Brief Portfolio Update Apr 2011


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Jae Jun

At the end of April, the OSV portfolio remained flat at 2.72% YTD total return. Markets are resilient and performing well. The year isn’t over yet and my portfolio has near term catalyst that should propel the performance if it plays out as expected.

This update will be short as I’ll provide more up to date updates int he May review.

Old School Value Stock Portfolio Performance

Transactions in April

  • Sold GGP – Reduced my stake in GGP by half to move the money into HHC.
  • Bought HHC – Bought after full year earnings disappointed Wall Street.
  • Sold BOLT – Sold out completely. Don’t see much value in new acquisition SeaBotix.
  • Bought DLB – A company that I’ve had on my watchlist for 3 years. Not a value stock, but a GARP stock I am comfortable with. Great business, strong moat, margins and continuing to expand into growing industries such as mobile devices.

Yukon Nevada Gold (YNGFF)

Definitely the toughest stock pick since VVTV. In March YNGFF tumbled down 10%. As mentioned in previous monthly updates, YNGFF is in desperate need of cash to continue the improvement to its mining facilities.

Originally, cash from operations would have been enough to handle the required working capital, but with the extremely cold winter this year, YNGFF went idle. Meaning, no cash generation. Thus the solution was to lower the warrant exercise price causing a sudden increase in selling pressure.

So what now? Well, nothing. The overall thesis of YNGFF has not changed. I have yet to see failure or success by YNGFF. Until then, price is a tool and not a guide.

Retail Holdings (RHDGF)

The biggest gainer in April helping to offset a lot of losses was RHDGF, up 25%.

No significant news broke for the price to jump that much other than a brief letter to shareholders discussing 2010 results. If you read the letter you’ll see why.

Read the letter now.

Disclosure

Long GGP, HHC, DLB, YNGFF, RHDGF

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9 responses to “Brief Portfolio Update Apr 2011”

  1. Zehua says:

    I have been tracking YNGFF for a few months as well. My major concerns for not getting into it are as follows:
    1. Gross margin is negative even in such high gold price environment. I tried to understand why, because I have not seen another other company with gross margin so bad. But I couldn’t understand.
    2. Called IR and felt like they knew nothing about what they are talking.
    3. Cash burn is terrible, and it won’t be long before they tap the finance market again. They spent a long time in 2010 to get debt financing, but wasn’t successful, so I would have to wait until they get financing to reevaluate the situation.
    4. Gold price is very wild. If it drops down, the stock price will crash. They don’t have any disclosure about hedging, so I assume they were not prepared for it.
    5. Unit production cost is planned to cut from $1000 per once to $500 next year. That is very ambitious, but I don’t understand how their plan of execution can achieve this. Again I asked their IR and they have no idea what they are talking about.
    6. Auditor is Deloitte, who signed off the 10-K with the mark that their internal control is terrible.

    Any thoughts is welcome.

  2. Ryan says:

    Hi Jae,

    Curious to know why you see more value in HHC versus GGP? Do you have a rough intrinsic range for both stocks? Thanks again and continue the great work.

    Are the Seattle houses as over valued as they are across the border (Vancouver)?

  3. Kiran says:

    Hi Jae,

    Is there any software that does the total and cumulative return calculations for your account(s). I maintain few accounts and I don’t have any handy tool to calculate total and cumulative returns for the accounts. Can you let me know how you do it, either an email or on the website is fine with me.

    Thanks,
    Kiran.

  4. Jae Jun says:

    Hi Kiran,

    You can download the excel file that I use from this article.
    http://www.oldschoolvalue.com/blog/investment-tools/calculate-xirr-annualized-returns/

  5. Dr. Capital says:

    On DLB – With WACC of about 10%, EPV calculation yields a negative 30% margin of safety… Owner earnings yield on EV is under 8%, so no, not a value stock… But CROIC has been increasing for several years and is now just over 20%… Worth considering!

  6. Dr. Capital says:

    Looked at DLB again… Some analysts project market share loss due to entertainment media existing primarily in the cloud (read: Apple stealing market share as they do not use DLB)… What says you?

    Source: http://www.minyanville.com/businessmarkets/articles/dolby-stock-performance-apple-stock-apple/9/28/2010/id/30299

  7. Jae Jun says:

    I think the article misses a lot of what the analyst has said or they don’t understand the business model of DLB.
    Quick remarks is that DLB isn’t reliant on content. Even if media moves to online content, the TV needs an audio codec which DLB can provide. If DVD players are dying, DLB can replace revenue by including their technology into the media boxes, receivers, speakers systems etc. No problem.

    Plus DLB still makes money from many different products.

    Two areas that look to grow quickly are smartphones and 3D movies. 3D movies in the theatre and in the home.
    If they get into more mobile phones, it will be start of a nice growth booster.

  8. Ray says:

    Why would you buy HHC now? It’s already skyrocketed in value over the last few months. The perfect time to buy was when it was spunoff (that’s when insiders were buying it too), which is a very good combination (spinoff + insider buying).

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