I have been posting about more general themes of investing styles of late so now I wanted to get up to date in terms of providing more detail about recent trades, or news on companies I own.

Since May I have tended only to mention if I have made a trade rather than give much background on my thinking behind it. So now I will write a little more about the recent trades. In a few days I also plan on some brief comments about companies I have mentioned I am a holder, I will just focus on those where some degree of significant news has occurred in the last couple of months.

Here are some comments on recent trades. I apologise if some of these comments appear like they were written a few weeks ago, as in some cases they may have been notes that I jotted down previously.

AAC – This was sold at $1.80 after buying around $1.30 near the beginning of the year. The last I wrote about this I mentioned I felt momentum was in its favour and maybe it can trade well above the NTA like it did many years ago. It nearly hit $2 and this was looking like the correct view for a short moment. I was in two minds because at the same time this stock is not one to deliver shareholders performance over the very long term which is why last year I made a range trade profit and sold in the 1.60’s. So on second thoughts I thought that $1.80 is ahead of what I initially hoped and done so in very quick fashion so it was time to sell. Another factor was there were some looming opportunities on my stock watch list in general that I felt it was a good idea to have a bit more physical cash in case more compelling opportunities were about to present themselves. So far as I write it would have been better to hang onto these, as they are trading close to $2.

MVT –Bought at 14 cents. Mercantile investments are a vehicle I first got into a long time ago, via investing in a listed India equities fund that was targeted by Ron Brierley. At the time he saw an opportunity to wind up a poorly performing fund but rather than completely shut it down, merge some of his personal holdings into the shell company to take advantage of tax losses and the listing. Since this time it has performed extremely well, although it must be said the fund has always had a very large weight to INA, I am talking circa 40%. So obviously I am still comfortable with INA itself. The retirement sector has long been touted as having strong tailwinds but few have exploited this well. INA is an exception as the management have done an excellent job. The reason the INA share price has been flat for some time is more a case of the shares going so well a few years ago it began to price in already the strong operational performance coming up. We may now be at a stage it can start to climb again as earnings grow.

The attractive MVT entry price of 14 cents comes as I look at how the NTA has grown since say July 31, to my estimate of where it was when I purchased in late June. So at 31/7/15 we had a post-tax NTA of 14.9 cents and a share price of 14 cents. Now my estimate of the post-tax NTA is 16.5 cents, yet the share price was still only 14 cents recently. Put it simply the portfolio has continued to perform strongly (up 11% in less than a year), but the shares have lagged. (unmoved). It also should be noted that a share price of 14 cents is even a larger discount to the pre-tax NTA, in the order of above 20%.

That begs the question why the recent large discount and will it change any time soon? In terms of why, the stock is not that liquid so one seller could have pushed the price down. This company offers very little by the way of information so there is maybe a lull before their results in August where they at least finally share some of their holdings breakdown. Another reason is the public’s love affair with dividends and MVT have not been paying dividends. Whilst I don’t expect a change soon on this they have mentioned though that at some point dividends could be on the cards, that would be very positive for the share price. Although I have spoken positively about INA, I believe the discount also exists because it is an unusually high weight for an LIC to have in a stock. They are a major shareholder in the company and their stake could be of strategic value. If they were to exit this at some point this could also be a catalyst for a re-rating.

Outside of INA, more recently other smaller holdings are doing well with the likes of UPG, JYC, RIS, POZ & AFY. In the meantime, the discount is as wide as I have seen it yet they continue to perform strongly. I struggle to see the discount pushing wider from here given that they keep on delivering the results. They have a history of making shrewd takeovers so perhaps they will want to narrow the discount and grow the company via a scrip takeover of another entity, which they did a few years back with MMX.

Also an interesting situation exists with MVT & SNC sometimes working together on targets, e.g. FWD recently. Gabriel Radzyminski is the main man at SNC but clearly a key director at MVT. SNC already is beginning to trade at a large discount and I am also watching that closely. I mentioned in the past with GVF, that for an activist fund like these it can be potentially embarrassing and hypocritical for their future campaigns if their own stock trades at very large discounts. So arguably there is a margin of safety in terms of how large the discounts can get in these cases. SNC has a very small LIC but also a larger unlisted fund, and then we have MVT being fairly small. When you see their joint campaign as an example with FWD, sometimes it feels it would make sense if all these funds were together. Size can give an activist fund manager more leverage for its campaigns.

CYB – Bought at $4.26. CYBG is the well-publicized UK spinoff from NAB. I have commented previously on the attractive nature of spinoffs. Most importantly the data backs up the performance of spinoffs both in the U.S. and Australia. Shareholders often receive small holdings that they can’t be bothered dealing with so they are inclined to sell cheaply. Also often the company being let go has been neglected by the parent, the de-merger is made because perhaps the parent company was not focused on it. The NAB / CYB situation ticks all of the above. CYB trades significantly below book value, trades in the low teens P/E wise but has poor returns on equity. The positive re-rating that can come this is from being loosened from the NAB shackles and being able to focus on cost cutting. There is a lot of fat in the cost to income ratios. In the last year they have already spent significant money on systems development. Therefore, we have a situation where the valuation for the demerger was deflated from this temporarily and going forward we can participate in the subsequent cost cutting and therefore profit growth that the systems investment can help produce. Brexit I hear you say! I don’t wish to comment extensively here as what can I say that hasn’t been already said on the internet.? I would just point out though that the fall in price from this event is huge, particularly in light of us not being entirely sure Brexit will occur. Also assuming it does there are various scenarios that are not as dire as some may believe. I will add a link below commenting on this that I read from the well-respected Hamish Douglass at Magellan.

