Maglan Capital increased in value by 4.24% (net of all fees) during the month of March.
For 2015, Maglan Capital has increased 14.14% (net).
In the most recent 3 years, Maglan Capital has averaged an annual gain of 52.48% (net).
March was another strong month for Maglan, closing a solid first-quarter for the fund. Our position in Globalstar (GSAT) was the largest contributor to performance in March. Over the past few weeks, Globalstar has emphatically continued its march toward FCC approval of its terrestrial low-power service (TLPS) initiative, which will open the company to a myriad of opportunities in the current explosive communications environment. More broadly, the largest players in the technology and communications industries have exhibited unremitting appetite for communications spectrum and the scope of their vision has expanded, unabated.
Maglan Capital: Volatility and Risk
Maglan’s first-quarter strength is largely a result of catalysts and events relating to our core investments, that the market had to recognize, coupled with relatively calm broader markets. As important as the fundamental progress, the outperformance that the fund exhibited in the first-quarter was augmented by Malgan’s deep-discount buying, in the fourth-quarter of 2014, of already-core positions.
As the broad markets swooned in the last months of 2014, as detailed in our monthly investor letters for September 2014 through December 2014, solid, fundamental progress was being achieved in our core positions. Nevertheless, as the tide of the market forcefully washed out-and-in with regard to mega-cap investments, Maglan’s world of small- and mid-cap investments was swept out to sea without immediate return. So, we took advantage of the environment and added to our highest conviction investments at lower prices. Our investors are now reaping the gains of those convictions and investment additions. And, we expect that Maglan will continue to garner those rewards throughout 2015, as significant investment-related catalysts transpire.
Like others, we don’t prefer volatility. Nevertheless, volatility is in the nature of our investment environment, so we must expect it. More importantly and valuably, when we’re able, we anticipate it and capitalize on it. It is the contrarian discipline of investing and buying at those times of fear and market dislocation that fuels Maglan’s outsized returns. Said another way, our ability to distinguish between volatility and risk is one of Maglan’s defining traits.
Maglan Capital: Globalstar (GSAT)
In 2015 thus far, Globalstar has made significant progress toward FCC approval of its TLPS initiative. Once approved, we expect that Globalstar will begin to showcase the value of its spectrum through discussions and actual transactions with licensees, joint-venture partners and acquirors. In addition, Globalstar will immediately begin the processes necessary to duplicate the FCC’s approval in as many viable jurisdictions worldwide. The FCC approval of Globalstar’s TLPS initiative is occurring at a remarkably busy and exciting time for the technology and communications industries. Globalstar’s spectrum continues to be an increasingly important and valuable piece to the puzzle of the future of wireless communications.
Maglan Capital: FCC Approval
We view the FCC’s process of solicitation and consideration of external comments, opinions and evidence as it relates to Globalstar’s TLPS initiative, as entirely complete.
In early March, Globalstar conducted demonstrations of its TLPS for the benefit of the FCC and certain industry opponents, particularly, special interest groups.1 The focus of the demonstrations was on whether TLPS activity creates interference with other communications activity, whether TLPS is compatible with existing wireless equipment, and whether TLPS creates increased throughput/network efficiency. From all of the reports filed to date, by Globalstar, the FCC and Globalstar’s opponents, the results of the demonstrations were very favorable to Globalstar.2 Some of the conditions simulated in the demonstrations were harsher than reality, and nevertheless, Globalstar’s TLPS succeeded.
The FCC is now poised to turn its attention to confirming Globalstar’s TLPS initiative, since the FCC’s Office of Engineering and Technology (OET) and the FFC’s International Bureau have recently completed the bulk of the work related to the AWS-3 spectrum auction and Net Neutrality. The OET, as expected, has filed a factual ex-parte filing summarizing Globalstar’s recent tests.
Maglan Capital: Company’s Offense against Back-Pedaling Industry Opponents
Globalstar has faced opposition from special-interest and industry groups, whose existence is predicated on preventing or inhibiting outside competition and who are incentivized to say almost anything against Globalstar’s initiative, with the aim of torpedoing or slowing down the FCC approval process. These opponents have little to almost nothing to lose in their attacks; similar to the incentive calculus of a common fear-monger or terrorist. In stark contrast, Globalstar has conducted itself professionally with long-term interests in mind, advancing its case with the FCC.
As a part of Globalstar’s recent FCC testing, opponents had multiple days to view and comment on the demonstrations. Not only have some opponents failed to comment as they indicated they would, some opponents did not attend the demonstrations at all and others departed the demonstrations prior to the conclusion and did not return. Since then, some opponents have publicly complained about the setup of Globalstar’s demonstrations, which the opponents agreed to prior to the commencement of the demonstrations. Other opponents have expressed that they will not file their concerns until mid-April, without any additional detail, seemingly just looking to stall Globalstar’s progress.
Although we have never been able to influence or confine the timing of the FCC’s approval of Globalstar’s NPRM, all the recent events indicate considerable progress. The company has been very responsive to claims made by opponents in the aftermath of the FCC demonstrations,3 and since the conclusion of the early-March demonstrations, the OET has made no additional requests for technical analysis. FCC Chairman Tom Wheeler has shouldered a lot of political and industry pressure in connection with the FCC’s push for Net Neutrality and with respect to the broadcast incentive auction delays, and the Commission could use a deserved victory related to freeing-up spectrum. Approving Globalstar’s NPRM would be a great victory for the FCC because it would release 22MHz of nationwide spectrum that can be deployed and used in the near-term.
Specifically, we expect that the FCC has internal deadlines that it intends to reach. We expect that the proceeding will close shortly with Globalstar’s NPRM put on the agenda for an open-meeting in the upcoming months, or approval will be delivered via circulation, dispensing with the open-meeting route. As we have stated previously, the only question surrounding approval is “When?” Approval itself is foregone conclusion.
Maglan Capital: After Approval, What’s Next for TLPS
After FCC approval, Globalstar will immediately commence an effort to address international markets and to apply TLPS as prolifically as professionally possible. Many international communication regimes take their cue from the FCC. Moreover, the US State Department has indicated that it would like to see the United States take the lead on repurposing the ISM band globally for Wi-Fi TLPS, and therefore, it supports advancing TLPS internationally after the FCC’s approval. We expect that although applications for many countries may be filed within proximate time, approval of Globalstar’s TLPS in Canada and Mexico will follow first and shortly after US TLPS approval. In addition, generally, international approval will be considerably faster than the FCC’s in the United States because, with the current proceeding, the FCC has laid the groundwork for TLPS-related diligence and vetting for regimes outside the US