After reading the conference call, I have decided to take a calculated bet in Weight Watchers (WTW). The management is cognizant of the problems and even though there are competitive/balance sheet risks, I feel comfortable with owning it at these prices. This will remain a small position.
A similar situation exists with Fortress Paper (FTP.TO). I own 400 shares and will probably add some more, maybe 100-200 shares. This is a risky proposition with huge upside. The company is a call option on DP pricing, which is at its lowest for the last decade or so.
My cash position continues to swell. These are the trades I made in this month.
ABB position closed at a profit of sfr 995
TSCDY position closed at a profit of $362
WTW sold 100 put expiry 17Jan2015@strike price $32.5 for $5.1 each
Profit from options: MT,NOV=$838.37
I continued to study on WTW and decided that the risks are too many to justify the price I paid. The company faces business model risk from apps. Even though I think that apps will not win in the long term i.e., there has to be social component to any weight loss strategy, I am still inclined to believe that they will continue to be a threat to WTW. The company reported a sucky quarter and cut its dividend. The stock was pummelled to $32. But reading the conference call, it seems that the management is very forthright about the problems they are facing. They laboriously went over what is wrong with the business and explained their strategy. This is more than I can say for many managements who try to put positive spin on everything. A good management does not help a bad business though. The question one has to ask here is clearly the competitive advantage of WTW and sustainability of its business model.
I sold a bit of Orange, all of my positions in Alcoa, and all of Munich Re.
I bought two new Canadian positions. These are small companies with great managements. The first is Fortress Paper helmed by Chad Wassilenkoff and the second is Altius Minerals headed by Brian Dalton. Fortress paper is in a commodity industry and is facing margin squeeze because of falling DP prices. I am not going to increase this position beyond 2% of my portfolio. Altius Minerals is another story. This is one stock I will likely buy hand over fist if the prices go down. At the moment I only have 200 shares.
It is time for an update again. My thesis is going very well and I should graduate sometime during the next year.
Unfortunately, I have increasingly less time to allocate capital — which is piling up. Whatever I do, I will make effort to not allocate it unwisely.
I sold Dell entirely. It seems that the deal will go through and there is no reason for me to hang around. Michael Dell has got a very good deal and I think in some respects this was quite unfair for the shareholders.
SLD Dell 600@$13.85 — realized gain = $1636
There was no other change in the portfolio.
The performance page has been updated.
It seems I have been starting a new position every month. I bought Bouygues, PostNL and then Nam Tai and now I am buying up Weight Watchers. The reasons for this being so is that instead of the companies getting cheaper after I buy them, they have went up drastically. For example, PostNL is up more than 40%, Bouygues 24% and Nam Tai 20% ! This drastic increase in price has eaten into the margin of safety.
I already wrote about Weight Watchers. I am not going to start a huge position in the company because it is in a very competitive industry and they have huge debt. So, probably the position I have bought will remain modestly sized.
BUY WTW 120 shares @38.27 each
SLD WTW 17 Jan 15 $30 Put @3.7 each
BUY AA 17 Jan 15 $5 Call @3.05 each
BUY BAC 18Jan15 $10 Call @4.4 each — closed position at a loss of $287
DIV 18 shares of SAN
FEE Sfr 38
Loss for the month = Sfr 325
Not much happened this month.
I finished an excellent book – “The power of habit” and am reading another – “More than you know”.
I started a position in Nam Tai Electronics (NTE). It is an electronics manufacturer and has significant assets in terms of real estate (see gurufocus). The company trades at meaningful discount to the book value and the management has a track record of being shareholder friendly. I hope I will be able to add more at these prices.
Following is the cash report for the month.
I am concentrating a lot on work. So, I did not get to do much research.
Gold collapsed and the interest rates rose during the month. The equity market also saw a lot of volatility following the comments from FED that they will ease out of “quantitative easing” soon. The change in the tone of the financial press and the market commentators was immediate. They went from “follow the trend” to why the equities will fall hard and there will be a correction. I was also of the opinion that a correction will happen and probably this was the last straw. But I was proven wrong.
After reacting strongly for a few days the market stabilised and has started its upward trend. Thankfully, I got out of HP at a very small loss. The opportunity cost for this position has been quite large in my opinion.
I added Bouygues, Tesco, E.On, Orange, MT, Santader, and Euro during the month. My net cash position went down a bit to around 52% of the portfolio. Which means that I put the HP money to good use (hopefully) and some.
The sales/purchase figure is high because I purchased €5000 and it got added up in purchases and sales.
A very interesting month starting with the clamours of “sell in May and go away”. The pundits were proved wrong and S&P returned more than 2% during the month.
Owing to the market being at an all time high, I did not do a lot of value finding this month. Meanwhile, I sold a substantial amount of my holdings.
I sold out of Roche, Transocean, Applied Materials, and Vodafone. I reduced Tesco because of concerns about CFD fees. I reduced ABB, Hewlett-Packard, and Alcoa. A summary of these is as follows.
I bought one new position – PostNL. They have been crushed by the TNT acquisition by UPS which did not succeed and pension liabilities – which has been taken care of. The stock traded for as low as €1.46 when their TNT holding is worth around €2.5 per share. There is a risk of more additions to pension plans but it does not pose a significant risk to the balance sheet.
I started by buying 500 shares. It was a placeholder until I could buy a lot more. Unfortunately, the stock took off after only 2 days and I sit on a 15% profit. I hope it will come down soon – in which case I will make a bigger position at lower prices.
Adding it all together.
||– Sfr 53.24
||– Sfr 6
||– Sfr 40
The monthly net was quite high. But remember that it has been the result of my Roche investment – which I bought nearly 3 years ago !
My portfolio composition is as follows.
Value of portfolio (31 May) Sfr 103,399
Cash Sfr 55,531