Simplifying the portfolio & raising cash. Small market inefficiencies in the LIC space.

Recently I wrote that I had some shorts in the US indices that in part gave me protection to pursue some more compelling opportunities on the long side.

Whilst as I write the stops on the shorts haven’t been hit it is only a matter of time. These 2 sales are more or less about reducing my exposures and number of holdings in the portfolio where I feel they may not be quite as compelling as when I entered them. So there also could a few more others I work to sell in the next couple of months.

WPL – I sold at $27.25 and held this a few months and finished a couple of percent above my entry price. Earlier in the year I was comfortable slowly adding exposures in the energy sector. I don’t typically have great successes in the large, well researched names on the ASX. It has traded a bit disappointing for my liking. Since I bought, some smaller “cash boxes” I own in MEL & NGE have used some of their cash to effectively increase my exposure in the sector. Therefore, I no longer consider it as a key hold for me. For a less active investor that wants to sit on a range of large caps I still think it should do ok.
HHY – This investment company has a large exposure to CSE (a company that really only holds SYR). SYR I am not enough of an expert in to comment on however I do monitor its movements and the likely effects on the NTA. The last time the SYR share price was down at these levels HHY was only at 10 cents. I decided to sell HHY at 11 cents today as at the time of sale HHY’s likely NTA was probably going to be close to 12 cents rather than the near 13 cents reported for June 30. This trade gained 5% in about a couple of months. At the time of selling I felt the discount to NTA was now under 10% versus close to 20% at the time of buying.

Sometimes the market is a bit slow to react on these investment companies that have a large exposure to other companies. We saw this with other recent trades I have made. Buying HHV recently you could look through and see SBM & DRM had been great and the HHV price was starting to lag. GVF was kind of similar yet I would use their offshore currency exposures as the example rather than a specific stock. A couple of months ago when the AUD had a sharp fall this gave the GVF NTA a lift that the market was slow to catch on. Today I even notice MVT trading at 15 cents. Initially the market was slow to pick up on INA firming, yet more lately they have had a few smaller holdings doing better like UPG, JYC, RIS, POZ & AFY.

I should stress that many of these stocks I have sold or lightened up in recently, eg HHY, WPL, HHV, GVF, AAC, AGF, EVN, KBC, SSM I am certainly not bearish on. They are just not quite as attractive versus where I was able to buy in the past. I think I read the ASX and the Dow Jones have had about 8 winning sessions in a row so I just prefer to have a bit more cash on hand.

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