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Decision Journal

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galumay:
Ok, so revisiting the prediction above, I am actually wrong so far! TGR have performed well and the $7200 investment is now worth $8832, but the investment in ICU has droppd from an initial cost of $7180 to $3686 for  a combined value of $12518. Had I just held onto the CCP shares they would have dropped in value from $14248 to $13872 so as it stands the decison to sell some CCP and buy TGR and ICU has cast me $1354.

I will revist down the track, 5 months is a very short time to be reassessing the decision, hopefully the situation will improve!

This week I made a decision to transfer Sal & my tax returns into the SMSF, we got about $8866 in total and I decided that the best way to ensure we didnt just spend the money was to move it to the SMSF. I bought more UOS shares after deciding they were the company trading at the biggest discount to intrinsic value in my portfolio.

I predict that this investment will ensure growth in the value of this years tax returns in line with the UOS shareprice as well as an income stream from the dividends.

A good lesson in how fickle the markets are over shorter terms, just a week or so later and those CCP shares had dropped to what i paid for them, so parcel value, $11744 and the combined TGR & ICU holdings were worth $13469 which makes the decision look much better!!

And the lesson continues, ICU up 100% in 2 days on positive profit guidance, combined holdings now worth $19000

Update 20/4 TGR initial stake of 2236 shares now $8497, ICU now worth $7659 so total of $16156. The 1252 CCP I sold are now worth $9.94 for a total of $12445 so this decision seems to continue to be vindicated.

7/4 TGR $9279  ICU $5026 for $14305  CCP now $15562 so a little bit wrong at the moment! The better decision in hindsight would have been to put it all into TGR

5/8/16 TGR $9168 ICU $4069 for $14237 CCP now $19732 so $5000 down now. Looking more like I should have left the money in CCP, even had I only bought TGR they would be worth about $18400 so still worse off. This decision has flip flopped a few times so its really hard to come to a strong conclusion. The most consistent point seems to be that the real damage has been done by the stake in a speculative position with ICU - but of course another 6 months and that could turn around.

1/9/16 -this has really been an interesting comparison, little doubt now that just staying in CCP would have been the best of all results, they have taken off and the 1252 shares would now be worth $20500. TGR worth $9279 and ICU $5265 - as above, even had i only bought TGR I would still be down on hanging on to the CCP (  TGR - $18500 ) Lesson - dont sell shares in good companies to buy another good company - sell shares in bad companies!

Another year, oct 2017, still would have been better leaving the money in CCP.

galumay:
Time to consider reinvestment of dividends options, we have about $5000 available to invest, I think I will keep $2000 aside as cash and invest the balance.

Options include increasing holdings in UOS as company trading at greatest discount to value

Increasing holdings in ICU in the expectation of a turnaround and averaging cost down

Increasing holdings in AHZ while price is low

Increasing holdings in SGH to average price down

Buy into ICS

Initial thoughts are that I really cant find any certainty about SGH's cash flow and my gut feeling is that they may not be off their fair value unless they can improve FCF.

I am reluctant to take another, small new position with ICS, i would probably feel more confident if I was closing another position, but i fell like I a already holding too many positions.

So investing more into UOS ensures an income from the investment, it also should have the most liklihood of capital improvement given that its trading at such a discount to value and NTA, on the other hand the opportunity to average down into ICU while increasing my position leaves me well positioned if as i expect this year sees a revaluation of the company based on the profit from the acquisition of Arte starting to flow though to the bottom line. Also an increasee in the holding in AHZ exposes me better to the upside once this company becomes profitable as I expect.

I currently hold $2000 worth of AHZ and $7200 of ICU (well thats what the stakes cost me.)


Increased my holding in AHZ by $2500

galumay:
Ok, I have another $3750 in dividends to reinvest. The question is where to allocate the funds.
The options to me seem to be all the previous options,
AHZ, SGH, ICU and ICS

Plus CCP which have fallen hard back to my original purchase price.

So thinking thru the options, AHZ now holding about $4000 which is close to my position sizing for a non divvy paying spec, SGH I still have concerns about as an investment full stop, although the greed side sees the biggest potential capital gain here. ICU I am also probably a little over size in my position given the speccy nature of the company, and ICS would require opening a position in a new company - something I have been reluctant to do.

Well i decided on increasing the holding in CCP and have chased the price for 2 days! Up from $9.38 back to $9.94 now! Not sure whether to chase any further or just bide my time.

