For the month of May the FTSE All Share declined 7.3% and the Kelpie Capital portfolio declined 2.1%, a very strong relative result but actually one that disappoints me due to many stocks in the portfolio behaving “riskier” than I believe the underlying economics should dictate. Capital was protected but I still give the month a C+ grade.

Some of the more speculative positions in the portfolio went from cheap to what appears outrageously cheap.

Aberdeen International now has around half it’s market cap in cash and has a portfolio at a greater than 50% discount to NAV. The yield is now 5% and their is a buyback in progress.

JZ Capital Partners reported what I consider to be pretty strong results and addressed several of the issues holding the stock back, the share price barely moved. It has £180m of a £240m market cap in cash, Gilts and listed equities, this allows shareholders to pay only £60m for a £260m private equity and corporate debt portfolio. This doesnt factor in their history of striking profitable deals and growing the NAV.

Yukon Nevada Gold has been the most tortuous investment of my short career. The turnaround is seemingly 80% complete and the mill is running at levels which should allow the company to hit it’s target of >100,000 oz of production. I think they will get there and hopefully when they can confirm this and communicate it to the market the stock should at least double. If they can make a $400 margin on each ounce that would leave them trading on 6x current earnings with the capability to triple production in the next 3 years and the asset backing of a very recently completed $170m refurb on the strategic roasting mill which has conservatively been valued at $500m. Not bad for a stock valued at $270m.
Tullett Prebon is trading on around 6x earnings with a near 6% dividend yield. It is the 2nd largest player in an oligopolistic industry and sits with about a quarter of the market cap in net cash and the CEO with an enormous ownership stake. I get the impression that Terry Smith would find a way to make money in a nuclear holocaust.

Braemar Shipping Services offers it’s owners an 8% dividend yield, trades on less than 10x what could arguably be trough earnings and again has a robust balance sheet with no debt, some property and 25% of the market cap in cash. Despite the cyclical nature of the business, it is owner operated and remained profitable throughout the last downturn which was particularly savage to global shipping.

New Positions

Tullett Prebon

Cisco Systems

Axia NetMedia

Braemar Shipping Services

Positions Added To

Gravity

Dell

British Empire Investment Trust

Positions Sold

Aware Inc

Playtech

InterGroup

British Sky Broadcasting

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