Category Archives: Portfolio

Another update on my basket of Italian real estate funds

Four years ago I bought a basket of various Italian real estate funds because I liked the combination of a 50% discount to NAV and the fact that these funds all have a fixed maturity date. When I started tracking these funds there were 24 different entities with a total NAV of €4.0 billion. Two years ago that number had shrunk to 21 different funds with a NAV of €2.6 billion and now just 14 funds are remaining with a total NAV of €1.5 billion. It’s taking quite some time to sell the assets of these funds, but they are liquidating. At the same time the average discount of the remaining funds has shrunk a little bit, but is still quite high at 41%:

So far my investment in this basket has worked out to my satisfaction. As of today my internal rate of return stands at 14.7% which I think is pretty okay for real estate. While all the funds I bought have appreciated in price, most of the return can be attributed to just two funds that have now been fully liquidated. While things have worked out for me, just blindly buying all these funds would probably have been a bit less successful. Most funds have been quite successful in slowly selling their assets close to NAV, but some have sold them at sizable discounts. The Obelisco fund liquidated this year, writing down their NAV to zero, and without making a single distribution to shareholders…

Another fund that is close to liquidating is Unicredito Immobiliare Uno. In the latest annual report the management company reports that they have received offers from multiple investors to acquire the remaining real-estate portfolio of the fund. I think it’s quite likely they will be able to sell their remaining assets close to NAV, and thus with the discount remaining above 20% I think it’s an attractive bet. It’s my only new position in my basket of Italian real estate funds, all the other ones in the list below have been in my possession for multiple years:

Ticker Purchase Date entry Sell Date dividend Price/Exit Return
QFUNO.MI Mar 1, 2019 727.00 765.00 5.3%
QFSEC.MI Mar 27, 2017 260.10 66.5 248.00 20.8%
QFARI.MI Mar 27, 2017 725.50 860.00 18.4%
QFSOC.MI Mar 27, 2017 237.30 27.00 244.15 5.5%
QFAL.MI Feb 26, 2015 1,150.00 278.00 1,457.00 26.6%
QFARE.MI Feb 23, 2015 1,120.00 575.50 860.00 23.4%
QFDI.MI Feb 26, 2015 41.01 85.18 107.5%
QFEI1.MI Mar 2, 2015 720.00 Mar 27, 2017 450.00 948.50 93.8%
QFID.MI Feb 27, 2015 70.90 3.50 95.25 18.4%
QFIMM.MI Feb 27, 2015 1675.00 1002.00 1,256.20 34.6%
QFVIG.MI Feb 27, 2015 1635.00 1,751.95 554.00 40.9%


Author is long everything in the table that hasn’t liquidated yet

PD-Rx Pharmaceuticals reports FY2018 results

On the first trading day of 2019 PD-Rx Pharmaceuticals reported its annual results for the 2018 fiscal year that ends on June 30. PD-Rx is one of these stocks that is wonderfully easy to keep track of. The company releases financial information just once a year, and the two dozen pages that make up the annual report and the accompanying financial statements are easy to comprehend while painting a useful picture of how things have been going.

Last year was actually packed with an unusual amount of action for PD-Rx. The company paid a nice $0.66/share dividend in May, and a big $2.20/share dividend in December (after the end of the fiscal year). I was hoping that the dividends signaled that business was going well, but after looking at the latest results it seems that they simply decided to return excess cash. An excellent decision in my opinion, and even after these two dividends half of PD-Rx’s market cap consists of cash and certificates of deposit. Knowing that they are happy to return large amounts of cash to shareholders makes me more confident that we don’t have to place a discount on their remaining cash reserves.

Looking at the results of 2018 we see a bit of a mixed result. Revenue went down a bit while their gross profit margin increased. If they managed to keep their SG&A costs stable, 2018 would have been a pretty good year, but unfortunately they didn’t, and as a result they earned exactly the same $0.38/share this year as last year. Especially with a lower effective tax rate in the 2nd half of their financial year that’s a bit disappointing. Some of the increase in SG&A spending can be traced back to increased levels of advertising spending, which presumably isn’t money thrown down the drain, but I can’t say I like the sudden jump, so I can sort of understand why the stock price went down after the publication of the results. At the same time, it also makes that the stock remains a pretty attractive deal. For $4.19/share you are getting $2.09/share in cash and $0.38/share in earnings. You don’t need a fancy valuation model to know that that’s not bad.

Last five years of PD-Rx’ financial results with the 2018 cash balance adjusted for dividend in December 2018



2018 end-of-year portfolio review

With another year behind us it’s once again time for the obligatory annual performance review. For the first time since I started blogging the MSCI All Country World Index ended up in the red, thanks to an action-packed 4th quarter, while my portfolio produced its worst result since 2011 as well. And while 2019 is still very young, so far it looks like that more excitement is on it’s way. Of course, exciting is most likely going to mean that I’m going to lose a bunch of money, but hopefully it will also offer opportunities to scoop up some bargains. So far I haven’t done a whole lot of buying. Sure, lots of stocks have gotten cheaper, but most of them were pretty expensive to begin with. But with so many stocks going down around the world I’m sure there are some new fresh bargains out there, waiting to be discovered by me :).

