Portfolio Update Feb 2011

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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Long all except sold positions.

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