WHERE INSTITUTIONS AVOID AND RETAIL INVESTORS FIND BORING (special situation investing discussion thread?)

I meant to write this post when beginning the blog to assist in describing my investment style but it slipped my mind. It resurfaced in my thinking when I recently read a book Margin of Safety, by Seth Klarman. Some areas he cites in the book that are useful to look for opportunities are very similar to what I look for. It would also be great if readers can comment on any current “special situations” they see out there in the markets.

Aside from Seth Klarman’s book, another one that is renowned for this topic is “You can be a Stock Market Genius” by Joel Greenblatt. The Klarman book wasn’t in production for very long, and believe it or not currently is quoted on Amazon in a range of $US850 to $US1,500! Fortunately if you can overlook the cheesy title of the Greenblatt book, that is quite cheap as you can see from the banner link below here if you wish to buy. I thought it was a very good read (disclosure affiliate link).

Joel Greenblatt books

The title of this blog post sums up why certain situations in the market can often lead to better than average risk/return characteristics. There is a huge amount of dollars spent by major fund managers and brokers in analysing the bigger companies which can make that area arguably more efficiently priced. There are still opportunities I believe though because although the research can be quite in depth, the major players are often pressured by short term performance which can lead to misjudgements. Generally speaking, the more researched this space is results in fewer opportunities from mispricing. So areas where major institutions are not as prevalent should be where we should examine.

Some situations I find retail investors do not place enough value on investments that may be limited in terms of huge upside, yet have a high probability of very limited downside. They find it boring. I believe this partially stems from a lot of Australians viewing property as the way to slow and steady wealth building where you invest the vast majority of your assets, and the stock market as a place where you have far less invested and try and make a fast fortune. That helps explain the vast amount that is poured into speculative mining, biotech and technology plays over long time periods that don’t on average produce good returns. An investment opportunity that shows a high probability of earning returns well greater than inflation (yet perhaps does not have the potential to quickly double in price) are often shunned by retail investors. For example, a company announces a wind up of a LIC and if the market stays flat perhaps there is a return of 7% awaiting in 6 months’ time. Suddenly with the prospect of making large returns finished, many retail investors want to exit immediately and look for a new investment that offers greater upside potential.

I will try and briefly describe situations that meet the 2 criteria discussed above. i.e. where there is not as much institutional presence and where retail investors may sacrifice safer high yielding returns in favour of faster ways of growing their wealth.

Wind ups – discussed briefly above. I will add that a slow wind up can also help shareholder’s tax position. For example, investors can receive a large portion of the market cap back in their pockets at a profit without paying CGT. Let’s say you purchase a stock for $1, and management then plan to slowly wind up the company assets of $1.50 a share over a couple of years. Perhaps most of the assets are easy to liquidate meaning 90 cents is paid back to you in the first year. This just reduces your cost base to 10 cents rather than being a taxable event in the first year. I would also argue your typical equities manager doesn’t spend so much time on these opportunities, they would prefer their quarterly market commentaries talk about strong growing and exciting companies instead. Some wind ups I have blogged about in the past include UPG, AIQ, GJT, & AJA.

LICs trading less than NTA – You will not see that many institutions will invest in another LIC. I don’t think they enjoy the thinking that they are relying on another fund manager to do the job for them. Retail investors have a tendency to fall for the slick marketing and get involved often at peaks in the market and subscribe into floats of new LICs. They will pay $1 and sometimes the new LIC has costs of listing such that on day one they already only have 97 or 98 cents in the dollar to invest. “Free” options may also partially limit the upside. In nearly all cases they then begin to trade at discounts to NTA, in some cases in the order of 20 to 30%. Strangely retail investors then decide they are angry with the manager about the discount and it is time to sell, precisely when they should often consider buying!

REITS trading less than NTA – Similar comments to above. I would add the desire for most retail investors to have property exposure via their own physical residential real estate holdings also arguably can assist in pricing REITS more attractively.

LICs / REITS trading less than NTA and unusually listed on an overseas exchange – Taking the above two themes, I also keep a close eye on them when they have an unusual location of listing. Thinking of successful examples I have blogged about include VNL:LN, GJT, AJA, UOS. Among this bunch we have a Vietnam property fund listed on the LSE that was voted to be wound up. We have two Japanese REITS on the ASX that eventually got bought out. Then a property developer in Malaysia but which has a great track record of generating returns for Australian shareholders with their ASX listing. Nagacorp was not a REIT but unusual in being a Cambodian casino listed in HK.

Other unusual exchange listings, NSX? – Perhaps it can be fruitful to glance at the National Stock Exchange of Australia (NSX) and keep a brokerage account that can trade on this exchange. It handles smaller listings and likely not an investible proposition for institutional mandates. I acquired some shares in Asset Resolution Limited (ASS) that appear to be on the right path. It requires patience with virtually no volume at times but I got some shares mainly early 2018 at an average fill of 2.27. Company just a few months later since bought back lots of stock from very small holders willing to pay 2.88 to mop them up. I hang on to mine since I think management are keeping costs low (this is where the NSX can help it is cheaper) and are very competent. It has an asset backing of over $3 a share cash with some small hope or free optionality on potential proceeds from legal action. (so another special situation category this fits under is my later headline under “legal action pending”).

Who knows whether the above will turn out well though, and I can’t claim to have banked many profits from monitoring the NSX. Many of the situations in this post here I have noted for the purpose of future reference for my own behalf to remind me to keep searching certain areas of the markets. I have seen Tony Hansen at EGP Capital make some wise investments via the NSX which has made me more alert to the potential. Also have listened to Andrew Brown from East 72 holdings explain why the NSX can be an economical way to list a small investment company.

Hybrids – These often don’t fit cleanly into institutional mandates so it can result in less institutional presence. I find the retail investors these are marketed to are not very sophisticated. Also the securities often contain a wide variety of features that they do not understand. This can make this area worthwhile to look for opportunities. In recent times hybrids from Crown Ltd and Elders in the secondary market have provided good opportunities for those that did the research. Unfortunately not me :(. SVWPA though is looking better for me.

Hybrids part 2 – In terms of not fitting cleanly into institutional mandates, it is even more apparent when we are dealing with credit rating downgrades. It is common for some mandates to be forced into selling a security because it is downgraded below a minimum rating criteria. The Multiplex security was a good example of this where some astute buyers took advantage of after the GFC. This area may make interesting hunting ground when Australia suffers its next recession.

