kelpieCapital

  By Kelpie Capital Logistics – “The process of planning, implementing and controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.” Small and/or mid-sized businesses often do not have the ability to dedicate time or resources to extensively plan the shipment of goods from their factory to the myriad customers or geographies in their order books.   In these circumstances what is required is a cost effective way of outsourcing this task to a reliable company whose specialism is in making this logistical nightmare disappear.  Logistics is a mission critical service to a business: late delivery is as bad as no delivery and so manufacturers really do  place their reputation in the hands of their logistical providers. The Business – Radiant Logistics (RLGT – $1.40) Radiant Logistics is a micro-cap franchise non-asset based third party logistic (3PL) provider. Radiant Logistics, Inc. (NYSE:RLGT) negotiates with transportation providers who offer them favourable and priority rates due to their large purchasing power on behalf of clients.  The non-asset based part means that they limit their investments in facilities and transportation equipment. Radiant Logistics, Inc. (NYSE:RLGT)’s average
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Summary As a contrarian investor I look for opportunities to identify companies whose likely future will be better than their perceived future. It’s that simple. In this light, pressure pumpers are key to the changing face of resource development. Despite this, because of some short term supply/demand dynamics in the industry, I believe the long term stream of cash flows which will accrue to owners of CalFrac Well Services (CFW) is currently being profoundly undervalued. Calfrac Well Services Ltd. (TSE:CFW)  is an owner-operated provider of specialized oilfield services in Canada, the United States, Russia, Mexico, Argentina and Colombia, including hydraulic fracturing, coiled tubing, cementing and other well stimulation services. Calfrac was founded in 1999 by Ronald Mathison (Chairman) and Doug Ramsay (CEO) who remain major shareholders today. They are a top 10 global and top 5 North American player in well stimulation, fraccing and pressure pumping deriving more than 90% of revenue from this secular growth industry. Market Capitalisation $1.0bn Price $22.75 Book Value $16.50 Dividend Yield 4.4% 2013 P/E 6.5x 2013 P/CF 3.5x   Extracting Energy from Shale Rock & Horizontal Drilling It is not easy to extract gas or oil from shale rock – it is tough and uncompromising! The
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“A capitalist should have shot down the Wright Brothers during their historic “first in flight” moment.” Warren Buffett Summary Aircastle Limited (NYSE:AYR) is a global company engaged in the acquisition leasing and trading of high-utility commercial or freight jet aircraft to passenger and cargo airlines. As measured by the value of their airplane portfolio they are a global top 10 player. Aircastle Limited (NYSE:AYR) was founded in 2004 by Fortress Hedge Funds and then IPO’d in 2006 at $23. AYR profits from the spread between their lease revenue minus their interest and operating costs and depreciation. Leases vary from 3-12 years and the lessee is responsible for maintenance, operating and insurance costs. All rental payments and deposits are paid in USD. The business model is very similar to a REIT for aircraft. Key Metrics Market Capitalisation $800m Price $11.00 Book Value $20.00 Dividend Yield 5.5% 2013 P/E 5.5x   The Change of Industry Circumstance On the demand side, Airlines are struggling to get finance because of their history of sketchy profitability(enormous understatement!), there is also a desire on their part to keep their balance sheets asset light and flexible and to minimise residual risk. Therefore leasing has some strategic advantages as it offers a
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By Kelpie Capital    Ouch!! That’s what this month felt like, particularly on the last day when the market enjoyed a face-melting rally into the quarter end with the Aussie Dollar, Euro and S&P moving very strongly higher and therefore against me. The problem this month is that basically, everything went wrong. Kelpie was down 1% relative to the FTSE All Share which was up 3%. The largest holdings in the portfolio did poorly; Third Point Offshore Investors Ltd (LON:TPOE)  down 3% Energold Drilling Corp. (CVE:EGD) down 10%, Zicom Electronic Security Systems Ltd. (NSE:ZICOM) down 12% Aberdeen International Inc. (TSE:AAB) down 12% SANDSTORM METALS & ENERGY (PINK:STTYF)  down 21% Pretty tough in a rising market! The hedge book took some serious pain costing the portfolio several percentage points. The only strong performer in the portfolio was Yukon-Nevada Gold Corp. (TSE:YNG) , up 13%, which made several major announcements particularly drawing a conclusion to their “turnaround” and announcing that they are up and running as a fully producing gold miner on track to achieve 150,000 ounces for the year. Should they meet this target the stock is very cheap on all metrics, they are a possible takeover target in the near future. The underperformance of the portfolio is in my opinion due to many
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  By Kelpie Capital “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.” Charles Dickens in 1859 “A Tale of Two Cities” “Will the last person to leave Britain please turn out the lights.“ The Sun Newspaper, 1992 Election “Britain’s economy is a must avoid….Gilts are resting on a bed of nitroglycerine” Bill Gross – “Mr Bond Market” “Much has been written about panics and manias… but one thing is certain that at particular times a great deal of stupid people have a great deal of stupid money.” Walter Bagehot, ‘Essay on Edward Gibbon’   In this post I am going to venture into deep waters, discussing several of the macroeconomic headwinds facing the UK and ultimately why I think this is a very large negative for two assets I am trying
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  Price –  930p NAV – 1166p Discount to NAV – 20% Third Point Offshore Investors Ltd (LON:TPOG) is the biggest holding in my portfolio because I believe it gives me exposure to one of the greatest investors in the world at a substantial discount to the value of his portfolio. Better still, I think his macro aware, event driven, value oriented process is one that will hopefully thrive in a poor broader market environment. Third Point’s multi asset class, long/short approach also offers an attractive alternative to direct equity investment at a time when I believe broad markets are still looking expensive. Historically the fund has provided better than equity returns and Dan Loeb has commented recently that they feel they have become much better at managing volatility lower. “A manager who has become overconfident by using a bad process is like somebody who plays Russian roulette three times in a row without the gun going off, and thinks they are great at Russian roulette. The fourth time, they blow their brains out.”  Dan Loeb, October 2011   The Listed Vehicle Third Point Offshore Investors Limited, was IPO’d on the London Stock Exchange in July 2007 and raised $523m, to be invested
