The first NCAV update of the year has been much delayed, as the process failed to show up any new names that could be added to the Absolute Value/NCAV bucket portfolio (for information on this bucket, and how it works, read here).
While the initial screen is a valuable tool, a number of names were removed during the simple qualitative overlay;
- As Our Man has discussed previously, Chinese companies (listed in the US) that come up on the screen are currently being excluded due to the number of frauds within their ranks (see DGW, JGBO, Sino-Forest, Longtop Financial, etc for just 4 examples over the last year or so) . Like all screens, Our Man’s NCAV screen is reliant upon the quality of the data going into it and the number of recent Chinese-based frauds (whose stock is listed in the US) argues for their exclusion.
- A number of Financial companies were excluded, due to their different definition of Current Assets or the screen mistakenly using Total Assets (instead of Current Assets) to pass them.
- A number of companies were excluded as the data used in the screen was sufficiently dated to be of no great value (i.e. 2010 year-end data, which is now 15months out of date).
Like the last time the screen was run, one existing name (TWMC) reappeared on the screen. As such, the final date that this name must be sold by has been extended (here are the rules when NCAV names are sold). However, a number of existing positions (LTON, SUTR & XIN) are approaching the 366 day cut-off in the portfolio since last appearing in the NCAV screen and will thus be removed from the portfolio during April unless they reappear in the coming fortnight. Finally, in the final week of March, OPXT agreed to a merger with Occlaro and unless any counter-bid is forthcoming (unlikely) in the coming weeks, this position will also be exited in April. The sum of these changes will be to leave the NCAV Book at its smallest size since the inception of the portfolio, reflecting another (exceptionally unscientific) indication of the lack of absolute cheapness in market valuations.
- As Our Man has discussed previously, Chinese companies (listed in the US) that come up on the screen are currently being excluded due to the number of frauds within their ranks (see DGW, JGBO, Sino-Forest, Longtop Financial, etc for just 4 examples over the last year or so) . Like all screens, Our Man’s NCAV screen is reliant upon the quality of the data going into it and the number of recent Chinese-based frauds (whose stock is listed in the US) argues for their exclusion.
- A number of Financial companies were excluded, due to their different definition of Current Assets or the screen mistakenly using Total Assets (instead of Current Assets) to pass them.
- A number of companies were excluded as the data used in the screen was sufficiently dated to be of no great value (i.e. 2010 year-end data, which is now 15months out of date).
Like the last time the screen was run, one existing name (TWMC) reappeared on the screen. As such, the final date that this name must be sold by has been extended (here are the rules when NCAV names are sold). However, a number of existing positions (LTON, SUTR & XIN) are approaching the 366 day cut-off in the portfolio since last appearing in the NCAV screen and will thus be removed from the portfolio during April unless they reappear in the coming fortnight. Finally, in the final week of March, OPXT agreed to a merger with Occlaro and unless any counter-bid is forthcoming (unlikely) in the coming weeks, this position will also be exited in April. The sum of these changes will be to leave the NCAV Book at its smallest size since the inception of the portfolio, reflecting another (exceptionally unscientific) indication of the lack of absolute cheapness in market valuations.
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