On looking at my holdings further the other opportunity to increase stake is in DWS which has quite similar metrics to CCP, it has made a couple of small aquisitions this year, which if they pay off could see an increase in earnings and a resultant re-rating by the market.

I think i will sit on it overnight and make a call in the morning.

galumay:
I realise that I have skipped the decision journal for some of the biggest decisions of my life - surrounding the work to win the NBN contract and all the decisions involved in that process! Lets hope at least mentally i fulfilled some of the process!

Anyway, some more dividends to consider investing, this time I realised there was another option - leave the dividends as cash because there may be investment opportunities that arise down the track that I need capital for. I actually made the decision to leave them as cash - and then of course the very next day an opportunity presents!

Tassal Group, TGR, the salmon producer released an announcement that I think the market completely misread, and hence the shares fell over 7% to $3.55 - and in fact were down as far as $3.46 during trading.

This is the body of the release,

Tassal rebalances sales channels to optimise returns
Tassal Group Limited (ASX: TGR) today announced that in line with its strategy to rebalance
sales channels and optimise returns, it has decided to withdraw its tenders for two domestic
retail supply contracts � Coles� fresh Salmon Deli business and fresh Salmon to Simplot for
supply of packaged Salmon to Coles. The supply contracts for Coles fresh Salmon and Simplot
will finish on 4 June 2016 and 30 June 2016, respectively.
This decision was taken to ensure Tassal continues to generate sustainable returns moving
forward in light of warmer water impacting growing conditions for near term supply. As Tassal
is rebalancing its sales channels to maintain sustainable returns, this decision is not expected to
impact revenues and earnings going forward.
Tassal has had a long and enduring relationship with Coles. This relationship is not expected to
change, and Tassal will continue to supply a wide range of other Salmon and Seafood products
to Coles.
The domestic wholesale salmon market has had, and continues to have, supply restrictions and
increased pricing to ensure impacts from a warm summer can be mitigated. This provides
Tassal with the opportunity to redirect salmon production into other domestic markets to
optimise returns following completion of the above contracts.
The export market continues to present favourable conditions given supply shortages globally
that are expected to continue for the next two years, with increased pricing and a low Australian
dollar. Tassal will continue to utilise the export market to balance sales volumes in line with
optimising shareholder return.

The market has read it as firstly saying that TGR has issues with stock due to the warm weather and water temp, and secondly that this represents management lying to shareholders because when HUO notified the market of stock losses due to weather TGR replied that they were unaffected.

The release says the market has been affected, not the company. I think its a classic mis pricing by the market and as the situation clarifies the SP will recover.

Revisiting my valuation for TGR I believe they are cheap at $3.55 although my FCF valuations are a bit rubbery because of the CapEx and the impacts of the DeCosti acquisition. Overall I believe they are worth more than what I payed for my original holding of $3.22 which ws prior to DeCosti, and under the shadow of the senate enquiry and was pretty near the bottom of the market - I think the SP of around $3.50-60 is at least as cheap as $3.22 was at the time I bought the initial parcel.

If I am wrong and there is a significant issue that effects profit for TGR I still think the price is ok, EPS would have to drop from 34c to 20c for the IV to drop to the current price.

I predict that $3.55 will prove to be cheap and within 6 months the share price will rise to reflect the mis pricing by the market.

29/4/16 Well, it didnt take long, closed this week at $3.90

1/9/16 $4.15

galumay:
Didnt manage to fill my order totally for TGR before they made a strong retracement back up to $3.80.

Still have $4K or so to potentially reinvest.

Started looking at SMX, an IT company that has had a very large fall in SP and looks like it may be trading well below IV. I considered taking a position at around $1.66 today, my reservation is that my rough FCF IV based on the H1 figures is only $1.70. They had a pretty poor H1 and the business is in some form of transformation. My dilemma is if I wait until the good news come they will quickly recover, if i buy now and they are failing on their transformation then the price may fall a lot further.

Inverting, and asking why should I avoid this company, the financial fundamentals have been steadily falling the last few years and margins are slipping - combined with falling revenue thats not a good recipe. The market has hammered the SP over the last few years. The EPS this year is similar to 2006 - when the price was about the same.

Also inverting the share price and looking at what that might indicate for earnings, FCF simple calc would be about 7.6c ps  - about inline with 1H figures, EPS indicated would be around 10c - impossible given that 1H earnings were 10c, unless they make a 2H loss.

I think this one goes in the thread discussing companies I didnt buy!

8/16 Now up to $2.15 from the $1.70 I started looking at this one, failed to run the FY15 numbers in my spreadsheet - I suspect i would hold them had i done so!

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