There are a multitude of reasons why there is unlikely to be a nationalization or impairment of the asset but uncertainty often provides opportunity.

 

Ironically, the company's financial and operating performance is currently the best it's ever been and the stock is trading around 4.3x EV/EBITDA 2019E EBITDA. which is pretty low for a renewable asset with a PPA. Every multiple point increase is worth about C$5/share.

 

I attended the AGM today and management seems to be considering all of their options for their extra cash, including a NCIB/SIB and investing in projects outside of Nicaragua (this is something they have talked about for years so it's not a reaction to the events in Nicaragua).

 

They also maintained that they will keep a 40-50% payout ratio and move towards a US$1.00 dividend from US$0.60 currently within the next 12-18 months which is about a 10% yield at the current share price/exchange rates.

 

They are reporting earnings in the second week of August so expect updates on all of these initiatives at that point.

 

wow. How did this company go from $500/share to a microcap in five years?

 

Issued a bunch of debt and then struggled starting up operations. The debt had to be restructured and they issued equity for the convertible debentures followed by a share consolidation.

 

[Dynamic]

Hi John,

 

The UK has Individual Savings Accounts (ISAs). For us, the Stocks and Shares ISA is the one to consider. not Cash ISAs. The ISA is a wrapper that shelters you from capital gains tax and UK tax on dividends, but also you cannot offset losses within an ISA for gains outside it. Withholding tax on foreign dividends is still payable. So are market fees like UK Stamp Duty PTM Levy etc, and brokerage commissions.

 

Unlike a pension where you put in money from your pre-tax income but may pay tax later on your income during retirement, your contributions are from after-tax income but gains and withdrawals are tax free afterwards. The ISA is more flexible than a pension allowing you to withdraw money at any age. Potentially, your ISA could be used to pay creditors if you went bankrupt, whereas a pension is more protected, but that's not something that matters to me. I really like the flexibility offered by an ISA.

 

Currently, UK taxpayers can put £20,000 each per year into an ISA (previously £7,000 in the early 2000s), so a couple can put £40,000 in each tax year (which runs 6th April to 5th April in the UK). You can withdraw as much as you like, but total deposits in a year are limited to £20,000 per person. There are no joint ISA accounts.

 

These account allow you to purchase Shares (Equity) or Funds on any major market if supported by your broker, but the only currency allowed is GBP, so when I bought and sold AAPL and BRK.B I did it via a LSE platform, quoted in GBP albeit during US trading hours. My ISA account doesn't allow limit orders etc. There are no exotic things available such as margin or trading in options, commodities or futures under ISA rules. Our ISAs remain the home to majority of our discretionary portfolio and are likely to remain our preferred home for the majority of our funds.

 

UK Capital Gains tax - aside from the additional entries on your online self-assessment tax return - is fairly kind compared to many other jurisdictions I know of.

First each person gets an allowance for tax-free gains, this year being £11,700 each over and above your 'personal allowance' before you pay income tax. This means the tax authorities don't get bogged down with small investors. A married couple (or civil partners) are allowed to gift shares and transfer the cost basis to their spouse, effectively using both allowances to maximum effect - £23,400 this year for a couple and trending upwards during this government's term. After that tax-free gains allowance, the capital gains tax is now only 10% for a lower-rate taxpayer until the gains in excess of your free allowance take you into the upper earnings band (if your income doesn't already put you there), and 20% from there on.

 

There is no distinction between short-term and long-term gains in the UK.

 

Also, the identification rules mean that you can switch to an equivalent investment if you like, e.g. BRK.B on NYSE, BRKB in Mexico, or BRYN in Frankfurt are all exposed to Berkshire Hathaway Class B stock but are different securities for capital gains tax identification. You could deliberately realise some gains up to your allowance one year to increase your cost basis if you wish by selling one and buying a different equivalent on the same day for the price of just the spread and currency conversion. Otherwise you need to wait 30 days to buy back in if it's the exact same instrument before you can reset your cost basis.

 

My move of about 35% of our portfolio outside the ISA tax-free wrapper means we're exposed to CGT, but we can make some significant gains and even then may only pay modest tax on it. We can also take some of the gains and original cost basis out of the new investments and contribute back to our two ISAs at up to £40,000 per tax year as we wish, sheltering it once more. If we wanted to put back £80,000 we could put in £40,000 before April 5th then £40,000 after April 6th.