Finally I believe the CYB valuation already implies very little in terms of the revenue growth in the business, so it will need to be pretty dire for the CYB share price to be lower in a few years’ time. I must admit there is still an element of binomial nature to this investment with Brexit. For that reason, my initial purchase is probably about 60% of a final stake I may end up with. So any Brexit panic from these levels would probably see me add again.

Update – I actually wrote this a few weeks ago and was looking for a level of around $3.50 to have a more meaningful stake. Unfortunately, the stock just missed falling that far and since has rebounded sharply even closing in on my initial purchase price of $4.26 which was not timed well in hindsight.

HHV – Sold half stake at $1.345. The discount has narrowed almost 10 % in very short time, perhaps some holdings like SBM, DRM could be due for a correction in the gold space. Made sense to sell half here at around 1.35.

GVF – Sold at $1.055. I made nearly 6% in a couple of months whilst the NTA went backwards by around 5%! Therefore, made sense to sell at 1.055.

EVN – I sold my EVN shares recently at $2.77. Note this is purely from staying within my maximum allowable asset allocations as touched on in the “about me” section of this blog. I remain positive on gold. These were held for over a year, and EVN were amongst the top 10 performers I believe for the last financial year in the ASX200.

KBC – Sold half at 17.5 cents. The position was large and the uncertainty has risen as I have mentioned with Bentley on the register. I had a feeling either WAM or Bentley may want to up their holdings before the next vote on the board composition so put in a sell order and got filled at 17.5 cents. I still hold a significant position here and feel 16 or so cents if often trades at is too cheap.

AGF – The AGF shares acquired just a little over a month ago at 83 cents were sold at 89.5 cents recently. With the discount to NTA narrowing almost 10% as I held I thought it was prudent to exit. The vote to wind up should hopefully succeed yet I didn’t feel there was enough upside from discount compression even if it did. Without that potential I didn’t feel it was compelling enough for me to own China shares exposure whilst short selling U.S. stock indices. Better with the U.S. shorts looking likely to get stopped to reduce my China equities on the long side also.

SSM – Sold half at 79 cents, but really simply a portfolio rebalancing exercise. Still hold, nothing really changed. This was purchased a little over a year ago in the mid 20 cents so the position had become unusually large for the portfolio.

WCB – purchased some WCB shares at $6.86 in early July. The main shareholder got to 88% of the company when paying up to $9.40 a share a while back. They are finding it very difficult to get to 90% because of a blocking stake held by Lion of 10%. The main shareholder Saputo recently tried some fun and games making a right’s offer which forces Lion to take it up, which may have been a nuisance. If they didn’t take it up then Saputo would have crept to 90% and could compulsory acquire the rest. I doubt the rights issue was for a genuine need, given that nearly all of the money raised is by Saputo itself anyway. I think they have shown their hand that they would be happy to mop up the remaining shares at $9.40. Lion probably don’t want to sell there but perhaps the games with this rights issue can spark some genuine discussion to resolve this situation. Perhaps a sweetener can be using franking credits in part and something can be done around the $9.40 level. If I am correct any time over the next year, then obviously that return from $6.86 (37%) would be quite juicy. I picked the shares up in my SMSF but the stock is obviously very illiquid. The trade hasn’t started particularly well with the shares looking a little soft at times.

RNY – Sold last half parcel at 12 cents. I didn’t like the look of this latest announcement. Seems they are under pressure to sell the properties and that the best they can do was that recent sell comfortably below the values already marked down. I was thinking recently that the last sale perhaps allowed them to patiently flick some of the other properties. With RNY very brief on details they like to give to the market, who really know what all the details of this agreement with lenders is? If they need to sell quickly and management are not that spot on with the recent NTA, (has it been discounted enough given the first sale?), what are we left with? I can easily see the hopeful 28 cents NTA (that I previously had in mind), being dramatically slashed. If buyers also think they are under more pressure with the sales process I think they will be a lot more patient themselves and low ball the bids. Sold my remainder recently at 12 cents, and glad I sold half at 18 cents a few months back. In at the high 20 cents range for me and out at average of 15, a shocker! I figure today’s sale will be effectively a much higher level for me on an after tax basis as I offset it against something, trying to look at the bright side! Good luck to those remaining, maybe I have just panicked at the lows!

I have made a crude attempt at tracking the performance of the stocks in the blog so with this one will put down the exit levels of average of 15 & 12 cents. I’ll be conservative, I sold the first half at 18 cents not 15 cents, but did so very fortunately after they reported results in a volatile day’s trading.



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