Year Return* Benchmark** Difference Old Return Delta***
2012 18.44% 14.34% 4.10% 18.53% -0.09%
2013 53.38% 17.49% 35.89% 53.04% 0.33%
2014 30.11% 18.61% 11.50% 27.72% 2.38%
2015 24.23% 8.76% 15.47% 20.23% 4.00%
2016 64.97% 11.09% 53.88% 43.58% 21.39%
2017 29.04% 8.89% 20.15% 30.12% -1.08%
2018 13.07% -4.85% 17.92% 13.21% -0.14%
Cumulative 606.75% 99.46% 507.29% 489.15% 117.60%
CAGR 32.23% 10.37% 21.86% 28.83% 3.39%

* Return in euro’s after transaction costs, net dividend withholding taxes and other expenses
** Benchmark is the MSCI ACWI (All Country World Index) net total return index in euro’s
*** Delta between previous reported return (Old Return) and new performance numbers (Return)

With a double digit positive return there is little I can complain about for the year, although that’s probably not going to stop me from doing exactly that in the next few paragraphs ;). But before diving a bit deeper in my portfolio I think I should explain what’s going on in the table above. When I started tracking my performance I tried to keep things simple by only tracking my main account(s), and ignoring stuff like the tax credits that I generate when dividend taxes are being withheld from my account.

Some time ago I decided that I should track things properly, and keep track of my results across all investment accounts and account for tax credits as well. At the same time I kept using my original methodology for the blog, but keeping two sets of numbers just for that is unnecessary complex. So that’s why I have provided in this table above a full reconciliation of the new numbers with my previous reported numbers, and going forward I will only report using the new and improved methodology. Adding the performance numbers of some small accounts doesn’t impact the yearly results in a huge way, except for 2016. That was an awesome year, mainly thanks to one special situation, that unfortunately enough will never repeat itself again.

Anyway, enough about the boring accounting stuff. Time to look at some numbers. As you can see HemaCare was the driving force behind the performance of the portfolio. Even though the stock gave back a decent amount of its gains in the last quarter, it still ended the year up 221%. Other stocks that did well were Viemed Healthcare and PD-Rx, while there were a lot of things that absolutely didn’t go in the right direction. This is without a doubt the performance attribution graph with the most red in it since I started making these.

The special situations bucket was, as usual, a good contributor to my performance, but to be honest, this year was a bit disappointing. A lot of situation that I entered in previous years payed out. Examples of these include two BINDQ liquidation payments (+115bps), Tejoori (+84bps), the Dyax CVR (+78bps) and the Casa Ley CVR (+57bps). With so such a big tailwind this years results certainly could have been a lot better. Unfortunately, I participated in some deals during the year that didn’t work out, with Rosetta Genomics being the biggest failure with a 202bps loss. At the same time, the missing distribution on the Sorrento Tech shares that I bought at the end of 2017 caused a 188bps loss. I’m somewhat hopeful that this loss will be reversed this year since the company says it’s working with DTC to correct the issue, but for now I have valued the position at zero, just like my broker is doing.

One thing that my regular readers probably noticed is that I didn’t blog as much during 2018 as in previous years. My New Years resolution is to bump up that frequency a bit again, and I hope 2019 will have some profitable situations in store for us. Happy new year!


Author is long most of the stuff in the performance attribution graph

Did I get screwed in the Sorrento Tech liquidation?

Last year I bought some shares of Sorrento Tech, formerly known as Roka Bioscience (NASDAQ:ROKA), on its last trading day, December 28, 2017. Today the first liquidation distribution finally showed up on my brokerage statement, but to my unpleasant surprise only shares that I bought earlier got the distribution. After checking with my broker they told me, and I will quote their response below, this was as it should be because the company set an ex-dividend date of December 28, 2017.

Per DTC comments:
The First Interim Liquidating Distribution in the aggregate amount of $3,199,137.92, payable to the holders of the Record Date being December 28, 2017 on November 9, 2018 (the “Payable Date “) be,and hereby is, declared payable on November 9, 2018; and it is further.

Given that I bought the shares on December 28, 2017 and it takes two days to settle trades I didn’t get anything. So the question? Is this possible? Did someone screw-up? The company had not set any ex-dividend date in the proxy statement related to the liquidation, although it did state that it would close its stock transfer books at the close of business on such date.

To me it seems that someone made a mistake, and I don’t think it’s me. If the stock isn’t trading ex-dividend when I’m buying it, I should in theory get the rights to any potential future payment. But the question is, who screwed up? The liquidating company? DTCC? My broker? And what can I do about it? Any readers with a good idea?


Author seems to be long a bunch of ROKA shares that might be worthless.

Nevada Gold & Casinos merger arbitrage

Last month Nevada Gold & Casinos (AMEX:UWN) announced that it had struck a deal to be acquired at $2.50/share, subject to certain minor adjustments. The company operates 9 mini-casino’s in Washington, approximately 604 slot machines in 15 locations in Deadwood, South Dakota and one casino in Henderson, Nevada. This last location is under contract to be sold, and is the cause of the possible adjustments in the $2.50/share merger consideration. Based on working capital of the Nevada business at the time of the sale there is a possible adjustment to the merger consideration. Because this adjustment is expected to be minor to begin with, and can both be positive and negative, I think we can safely ignore it since I think it should have a more or less neutral expected value.

With the stock currently trading at $2.39 there is a potential upside of 4.6% which would translate to a 19.8% internal rate of return if the deal closes, as scheduled, before the end of the year. And with the stock trading at $2.15 before Nevada Gold & Casinos announced that they were in discussions to be acquired the likely downside in case the deal breaks is probably limited. Add that there is no financing condition, and stockholder approval and regulatory approval shouldn’t be an issue either, I think it’s an attractive deal. As a small sweetener, the merger consideration will be increased by $0.01/month if the merger is completed after February 1, 2019. I don’t think that will happen, but if things get delayed for some reason it’s nice to get paid while waiting for the deal to be consummated.


Long Nevada Gold & Casinos