Monthly Archives: July 2013

China Energy Corp. merger arb update

I entered my position in China Energy Corp. at the end of March with the expectation of making a low risk 8% return in a couple of months. The completion of the going private transaction is going slower than expected, but the transaction seems to be on track. The company filed a form 15-12G last week terminating the registration of the shares with the SEC while the reverse stock split was executed more than a month ago. So the going private transaction at $0.14/share is at this point in time really a done deal, but the shares are still trading unchanged around $0.13/share.

The fact that the shares are still trading after the reverse stock split was effectuated more than a month ago is normal I think for these kind of transactions. I owned a few shares of AssuranceAmerica in the beginning of this year. In this case the reverse split was effectuated on March 11, the form 15-12G was filed on March 26, the shares stopped trading almost a month later on April 16 and the money hit my account on May 10. If China Energy Corp. would follow a similar timeline you are looking at a ~6.5% return in ~six weeks time. That’s pretty attractive if you ask me, so I decided to buy a few more shares today.


Long China Energy Corp.

Exited Allan International Holdings

I already mentioned in my previous post that it was my intention to sell the remainder of my Allan International position soon, and that’s exactly what I did today. Including dividends the stock returned 17.5% in a bit more than one and a half years. Not bad, but not good either compared to the overall market or my own performance. But you can’t get it right every single time, and making mistakes is part of the learning process. But luckily making mistakes in investing doesn’t have to be costly. Not just because you can do something stupid and get lucky, but mainly because the market is often approximately right about the fair value of a company. Buying something that you think is undervalued but is actually reasonably priced isn’t going to cost you in the long run.


No position in Allan International anymore.

Half-year portfolio review

With the first six months of the year behind me it’s time for the half-yearly portfolio review. As is visible in the table below the first half of 2013 was excellent. I knew my return was good, but I didn’t realize it was this high before doing the math (I’m using multiple brokers, so keeping track of performance takes some work).

Year Return* Benchmark** Difference
2012 18.53% 14.34% 4.19%
2013-H1 27.06% 7.57% 19.49%
Cumulative 50.60% 23.00% 27.61%

* Return in euro’s after transaction costs, dividend withholding taxes and other expenses
** Benchmark is the MSCI ACWI (All Country World Index) net total return index in euro’s

I’m at the moment fully invested and my portfolio is effectively 109% long and 6.3% short. The biggest part of the long exposure above 100% and the balancing short position is the pair trade in the PRISA capital structure that I entered in the beginning of the year. If we ignore this position my long exposure looks as follows:

Portfolio as of 30 June 2013

As discussed here I decided a month ago to increase my bet on Conduril simply because I think the stock is extremely cheap, and I want to bet relative big on my best idea. Since then I bought a few more shares and with the stock price also advancing 10% my current allocation stands at 16.5%. I expect it to grow to become an even bigger part of my portfolio, because if this is my most attractive idea it should outperform the other positions.

While I don’t trade a whole lot in my existing position there has been some movement in my allocations that is not completely the result of the relative performance of the various stocks. I reduced my position in Allan International, and I’ll probably sell the remainder of my position soon. The stock has been a top candidate to sell for me since last December when I reviewed the position, and my net long exposure is currently a bit above my target of 100%. While I reduced my Allan International position I increased my Deswell Industries position a bit. A lot of the return from Deswell Industries is coming in the form of dividends, so even though it’s performing alright the allocation as a percentage of my portfolio was dropping.

I also sold some Alternative Asset Opportunities opportunistically some time ago. The amount of cash collected from the life insurance policies has been very low so far this year while the stock price has been going up since I initiated my position. That said: I do think it’s currently still attractive because how fundamentally uncorrelated the returns are with the general market, and I’am looking to increase my position again when possible.

The individual performance of the various positions has been as follows this year:

Ticker Purchase Date
Entry* Sell Date Dividend price** YTD Return
AWDR.OL May 15, 2013 90.00 1.00***
105.00 23.4%
AKPS.OL Apr 8, 2013 26.50 May 8, 2013 35.90 35.5%
BUR.PA Mar 20, 2013 346.83 4.4 326.99 -4.5%
PVCS.L Mar 3, 2013 0.1109 0.1200 8.2%
ALJJ Feb 12, 2013 0.732 Jun 7, 2013 0.84 14.8%
UTSI Feb 11, 2013 2.90
2.66 -8.3%
TLI.L Nov 21, 2012 47.75 44.50 -6.8%
CDU.LS Sep 27, 2012 22.00 1.50 33.09 57.2%
AIG Sep 10, 2012 35.30 44.70 26.6%
RELLA.CO July 19, 2012 37.80 48.00 27.0%
CNRD.PK Mar 29, 2012 18.50 28.00 51.4%
SODI.OB Mar 26, 2012 3.45 3.89 12.8%
DSWL Mar 6, 2012 2.40 0.10 2.49 7.9%
SALM Feb 21, 2012 5.46 Apr 3, 2013 0.05 7.85 44.7%
IAM.TO Jan 24, 2012 0.48 Jan 11, 2013 0.52 8.3%
ARGO.L Jan 3, 2012 12.50 1.30 14.25 24.4%
0684.HK Nov 16, 2011 2.26 2.40 6.2%
ASFI Nov 7, 2011 9.51 8.65 -9.0%
Average 19.25%

* Entry price or closing price 2012
** Exit price or current price
*** Stock price in NOK, dividend in USD

As is visible Asta Funding (ASFI) has been my worst performing position this year so far, but when your biggest loser is down less than 10 percent you can’t complain. The company has been written up very recently by Whopper Investments on Seeking Alpha, and he provides a refreshed overview of the investment thesis. I think intrinsic value is slowly going up because the company is collecting the outstanding receivables and buying back shares, but it would be nice if they could speed up the latter using, for example, a self tender offer.

I’am hoping that at the end of the year, when it’s time for the next portfolio review, my biggest complaint is still this insignificant :). I certainly don’t expect to repeat the performance of the first six months though: that’s more luck than skill.


Long everything in the above list, except the positions marked as sold.