Takeovers – Once a takeover is announced the share price will generally gain significantly on the day. Investors both institutional and retail are often overjoyed and want to quickly take profits and move onto another opportunity. They may have just made 30 or 40% on the day and now that stock is very unlikely to have another 30-40% upside left. This especially leads to retail investors moving on. They forget that perhaps in a friendly takeover there may only be another 5% upside but what if the funds can be received within 4 months and because it is friendly there are very little risks involved? Annually that may be a very attractive return. In a hostile situation perhaps another bidder may come along and some bidding tension result in the final bid another 20% higher? One must be wary of binary situations where one bidder may walk away and the share price could fall substantially. Institutions are often overly scared of reporting such a situation to clients so they will tend to sell too conservatively to completely eliminate such risk. If you are prepared to take on this risk, there may be the odd bad result but if you play this game long enough over time the average risk/return profile tends to stand up extremely well. I have had some hits and misses here in recent times with the likes of WCB, WTP, YBR & MUA.

Rights Issues (part 1) – Retail investors may often be strapped for cash to take up renounceable rights issues. Or they just do not want to increase their exposure too much in a company so they have a tendency to sell on market where they can the renounceable rights. If one likes the underlying investment this may provide an attractive way of entry. Institutions may pass up on the seemingly attractive arbitrage as they are probably focused on bigger decisions and getting involved would mean work for the corporate actions department.

Rights Issues (part2) – I am referring here to when a company makes a rights issue for good reasons. Perhaps for example an acquisition that is viewed by all as making sense then it may lead to a little short term indigestion of surplus stock. Investors both institutional and retail within a day find themselves having increased exposure to the company. Institutions may have tight sector or company restrictions and may need to sell back to keep the weight the same. Retail investors often do not manage their cash well or to begin with run far too high stock concentrations meaning they also don’t want to increase their exposure. This can perhaps be an opportunity in the underlying stock. COG (formerly AIK) did this a couple of times but I eventually felt this stock was making too much of a habit of it.

Share Purchase Plans (SPPs) – Looking at LICs regularly I see a lot of them. If I sell a LIC that is at a sizeable premium to NTA I usually hang on to a tiny token parcel of shares. You may get offered a SPP that is “in the money” down the track. Kind of like a free option in the bottom drawer. Now some may say you can only get $15k worth but it could be a relatively risk free quick gain of 5-10% on some occasions. You also may be able to participate on a separate account such as another holding in a company etc. Given some overseas destinations where I travel tend to be cheap, gains can still go a long way so I am not too proud to overlook such opportunities! I have seen GVF do a SPP that was in the money at the due date and as I update this FGG may be heading that way.

Scrip mergers – Similar to the rights issues retail investors don’t like complicated administrative things to deal with and tax issues to consider, even institutions are in the same boat. This can mean complicated scrip takeovers and mergers can provide attractive entries into certain stocks. As I update this in September 2018 the Wilson LICs may fit this category with retail punters not bothering with the complications. On the surface WDE looks a cheaper entry to WAM. CYA (possibly if they use up tax losses) could be a cheap entry into WLE.

When thinking about complicated things retail investors may not want to deal with the Paperlinx Trust / Spicers securities conversion comes to mind, given the booklet was 232 pages long! So long to read it almost put myself off, which was costly as I eyeballed it at 2.5 cents in May 2017 but was slack to get around to it. I felt initial pain finally stepping up and paying up to 3.2 cents in August 2017 but now touch wood that pain seems to be subsiding.

Delistings – A retail investor may fear the process with a delisting, and an institutional investor may not have the mandate to hold, or it could be too illiquid for them. For example, quite a few years ago I bought the stock AYT for about 3 cents. It provided loans for investors to buy into the eventual failed plantation schemes and was in wind up mode. MVT were trying to take it over at 3.5 cents and as a tactic their bid expired quickly and the company would delist. Many sold at around 3.5 cents because of fear of the process. I hung on and received payments over 13 cents the next 3 or 4 years from the share registry even though it was never listed. The loans were enforceable (after a high profile, complicated and drawn-out court case) and largely paid back to the company.

Another delisting example also from Mercantile occurred mid 2018. I bought a small parcel of AKF mid 2018 (likely from a seller late June wanting a tax loss) for 2.1 cents. I was able to sell into the company buyback in August for 6.1 cents. They had a delisting plan but clearly stated they would do a buyback first. Just a few months before they had already been happy mopping up unmarketable parcels at around that NTA value of 6.1 cents. It is handy to be playing with a smaller portfolio than the institutions sometimes.

Legal action pending – I could use the example just given above in this category (AYT), where the market almost forgets or at least misprices the probability of an outstanding legal case. APW was another example a few years back. I still hold and have written plenty about but the way I came into this a few years ago which is interesting. It was already well under NTA but the icing on the cake was a legal case that they were probably unlikely to win. If they did win however it would add about 25% to the NTA, over time it appeared the market had just given up on this because it was rarely discussed and considered on balance unlikely. So it was like effectively paying nothing for maybe a 40% chance they could add 25% to the NTA. The share price eventually climbed about 25% not too long after the case when in fact they did win. Maybe a future example can be with Asset Resolution Ltd on the NSX I mentioned?

Spinoffs – Both retail and institutional investors may receive shares in a spinoff company that is suddenly very small for their portfolios. They have a tendency to not want to have to think about these new shares and to make things easier just sell them. They are less price conscious as sometimes the holdings are small for them, this may create opportunities. Statistically the evidence shows this is certainly the case both in Australia and the U.S. Quite often the company being subject to the spinoff was not given much focus to from the parent, and once these shackles are broken can then outperform. I am embarrassed to say I was a seller of S32 near the lows that could have been a great example here!

On the subject of embarrassments here is another one in an effort to keep this post a bit more balanced and not all about things that have worked. Whilst trying to make some money on RKN as they had a bid for their accounting business I observed that their spinoff of GetBusy could be the type I look for. Perhaps Reckon investors would easily discard it being a nuisance holding for them listed on the LSE. Well the sale for RKN fell through and I didn’t get around to buying GetBusy! RKN which I owned plunged and GetBusy went up about 50% after I looked at it! Anyway it is still an example of a spinoff working.

Potential demergers – Rather than waiting for a spinoff opportunity it may be attractive to speculate beforehand. Recently we saw Crown Ltd rise substantially with plans to demerge. A couple of months ago I mentioned how Sandon Capital had some research about the increased value in TTS if they were to demerge. If you had of invested in Fosters before they demerged TWH that may have been attractive. Often pre demerger the companies have been underperformers and shunned by retail and institutional investors.

Taxation (part 1 franking availability) – Some companies have large capacity to pay franked dividends where they are currently not utilizing appropriately. Many institutional fund managers are set up such that these are not as valuable in a managed fund compared to say an individual receiving them in their directly managed SMSF. Retail investors probably may not even be aware the company has this capacity on their balance sheet. Therefore, they may represent undervalued situations in the market.

