Portfolio Update Feb 2011


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Old School Value Stock Portfolio Performance

Portfolio Movers

  • YNGFF up 15%
  • MMPIQ up 36%
  • HHC up 17%
  • SUNH up 18%

After a big drop last month, YNGFF has recovered somewhat. Recall that I said that the drop last month was not due to any fundamental reason. With mining stocks, many speculators and traders are involved and without news during the winter when operations have frozen over, these same speculators are the ones that continue to sell causing prices to drop.

I was never a gold bug, but from what I am seeing, gold prices will remain at these levels for quite some time, making the potential cash flow of YNGFF very attractive and undervalued at the moment.

MMPIQ was also up early in the month. Not sure what the reason for the run up was but with the fair value around $0.90, it is not time to sell yet. Thanks to Planmaestro for the work he has put into this distressed security.

HHC has been one of the best performing spinoffs, up over 65% since the spinoff. SUNH also has been doing well after the spinoff. Although investing in spin offs has become more well known, the returns are still favorable as the institutions who hold spinning off companies must adhere to their rules of selling tiny sized positions.

Overall, everything was up along with the markets in Feb.

February Transactions

Bought ARO

The decision to buy ARO was something I was sitting on for a while.

As I already briefly outlined in the best mid cap stocks article, ARO was one of the three that made it based on current valuation and fundamentals. ANF and AEO may be premium brands compared with ARO, but there is no premium over ARO in terms of operations.

The price should meet intrinsic value as the economy continues to improve.

Bought ITI

A microcap traffic management company that has been on my watchlist for a while thanks to a great write up by Value Uncovered (full analysis here).

With the 3rd quarter earnings report, ITI took a goodwill impairment which reduced EPS, but not cash. I took the chance to buy a small position on the drop. I am expecting the intrinsic value to be slightly above $2.

Sold CCME for 15% loss

Finally, the big news for Feb. I sold out of my CCME position completely.

The problem I find with CCME is that there is far too much noise. There is good work being done by individual investors, but the majority is noise, so I stopped listening to everything and stopped checking prices even on the day I sold. Luckily my sell trigger was met on the very next day when Global Hunter released their latest report.

Somebody told me that the probabilities of winning this CCME bet was too good to pass by, but that’s exactly why I sold. I do not agree with or like those probabilities.

Buffett’s 2010 annual letter also hit home the lesson.

It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics).

The risk with CCME is the possibility of losing everything. The longs are saying that is not possible, but the truth is, it is possible with every investment. CCME has it worse in my opinion.

If you hold CCME, don’t let me influence your decision. That’s the last thing I want to do.

Great News

On a lighter note, my wife and I introduced a 5th child into our lives by sponsorship. Bladimir is a 5 yr old boy from Bolivia.

I will have to put Bolivia on the list of countries I need to visit. If you come from or live in Bolivia, let me know. I’ve got lots of questions to ask you 🙂

Oh if you joined recently and do not understand why I’m suddenly talking about children, read our movement page.

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Disclosure

Long all except sold positions.

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6 responses to “Portfolio Update Feb 2011”

  1. Jae,

    I like your reasoning on CCME. It brings comfort to my latest decision to sell a growth company I have only recently bought: Qlik Technologies. Though the business operations are sound and it seems to have everything in its favor, there is just too much to loose at its current valuation, if anything were to go wrong.

    I am impressed in your ability to change your mind regarding a stock you felt so strongly about. This lack of stubbornness will most likely not only help you sleep better and feel more comfortable in your investments, but it will probably also pay off in your returns in the long run . . . avoiding most major losses of principal.

    Also, congratz on the addition of the child. Your doing a great thing. Keep it up.

  2. Daniel Vincer says:

    Hey, I love your website it’s been very useful to me. My wife is from Bolivia and we traveled there last year and had an unbeliveable time if your going and have any questions or would like to plan a trip let me know and I can help. I think you have my contact info. I also really like that your helping out Bolivia they need help and are very nice people.

  3. Jae Jun says:

    @ Daniel S,
    Thanks. Unlike politics where you are seen as a “flip flopper”, investing requires being able to adjust when the information presents itself. Of course, it isn’t good to constantly change ones mind, but in this case, I believe I made the right decision. Not many people will agree with me, but as long as I believe so it is fine.

    @ Daniel V,
    Thanks. Got your email and will look you up.

    @ Evan,
    Thanks!

  4. Pat says:

    Hi Jae,

    Did you ever update on your position in RHDGF? They announced today that the Bangladesh sale is off and it took a hit. Looks like it could be another decent entry point with 50%+ MOS.

  5. Jae Jun says:

    I still hold RHDGF and kept holding. I MAY buy just a little more. Already at my designated sizing for this company. Now that the deal has been canceled, the intrinsic value has returned back to the original of range of $25-$30

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