It has been a long time
since the first NCAV update of the year, but this represents the process
failing to show up any names that could be added to the Absolute Value/NCAV
bucket portfolio (for information on this bucket, and how it works, read here).
As reminder, the initial
screen is a valuable tool but from its list of potential positions, a number of
names are removed after a simple qualitative overlay. The conceptual reason for this quantitative
overly is ensure that the data used by the NCAV screen as an input is of
suitable quality, and that the results are thus meaningful. A fuller explanation of some of the reasons
why names are removed after this qualitative overlay can be found in the
earlier update from this year.
The NCAV screen (run on 11/25) produced 2 new positions;
- Imation Corp (IMT), a
c$160mn market cap company. Based on its
Q3-12 report, 65% of the company’s Net Current Assets (=Current Assets - Total
Liabilities) was $185mn.
- Radioshack (RSH), a
$190mn market cap company. Based on its
Q3-12 reports, 65% of its NCAV was $225mn.
As a result, both of
these positions were added to the portfolio.
The one existing name in
the portfolio (TWMC), no longer qualified for the screen and thus the final
date that this name must be sold by was not extended (here are the
rules when NCAV names are sold).
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Wednesday, November 28
Friday, November 23
Things from my Google Reader: Nov-12 Edition
Well, with the Holiday Season upon us, what better time to update you some things that Our Man read over the last couple of months. There's a special US Election-related section, at the end, since I couldn't quite hold my tongue entirely
- America’s Slippery Slope into Britishisms!
- America’s Slippery Slope into Britishisms!
Can I take credit for this? Did Goldman Sachs’ (allegedly) prevalent use
of the word ‘muppet’ to describe clients in London lead to this article? Or are American’s finally accepting that Brits
just do the whole colloquialism/slang thing vastly better! (Alex Williams, New York Times)
- The Birth of Bond
- The Birth of Bond
Continuing our British-theme, what could be more
British than James Bond? Well, excluding
some of Daniel Craig’s dubious pronunciation in Skyfall - no doubt it was for the
benefit of a US audience – didn’t they read the above NY Times article! On that note, Our Man saw SkyFall last week,
loved it and heartily recommends it if you liked Casino Royale (but somewhat
less so if you preferred anything Roger Moore/Pierce Brosnan! There’s no accounting for taste!). (David Kamp, Vanity Fair)
- Show Me The Money
- Show Me The Money
After long being the red-headed stepchild of
economics, behavioural economics is now being used more than every (especially
in the US and UK) to shape policy and bend its impact. Here, Professor Cass Sunstein’s talks about
its development and impact on policy (especially consumer protection). (Cass Sunstein, The New Republic)
NB: You may want to try the experiment in this video, before
reading the article!
- The Hunt for “Geronimo”
- The Hunt for “Geronimo”
Mark Bowden’s adaption from his forthcoming book,
detailing the process, research, preparation and decisions behind the Administration’s
decision to green-light the raid on Osama bin Laden. (Mark Bowden, Vanity Fair)
- When The Growth Model Changes, Abandon theCorrelations
- When The Growth Model Changes, Abandon theCorrelations
Professor Pettis describes why he thinks a lot of
the current research on China’s GDP growth over the coming decade is
flawed. He also considers why Japan in
the late 80’s is a better comparable to the China of today, than the more often
mooted Japan in the 70’s.
Things that amused and interested me about this year’s US
Presidential election.
- That (as Mark Cuban noted, post election) the multi-millionaire CEO who was running built an organization that was technologically inept (and had no back-up plan), was inefficient in its expenditures (purchase of ads) and never tested its core assumptions.
- Sasha Issenberg being right beforehand, and Alexis Madrigal subsequently adding much more colour, about how the President’s team was creating the first truly 21st century campaign, and utilizing data efficiently and effectively (i.e. like they do in the private sector).