REF eventually paid out a huge special dividend to me, thankfully after the stock had previously been terrible for me. A dividend was declared of 5.5 cents which was pretty much where the stock price was only a couple of months earlier! TBR was quite successful in this regard. Management had some hidden value to some by holding their physical gold on the balance sheet at cost. Eventually a large part was sold for huge profits paving the way for a fully franked dividend worth half of the market cap.

Taxation (part 2 large losses to carry forward) – Some often poorly performed companies historically may have done so poorly much of the business has ceased. They could represent a small shell company with is little as under $10 mill in cash waiting for a new future direction. Sometimes they may well trade significantly less than the cash they have in the bank. If an acquirer can buy the company out and keep the direction of the company for the same purposes, there could be significant hidden value in the tax losses. For example, and oil and gas explorer/producer buying out another oil and gas explorer/producer. The same company purpose is needed to offset the losses against future gains to reduce tax. Also when companies are very small they can be attractive for “backdoor listings”. If another company needs to raise funds then acquiring a listed shell company may be far easier and cheaper than doing your own ASX listing, so there may be hidden value in this also. It is not inconceivable a company with a market cap of $5 mill, trades at a market price of $3 mill whilst having prior tax losses on the balance sheet in the order of tens of millions. This may very much suit an acquirer! One needs to however treat these with caution. The risks are that the current management suck cash out of the company quickly and just want to keep their jobs with little concern for shareholders. You want to see an activist shareholder already present to extract the values, management to have some skin in the game or become the activist yourself. NGE became a LIC that I blogged about that soon began to highlight its huge tax losses to the market in regular NTA updates. Unfortunately I missed out on good gains in this stock as wasn’t holding when they had most of their big run!

Tax loss selling – I wrote about this here…

https://stevegreeny.com/2016/06/02/tax-loss-selling/

Companies with large single holdings – Sometimes a company, often an LIC may run a concentrated position in another company and the market is slow to react if that holding surges in price. Some examples in recent years that spring to mind are HHV had 20% of funds in Sirtex, MVT had 40% funds in INA, HHY had 30% funds in CSE, CSE have nearly all their funds in SYR etc. As discussed above institutions are usually not present in LICs, and often the retail investors trading them do not watch the underlying investments of the LIC very closely. This year on the blog I have timed entries into HHV, GVF, HHY, TOP, SNC and particularly NCC recently quite well I believe due to other investors not paying close enough attention to the underlying holdings of the LIC.

Director or “insider” buying – I feel you have to be very selective here. The amounts should be significant for the director involved in terms of personal wealth, and ideally they have a decent track record investing themselves. Have seen plenty of examples of some director buying at peaks in the market so it is just a tool to use with discretion.

Company buybacks – Like director buying just mentioned you need to be selective here also as there are plenty of examples on average that companies buy back their shares at precisely the wrong time. I think it is more of a signal to watch when used in LICs or REITS trading at a discount to NTA. If you can sense the balance sheet allows and the company has hinted a buyback may be imminent then a purchase in anticipation of the buyback may prove a solid entry point.

Company inclusions / exclusions in major stock indices benchmarks – In recent years’ active managers around the world are having on average a terrible time with performance, so I expect the growth in ETFs and index investing to continue to be strong. This is likely to present more opportunities in taking positions that can capitalize on index funds being forced buyers or sellers in certain companies being included or excluded from benchmarks.

Small companies in general – The smaller the company is obviously the larger institutional fund managers cannot invest in it to obtain a stake that is meaningful in terms of their own portfolio. The smaller the company it is the more likely you are placing your investment skills against participants in the market that are less sophisticated.

Illiquid small caps – this can be an area suitable for me given my modest funds to manage. Convention would say this is a major negative. This view, and the fact that many fund managers can not get set in a position, can see some good investments get bypassed by many knowledgeable investors. Ideally they are situations where I am not reliant on selling on market any time soon. That could mean the business is sound enough to hold for many years. Maybe it pays the return via regular dividends, or regularly can buy back shares, or perhaps it involves a slow wind up of assets. An impatient investor who needs out may provide a bargain due to selling at very cheap prices because of the illiquidity.

Lost mandates and forced selling – This can impact smaller companies more severely. Shareholders owning greater than 5% in a company will have to disclose when they are reducing this my more than 1%. Occasionally there may be situations where you discover this selling matches the news about the manager having lost an investment mandate. The client behind the mandate may not give the manager much discretion and this could be an opportunity, the selling may be done with little regard to the valuation at the time.

LIC options – I added this recently because over the last few years there has been a surge in new LICs come to the market with “free” options. I haven’t found many buying opportunities yet but suspect it may be a good hunting ground. In the example of spinoffs, the average punter often sees the spinoff company as a tiny new share holding of nuisance value and can end up selling without any thoughts about the underlying value of the security. I can see in the future many participants in LIC floats in recent years will firstly quit in frustration at a discount to NTA. They then also may sell the options into thin markets with no research at all about their value. Another scenario is they simply are short of cash to exercise the options in the future anyway. Here they also may sell the options on market, and because the value of the trade is likely to be small they may not bother with much research as to their underlying value.

LIC catalysts options expiry and dividends – The share price of LICs with large overhang of options can often find it difficult to perform. I notice as this overhang is dealt with it can lead to quite a positive re-rating of the LIC. Another factor that can kickstart a LIC share price that is suffering is the announcement of an inaugural dividend or a big increase in dividend. The good thing about this is it is often telegraphed to investors if you bother to read the annual and half yearly reports (which many LIC investors don’t). If you follow the profit reserves, franking, and how the portfolio is going including sales they have made in the period, you can get a good insight. I was buying SNC in the second half of 2016 partially on this basis. It appeared the announcement of a large franked dividend in early 2017 was the turning point and for awhile led to them trading at a premium of nearly 10% to NTA. Quite dramatic when there was a discount of about 15% at times in the previous year, and this large dividend was always quite predictable if you listened to what management were saying.

Hidden value within accounting policies reading the notes sections of the accounts – Stocks I have held such as TBR, UOS & SRS have had assets recorded at levels lower than their realistic worth. This can keep them under the radar to some extent on certain quant filters. In the case of UOS & SRS some properties being valued at cost and TBR had huge amounts of gold likewise at cost.

Companies in ugly industries but not reflective of the entire business – An example that springs to mind would be investors turning up their nose at Fairfax in recent years without doing their numbers on Domain that was later a spinoff. SRS was an ugly company, commercial print would cause many to not take a second look. But in 2017 a heap of net cash, room to slash costs made it less ugly. Likewise other facets such as signage & display, packaging and digital media solutions weren’t as ugly. One of my positions in JYC hasn’t done much for me. I wonder if the perception of it being old style bricks and mortar retail turns off investors. It shall be interesting how much profits come from the recently acquired Lloyds online auctions in the longer term.

