Portfolio Update

The takeover of Novus Energy went through this week for $1.18 a share so this is now gone from my portfolio. That is 42% above my purchase price of $0.83 5 months ago, but as I said when the deal was announced, I am very disappointed in this as I think the company was worth far more. If anyone is planning a class action lawsuit against management then contact me, I will be happy to participate. Still I cannot complain too much with such a return in a short amount of time. What I can complain about though is that I personally only got a return of 29%, or 72% on an annualised basis.

You may wonder why, well the simple explanation is that $CAD is a foreign currency for me so I was at the mercy of exchange rates which moved against me ever since I entered the position. Without any hedge at all I would have had a return of only 21% (i.e. $CAD moved against me by 20% in 5 months!) but luckily in December I initiated a hedge on my Canadian holdings which returned 8% on the value of the Novus shares. If I had hedged immediately from my purchase in August I would have come away with much closer to that 42%.

Unfortunately this isn’t an isolated incident, foreign currencies have already lost me 7% on my Awilco Drilling position and 9% on my Emeco position. Emeco is now hedged (too late though) but Awilco remains unhedged (just because its hard to hedge NOK, not through choice). All my US and Canadian holdings are hedged against GBP (my home currency) and this hedge has provided substantial ‘returns’ in the last few months.

Anyway, that is enough complaining about foreign currencies. Next onto my article on Clear Leisure (AIM:CLP) in which I stated I intended to initiate a long position. I have now got a starter position in the stock which is 3.3% of my portfolio, my price target is 5.82p, or 160% above todays price.

The portfolio is doing well so far this year, up 5%, or up 2% excluding my biggest position, Craven House Capital (AIM:CRV). That compares well with my benchmarks (FTSE & S&P 500) which are down 4-5%. CRV is at 34% of portfolio. I am not happy with it being such a large position now that it trades much closer to book value. I made a big mistake last year, which has cost me probably 7% in portfolio performance! CRV increased to about 1.2x book value in a single day and I watched on, greed clouding my judgment, and expected it to go higher. I should have significantly reduced the position when it so obviously exceeded book value. Since that day CRV has lost 20% and is now below book value. The next time CRV makes such a speculative jump and exceeds, or reaches book value I will reduce the position by at least 50%.

Cash now is 20% of portfolio, and if the CRV position gets reduced at any point that will increase substantially to ~40%. I am more comfortable with this cash position than I was at the end of 2013. I don’t know how much further this bull market has to run but I am prepared to accept some possible short term under-performance safe in the knowledge I have enough cash now to pounce on any great opportunities that arise.

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

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