1,143% Outperformance, Tons of Stock Ideas and the Charity Challenge Update...Q1 Wrap-up
CAPS calculates points totals for players by looking at "the total percentage return of all his picks subtracting out the S&P." At the beginning of the first quarter of 2013 I decided to begin tracking my quarterly performance here in CAPS and to donate a quarter to charity for every percentage point that I outperform the S&P 500 by. On January 4th, my CAPS points total stood at 5,200. At the close of the quarter on Thursday I had 6,343 points. According to my complex calculations, that means that my CAPS portfolio outperformed the S&P by 1,143 percentage points during Q1. Let's say that I maintained an average of 195 or so active picks during the quarter, this means that on average each stock I went long (I don't short) beat the S&P over the past three months by an average of 5.86%. Not too shabby, considering I did this with none of the usual CAPS tricks and trinkets like shorting ultra-leveraged ETFs or scams.
Doing some more higher math, I calculate that 1,143 points x $0.25 = $285.75 for charity. The only question is which one? Most of my donations recently have been geared towards underprivileged children in foreign countries. My wife mentioned that she would like to do something for deserving children here in the United States. Does anyone have any suggestions? I've done Make a Wish before, but I think that she was thinking more along the lines of hunger.
At the end of every month, I post a compilation of the various stock picks and pitches that I have made here in CAPS over the past 30 or so days. Here's March's:
Groupe Danone (DANOY) - Activist investor Nelson Peltz is attempting to unlock value in Danone by encouraging management to cut costs and avoid dilutive acquisitions. Peltz believes that the stock could yield a return of nearly 50% including dividends by the end of 2014.
Transocean, Inc. (RIG) - This is a bet that RIG establishes an MLP, much like Seadrill did when Transocean's new CFO was there. Such a move should serve as a catalyst for the stock.
Crimson Wine (CWGL) - This is an interesting spinoff of Leucadia. While it doesn't really make any money, trades OTC and is valued fairly close to its stated book value, much of Crimson's land was acquired as long as 20 years ago. This is a bet that the company's book value significantly understates its real value. If Crimson were to actually run its vineyards properly and actually make money, that would be gravy.
Loral Space & Communications Ltd. (LORL) - Loral recently solid off its Space Systems satellite manufacturing business to MacDonald, Dettwiler and Associates. In conjunction with this sale, LORL paid out a distribution of $29/share to shareholders. That explains the huge drop in LORL a couple of months ago when you look at its stock chart. The sale of the manufacturing business leaves LORL with one main remaining asset, a significant stake in Telesat. One of my favorite investors, Chris DeMuth Jr. estimates that the value of this stake is worth in excess of $60 to $65/share. Compare that to a current share price of just over $58 for LORL and you have the makings of an interesting investment.
MICROS Systems, Inc. (MCRS) - Following ValueAct Capital MCRS after it was announced today that it has purchased a 7.5% stake in the company. Good things usually result when this activist shakes things up.
MFC Industrial (MIL) - As I have mentioned, I am becoming increasingly interested in jockey investing...the following of individuals who have proven themselves to be efficient investors of shareholder value in the past. I'm not under any illusion that I'm going to find the next Warren Buffett, but someone who's half as good will still be a successful investment. Over on the TMF message boards, turb0kat, just reminded me about Michael Smith and his impressive history of generating solid returns. For some reason I have never invested alongside him, despite the fact that he is a favorite in some circles. He certainly uses lots of tricks and trinkets with his companies, along the lines of a John Malone type figure after drinking Red Bull. I certainly cannot profess to know a whole lot more about Michael Smith than that, but I plan on tracking his investment vehicle here in CAPS and to do more research on him in the near future.
Sandridge Energy Inc. (SD) - The change of control at Sandridge that was recently forced by the activist investor TPG-Axon is likely a good thing for the company going forward.
NovaCopper (NCQ) - Direct exposure to miners and commodity prices are usually big No Nos in my investment strategy, but NovaCopper has been so beaten down since its spinoff from NovaGold that I am inclined to take a CAPS flier on it at this level. Seth Klarman's large stake in the company, small for him but nearly 10% of NCQ, is a major plus as well.
Northwest Bancorp, Inc. (NWBI) - This former demutualization's takeover waiting period just expired. It's ripe for a takeout at a premium to today's price.
Capital Southwest Corp (CSWC) - I'm going back to the well with Capital Southwest. It appears to be trading at too large a discount to the value of its various holdings, perhaps as much as 60% to 70% less. I don't think that this gap will completely disappear, but it should narrow. Combine that with modest growth in book value, say 8% or so annually and CSWC should outperform.
Reading International, Inc. (RDI) - I know that I've been long RDI in the past. Well, I'm back. One of my favorite bloggers, Whopper Investments, believes that this movie theater / real estate company is trading at a 40% discount to a conservative valuation of the sum of its parts.
Now this should by no means represent a real-life buy list for anyone, but it would probably serve as an excellent starting point for someone to do their own research on a company as a potential attractive investment. I sure read and sifted through a ton of stuff to come up with these ideas. I personally have not put any real money into any of the March stocks yet. During the month I increased the size of many of my existing holdings. I also did start one new position at the end of the month in a stock that I went long in CAPS in February, SPX Corp (SPW). Hopefully I will have time to expound on why I made that investment later in April.
I also plan on writing a recap of my real-world performance during the quarter. The bonds and preferred stock that I hold in my accounts continue to hold back my returns in this massive bull market. Having said that, I am very happy with the results. I haven't dug into it deeply yet, but it looks like I underperformed the S&P by less than 1% while holding around 30% fixed income and 10% cash in my portfolio during the quarter. That beats a ton of famous hedge fund managers without even having to pay 2 and 20, so I'll take that any day. If one looks at that on a risk-adjusted basis versus some of my broker's model portfolios I absolutely crushed it. Of course, in the end I really don't care how other benchmarks do all tht much as long as I continue to generate real money that I can use to put my kids through college, retire, build a safety net and help others. I should have more detailed information once my broker puts together some quarterly reports.
Thanks for reading everyone. As always, I love stock ideas so if anyone out there has any interesting ones, please post them in the comments. Have a great evening.