December 3, 2017
December 3, 2017


Thanks for your post about Ben. How do you frame one’s decision to raise cash if invested in money printing beneficiaries such as miners? Does your experience suggest that even though these names will ultimately benefit from a buckling dollar that a potential market selloff warrants unloading portions of these names as well? Perhaps you could give us a general idea too for names such as Energold that you like so much – while everyone’s situation is different are you selling 10%? 30% if you expect a downdraft? Your posts are very thoughtful – Thank you for your time.

Stocks are volatile, mining stocks are particularly volatile. These things can have 20% moves in a few days. I have consistently been long the market since the lows in 2009. It’s been a huge run. I haven’t had a real reason to be negative about the market in ages, but a rise in interest rates is not good for a market addicted to cheap credit. I am not expecting a crash or anything–Ben has my back–if you know what I mean. But I just figure I should get a bit more liquid just in case some bargains show up if there’s a pullback.

I haven’t sold any Energold. It is probably the best run and most undervalued company I own. I have sold bits and pieces of other things (mining and non-mining). This isn’t a market call. I’m not expecting a top in metals or anything. I’m just saying that this has been a huge run in all asset classes over the past two years, it’s never wise to be a pig about these things. For the first time in ages, there seems to be a reason to at least be a bit more cautious. A while back, I got scared owning cash, so I bought a basket of large cap mining stocks. On Wednesday, I took some of that position off for a pretty nice gain. I still own plenty of them.

Kuppy…APEX released a decent november update today, with a little more cash at hand form the sale of thier AQQ holdings earlier in the week, do you think APEX is well placed for a decent SP move.. i thought there would be more intrest from the buy side today than there was after such a statement. thanks

I’m a bit baffled by the lack of interest in the shares. November continued the trend that started around when I visited in May. Every month seems to be an improvement over the prior month as they ramp up tonnage, recoveries, production and lower production cost. They’re like 2 years and 3 billion shares behind target, but they seem to finally be making some money. If they can string together a few more good months, I think the shares should begin to respond.

Someone was asking about investing in India – as you say, it’s a big and complicated place… I haven’t been comfortable with investing directly there.
I have a friend that manages a closed end fund that trades in Toronto. It was at a substantial discount a while back, so I bought some – the discount has narrowed to about 20%, which is still pretty good.
The manager is very smart and you can see their holdings on the website www.dpfopportunities.com. May be a good way to get exposure there and save some trouble, the discount to net asset value being a little free juice.

I figured I’d post this for readers with an interest in India. It turns out that I’m friends with co-manager Vishal Patel and he’s a smart investor. I had no idea this traded at such a discount to NAV. The discount seems silly.

I really want to thank you for your great website. It is really a great service to independent investors all around the world. After reading your pieces I bought into Energold and Aeroquest. I also find your discussions of things as operational leverage not only important,but also enlightening even for experienced investors. I am considering buying into a company that may be a good candidate for operational leverage, the Indian company Makemytrip. They are currently valued at 14 times 2010 revenue and something like 100 times earnings, which seems outrageous at a first glance. But if you consider the net profit margins of more mature companies in that business as ctrip.com, a 20% net proft margin seems to be obtainalbe for a more mature market leader in that segment. What I would like to say here is that if makemytrip increases revenue 4 fold, I think they would be close to a p/e of 10-12. They would achieve that within 4 years if they continue to grow at this current 50% annualized pace. I think this is not an outrageous statement, if you look at India’s internet penetration of currently 7%. Finally, if you compare market caps of ctrip.com and makemytrip you will see that ctrip is 8 times more expensive. Both are market leaders in similar positions in their markets only that India is 10 years behind China. I would really appreciate your opinion on that.

MMYT should be a business with good operating leverage if they can execute on the business plan. The problem is that the company doesn’t seem all that cheap. Based on what you just wrote, if you think it’s worth 30x earnings (an agressive multiple), they have to pretty much thread the needle for it to be a 3x upside in 4 years. That’s not much upside considering how much risk you are taking if they cannot execute quite right on the business plan. That doesn’t mean you are wrong in your analysis–it just isn’t for me. There are plenty of real good gearing stories that are currently at teens (or better) multiples on earnings. Even if they don’t gear, you probably don’t get hurt. If they gear, you make 10x.

Your “Beer and Babes” post reminded me of Icahn’s comment: “the guy that gets to be the CEO . . . he’s the kind of guy that was the president of the fraternity.” He elaborates in a couple of paragraphs in this business school lecture:
(Ctrl F “anti-Darwinian” will take you to the start of that conversation.) What do you think of his theory? Do you think it applies less to managers of the types of smaller companies in which you prefer to invest? Thanks!

Ichan really gets to the bottom of the issue. Most large corporations are just awful investments. There’s no incentive to make big shareholder returns. Rather, they kinda plunk along with small gains until they blow themselves up doing something stupid.

I like to invest in CEOs who have a lot of skin in the game. These are the guys who got passed over for CEO job b/c they were too outside the box on their thinking. So they left some big firm, took their experience, and started something smaller. Those are the guys I want to invest in. Most large company CEOs can barely run a hotdog stand, but they are great politicians and that’s what they’re there to do.