- That systematically using data (whether it was 538, RCP, Pollster, or my personal favourite Votamatic) was more helpful than using your “gut” and paying little attention to the data (Karl Rove, George Will, DickMorris, etc). And that people were then shocked by this!
- That the ‘auto bailout’ was deemed a major factor in helping the President win re-election. That's fair enough, but it's strange how nobody points out how universally unpopular the bailout was, even in Michigan, back in 2009 when the decision was made!
- That Democrats think that demographics and data mean the future is theirs. As ErickEricksson noted within a pretty thoughtful and insightful piece (especially given it was barely a couple of hours after the Republicans had lost the White House) on the election and the conservative movement, it’s yet to be proven that Obama’s coalition is a Democratic one (as opposed to just an Obama one).
- That (as Mark Cuban noted, post election) the multi-millionaire CEO who was running built an organization that was technologically inept (and had no back-up plan), was inefficient in its expenditures (purchase of ads) and never tested its core assumptions.
- Sasha Issenberg being right beforehand, and Alexis Madrigal subsequently adding much more colour, about how the President’s team was creating the first truly 21st century campaign, and utilizing data efficiently and effectively (i.e. like they do in the private sector).
- That systematically using data (whether it was 538, RCP, Pollster, or my personal favourite Votamatic) was more helpful than using your “gut” and paying little attention to the data (Karl Rove, George Will, DickMorris, etc). And that people were then shocked by this!
- That the ‘auto bailout’ was deemed a major factor in helping the President win re-election. That's fair enough, but it's strange how nobody points out how universally unpopular the bailout was, even in Michigan, back in 2009 when the decision was made!
- That Democrats think that demographics and data mean the future is theirs. As ErickEricksson noted within a pretty thoughtful and insightful piece (especially given it was barely a couple of hours after the Republicans had lost the White House) on the election and the conservative movement, it’s yet to be proven that Obama’s coalition is a Democratic one (as opposed to just an Obama one).
Sunday, November 11
October 2012 Review
*Post updated 12/1, to reflect some inaccuracies in the performance figures of the individual books (the overall performance, exposure information, etc was unchanged).
Portfolio Update
- There were no changes to the portfolio during the month.
Performance Review
The portfolio fell, together with the market, during October losing 1.12%, which leaves the book -1.51% YTD.
The moves in the Treasury book (-1bps) and the Bond/Absolute Return book (+2bps) largely cancelled each other out, as Treasuries widened during the month while other bonds (especially mortgage-related) tightened in October. The Energy Efficiency (-4bps) and NCAV (-4bps) books posted incremental losses, as they fell with the markets. The Precious Metals (-23bps) position was a negative contributor. The Currencies book (-11bps) hurt the portfolio, after the Euro strengthened following continued signs that the politicians and bankers are prepared to support the currency and the member nations that run into fiscal problems.
The Puts/Hedges (-2bps) and China Thesis (-10bps) strategies both suffered in spite of the falling market due to the cost of the time decay outweighing the benefit of the various options being closer to profitability. While the falling market brought both books closing to being in the money, they remain some way out of the money (20%+) and thus suffer from a rapidly declining probability of being profitable.
The primary detractor was again the Value Equities (-58bps) book, with the losses from the position in THRX offsetting the much smaller gains in DRWI. Despite the difficult markets, Dragonwave (DRWI) rose over 10% after announcing its Q2 number during the month and guidance that suggested the integration of the division it recently purchased from Nokia was going well and that the firm was likely to be break-even by its fiscal year-end. In contrast, Theravance (THRX) fell over 15% during the October, which means that the position has given up the majority of the gains it made since it announced Glaxo taking a larger stake and the positive progress of their key drugs back in June/July. There has been limited news since then meaning that market fears over the success of these drugs has returned, and this has been compounded by Glaxo’s weak results which means people feel it’s less likely to bid for THRX (in which it owns a 20%+ stake) in the short-medium term.
