Monthly Archives: October 2017

Home Capital Group (HCG) – Contrarian Opportunity in Canada after being rescued by Buffett ?

hcg-logo-200x72

Background:

Home Capital Group is a Canadian bank/mortgage lending company founded in 1986 and run by the same CEO for 30 years, which came into the spotlight over the past few months. It ran into trouble, almost imploded and then got saved by no one other than Warren Buffett (and Ted Weschler).

There is good coverage following this link. The story in short:

Home Capital wanted to aggressively expand into insured mortgages. However at least one underwriter collaborated with mortgage brokers to get mortgages approved without proper documentation. At some point regulators reigned in but management did not tell shareholders about it. Then the regulator got tough and management had to go. In the meantime, short-term financing was pulled and the company got into real liquidity troubles.

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Some links

Geoff Gannon has been writing a lot this week: The Danger of holding onto great stocks, why you should avoid the value investing crowd and his 4 favourite blogs

Seth Klarmann’s Baupost is holding a lot of Puerto Rico debt

John Kingham looks at five “high yielding” UK stocks

Eddy Elfewnbein’s high quality stock watchlist

David Rubinstein interviews Masayoshi Son (Softbank)

A good overview of the Internet economy in China

Some interesting thought on “Must happen” mean reversion

Trisura (TSU) – Interesting spin-off opportunity or intransparent minority mess ?

trisura

A friendly reader had mentioned Trisura as a potential Spin-off opportunity in the comments and the stockspinoffinvesting blog mentioned it a few days ago  and linked to a  Seeking Alpha write-up.

At first sight, Trisura indeed looks interesting:

  • it’s a small cap specialty insurer currently mainly active in Canada
  • it hasn’t been “discovered” by sell side analysts yet
  • only mini spin-off dividend for Brookfield holders (1 Trisura stock for 170 Brookfield stock(~0,3%)
  • the company has been growing very quickly over the last few years

This is from the listing prospectus:

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Performance review 9M 2017

Perfomance 9M 2017:

In the first 9 months of 2017, the blog portfolio gained +18,1% +18,5% (including dividends, no taxes) against 15,1% for the Benchmark (Eurostoxx50 (Perf.Ind) (25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%)). Since inception, the score is now +178,2% 179,1% vs. 95,1% for the benchmark. The full details (and graph) as always on the performance page. (adjustments for TGV Partners final 30.09. valuation)

In the third quarter, the portfolio underperformed the benchmark significantly (+1,8% vs. +5,33%). Several of my larger positions did not very well in this quarter.

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Venture Capital / Start ups: Why should you give a s*** as Value Investor ?

Disclaimer: It might easily be that If I look back at this post in 10 years and that this marks the peak of the current Venture Capital boom but who knows ?

Let’s start with a quick reflection on how to distinguish Value Investing vs. Venture Capital:

What is Value Investing ?
There are many opinions on what Value Investing actually is. There is “Graham” or “Klarmann” style value investing where one tries to buy existing assets at a discount, or ” Buffett style” where one tries to buy great and “moaty” companies at a discount to future earnings. My personal interpretation is to buy good companies at decent prices (something like a GARP strategy) or misunderstood companies. What all those approaches have in common that one tries to protect the downside by getting a “discount” on some perceived value. With regard to portfolio management, full diversification is rather the exception. In its more extreme version, concentrated value investors concentrate on mostly making sure that they don’t have losers in their portfolio and transact very infrequently.

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