A couple of trades in the last week

HHV – I purchased some at $1.22 last week as the discount seemed to be getting to around 18% pre-tax, having sold shares over a year ago when the discount was less than 5 %. Some points in their favour are that performance has improved greatly over the last year or two. They have quite a defensive portfolio with large exposures to some gold holdings, cash and Sirtex, and largely the portfolio is in foreign currencies. The large cash balance could be used to aggressively buy back shares soon. They could take some profits in large exposures in SBM, SRX, DRM and pay out large fully franked dividends. Since they made two capital raisings that arguably did not treat all shareholders fairly Wilson Asset Management has increased their stake from about 6% to 13%. Since then the shares understandably have been a bit on the nose but now WAM have more of a stranglehold on the register and the fund is much larger we should expect to see the end of them greedily tapping shareholders, and more likely major share buybacks down the track when the discount is this large.

S & P 500 PUT OPTIONS – September 1775 puts. Buy level was at 21. Please refer to post under the Asset Allocation category about volatility and portfolio protection for my thoughts.

 

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4 thoughts on “A couple of trades in the last week”

  1. HHV is my largest position at an average of $1.18, for the same reason. SBM is outside the 12 month envelope for them, and looking very toppy.

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    1. Whilst they have had success with concentrated positions (Sirtex) in the past I feel it contributes to the NTA discount as many investors are put off by the large weightings. I think they realise this as they had a scare in the past when Sirtex fell about a third in one day, even though it bounced back very quickly. I think they will be more likely to book profits earlier with SBM and not let it get to 20% of the fund like Sirtex did. That could help with dividends.

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      1. Personally I like the deep value approach.
        SRX played really well for them, and in the end they were a forced seller to stay under the 20% threshold.
        SBM is now 13.6% of the fund, but it is also a strategically attractive producer, and I would suggest a potential takeover target. With the size of their holding (11% of the company) anyone who wants to acquire will need both M&G and HHV to sell before bothering. So I wonder if that is a better exit strategy. (Note I bought SBM at 0.089 and sold half at 45c, and the rest at a buck.) – Third time I have held it. First time was a buy under a cent back in the 90s, and sell at 8c, when it subsequently ran to a buck. IF I had have held on then, I probably wouldn’t need to work now!

        Love hindsight. SBM does seem to have a history of revisting 1c. Love a 20 year chart!

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      2. I tend to agree with you about holding out for a possible takeover being the best way for them given it is not easy to sell down such a big stake like that on market. I am also ok with the large concentrations so just really commenting about what most other investors in the LIC space may want, so purely from a narrowing the NTA discount perspective.

        Well done with SBM! I wouldn’t beat yourself up about selling, I think you still let it ride quite a way. Different if you took all your profits after it doubled that may be more frustrating. I seriously looked at SBM at about 50 cents when I saw HHV liked it but unfortunately didn’t buy. I am hoping RMS can do something similar. I bought at 8 cents and still dwell on the fact I sold about half at 23 cents at the start of this year, though I did re invest half of it in another gold exposure that did well. That is why I have decided to take a more mechanical approach to RMS from this point and hold my remaining shares whilst they keep above the 200 day moving average. Hopefully it enables me to better take advantage of winners. Looking at SBM for instance, in hindsight that would keep you in still, with a worst case scenario of 1.50 but most likely the exit will be a lot higher. Most of my investments I never use this approach but I think it may be appropriate when you get on a smaller mining winner.

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