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Friday, January 27, 2012

Confessions Of An Investment Blogger

I feel obligated to write something of value. Yesterday, HCV snuck into Vuru's top 21 investment blogs. We were 21st by the way :) 

I started this blog back in March with the aim of getting more connected to the value investment community. In that sense, HCV has been a big success. I now personally know a number of very intelligent investors who share my passion for value investing. I can bounce ideas off them and we can try and destroy eachother's investment thesis. For the record, barelkarsan.com was the reason I got really back into investing after leaving the industry for a while in 2009. Saj's concise daily articles combined with value investing lessons helped me refocus on value investing and reignite my passion. Thank you Saj.


That being said, I have some problems with sharing my ideas. Urbana, which I've written extensively about hasn't worked out the way I hoped. The discount to net asset value has increased to nearly 50%. I'm partly disappointed because it's an investment Buffett wouldn't have taken. I knew management's conflict of interest and their control with the non-voting shares but I was tempted by the discount. This was the last of my 'poor business at a great price' investments and I've been selling down the position. It could still go well, (very well in fact!) but there are other investments that I believe are superior for a concentrated portfolio such as mine. 

Recently, I've been reposting links to other articles. I know that's not as interesting as long positions articles like my Bank of America article or investigating niche companies like Bennett Environmental. However, it absolves me of that awkward moment when you want to sell something you earlier recommended. I know it's buyer beware but I still feel an obligation to my readers. (about 4000 views per month). I'm also trying to tone down the negative articles, which are usually focused on RIM and Microsoft's management. I finally read the Dale Carnegie book: how to win friends and influence people. If Buffett doesn't normally criticize other people, why should I?

For these reasons, I've thought about shutting HCV down but it's similar to facebook. You've invested so much time acquiring great contacts of people you admire, that it's far easier to just maintain your account. 

Anyways, I said I wanted to write something of value (or at least mildly entertaining) so I'll share with you my portfolio (in descending order). I've already written about all of them except Howard Hughes but like I said above: Buyer Beware and I may sell my positions at any time

Berkshire (BRK.B): We have all seen Whitney's analysis on Berkshire. However, this really is a no-brainer in my opinion, when Buffett's buying back his own shares you are likely to do well. 

General Motors (GM): I am dumbfounded on why this stock is not worth more. It's balance sheet is solid, there is massive pent up demand and its break even point is likely around 10m auto sales in the US. At 6x earnings it's just too cheap. I got the idea from Einhorn. I hadn't even looked at GM because my mind was still stuck on the old GM. 

Howard Hughes (HHC): Yes, I know about the possible 8.5m in the shadow housing inventory. But much like Bank of America you need to see what's priced in. At $50, low leverage and with the Ward Centre and Summerlin properties I think there is good downside protection. What really pushed me to buy was management's cash commitment to the company. Cheers to Ackman for hiring a great team and aligning incentives with shareholders. 

Bank of America (BAC): John Hempton was the driving force behind my investment in Bank of America. It was trading for 40% of tangible book and tier 1 capital was continuing to grow. Litigation  is likely to be realized over a long period and the long term bull case is very exciting. The market was/is concerned about a capital raise but some simple calculations showed that even in a pessimistic scenario, a large capital raise would still leave tangible book higher than the market price. It's more complicated than this but that's my general line of thinking.

Other small holdings: JNJ, solid dividend, disappointed with management, dislike their pension assumption but long term a great industry. 

As you can see, it's a very concentrated portfolio but I prefer rifles to shotguns. Anyways, like I said sorry for being so random with posting quantity and quality but I guess you get what you pay for!

Cheers & thank you very much for reading.

HCV




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