Commodity Royalty Assets – I am more flagging this here for my own reference rather than claiming I have invested in this space much in the past. I found the Sandon presentation on Iluka regarding a potential spinoff of their Iron Ore royalty asset very interesting. I did profit well on ILU but I don’t think as a result from this event or its potential. Yet looking at Sandon’s point that these assets can be valued more fairly on the US exchange, I wonder whether there is more hidden value in this area on the ASX?

For an investor like me who seeks to limit drawdowns on the portfolio, yet still achieve returns greater than inflation to help make a living, these areas can be rewarding to examine. These are areas I have written down in the past for myself to look for. They are also very similar to one of the chapters I read in Seth Klarman’s book. Though here I have just written as briefly as I can and more directly linked to my own experiences on the ASX.

BELOW UPDATE SEPTEMBER 2018

It would also be great if this post can become a bit of a discussion thread. It is hard to find the time to be over all these weird opportunities in the market that may be out there, so perhaps a reader can point out some current opportunities to me. I think when you comment here below you can choose to be updated when others reply with comments if you wish.

Apologies if this post sounds like the bloke crapping on about some of his past cherry picked winners at the racetrack! I tried to throw in the odd stock example to help describe what I look for and encourage discussion on potential current opportunities out there.

If you want to get your hands dirty and actively try out doing some quant filtering for such opportunities across global markets, then I have had a good experience with the Gurufocus website. (Refer link banner further below, disclosure affiliate here). It even has its own already created tool for screening for Joel Greenblatt’s “magic formula” stocks. There are many other useful predefined value based filter tools. I am comfortable placing this here at this point in time as I believe “value” will make a major comeback in relative terms over “growth” or “momentum” investing.

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Sometimes when identifying dirt cheap valuations via filters, some of the “events” highlighted earlier often occur. Either by way of management being proactive to unlock value, or first prompted from shareholder activism.

Special situation investing often requires a lot of hard reading work rather than just simple quant filters. It can especially be rewarding though for those managing smaller portfolios. Apart from generally reading plenty of stock news, one could follow other fund manager articles and blogs that think in a similar fashion. Setting up google news alerts for specific key words of the examples I have covered can also help.

64 thoughts on “WHERE INSTITUTIONS AVOID AND RETAIL INVESTORS FIND BORING (special situation investing discussion thread?)”

  1. Steve this is a great post. I don’t do a lot of special situations so I have bookmarked this for a more thoughtful re-read in the future. I do have one question for you though. You say “Generally speaking, the more researched this space is results in fewer opportunities from mispricing.”

    I think most investors would agree – I know I do. However, David Einhorn (I think) made the point once that “the people that own the ‘underfollowed’ stocks probably *have* followed the stock.” Not sure I remember correctly but his point was that with the smaller companies you might be dealing with even more informed investors than usual, eg executives family/friends, suppliers, customers, etc. Have you found that to be the case in the past? I know from my own experience it can be very tough to actually find a shareholder of these smaller companies to speak with.

    1. Hi 10foot,

      That is a very good point you make and one to have at the forefront of your mind when you buy, as it can be tough in the less followed stocks. I certainly have the odd scar from getting burnt along the way.

      Some of the ways I at least try to address this concern would be the following.

      I look a lot at LICs, sometimes there are smaller LICs that are not followed that closely. Some of the selling may simply be less sophisticated investors getting bored with it after they initially fell for a bit of hype over it during IPO stage. I don’t see as many fund managers following these as closely as other companies perhaps.

      For other companies I often prefer to see another respected fund manager take a position first. Some may say it is merely copy catting and reflecting a lack of my own investing ability. But I see it as playing within my limitations, and being realistic about the resources I have to analyse a company. You can’t have a big ego when it comes to investing.

      I have favoured following some activist style investors, and sometimes find I don’t necessarily have to speak to them. That is, if you see them accumulate early then often you know their motives by learning about their prior moves. These situations can help minimise risk in some cases.

      I also often don’t buy my full position to start with, and give myself time to potentially learn more about what the various potential “insiders” may know.

      I often am a bit gun shy about buying when a stock is falling sharply. In theory I should welcome it being cheaper and dive in. In practice I have found when you do that you often find out quickly what those insiders selling knew!

      I would add though that executives family/friends, suppliers and customers may have some information advantage but it is not 100% they use it to draw the correct investment conclusions about the share price. In many cases I’m sure they will, but in some cases they may not be good investors.

      Despite all this I am sure I’ll still have my fair share of mistakes in the future in this area though. Your point is a good reminder that it’s not necessarily easy.

      Steve.

      1. One special situation trade I am I currently in is WDE, having bought late September 93.5 cents cum div.

        Still plenty of conditions on the takeover but am guessing WAM will follow through on this. The arbitrage available may indicate I am wrong? From what I can tell someone may still pick up WDE and the equivalent WAM expected amount is some 5-6% higher? Of course WAM may get sold down a tad by the new holders coming from WDE but still it’s a short time frame trade. Possibly wrapped up in less than 4 weeks? I could be missing something!?

      2. Those playing the WDE / WAM arbitrage would have seen their new scrip last night and could have closed out at 2.42 on the open this morning which I chose to do.

        The ASX200 suffered a major hit during the process but WAM never looked at risk of not progressing with it. So this felt like the worst case events occurred and still resulted in about a 3.5% pickup in fast time. From my late September entry probably about 30% annualised. If the market had of been flat I suspect it would have ended up being an annualised equivalent of 50% plus. Some of the passive holders may have pencilled in November 2 as the date for the new scrip issuance. Therefore I wouldn’t be surprised to see a bit more pressure from ex WDE holders selling WAM tomorrow.

  2. In regard to the Hearts and Minds LIC.
    It has surprised me a little to see this hot demand.

    http://smh.com.au/business/markets/new-charity-investment-vehicle-has-fund-raising-lic-ed-20181021-p50b0h.html

    I see the idea from an investment perspective as likely to be able to overcome the 1.5% taken out each year. Even though the upside potential is greater than the Future Generation Fund concept due to concentration, it has some features that I am less certain about.

    It doesn’t seem to be managed like we are normally used to with a fund. For instance the conference stock ideas I think get rotated out after 12 months to make way for the new ideas. In terms of the other investments, the regular participating fund manager picks I assume are after the fundies have bought them for their own funds? Then I believe with these stocks they may not be disclosed, so sometimes LIC investors are less enthusiastic when there is a lack of information in the monthly NTA reports. Will it all mix together to get an appropriate level of some diversification?

    The above comments I am wearing my long term hat on in terms of thinking. Yet given such hot demand reported I wonder if there is an opportunity to make some pocket money. I heard that they are still accepting applications. I don’t have much colour on how they may go about scale backs. Their wording has been firm from what I have read that the number of shares they issue in the IPO won’t be increased. I would assume they would stick with this based on how the L1 capital float turned out this year.

