Category Archives: Capital allocation

Record Plc (ISIN GB00B28ZPS36) – I like that record too !!!

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Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!

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A few months ago, fellow blogger Wexboy had a very interesting post on Record Plc, a UK based “specialty asset manager”. Go and read the whole thing, it is worth it.

I try to summarize the business & background  in my own words:

Record Plc provides so-called “Currency overlay” asset management services. Currency overlays are in principle used for two reasons.

  1. To hedge an international investment portfolio into one single currency, usually the currency of the investor and/or
  2. To gain some extra yield by hedging currency exposures more “dynamically”

It is important to know that they do not manage the underlying assets, but “just” a derivative portfolio hedging the underlying assets and that they do not use their own balance sheet but act solely as an agent for the ultimate client.

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Short cuts: Provident Financial, Topdanmark

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Provident Financial

Wow, that was fast. In November I looked at the stock but luckily dismissed it. This is what I wrote back then:

However for me, despite I do like financial companies, I don’t want to invest into a company which in my opinion runs an ethical questionable business. Some might argue that Lloyds Banking is not much different but I think that there is still a big difference between a well run main street bank and an aggressive subprime lender.

I do belive that in the long run, a company which takes advantage of clients has a higher probability to get into troubles than one which actually benefits the customer.

Although the “Crook” is out, the stock tanked an incredible -70% alone on Tuesday

So what happened ?

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Some thoughts on averaging down & averaging up

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John Hempton has a very interesting post on when to average down into a stock.

As a summary, one should not average down into a stock if

  • a company has a lot of financial leverage
  • a company has significant operating leverage
  • the company is in danger of becoming obsolete

I think this is already a pretty good advice, as a counter example he gives Coca Cola where one can average down “without much risk”. As this is a very interesting topic, I wanted to contribute my 5 cents to this:

Behavioural biases at work

In my experience, averaging down is often motivated by a couple of behavioural biases.

The major bias which “helps” investors and especially professional ones to average down in the wrong cases is in my experience the “over confidence” bias.

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Camellia Plc (ISIN GB0001667087) -Exotic assets at a deep discount ?

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Background:

Camellia Plc is a pretty odd company for UK standards. It is a conglomerate with interest in plantations around the world, as well as some engineering businesses, a UK cold storage business, a fish trader in the Netherlands and a private bank plus an art collection, a stock portfolio and other stuff.

Some UK blogs have covered Camellia like Richard Beddard and Expecting Value.

Camellia seems to be a favourite among deep value or “assets at a discount” investors and as I do like strange companies (and conglomerates) , I decided to take a deeper look at it. Also as it is in the same sector as ACOMO makes it easier to get “into it”.

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SportsDirect (SPD) – Bad PR but maybe good Capital Allocation ?

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Already some days ago, I linked to an interesting write up from Wertart on UK retailer SportsDirect.

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In general, I liked a lot of things at SportsDirect from a share holder perspective:

+ It is kind of “Owner operated” with an experienced management
+ Aldi/Lidl like business model (Some brands, own brands, “hard discount”)
+ good growth track record since IPO
+ very good profitability
+ looks cheap based on past performance

Of course there are a couple of issues as well:

  • it is retail after all
  • Brexit / GBP issues (higher import prices, potential issues with consumer confidence)
  • Bad PR (low wages, zero hour contracts, incidents)
  • some governance issues (related party dealings etc.)

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