My 3 “Best” Ideas


Written by

Jae Jun

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Geoff Gannon from Gurufocus has recently written about how Warren Buffett made his first $100k by concentrating on his best idea, GEICO.

I’m not Buffett, and I’m not ready to put 75% of my portfolio into a single idea, but I do consider myself to be highly concentrated. A very volatile portfolio which most people cannot stomach.

I have 50% of my portfolio in 3 positions. This is the latest sizing after the big run up we have had this year.

  • Gravity Inc (GRVY): 21%
  • Retail Holdings (RHDGF): 16%
  • Dacha Strategic Metals (DCHAF): 13%

Howard Hughes Corp (HHC) is no longer in the top 3 after I sold half to raise cash for another purchase. If I hadn’t sold, my top four positions would have made up about 65%.

GRVY, RHDGF and HHC is showing excellent returns since my initial investment. DCHAF, not so much.

In fact, I labeled DCHAF my highest conviction pick and wrote a detailed analysis of it, but so far, I only have mud on my face to show for it.

Here is a list of good links to let all the newer readers of Old School Value catch up on my “best” ideas.

Gravity Inc (GRVY)

A company that I have beaten to death lately on the Old School Value Facebook page.

After 7 LONG years of delays, GRVY has finally released their flagship sequel game in Korea. The first catalyst has played out and I am anticipating a greater stream of revenues from licensing deals for other countries.

Retail Holdings (RHDGF)

For me, RHDGF was one of those investments where I could just immediately tell that it was cheap.

The company should be valued on a sum of parts analysis and management has clearly expressed their intention to monetize the assets and return it to shareholders.

Management has demonstrated their commitment by distributing big special dividends (14% payout last year) each year and I expect it to grow as RHDGF continues to report excellent numbers.

You only need to read a short letter to shareholders by them and you will see what I mean. Here is an excerpt;

“ReHo’s medium- to long-term strategy remains unchanged–to maximize and monetize the value of its assets, with the objective of liquidating the Company and distributing the resulting funds and any remaining assets to its shareholders. The Company’s objective is to ultimately distribute to its shareholders at least the equivalent of its net asset value of $16.51 per Share, but potentially up to and possibly in excess of its derived market valuation of $35.20 per Share. Consistent with this strategy, the Company intends to continue its dividend/distribution program, including an anticipated distribution this year of at least $1.00 a Share, bringing total dividends/distributions paid to shareholders to at least $6.25 a Share.

Dacha Strategic Metals (DCHAF)

The trouble maker of the three.

The mid term view for Heavy Rare Earth Elements (HREE) is still attractive, with no company able to produce HREE’s in adequate quantities outside of China.

Some companies are in the process of trying to mine for REE’s but they are limited to Light REE’s and will be at least 3-4 years out before any feasible mining of HREE will come to production.

In that sense, the stage is set for DCHAF, but the market for HREE has weakened and management has not been able to improvise outside of its business model of holding then selling the metals.

Stock price is very much below net asset value.

Disclosure

Long all at time of writing.

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