    Am wondering if they try to accept as many applications as possible for the small investor, and scale back heavily for amounts above for example $15k? If so is there a low risk 5% available on small parcels in about a month to be made? Perhaps too many doubts and maybe not worth the trouble, but if anyone knows anything more about this process let me know. Perhaps even getting $15k will be difficult now anyway?

  3. I have a friend whose broker was sponsoring it and he enquired about it after the oversubscription was announced and his broker stated that they were now only selling it at a minimum $50 k parcel and only HNW individuals. Might be worth checking with a sponsoring broker if you have an account with one.

    1. Thanks for the feedback Eddster. I posted this because I read somewhere that applications were being accepted, so wasn’t sure if that meant they were still accepting small applications from the general offer. That was making me wonder whether they hoped to fill the register with heaps of small shareholders on the back of the large initial backers they got.

      What you suggest seems more likely. I guess if they accept a $50k parcel application it still could suffer a huge scale back?

      It looks good for anyone who has managed a firm allocation somehow for the short term anyway. That isn’t me unfortunately!

  4. A wind up & shell value play I recently bought at 30 cents was USR. This US Residential Fund has almost completely sold down to cash and most likely will return the approximate share price value in a capital return soon. My rationale was that the capital return guidance was based on an exchange rate range of AUD/USD 73-78 with the realisation of assets. The possible capital return guidance range was 29-32 cents. This guidance was given a little while back and the way the exchange rate has played out at this point in time there might be a potential 6% uplift from buying at 30 cents in terms of a capital return.

    That in itself is quite boring. Aurora Funds Management have been selling out to Mercantile of late, the latter is normally a good judge of residual value. Perhaps Aurora just need cash quickly to fight other battles. Although I said that 6% was boring it is possible we don’t have to wait too long for the capital return, perhaps early next year. The upside may be if the capital return guidance was too conservative, and there is a reasonable amount of residual cash left over they set aside for the wind up process. I don’t expect, but haven’t ruled out, some additional value from prior tax losses. It may have some value to someone for a backdoor listing, remembering the market cap here is about $11 million. If someone wants to IPO these days they might chew up half a mill to a mill with all the compliance etc and time involved. It can also be tricky meeting all the requirements. So I see some chance of it all ending up adding another 10% plus to that 6% I mentioned earlier. If it is wrapped up in under 9 months, with the capital return coming back a lot sooner, it could work out a good return with low risk. The company has been buying back plenty of shares where I bought at 30 cents also.

    Risks may be there are a few US residential properties to offload, but this is a relatively small part. I am not clear how from this point they will deal with the currency but personally it is not a big factor for me. The capital return is yet to be voted on. Another strategic direction could be formulated and this could be a negative, but then again depending on what it is that could also turn out a positive.
    Still contemplating whether I should add more if Aurora perhaps sell more, or someone pushes it below 30. So please point out if I have missed something here. Admittedly my analysis on this has been rushed so as usual not advice etc! This will not make me rich but hopefully is a better alternative than cash in the shorter term.

  5. Stanmore Coal (SMR) is an interesting takeover play. It is rare when a takeover bid comes in with such a low premium to recent trading activity. SMR in fact in a brief response to the bidder were noting that the bid was just at a 6.4% premium to the 5 day VWAP. The bid price values SMR at about $240 million. On the morning prior to the bid being announced, SMR released FY19 earnings guidance. Underlying EBITDA was expected to be between $130 and $150 million.

    The risks are the sector is quite cyclical and we could be playing around here with a stock experiencing earnings based on top of cycle underlying commodity prices. This risk is probably worth taking on I feel for a small position in a portfolio. As a takeover play we may not have to stay in the stock for a long time, and who knows the outlook could even improve anyway.

    The bidder has secured just under 20% already by an agreement for when the offer period expires. I doubt the bid can succeed at this 95 cent level. There appears to be a decent likelihood of a sweetened offer. Or as we often see in a takeover battle, highlighting some value in the target can flush out an alternative bidder. That possibility stacks up ok I think if you can acquire at $1 or better, given we saw plenty of stock being traded in November anyway at 90 cents. This was prior to the FY19 earnings guidance.

  6. Hi Steve,
    Have you looked at Ramelius (ASX RMS) takeover offer for Explaurum (EXU) which is $0.05 cash per EXU share plus 1:4 Scrip. which represent approx. 20% premium based on current price. the risk is it being conditional and non-binding but I feel the premium accommodate the type of risk.
    Happy to hear your thoughts!

    1. Hi Matt thanks for commenting. I was aware of RMS making this takeover but haven’t got around to looking at it. Recently I’ve been a holder in TBR in the gold sector and received some nice cash back from a dividend. I’ve had in the back of my mind maybe to reinvest some of this in the gold sector.

      I held RMS a few years back. From my memory of that I’m not surprised they are making takeovers. They sat on a lot of cash and often looked cheap as some investors shunned them querying their longer term production potential. I pondered them and DRM but in the end have done nothing really. I haven’t read much about this takeover but if you end up with some RMS scrip you could do far worse I’d say. I remember them getting bagged doing a big capital raising when the shares went above 60 cents a couple of years back but it probably wasn’t bad timing.

      I’ll let you know if I look at this takeover more. Fair chance I won’t get around to it but you have tempted me to try and take a bit more of a look.

      My thinking time got distracted on TBR again recently. I’ve almost got itchy fingers to nibble at TBR again seeing at 4.60 the other day. If I tried to write about them I would have to write a whole book though, it’s complex. Technically not a takeover play yet kind of is, thinking the end game should be above 4.60 anyway there.

      1. Thanks Steve. Love you blog and your ideas!! I love wind up ideas and LICs and your blog has really sync with me. I’m just surprised that you havn’t looked any ideas globally as I found there are much more cheaper and more lucrative plays. I have a few positions in the winding up Private equity plays (Better Capital 2009 (LN: BCAP) & 2012 (LN: BC12) and Ashmore Global Opportunities (LN: AGOL)) that was listed in London which seems to be interesting ideas and is trading at 30% to 40% discount to NAV and will likely to be winding up in 2 years. 🙂

      2. Thanks Matt good to get your comments here. What you said is exactly why I am happy if others make the odd comment on this thread. I do try and look at closed end funds globally but struggle finding the time. I have found my results are usually better if I do more research work on a smaller number of ideas, rather than a little bit of work over a large range of potential ideas. A while back I blogged about LN:VNL that turned out well but that wind up is virtually finished now.

        Also partially why I will try and attend the GVF meeting in Melbourne tomorrow. I basically own close enough to zero shares in GVF but like to hear about some of their interesting investments in global CEFs and wind ups.

