More portfolio changes – 2 positions sold

Still cleaning up my portfolio after a year of not paying much attention to it. I sold HOS:US and BXP:LN last week, and opened a new position in Cambria Automobiles ($CAMB:LN) which brings my portfolio cash up to 46%. A full post on CAMB:LN will follow later next week.

Hornbeck Offshore ($HOS:US)

I sold my entire position of this share, which was very small (started at 1%, down to 0.5% of portfolio), but realised a 63% loss. This is yet another example of where I got drawn in by a large discount to book value, but that didn’t mean much as no one wants to buy their ships. Longer term I think oil will rebound, but Hornbeck has a lot of debt that needs repaying in a few years and no cash coming in to do it. They have been signalling they may restructure the debt which could really hurt shareholders, so I’m out. It’s still on my watchlist, so I may go back in, if the oil market starts to improve and HOS’s debt is sorted out.

Beximco Pharma ($BXP:LN)

On a happier note, I just realised what has officially become my new best ever investment. Overall gains were 326% since September 2014, or 86% annualised (this narrowly beat my 296% $CRV.L gains last year). In what has become typical of me, this started out as a decent sized position (7% of portfolio) but I halved it quite soon after investing due to it being a “dodgy” foreign listed share on LSE. In hindsight, I still think it was the correct call to not be so exposed to a foreign market I know nothing about, especially after my disastrous Ukranian Avangardco investment (that’s down 94% since Russia annexed Crimea and stole AVGR’s assets by the way). That’s not to mention that many of these foreign companies listed on LSE as GDRs are fraudulent, but that risk was lower here given they had a local stock market listing and FDA approved drugs in the USA.

But still, a 326% increase on a 3.5% holding is meaningful. Dividends and exchange rate movements helped, as the share price alone was only up 257%.

I sold because I think the company has reached fair value. It is fast growing but if you look at its cash flow, it is all being reinvested to fuel this growth, and its return on invested capital is nothing special at 11%. So the shares now trade at roughly book value and P/E 10. Normally I wouldn’t sell so soon as reaching fair value, but given it is a foreign share I think it deserves a discount so it’s over that.

Logicamms Update ($LCM:ASE)

I haven’t sold any of these shares, this is just an update. I was less than impressed with this company’s equity raise a few months ago, given they had a strong cash position when I bought into the share, and still do. The management must be very debt averse, either that or they couldn’t find anyone to lend to them.

After reading through their most recent update, it appears the company will perform poorly in H1 2017 but expects won contracts to come through strongly in H2 2017. Mind you, I take what this management says with a pinch of salt given they are always optimistic. The company keeps reiterating a 6% target EBITDA margin, which on revenue of around A$110m (FY 2016) gives A$6.6m. After cap ex and tax, I think that converts to FCF of around A$3.9m. With a market cap of A$33m that doesn’t make the shares particularly attractive you may think.

Still, the management are optimistic about replacing the revenue that once came from oil and mineral exploration, and I can’t see any reason they can’t do this over time, so would expect their revenues to continue to grow over the medium term. I’m happy to continue holding for the longer term. I’m unsure on a valuation, but I’d probably sell if the share price hit $1 without much material change in business/financials.

Disclosure: Author is long LCM:ASE and CAMB:LN. Has no position in HOS:US or BXP:LN

Founder of Investing Sidekick. Works as a research analyst and is an avid value investor, always searching for undervalued shares.

3 thoughts on “More portfolio changes – 2 positions sold”

  1. Are many GDRs on LSE fradulent? I know that there have been a lot of fradulent chinease ADRs/GDRs on the german/US Exchange, but I din’t konw that the LSE was hit as well. Is it also non-chinease compagnies you are thinking of being fradulent on LSE?

    Best regards Casper

    1. I don’t know how many are, but there have been some cases. Chinese seem to be the most common, or at least the most high profile. Often a company will have shares listed on another exchange as well though, like Beximco Pharma does, and that can give you some greater confidence in them.

      I’m always more sceptical of foreign companies in non-developed countries as the accounting practises are less rigorous and fraud is easier to commit.

      1. Okay, thanks for the reply. I have been burned enough by Chinease frauds in the US and Germany, so I really don’t need any more of that ;o)

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