Portfolio (as at 10/31 - all delta and leverage adjusted, as appropriate)
19.6% - Bond/Absolute Return Funds (DLTNX and HSTRX)
7.5% - Precious Metals (GLD)
6.0% - Value Idea Equities (THRX, and DRWI)
5.1% - Treasury Bonds (TLT)
2.5% - Energy Efficiency (AXPW, and XIDE)
0.6% - NCAV Equities
0.0% - Other Equities (none)
-0.7% - China-Related Thesis (6bps premium in EWZ Jan-13 puts)
-0.1% - Hedges/Put Options (2bps in IWM Jan-13 puts, 2bps in SPY Jan-13 puts and <1bps jan-13="jan-13" puts="puts" span="span" xly="xly">
-12.1% - Currencies (EUO – Short Euro)
52.7% - Cash
Disclaimer: For added clarity, Our Man is invested in all of the securities mentioned (TLT, DLTNX, HSTRX, GLD, THRX, DRWI, AXPW, XIDE, , EWZ puts, IWM puts, SPY puts, XLY puts, and EUO). He also holds some cash. You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.
Portfolio Update
- There were no changes to the portfolio during the month.
Performance Review
The portfolio fell, together with the market, during October losing 1.12%, which leaves the book -1.51% YTD.
The moves in the Treasury book (-1bps) and the Bond/Absolute Return book (+2bps) largely cancelled each other out, as Treasuries widened during the month while other bonds (especially mortgage-related) tightened in October. The Energy Efficiency (-4bps) and NCAV (-4bps) books posted incremental losses, as they fell with the markets. The Precious Metals (-23bps) position was a negative contributor. The Currencies book (-11bps) hurt the portfolio, after the Euro strengthened following continued signs that the politicians and bankers are prepared to support the currency and the member nations that run into fiscal problems.
The Puts/Hedges (-2bps) and China Thesis (-10bps) strategies both suffered in spite of the falling market due to the cost of the time decay outweighing the benefit of the various options being closer to profitability. While the falling market brought both books closing to being in the money, they remain some way out of the money (20%+) and thus suffer from a rapidly declining probability of being profitable.
The primary detractor was again the Value Equities (-58bps) book, with the losses from the position in THRX offsetting the much smaller gains in DRWI. Despite the difficult markets, Dragonwave (DRWI) rose over 10% after announcing its Q2 number during the month and guidance that suggested the integration of the division it recently purchased from Nokia was going well and that the firm was likely to be break-even by its fiscal year-end. In contrast, Theravance (THRX) fell over 15% during the October, which means that the position has given up the majority of the gains it made since it announced Glaxo taking a larger stake and the positive progress of their key drugs back in June/July. There has been limited news since then meaning that market fears over the success of these drugs has returned, and this has been compounded by Glaxo’s weak results which means people feel it’s less likely to bid for THRX (in which it owns a 20%+ stake) in the short-medium term.
Portfolio (as at 10/31 - all delta and leverage adjusted, as appropriate)
19.6% - Bond/Absolute Return Funds (DLTNX and HSTRX)
7.5% - Precious Metals (GLD)
6.0% - Value Idea Equities (THRX, and DRWI)
5.1% - Treasury Bonds (TLT)
2.5% - Energy Efficiency (AXPW, and XIDE)
0.6% - NCAV Equities
0.0% - Other Equities (none)
-0.7% - China-Related Thesis (6bps premium in EWZ Jan-13 puts)
-0.1% - Hedges/Put Options (2bps in IWM Jan-13 puts, 2bps in SPY Jan-13 puts and <1bps jan-13="jan-13" puts="puts" span="span" xly="xly">
-12.1% - Currencies (EUO – Short Euro)
52.7% - Cash
Disclaimer: For added clarity, Our Man is invested in all of the securities mentioned (TLT, DLTNX, HSTRX, GLD, THRX, DRWI, AXPW, XIDE, , EWZ puts, IWM puts, SPY puts, XLY puts, and EUO). He also holds some cash. You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.