        The cheaper private equity wind ups may be due to investors thinking we are “late cycle” and wondering about whether the asset values are truly reflective of the worth. Of course we have been arguably “late cycle” before this blog started! It can be difficult to form a strong view in that respect, but if the discounts are wide enough it’s always tempting. So always fascinated to hear yours or other readers potential opportunities out there so keep them coming. I’ll try and have a sneaky look at the ones you just mentioned also in the next week.

      3. Ashmore – from theri website ….taking their time !

        After AGOL traded at a discount to NAV over a long period of time, the Board, in consultation with the Investment Manager and Shareholders, proposed a managed wind down of AGOL which was subsequently approved by Shareholders at the EGM on 13 March 2013. The Board consequently changed the investment objective of AGOL to an orderly realisation of AGOL’s assets in order to return cash to Shareholders.

      4. from better’s website :

        better cap 2009 might be worth 80 trading 56

        better cap 2012 last traded a week ago at 9.5pence, might be worth 18p

        Sept 30th figures for each to be released 181203

      5. Ashmore : emerging markets , two biggest single co. positions
        a chinese co. 27%
        a guatemalan power gen co. 16%

      6. Thanks for chipping in Simon, have you been tempted on some of these wind ups mentioned yourself?

        Just to expand on my preferences for position sizing. I highly doubt I would invest more than 10% in one idea. If it started at much lower than 10% and it happen to perform really well such that it crept above 10% of my portfolio, I may tolerate that higher weight though. Even then I think I would be awfully tempted to trim such a position.

        It’s quite an individual thing though. For instance taking an extreme example, if I was 20 years old and the portfolio was a fraction of what I expect it to grow to, well a 10% weight is nothing!

      7. TBR rejected a bid for a big asset they owned, are flatlining as AUD price of Au is going to the moon.

        A buying opportunity ?
        Or has this rejection news taken some wind out of the 4.60 sails ?

        Any brief comment appreciated ☺️

      8. I certainly think TBR looks too cheap and the deal that NST proposed was not in the ballpark in terms of what should be considered. Perhaps they can dramatically improve this at a later date.

        TBR has a “colourful” history so not one to make e big bet and obviously very illiquid. I’m certainly holding and hope to see it do better than the current $4 price though. In the meantime yes the gold price is looking good of late.

    1. That’s a good question and a difficult one re position sizing. So much so that I will partially outsource an answer! If your question is more about takeovers I think Luke Cummings from Harvest Lane Asset Management spoke really well in the subject. It was on a podcast from Owen Raszkiewicz.

      If about special situations generally I just think it is more trial and error on what you are comfortable with. Obviously think hard about the downside and take it from there. Recent ones here I mentioned can be different. The WDE / WAM i didn’t see a lot of downside, and would get more weight than say SMR takeover play. Coal stocks can be volatile and the bid could just reach a stalemate with no sweetener or outside bid. USR I don’t see so risky touch wood as the stock is backed by heaps of cash now. Liquidity has stopped there though so probably wasted my time mentioning it.

      Hope some of my ramblings help. Oh and take my gold sector comments with a grain of salt I don’t fish around in the sector that much!

  7. SIZING

    for sizing if you never go above 10% of your cash in any one position you would need to lose 100% on all 10 maximum positions simultaneously to be wiped out totally… so i think 10% maximum position is a (very?) conservative approach.

    1. Thanks simon and steve.
      Yea, i think 10% is my highest tolerance for any single stock (in reality i know it shouldnt be the case if the risk is very low, i guess its just physiological). I have 10% on agol and better capital and im comfortable with the size coz of the capital return and insider buying and the level of discount (wish i could have discover it soon though! I was 2 yrs too late)
      Steve, regard Following GVF, you should follow British empire trust, they do exactly the same thing as GVF and has more detailed analysis on their holdings. Also very cheap MER (1%) and trading at 10% discount to NAV.
      Sorry about all these blogs, i just cant help myself :p
      Steve

      1. Steve, me = USR !
        was wondering if it was one of yours then remembered to click on this chat/share thread page and found out it was 🙂

        looking at MUA right now, makes better sense if one has borrow or ability to trade in Japan.

        Matt,
        will read up on British Empire next, thank you for mentioning, the more blogs the better

      2. Yeah I see a lumpy bid at 31 for USR hopefully a good sign for the shares I got. I don’t expect an exciting result here but hopefully something good. A relief to see MUA heading the right way. That was giving me a headache at one point. Thought it would be a simple trade but was down about 20% at one stage I think!

      3. Empire Trust are a little diff. to GVF in that GVF tend to be more likely to choose investments that can be cyrstalised.

        An example is Empire have over 5% in Jardine Strategic, one of my favorite holdings (held 10 years now) but like a version of BKW /SOL not for the unwinding, being controlled by Keswick family for all time

      4. The more I read about British Empire Trust the more I am surprised about how it trades at a discount of more than 10%. Seems like a reasonable product? Can you think of any significant negatives to it that I may be missing? Why are investors shunning it?

      5. My feeling is that the investment trust that listed in UK in general tends to trade at discount compare with Australia. any reason I can think of is that the underlying investment is simply not the ‘fad’ of the day (given most of them are either family controlled, Japan equity, historical underperformance CEF e.g. Pershing etc) and the management does not market themselves very much (I only found BTEM coz it has Pershing square which I own, would never have looked simply coz of its name – doesn’t sound like a fund manager). I don’t think there’s any significant long term risk with BTEM as most of its investments sounds pretty reasonable and underpriced to me. short term risk might be the underlying discount could get even cheaper coz how unpopular these underlying investments are.

      6. Thanks Matt I agree with your comments. Despite that it is the norm for closed end funds to be at discounts I still would have thought this could trade very close to the NAV. Their historical performance looks sound and they are keeping the expenses quite low. The buyback also adds value.

        Also there are not too many around like this using this strategy. (That I know of anyway). GVF here has similarities but no discount there and way more expensive. I think there is one in the US but the fees are also expensive like GVF.

        Many of the current bets within British Empire Trust look ok to me.

      7. Oh whilst we are on this subject wondering if you have spent any time sussing out Tetragon Financial Group?(BTEM) hold this. Huge discount to assets. But an unusual mix of assets and not sure if management care about the discount. Very high fees I think although they appear to have performed ok after those fees?

