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What I Hold in My Portfolio – Part 1


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Jae Jun

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My Current Portfolio Holdings

Here is an update on my portfolio holdings. I don’t do full portfolio reviews often and I don’t bother with monthly portfolio updates anymore so who knows when the next update will be. I’ve stopped tracking my portfolio on Google Finance for a while now. Good thing is I don’t waste time or energy watching prices tick up or down. Bad thing is, I don’t know when something blows up (e.g. ARO & RSH).

For this reason, be sure to do your own analysis or start a thread in the forum if you want to discuss a certain stock that I hold in more detail.

I will provide all relevant links here for your convenience.

Gravity Co. (GRVY)

Earnings will come out in a couple of days and I will finally be able to see exactly how RO2 has been doing. Many people have been disappointed after the initial short term price spike when RO2 launched, but for me, the real test is to see how much value RO2 brings to GRVY.

I won’t get into too much detail because I wrote about GRVY last month and not much has changed. We will know the full details in a few days anyhow.

About GRVY

We are a leading developer and publisher of online games in Japan, Taiwan, Brazil, the Philippines, Singapore, Malaysia and Thailand based on the number of peak concurrent users, or PCU, as compiled from various statistical data available from public sources in such countries. We are based in Korea and we currently offer thirteen online games worldwide and have one online game in development and one online game developed or being developed by third parties for which we have entered into license agreements. Our principal product, Ragnarok Online, is commercially offered in Korea and 78 other countries and markets. Ragnarok Online II is currently commercially offered in Korea.

Retail Holdings (RHDGF)

The somewhat economic “recovery” for the emerging markets has done wonders for Retail Holdings. It’s fundamentals are growing in this environment and they have been posting record revenues even during these difficult periods.

There certainly isn’t anything exciting about RHDGF. It’s a holding company of a holding company that sells things like dishwashers, fridges and fans.

The main investment thesis that RHDGF investors know about is the sum of parts. Add up all the parts and RHDGF is worth around $30. We are currently sitting on a $21 stock price at the moment with big special dividends coming up and very shareholder friendly management.

Recently I came upon another RHDGF investor & blogger who went the extra mile and did further analysis on the company.

About RHDGF

The Company holds three principal assets: 1) a 56.2% equity interest in Singer Asia, a distributor of consumer durable products in Bangladesh, India, Pakistan, Sri Lanka and Thailand with consumer credit and other financial services available to qualified customers; 2) seller notes, arising from the sale of the Singer worldwide sewing business and trademark in 2004; and 3) cash and cash equivalents. The Company has no operating activities other than those carried out through Singer Asia.

ADDvantage Technologies Group (AEY)

I first read about AEY from Whopper Investments and following up on his idea with my own research, I liked it to and still hold. Business is easy to understand but has a cloud of pessimism hanging over it. This company is not going to be some high flyer, and can only operate within a niche, so growth is limited.

But with consistent profits, strong cash flow generation, good margins and returns on capital, it was just too cheap to ignore. As I don’t believe this is a value trap (their business is not dying or becoming obsolete), it’s a solid holding in my portfolio.

More articles on AEY by others

About AEY

ADDvantage Technologies Group, Inc., through its subsidiaries, distributes and services a line of electronics and hardware for the cable television (CATV) industry. The products, the Company sells and services are used to acquire, distribute, receive and protect the communications signals carried on fiber-optic, coaxial cable and wireless distribution systems.

UFP Technologies (UFPT)

UPFT is another boring company. They make the molded cardbox packaging in electronic products and for other industries.

UFPT will probably do about the same as last year in terms of net income and FCF, but the biggest difference is the increased spending on capex. The last quarter showed that the company has spent 5x more on capex than the previous year.

There isn’t enough information to determine whether most of the capex is for maintenance or growth from the reports just yet, but by applying Greenwald’s method to calculate maintenance capex, most of the capex in the latest quarter is for maintenance.

If the maintenance capex number creeps up too high, 2012 will be a struggle in terms of FCF.

But UFPT isn’t a sell at the moment. It’s still worth holding.

About UFPT

UFP Technologies, Inc. (UFPT) designs and manufactures engineered packaging solutions utilizing molded and fabricated foams, vacuum-formed plastics, and molded fiber. The Company also designs and manufactures engineered component products using laminating, molding, and fabricating technologies. The Company’s products include foam, plastic, and fiber packaging solutions, and component products.

Yukon Nevada Gold (YNGFF)

What I have learned is that mining isn’t rocket science. It is harder. Even more so for junior mining stocks.

YNGFF is a big problem child. So much potential, but just cannot make use of it. It’s been and still is a wild ride with problem after problem after problem.

But, the previous CEO, Bob Baldock, resigned, which I see as great news, and YNGFF finally reached steady state production and is cash flow positive.

The company wore out everybody with its problems and is still flying very under the radar. I’m keen to see what will happen when YNGFF releases numbers that the market is not expecting.