 

Our new brokerage account does allow most of the features like margin and various currencies and some other instruments and additional markets not available within our ISAs, which just increases our scope and choices. Dealing costs are also a little lower. I can also file a W-8BEN to reduce my withholding tax on US dividends to 15% (this is possible in ISAs, but only if supported by the broker, which our discount broker did not support). The tax consequences really only kick in if the positions happen to be very very successful (thanks to the Capital Gains allowance before the tax becomes payable) and occur only when we choose to realise gains. I'll concentrate first on making the optimal investment decision and have tax as only a secondary consideration.

 

The principal reason for our move is for improved flexibility, features and choices in investments, coupled with a minimal tax penalty if any. It also means that if something bad (perhaps a computer failure lasting many weeks) were to befall our main broker, although it's protected by the FSCS, we'd have backup funds elsewhere just in case. In the end we might even decide to use some of our future ISA contributions allowance with a different ISA broker that permits international stock trading, just to insulate ourselves against this modest risk.

[scorpioncapital]

I think UK also has some sort of remittance basis system if you're resident but have a foreign / EU passport? Something like 20% of remitted income? But...if you say make $100,000 in capital gains, spend 5-6 months abroad and remit half a year of living expenses, you could probably get your total tax to 3.6% of the total gain, maybe less. I would say UK is a massive tax haven if you are a non-British passport holder. Ireland too but they have a physical presence requirement of 6 months which UK doesn't. Let's see if Brexit changes the dynamic.

 

 

 

[Mondegreen]

Hi SafetyinNumbers,

 

I don't suppose you could elaborate on managements confidence regarding the impairment of their asset?

 

My thinking is along the same lines, but it would be interesting to hear their view and I can't find anything on the website?

 

Thanks,

Mondegreen

[John Hjorth]

Thank you very much for the meticulous elaboration of your considerations and your explanation of the inner mechanics of the UK ISA account, Dynamic.

 

After understanding correctly how the ISA account works [i have misunderstood that untill reading your explanation [- ISA contributions are after income tax]], your considerations make perfect sense to me.

[SafetyinNumbers]

Hi SafetyinNumbers,

 

I don't suppose you could elaborate on managements confidence regarding the impairment of their asset?

 

My thinking is along the same lines, but it would be interesting to hear their view and I can't find anything on the website?

 

Thanks,

Mondegreen

 

The only thing they have said publicly about the problems in Nicaragua were at the AGM as far as I know. It’s a sensible strategy as no one knows who is going to end up being in charge in the long run.

 

Management indicated they are unaware of any power assets that have been nationalized and they do not expect this to happen. Unlike other resources, like gold and oil where stuff is taken out of the ground and sold outside of the country, all of PIF’s power is sold in country and mostly to retail buyers.

 

If anything, the political changes indicate a push to more centre right policies from leftist policies which may end up being constructive for the country.

 

They are obviously biased but I think their conclusions follow logically from the fact set that we can see looking in.

 

The CEO said he would buy stock if he wasn’t restricted and I believe him.

 

[TwoCitiesCapital]

Selling Fairfax to purchase others on weakness:

 

1) Altius

2) Santander and subs

3) More Brazil exposure

[rolling]

Brk-b. Decided to add some diversification and downside protection while maintaining liquidity (other positions are of very low to very very low liquidity). Small position at just 8-9%.

 

Price as dropped quite a bit (less in euro) but earnings have been retained, so I don't see that much downside in USD. €/USD evolution is for others to guess but my bet is that it will either reduce my losses or reduce my gains.

 

[boilermaker75]

Assigned some BRKB this weekend, at a basis of $188.40 per share.

[bennycx]

AXP (largest position)

[Spekulatius]

Selling Fairfax to purchase others on weakness:

 

1) Altius

2) Santander and subs

3) More Brazil exposure

 

Which Santander subs are you looking at?

[thekiefs]

BRK.B @ 185.5. Almost bottom-ticked it. Close to a 10% position.

[rb]

H.TO, BRK.B, AAPL

[Lance]

BCE

 

Thanks

Lance

[Agrippa07]

MO (Altria Group) & BRK.B

[libor.plus1]

Not sure why so many people are buying brk.b - at this point brk is an S&P hugger and they both have the same 1 and 5 year returns. Plus, there's probably downside if WB kicks it.

[gfp]

Must be some kind of compound interest nonsense

 

Not sure why so many people are buying brk.b - at this point brk is an S&P hugger and they both have the same 1 and 5 year returns. Plus, there's probably downside if WB kicks it.

[libor.plus1]

Must be some kind of compound interest nonsense

 

Not sure why so many people are buying brk.b - at this point brk is an S&P hugger and they both have the same 1 and 5 year returns. Plus, there's probably downside if WB kicks it.

 

and that doesnt apply to the S&P?