I missed the traditional half year updates so thought I would post a July one. Its been a decent start to the year, am currently up 23% to End July (27% to 15/8). This compares with 9.5% for the NASDAQ and 9.9% for the FTSE All share. Portfolio hasnt changed much at all, I have been busy with various other projects, that have taken up a lot of my time so it’s very similar to what it looked like at the start of the year. Most of the moves I have made have been raising / cutting weights in existing positions.
Much of the portfolio is covered in my end of year post in December.
Only a couple of new and returning ideas, I bought some SEIT – SDCL Efficiency income trust. This is a reasonably mixed bag of things, 27% Solar,19% district energy, 22% CHP, 7% gas network. Yield is over 10% but its not terribly well covered by earnings (1.0x). Its trading at 55p vs NAV of 90p and has some debt – which is all project level. Fees are 11m per year or c 1.1% of NAV, as usual I think this is excessive, it sounds like a small percentage – but what do these managers actually do to generate value to justify this salary ? I have my doubts, but these sort of excessive fees are pretty much everywhere so not much I can do about it. They sold a solar portfolio at a 4% premium to NAV in 2024, in July they sold a (small) convertible loan for an 18.75% premium, no guarantees but this suggests the bulk of the assets are priced accuraately. There have been a number of takeovers of renewable / energy assets in the UK – usually at around NAV, so if you are positive on this you get paid 10% a year then in a year or two (maybe less) potentially you get a sizeable uplift.
The other old favourite I have bought back into is FP. – Fondul Proprietea, I bought this as since it distributed capital the price fell significantly and I like the stake it has in Bucharest Airport – hilarious reviews are here, my personal favourite:
“Bucharest Otopeni is more than just outdated — it’s actively hostile to the needs of modern travelers. No water. Dirty, smoky bathrooms. Inadequate, miserable seating. It’s a third-rate experience pretending to be a gateway to a capital city.”
Of course it is a monopoly more or less, at the value it’s in FP it is trading at a 7.7% yield, 12% EBIT Yield so far from expensive for what is a strategic asset that would be difficult to rebuild for the $1.1bn its valued at. Ultimately FP. itself is cheap – trading at a discount of 40% to NAV, the airport is 50% of NAV so you get the other assets – a port (16.8%), and a salt producer (12.2%) mostly used as road salt, not a bad business as salt is low value relative to transportation cost 10% of the NAV is cash. The discount has widened, the prior institutional owners have sold out. I believe this is down to the removal of Franklin Templeton as investment manager – who were slowly liquidating the fund. The idea being to replace them with a Romanian fund manager who would make further investments. The board are understandably keen to continue get paid and not wind it up. They may not get their way as some shareholders have requisitioned an EGM to scrap the proposed change in investment strategy. I will, of course, vote to liquidate it. To me a strategy of continuing to invest when the company trades at half NAV makes no sense – they can’t raise equity, they have no expertise in ongoing investment. Not all shareholders agree though so a win for liquidation is by no means a done deal. My weight on this is low – UK capital gains tax changes (18%/24% above 3k) and a tax on dividends of 8.75%/33.75%/39.35% mean that sadly this sort of investment is no longer as attractive as it once was to me. I can’t use tax exempt accounts / spreadbet for my esoteric listed stocks so have to be very careful. You can’t buy a GDR on this any more as it was delisted (probably not helping the widening discount).
Sells were KAP (Kazatomprom) – simply because my broker no longer allowed me to hold GDR’s in a tax efficient account so it had to go, EC (Ecopetrol) for the same reason. I sold EVER in Romania because it hadnt done well in a year – of course once I sold it was up 30% but I put money in FP. which also did well – so not all bad… I sold 915 – Shandong Pharma, as I thought it wasnt doing well – again a misstep – up 24% ytd.
Best performing stocks were Gold /Silver related, I own a fair weight in the metals (4.4% Silver ( though some is 3x so that could be thought of as 6.8%) and 8.7% gold with a further 18.2% in gold / silver miners. This gives a weight of 31% – so I am at my limit, its done well, GDX gold miners ETF is up 47% since the start of the year but I am not going to put any more weight into this, even though I think currency debasement / a move back to gold is a virtual certainty. Paper money simply can’t be trusted as a store of value and eventually the man on the street will wake up to this – but we are nowhere near that point yet.