About YNGFF

Yukon-Nevada Gold Corp. engages in the acquisition, exploration, development, and mining of mineral properties in Canada and the United States. The company holds a portfolio of gold, silver, lead, zinc, and copper properties in the Yukon Territory.

Part 2 Coming Soon

Remaining portfolio holdings and sold out positions coming soon.

Disclosure

Long all mentioned stock at the time of writing.

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15 responses to “What I Hold in My Portfolio – Part 1”

  1. Gregory P says:

    GRVY earnings are going to be a disaster. Stock will push down further below the cash liquidation value. If the game was any good and the revenue any good from it, they would have released it worldwide by now.

  2. jsarasin says:

    Just wanted to comment on GRVY 2nd quarter earnings to be released.

    I just don’t see what kind of details we will get other than we hope a revenues jump. But how much? Its a free to play game so is it going to be lower in the beginning than expected? GRVY won’t give us more than an income statement so how are you going to see where the revenues came from? How much of an offset of RO1 going to be against new RO2 revenues in Korea?

    My point is I would not put too much importance on this quarter report but more on the 2012 20-F. I think that should be a selling point in my opinion.

  3. jsarasin says:

    @Gregory P

    You don’t release MMORPG games in every country right away. Common sense. Unless you think every country has the same culture or speak the same language.

  4. Jae Jun says:

    @ Gregory,
    I don’t see what the basis of your reasoning is.

    @ jsarasin,
    This quarter and comparable quarters could be compared line by line. We’ll be able to see whether it was due to jumps in marketing at least. But we’ll have to see first. I’m sure there will be some information available.

  5. Epeter says:

    I see NNWC used in the margin of safety calculation for GRVY, however over half of GRVY’s liabilities relate to deferred revenue, which is not a monetary liability and I would think should be ignored for this purpose.

    Reading the financials again today I cant see how you can come up with a margin of safety starting point of other than the 48m of cash. The working capital and other assets/liabilities more than wash.

  6. jsarasin says:

    The numbers will include numbers from not just RO2. What will probably happen is the cost will go up at a percentage higher than the revenues for right now due to many factors in releasing a game. What percent I don’t know but you must also realize RO1 will lose some revenues right? So if revenues only goes up a little does that mean RO2 was a complete miss. You cannot answer that without knowing what was lost on RO1 side.

    I hope mobile revenues goes up though too.

  7. jsarasin says:

    @Epeter

    Your saying not to subtract any liabilities from the cash balance right? I agree with you. Very strong balance sheet. The deferred revenue would be due on liquidation though right? But they have other assets to offset in my opinion so I don’t subtract it.

    Add the cash per share to what you think discounted FCF would be.

  8. Epeter says:

    @jsarassin

    Yes the will need to deliver on their contracts to earn the def rev, but if you read the 20-f on rev rec they have minimal servicing. This is an accounting liability and I don’t reduce assets any more than I would increase a valuation for prepaid rent.

  9. Jae Jun says:

    @ jsarasin,
    Yes I am aware of that, but surely they will mention something.

  10. Gregory P says:

    Just as I said. Disaster. All other gaming companies are seeing drops in gaming revenue, it was hardly likely that GRVY was going to escape the industry trends.

    They are not seeing the revenue in the new games, and the revenue from all existing games is down, and in some cases dramatically. Brilliant.

    Stock will drift down and sideways from here, even with the new releases into other countries.

  11. Jae Jun says:

    You got this one right, but I’m not certain whether you are talking from hindsight based on your initial comment.

  12. Gregory P says:

    To have been totally blindsided by these disasterous results, one would just have to have been ignoring the trends in MMORPG’s, and the results of all the other gaming companies that have reported. Massive amounts of people are no longer playing the MMO type games. Look at the trends for WoW which came out last month.

    I was hoping that they could have at least kept revenue flat and that the stock price would stay flat.

    The balance sheet remains OK, but they need to hope big time that they can entice Singapore and Malaysia to start paying up for the new game.

    BTW: You need to change these comments to have a time stamp and email replies to the comments. I do not check the comment often for responses, otherwise I would have explained my reasoning before the earnings and not had to be accused of hindsight. However: There is a little bit of hindsight bias in all comments made after the fact as is obvious.

  13. jsarasin says:

    @Gregory P

    So where are the gamers going to? Mobile? Give some detail.

    I thought in the US it was less popular not in Asia.

  14. Sungsta says:

    Yep, I just saw what GRVY did this morning. It wasn’t pretty took a pretty bad -20% beating. Although management said they are excited with the mobile version of their game picking up quickly, I’m not too optimistic with their word. I would have to say I should have discounted this company further before jumping in the shark tank.

  15. Thomas says:

    I like your portfolio Jae. As original and obscure as it gets. Keep us updated please.

    Thomas
    Mauricefund.com

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