      8. I had brief look at Tetragon Financial. It does look pretty interesting to me on the large discount but I gave it a pass for now due to four reasons: 1) I don’t understand their underlying investment and don’t know how they make money. 2) The management fee is too high with hurdle rate too low (given the nature of the instruments they invest in). 3) there’s no catalyst I can see (apart from BTEM being a shareholder) which will close the discount, especially when the management (which I’m not familiar with) holds 26% of the FUM. 4) It currently doesn’t align with my portfolio strategy (i’m relatively worried about current market) where I’m have material portion of my money in CEF that’s on winddown (e.g Ashmore and Better Capital) or hold investments that’s simply and easy to understand with low fees (e.g. Pershing Square) or family business which has good reputation and very large Discount (EXXOR).
        I have small holdings in BTEM as I have plenty of time and effort to dig into some of the investment they hold and invest directly (eg. EXOR, Pershing and JPEL). but I think over a long term, BTEM will be a vehicle for me to park my passive funds when I’m no longer active in the sharemarket (although that will be the case!)

      9. Thanks for the detailed response Matt. It aligns with most of my thoughts so far. Although I don’t yet own BTEM but the more I read the more I like the chances it will make my portfolio in the future. Like yourself I also see some value of owning it with more passive funds and hopefully not having much to stress about. I suppose they would benefit in a small way if Tetragon did well anyway, but you don’t have to get headaches over analysing it. And the Japanese basket of stocks they own sounds ok in theory but personally I would never get the time to implement myself directly. So it ticks a few boxes with its relatively low cost structure.

      10. No worries Steve. If you are interested, I also follow Desmond Kinch (https://oam.com.ky/funds/oam-european-value-fund/) who has somewhat similar investment strategy, I found his annual letter very useful to find ideas (my ashmore and Better Capital idea is from his letter). I found these type of investment very attractive for my personality compare with the typical growth investing. (I use the term growth loosely here and not object to paying higher multiple for business – it’s just very hard psychologically to do so!)

      11. Matt, that’s a very interesting letter by Mr. Kinch. 🙂
        i notice both that
        “The Fund’s shares are listed on the Cayman Islands Stock Exchange (CSX).”
        and also that
        ” The minimum initial subscription to OAM Asian Recovery Fund is US$250,000.”

        Do shares in his fund(s) trade in a secondary market on CSX ?

        Coz i wouldn’t be able to start off with a usd 250k investment …

      12. Glad you like it Steve! 🙂 Unfortunately I don’t think he has a close end fund with smaller buy in. It is a shame, but he is pretty transparent in his European fund (wish he could done the same for his Asian fund!) which you would get a lot of good ideas. I think BTEM would be a second alternative as it is somewhat similar (and trade at discount).

  8. Liquidity
    1.) liquidity on USR HAS returned today but unfortunately its on the bid side, with a 31c bid for around 3% of USR.

    2.) someone bought and someone sold $650 only of RYDO today, one i watch and more than 3% of the outstanding in these options, which are now down to last 12 days, and well out of the money (even including attaching option)

  9. maybe BAF
    geoff Wilson’s tip at yday FGX roadshow
    ” you can buy 80c in the dollar”

    since his co. is trying to take over management of BAF i’m assuming GW has made some due diligence of the assets (sic) BAF owns before making this recco.

    note also elements of : IF we at wilson get to take over running of BAF i can be more sure of my/this tip then AFR y’day says it’s a so called done deal that he will ( AFR guessing early next year as their maybe ?)

    1. I’d like to look at BAF over the next month sometime as I am not very familiar with it. The GVF annual report has it as one of their holdings and Miles Staude yesterday seemed upbeat about how the situation was evolving. Because Wilson was mentioning it yesterday perhaps it may not pull back and it might just be one that creeps up and opportunity passes as I look into it. So be it I guess but we shall see. Obviously helps if one day it gets renamed Wilson Alternatives Fund or something similar.

      1. Steve,
        steps taken toward Wilsonifying BAf progressed today with BAF giving details of Wilson’s recomittment to proposal for BAF.
        As a multi manager altrenative fund.
        Wilson also nominates two current Wilson employees with IMO much nicer CVs than current BAF people..

      2. For what it is worth at the WAM presentations Thursday morning he was mentioning that he felt he had the guy or guys that are the best you can get in this space.

  10. Hi Steve,

    I believe that Retail Food Group (ASX:RFG) will have recapitalization at some stage according to the recent announcement of executive Chairman. Might be worth having a look at. Your thoughts?

    1. Hi Igor,

      Thanks for taking the time to bring this one up but I am doubtful I am of much help with this stock, although maybe another reader can chip in.

      In my earlier days whenever I tried to pick the stocks that have experienced a rapid decline in the fortunes of the business I often got burnt. So I now tend to stay clear of something like this. At its high points a few years back it would have had a decent size market cap. That also leads me to think there would be plenty of other analysts that will always have a better idea on it than me, so another reason I personally put in the too hard basket.

      I also have a bit of a bias to stocks that have a strong net tangible asset position to protect the downside but RFG does not appear to me to be a stock of that nature.

      So it might sound like a bit of a cop out but probably not one that I will try to attempt to call the bottom on. But understand it’s not one I have been following very closely at all thus far.

      Cheers
      Steve.

    1. Yes Peter it’s been pretty nasty for managers fishing around in small cap stocks of late, hard to dodge some of the ones plummeting. Bennelong have so much in AUMs perhaps they can find some winners to offset, I haven’t crunched the numbers to see how critical BWX is. I doubt I’ll ever go near the Bennelong LIC though because of their fee structure for starters.

  11. SLX

    this one was or is still trading below cash in the bank.

    Just noticed the well regarded chair and a very well respected director both quit same day with immediate effect 31st December.

    The founder and long term believer remains.
    ( think Elon Musk ? )

    So possibilities of movement at the station at this “Net Net” type stock. And probably increased risks ? 🤔 Not really sure.

    1. SLX I’ve only looked at after I read your post. It seems like one you would have to have read quite a bit about all the industry dynamics to get a feel for it. Of which I don’t have much of a clue! So I wouldn’t know how that cash flow statement may look the next couple of years, I’d have to read a lot to learn. I can see there are maybe liquid assets greater than the market cap. In these situations I might put it on my watch list and keep checking the announcements over time. Perhaps in 6-12 months time I might know more about it. Or if it declines a lot all of a sudden maybe I may devote some time to read up more.

      For what it’s worth (not much I have been wrong), I did make a second purchase of OMN at 60 cents. Always high risk this and originally I committed about 1% of my portfolio unfortunately starting at about 88 cents I think. Whilst there is a lot of cash burn it is within what they guided for and predictable in that sense thus far. A large buffer exists with cash and market cap there. But the chance of it going to zero is still there and I won’t be buying any more if it continues to plunge!

  12. Thanks also TBR and OMN 🙂

    OMN ticks lots of boxes , unloved and well below cash at bank.

    If we get lots of these the winners on average should balance out the losers and more ?!

  13. from this morning’s AFR :
    ANZ Banking Group has taken a strategic stake in online home loans platform Lendi.

