Position Update 10/08/2012

It has been 10 months since I posted some position updates (I have meant to do this quarterly) and I thought it was useful to at least review where we are and what’s happening with the companies that I have mentioned on this site.

AAG.V

Price at Mention $0.56    Current Price $0.16     -71% Change

Clearly I got this one wrong. I’m done with small cap mining companies. DONE FOR GOOD! I’m not sure what happens going forward with Andean, but with the merger completed, it seems like an appropriate time to stop following Andean as the thesis is changed. This has been one of the worst % declines of my career—a lot of great lessons however.

AYR

Price at Mention $11.76     Current Price $11.64     -1 % Change

Since I just wrote about Aircastle in September, not much has really changed. However, with interest rates now set perpetually at zero, Aircastle will continue to be the low cost source of aircraft for companies in emerging markets that have much higher structural borrowing costs.

BDS MO

Price at Mention MNT 2355    Current Price MNT 3450     +46 % Change

BDSec is the largest securities broker in Mongolia, one of the fastest growing economies in the world. In the first half of 2012, BDSec reported that its market share had grown to 85% of all dollar value of trading volume. First half 2012 revenues, and EBITDA increased by 31% and 74% respectively. There are dozens of state owned companies that are expected to be privatized in the next few years. With the recent changes to the stock exchange and company laws, these privatizations are expected to begin within the next year. As the dominant broker on the Mongolian Stock Exchange, I would expect BDSec to be a sizable beneficiary of both underwriting revenue and also commission revenue as these companies begin to trade. The shares are up 46% since I wrote about them, but they trade at roughly the same prices to book and PE ratios. That’s the beauty of such a rapidly growing business, as long as you get your thesis right, you can pay a market price for the shares and still be well rewarded. I should point out that BDSec recently paid a MNT 50 annual dividend or a bit more than 1% while you wait for further growth.

EGD.V

Price at Mention $2.70    Current Price $3.76     +39 % Change

I’ve written more about Energold in the ‘Ask Kuppy’ section than about any other company since this site started. If I haven’t answered it in ‘Ask Kuppy’ it’s probably not worth mentioning. Energold remains my largest position in the fund and I’m very content to own it.

GLD

Price at Mention $108.28    Current Price $172.62     +59 % Change

Ben Bernanke basically got up on the largest soapbox in Washington DC and told the world that they are all underinvested in gold. If you’ve been reading this site, you will see that I posted a few pieces on gold this spring and summer. I didn’t exactly get the bottom of the pullback, but I was close. Gold is now up about $200 dollars in a month. I keep a core position that I NEVER sell, but I tend to add on pullbacks to sell on rallies while trading around this position. It’s time not to be greedy, but to take a bit off the table. It always helps to have firepower ready for the next dip. That said, overweight in gold is the trade of last decade and will again be the trade of this decade…

MERC

Price at Mention $8.11    Current Price $7.54     -7 % Change

We are now at NBSK prices where many high cost mills will have to close down, reducing production and ultimately leading to higher NBSK prices. This is a cyclical commodity at trough prices in what I believe will be a much larger super-cycle for NBSK prices. If the company can be profitable at the bottom of the cycle, just think about how it will do when we get back to the high end of prices in the cycle. I should point out that with cotton prices this low; there has been some switching between cotton and NBSK. Given what’s happened to other agricultural commodities, I would have to think that less cotton gets planted in 2013, which should remove additional supply of competing products.

TITN

Price at Mention $20.93 Current Price $ 21.23 +1% change

Not much has happened at Titan since I wrote about it a few weeks back.

VXX

Price at Mention $329.6    Current Price $34.12     +90 % Change

VXX continues to decay as the contango slowly eats through the equity in this vehicle. Eventually, this will go to zero. The trick is figuring out when and how to rebalance on the inevitable spikes, so that you keep a constant position sizing.

Disclosure: My fund has positions in the securities mentioned above. These positions can change at any time. I have no obligation to mention changes. Over the past few months, I have reduced a number of these positions due to redemptions at the fund.

Categories: Current Investments
Positions Mentioned: none

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