ATG Portfolio Update

Please pardon the lack of interesting ATG blog posts over the past month.  Yesterday I took the CFA Level II test- a brutal endeavor I’ll expand upon in a future post.  To give you an idea of the atmosphere on CFA test day, there was a guy in line who offered to pay $100 for a calculator, only to be met with 200 people giving him the thousand yard stare while holding two calculators and a spare battery.  (Admittedly I also participated in the thousand yard stare, but in my defense I only had two calculators and no spare battery).

Today am I a new man with an abundant amount of free time to keep the ATG blog active and fresh and current with our investment ideas.  moMANon has done an admirable job of watching over the ATG portfolio in its first 6 weeks.  Subsequent to opening the fund with 7 positions on April 17, we added to our Vietnam ETF (VNM) position on a 10% drop and initiated a position on weight watchers (WTW).  Through 6 weeks we are up 4.7% on invested capital- sounds fantastic until one realizes that the S&P has been up 4.5% over the same period.  Overall we’re very happy with the fund progress to date and especially pleased to report that all 8 of our current holdings have positive cumulative gains.  We’ll continue to keep you posted as we slowly build to our full position in the fund (see prior post on dollar cost averaging) and report on returns to date.   Below is a snapshot of the portfolio returns and some notes from moMANon on our positions.   It’s going to be a very interesting second half to 2014 in the stock market… Will oil prices hold, rates stay muted, emerging markets continue their move, old tech outpace new tech, Ukraine/ Russia tensions flare up?  I don’t know, but I still feel good about the ATG portfolio and the future investment opportunities out there.

ATG Portfolio- 6-8-14

 

moMANon notes on current ATG Holdings:

ESV – Ensco has a fleet of drilling rigs.  It rents those rigs out to oil companies who need drilling equipment.  This is a cyclical business.  As drilling rig supply gets low, prices go up, and the Enscos of the world build more rigs, then there’s too many rigs and the prices go down.  Currently there is an excess of drilling rigs.  (Rigs are not one market.  Deep-water, jackup, all have different supply/demand dynamics.)  The best way to make money on these stocks is to ride them through an upcycle and then get out of the way.  Thankfully management understands the nature of the business and makes sure to distribute earnings yearly, so even if the macro trend isn’t great you can earn money while you wait.  I imagine we will keep ESV a small position, and lighten on any strength, but for now we like the oil exposure and we keep clipping a healthy coupon.

CLNY – Colony is a REIT.  Thankfully Maverick knows way more than I do about real estate.  I like the yield.

GOOGL – My old boss and I used to put companies in two categories.  Will take over the world, will cease to exist.  Obviously there is a lot of grey area in between, but we liked the idea that if you had to pick one direction which would you bet on?  Right now I think Google is a world beater.  We need some technology, and it’s unlikely one issue is going to derail the Google express. 

OZM —  So OZM might have taken some money from unscrupulous figures.  (A hedge fund accepted money from a shady figure?  What a surprise.)  Investigations are ongoing, but it seems that this piece of bad news is priced into the stock.  (It could always surprise to the downside)  For me OZM is a high quality asset manager that distributes most of its earnings.  If the market goes up OZM will perform better, but either way they are one of the few institutional alternative asset managers and I believe they will continue to attract large inflows, improving the economics of the business.  OZM can be volatile, we are looking to add on weakness and lighten up on strength.

PFF – Hmmm preferred financials.  Maverick and I have discussed if PFF should be bigger as it’s a low volatility dividend payer.  But we are still discussing whether cash, bonds, low vol equities are the place to store excess money.  So far PFF has acted as expected. 

VNM – Nothing has changed with our view on Vietnam.  We think it’s a good place to have emerging market exposure, and will continue to buy on weakness and lighten on pops.

WWAV – I wished we owned more so we could lighten up.  Since we own a starter position we are holding tight.

WTW –  Weight Watchers is an out of favor brand.  Recent numbers have shown some traction and hopefully the trend will continue to improve.  Out of favor stocks need a change in sentiment as much as a change in performance figures.  Long term we believe that weight watchers will make a comeback and we will add on any significant weakness.

 

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