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“Each politician pursues self-interest while the common cause imperceptibly decays.” Thucydides. “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” Peter Lynch “In short, the depression IS the “recovery” process, and the end of the depression heralds the return to normal and to optimum efficiency. The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions imposed by the boom. The boom requires a bust.” Murray Rothbard   Yogi Berra might say that the month was like “déjà vu all over again” as the market plunged after a strong start the year, just as it did in 2010 and 2011. This was the “Third False Dawn” of recovery. Furthermore, the worries remain the same: no self sustaining recovery, continued private sector deleveraging, financial sector balance sheets and of course the intractable European currency crisis. The driver of market returns in the short term will likely be driven by “Volitics” the uncertain interaction of Policy Uncertainty and Volatility. More to Go? Paraphrased from John Hussman….“Michael Wilson of Morgan Stanley noted “Make no mistake, institutional investors are all in.” Wilson reported that the
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First off, I’d like to thank Joe at WalueinvestingWorld for alerting me to this idea, his site provides a great source of links/articles from around the web. In my opinion, Zicom Group at around $0.20 offers investors a low risk and deeply undervalued exposure to a number of “GDP plus” growing end markets with a conservative and proven founding family operating the business. Whilst we wait for the market to re-evaluate the prospects of this business and it to trade at a premium to book value, like it deserves, we get paid a 5% plus dividend yield and allow management to opportunistically buy back shares to increase our ownership. The stock currently trades at a 20% plus discount to Net Tangible Assets. Zicom has 3 main Divisions comprising the vast majority of revenues and profits. 1)      Offshore Marine Oil & Gas (circa 40% of revenues) 2)      Construction (circa 40% of revenues) 3)      Precision Engineering & Automation (circa 15-20% of revenues)   The Divisions Offshore Marine Oil & Gas (circa 40% of revenues) Zicom is one of the world’s leading manufacturers of high spec, heavy duty winches and deck machinery for use on large marine oil & gas vessels. They supply to
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  “The temptation to quit will be greatest just before you are about to succeed.” Chinese Proverb “Many shall be restored that now are fallen and many shall fall that are now in honour”  Horace Over the month of April the value of the Kelpie portfolio fell by 4.4% relative to the FTSE All-Share which was down 0.7%. The portfolio was damaged by large declines in major holdings Energold Drilling Corp. (CVE:EGD), Yukon-Nevada Gold Corp. (TSE:YNG), Gigaset AG (ETR:GGS), IDT Corporation (NYSE:IDT), Genie Energy Ltd (NYSE:GNE), Sandstorm Metals and Energy Ltd (CVE:SND) and SanDisk Corporation (NASDAQ:SNDK). It was a month where my idiosyncratic portfolio just looked idiotic. I sense a strong contrast between operational performance and share price performance; Gigaset, Energold and Aberdeen all posted good results and their share prices declined from what I already consider undervalued levels. The only bright spot was Aware Inc which was mentioned in a previous monthly for having valuable IP assets – these were sold for a sum roughly equivalent to the market cap causing a 60% rise in the share price on one day. The biggest change in the portfolio positioning for the month was probably an increase in gross exposure via adding some
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“It was luxuries like air conditioning that brought down the Roman Empire. With air conditioning their windows were shut, they couldn’t hear the barbarians coming.” Garrison Keillor “Look to the past and remember no empire rises that sooner or later won’t fall.” Al Stewart   British Empire Investment Trust has been added to my portfolio because it is uniquely positioned amongst funds at the crossroads of a number of themes that appeal to me. -          Discount to NAV -          Owner Operated Businesses -          Strong Track Record -          European Equities -          No Sell-side coverage/ Institutional Sponsorship -          Concentrated Portfolio The British Empire Investment Trust managers believe that their edge is maintained by keeping a very small investable universe relative to most of their “Global” investing peers. They focus on conglomerates, investment holding companies, asset backed investments or investment trusts trading at a discount to their own NAV. They think that this area of the market is particularly susceptible to inefficiencies and mispricing because their universe doesn’t possess any “natural owners” in the institutional world and often the stocks are quite hard to categorize or pigeonhole into sectors.   Price – 413p NAV – 467p Dividend Yield – 2%   Discount to NAV The trust currently trades on
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Overview SanDisk Corporation (NASDAQ:SDNK) was founded in 1988 by Dr Eli Harari who remained Chairman and CEO until the end of 2010. The company is a world class, pure play, technological innovator in NAND flash memory storage which is used in a wide range of devices for which traditional spinning disk storage isn’t appropriate such as digital cameras, USB drives, tablets, smartphones and certain high end laptops. The company also receives royalty streams from various competitors such as Samsung for the use of their technology. I first came across SanDisk Corporation (NASDAQ:SDNK)  when researching the industry of a previous holding Western Digital, but I didn’t dig too deeply until I saw it mentioned in the T2 Partners year end letter as one of their top 10 holdings. Of course the reason that Western Digital was so cheap was because the HDD business is in secular decline, mostly because of the increasing capacity and affordability of the products produced by SanDisk and its peers. SanDisk stock presents an excellent buying opportunity because the current price meaningfully underestimates the future cash flow potential of a company that is intertwined as a vital facilitator in the growth industry of smartphones, tablets and increased data storage
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