My other larger holdings are Genel / Gulf Keystone Petroleum, Iraqi Kurdistan oil producers. Apparently agreements are mostly signed just awaiting way of covering costs / paying money owed. Everyone – Iraqis / Kurds / companies agree deal will be done its just taking a long long while to get to it. I am pretty convinced a deal will be done here and upside will be significant. If you look at Genel, it has net cash of $134m, (£99m), $55m receivables (£40,) vs a market cap of £165m and you have an oil company attached. They say when / if the pipeline reopens prices can more than double, and they have operating costs of under $4 per bbl. Similarly for Gulf Keystone $100m net cash $120m receivable vs a market cap of $489, again with an oil company with substantial reserves and an operating cost under $6/bbl. Having said that you are investing in Iraq, and there is a non-zero risk either the Iraqi govt / Kurdish govt could just send troops in / seize everything. Outside Iran in 1951 there arent many examples of Islamic states doing this. Kurdistan/Iraq are likely to want to develop their oil fields while they still can – so in my view are unlikely to do anything along these lines.
My Russian stocks remain frozen, though I may have got a little money out Global trans moved to a Kazakhstan listing and I managed to transfer my shares to a broker in Kazakstan, they did pay a sizable return of capital, unfortunately that was in Roubles so may still be frozen – we will see if I can actually convert / transfer it. Other Russian stocks are still frozen – apart from JEMA – which I dont own much of – risk management forcing me sell…. Russian stocks are not included in above performance figures – if I do get my money back they have performed reasonably well and would likely rally following a deal. I remain optimistic this will be resolved shortly. I sold some of my Ukranian stocks (MHPC and AST) before they fell back recently. I am still tempted to buy more but with a potential 30%+ of the current value of the portfolio already in Russia I just can’t, though in a piece of good news the value of the pot ex Russia is now around the value before the invasion – its taken me 3 years to get out of the potential hole I dug for myself…
Lots of surprising moves – Kistos (KIST) +58%, Jupiter (JUP) +50%, AEP (Anglo Eastern Plantations) +50%, its very surprising for these as although things did get better, many of the issues from before remain – KIST still in a hostile tax environment with very little investor interest, though has made some good deals, still looks cheap. JUP made a decent deal and had reasonable results. AEP is ridiculously cheap (PE of 7 before great results, P/B of 1.1) and is looking more investor friendly. Yet other stocks that have done OK – particularly Ashmore (ASHM) havent moved.
Kenmare remains one of my better ideas and had been on a bit of a roller coaster – potential offer pushed it up 54% before falling back. I suspect it will attract another offer, its on 0.4x book and a PE of 7 with a yield of 7% – far too cheap. $1.5bn of capex built this mine, now valued at $400m. The key thing is a renegotiation of their implementation agreement with the Mozambique governement. The locals basically want more money. Personally I believe a hard line should be taken with demands like this – if they get paid off they will only be back for more. Very few take that view now in favour of ESG and ‘cooperation’ – basically paying the locals to not cause trouble. Its cheap enough that I can wait. Irritatingly they continue to invest despite being valued far below book, as with all miners. Hopefully one day shareholders will wise up and cut all growth investment where it is not valued appropriately, its been like this for years….
Holdings are below:
**PTEC distributed capital so performance figure isnt accurate.
In terms of weights – would like to raise FP. and potentially BXP but limited due to tax reasons. Thinking about raising KIST / SQZ, believe UK will become more oil company friendly when the pound / economy / public debt collapses more – maybe a year or two… Budget deficit is currently running at 5.3% of GDP – not remotely sustainable. Having said that the US is at 6.3%. This is why the position in gold/ gold miners is so heavy. Debt / GDP ratios across the world are large. the debt probably wont be paid back, in the event of any major stock/asset market crash more will be printed. Government can force banks / pension funds / insurance cos etc to buy their debt so the show can be kept on the road but eventually real stores of value are needed / wanted. Toying with the idea of
I could do with coming up with a few more of the esoteric stock specific ideas myself. Some have done really well, 1681 – Consun Pharma is up 129% in under a year. It takes a while to come up with these and they dont always work out, but worth putting more time in and moving away from my usual investment trusts, which are not the opportunity set they once were…
On to sector / country weights.
In terms of sector weight Natural Resources / Gold / Silver are at / beyond my limit. Likely I will trim these and move to other things, toying with moving from gold/silver metal on to more in the mining ETFs… I am very overinvested in Iraq (GKP/ GENL) – this is at / beyond my limit – I dont have a benchmark per-se, but over 5% for something like this is unusual… If the pipeline does reopen I will try to perform the balancing act of letting my winners run, whilst not wanting my portfolio to become a 2 stock Iraqi equity fund.
Expect the next 6 months or so to be busy with other projects so may struggle to get time to work on this, which is frustrating… Will try and get a few more ideas in / make a few improvements before year end…
As ever, comments / ideas appreciated.