    Street Talk understands ANZ paid close to $40 million for a minority stake, to become Lendi’s second largest strategic shareholder behind fellow Australian financial services giant Macquarie Group.

    note : BTI on asx has a mkt cap of $96 and stated NAV of around $130m, with BTI’s invstment in Lendi last being valued by BTI at $10.7m.

    1. Is it possible to guess how this could affect the NTA of BTI? I had a quick look at some BTI reporting, but not sure how much BTI’s $10.7m stake of Lendi is meant to represent in terms of the total valuation of the Lendi business? And ANZ may have a minority stake but do we know what percentage of the business they will own?

  14. qualitatively i like it coz Macqas and ANZ are suporting BTI’s investment and valuation, and i don’t see a lot of that type of external validation in say BAF to choose one…

    1. I think it’s hard to be comfortable with the valuations inside of either BTI or BAF. For this $10m stake I agree this announcement seems positive for BTI. I haven’t tried to understand the other assets in BTI for a long time so am not sure how the rest of the portfolio stands.

      BAF we can assume the water fund and the cash is quite reliable? Wasn’t there a genuine offer for the water assets from memory? That may tick off 37% of the fund anyway. Would you agree with that? I’m curious if you think a greater portion of the BTI assets might be reliably or conservatively valued? I suppose I need to understand the valuation behind siteminder which I haven’t done. Or trust BTI management which I don’t.

      There is of course a bigger discount with BTI, but I worry it could be a “hotel California” type stock! I would love someone to convince me of the valuations given such a huge discount.

  15. Steve, i’m not an expert about either.

    About BAF i have the feeling that the water fund was ‘bid for’ recently ‘at NAV’ by employees of or people associated with BAF. Nothing came of that anyhow. But same issue – not an external verification.

    About BTI, they wrote last Thursday ;
    ” There have now been 16 third party transactions across seven BTI portfolio companies. All of these transactions have been at a valuation at or above BTI’s prior carrying value. ”

    So i’m sensing a differentiation bewteen BAF and BTI in the external validation area.
    Also quite a lot of BAF’s money is in things called ” Blue Sky XYZ Fund”
    BTI appear to all be in real outside businesses, tho i notice some of these same businesses pay fees to BTI employees, presumably to sit on their boards ?

    Soul Patts own 20% of BTI – from my own experience I take comfort in that on average. SOL often take quite patient and often conservative approaches.

    1. Join the club about not being an expert in all these assets under these 2 vehicles!

      I take your point about that water fund bid was maybe not still reliable. Hopefully they are not playing any more games though given what has already happened at Blue Sky. I don’t fully trust their valuations so I’d be looking at an entry around a 30% discount if I was tempted. BAFs investments seem a bit more spread out though, maybe that means less upside but less risk in a sense than BTI.

      I’m still just an observer with both of these now and don’t own. I initially thought the BTI comment about 16 third party transactions sounded good. Yet siteminder at the end of the day is 40% of the portfolio? It is valued on a multiple of revenues. If that is cheap then more upside can exist with BTI. But I wouldn’t have a clue and worry what happens if this doesn’t work.

      Yes BTI management get some extra fees sitting on some of the boards I think of the holdings, in addition to the hefty fee structure. I also noticed most of the board hasn’t bothered topping up their BTI holdings in years and are still sitting there. With the shares at a 30% plus discount can’t they afford to buy a few on market with the $60k salaries if the siteminder valuation is legit?

      I do see the Sol Patts presence as a minor positive but couldn’t they also creep up with their holding a bit more at current cheap prices and at least give some token support?

      Moral of the story the big bucks is in starting up an investment company with unlisted valuations rather than us mugs trying to sort through the mess and work out what is real!

    1. I think I’ll at least create a google news alert for SiteMinder and try and follow it a bit more. It would be good to try and learn about what may be a fair value given it’s huge weighting in BTI. Also watch and see if the directors can get their hands in their pockets and buy some more shares.

  16. Thought I would drop some comments here on hits and misses of mine on this thread and updates on other things discussed here.

    If anyone got some stock in the Hearts and Minds LIC (not me) they may have been able to turn out an ok quick profit or keep holding.

    USR is probably too illiquid to mention but I still own a bit and that is going slowly but I still expect it to turn out ok.

    SMR I still own and despite the takeover being unsuccessful it has risen strongly. My gut feel is this sector is under the radar and I recently bought UNV which has a non-binding conditional takeover proposal. My hope is a better bid than current levels, but I also have a gut feel that if no takeover occurs it could do similar to what SMR did and slowly rise north of current levels anyway.

    It seems on this thread you are better following others than me though, 2019 has been a pretty dull start to the year in a very strong market for me. Looking back I see Matt commented on the EXU takeover by RMS. I think that would have turned out quite well if I am crunching the numbers correctly with the conversions. At the time I noted that I thought TBR at $4.60 was a good level for the corporate interest. This has struggled and is now at $4.44 but quite illiquid. I still hold this and haven’t changed my view. We may have some competitive tension now between EVN and NST.

    The London stock British Empire Trust BTEM:LN was discussed here, and I own a bit now. This is likely a bottom draw type stock that I may accumulate more slowly, I expect good returns long term but nothing too exciting.

    BAF on the ASX I was trying to buy at about 80 cents, but it didn’t happen. I may still consider it.

    Peter on this thread threw up SLX as a potential idea. I didn’t have the knowledge there but perhaps I wish I did. I see it has been very strong.

    I am still underwater on OMN. Think my average buy price is near 80 cents but I prefer not to look! My theory from these levels is if this business idea doesn’t work out (a very real chance), that this might be clearly evident later this year and that pulling up stumps could be a genuine plan to consider. In this scenario hopefully cash in the bank may still be comfortably more than today’s market cap. It is not inconceivable though that management want to pursue their vision at any cost and can run down all the cash. So I’m mindful of that with position sizing.

    Other little “special situations” style purchases I made recently are I suppose KAR & HZN. KAR I went in once I was pretty sure that Janus Henderson’s lost mandate meant they were a forced seller. I got in the low 90s and my feeling is the few institutions there are pressuring management more than in the past, which is needed. Later on I discovered NGE was one of the buyers of the stock (they actually borrowed to money at 10% to get set on this). David Lamm seems to be coming up with some good ideas lately and I was happy to read they won’t necessarily be entirely passive with this stake. NGE did well in KAR stock a couple of years ago. Interestingly they like the other one mentioned here in HZN. I got in HZN this week at 11.5. The thesis of NGE and others centre around some free optionality upside for their PNG assets which makes sense to me.

    Anyway good luck all but be wary of copying these ideas, as I said at the start there maybe hits but plenty of misses! Thanks for those throwing the odd idea up here and feel free to discuss further!

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