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What I Own Right Now

I’m going  to briefly go through the stocks that I own in my margin account.  On Monday (Tuesday for the US stocks) I am going to add these companies to the RBC practice account that I’ve created with a percentage weighting consistent with their weighting in my investment account.  Unfortunately this could lead to some short term portfolio losses, as some of these stocks have moved up fairly strongly in the past few weeks, but I need a starting point and the first of the month is as good as any.

Here are the stocks I own right now, weighted from largest to smallest:

1. Cash (12%): This is down about 10% from a week ago.  I have been a buyer of stocks as Greece has settled (for now) and as I try to pick up bargains (see GIX, EQU, JAG, ONR below).  In my real margin account I also have shorts of about 15% but the practice account is long only so I plan to just ignore them for the purposes of this blog.

2. Arcan Resource, ARN.v (14.7%): Largest position in my portfolio because I’ve had a double and have yet to sell a share.  I will probably write about Arcan in more detail at some point, but you can get all the information you could ever want to know by reading the Investors Village ARN and Oiljack’s Oil Thoughts boards.

3. Jaguar Mining (13.3%): I may be in over my head on this one.  Time will tell.  I almost doubled my position in the last couple weeks on pullbacks to the  $4.40s.  My thesis?  I think this company, which has admittedly been the dog of gold stocks for the last year (no disrespect to other terrible performers like Gammon and Golden Star), may be turning it around.  I detailed my research in a post on IV here.  The upside?  If, and its still an IF, the company can meet targets this year, they are trading at about 4x cashflow.  They have a strong growth pipeline. And they are a hated and heavily shorted stock.  I’m hoping for a move to $7 in the next 6 months.

4. Equal Energy (9.1%): Another stock that I bought a lot of in the last week when it reached down into the $6.40’s.  I like that the company has about 30,ooo acres in Oklahoma that should be prospective for the Mississippian.  I also like that the company is trading for less than $40,000 per flowing barrel and less than 4x cashflow. Finally, I like that nobody, not a broker, not a message board, no one, gives a shit about the stock.  Its like it doesn’t exist.  Some day someone with money or influenc will realize it does. got me on the story originally with this post here.  I have posted a number of times on the company here.

5. Lydian International (6.4%): You can value invest in gold exploration stocks, really you can, but you have to be very careful.  When I first started investing in gold, I used to look at the $/oz number and then announce that something was cheap (or not).  Dumb move.  Its all about the deposit depth, orientation, the metallurgy, access to infrastructure, management, in other words all of the things that aren’t so easy to figure out. Well I’ve learned some since then, and Lydian, which is not the cheapest $/oz company out there, is a company with a legitimate low cost, low capex deposit that is probably worth at least 50% more than the current share price.  I’ve talked about Lydian in detail on IV in a post here in December 2010.  Not much has changed since then except that the deposit has grown and the story matured a bit further.

6. Canfor Pulp (6.0%): This has been a trade. I bought the stock at $16.60 a couple weeks ago when it had free fallen from $19 without an up day.  I already  took half of what I bought off the table at $17.75.  I hold the other half and will probably look to sell this in the next couple days.  I don’t see many signs of weakness in the pulp market, but I think that in the high teens the stock is reflecting a lot of the upside of pulp already, and that if you really like the pulp market prospects you might as well go with Mercer International where the leverage is higher.

7. Gramercy Capital GKK (5.3%): I’m slowly moving into financials.  It started with a couple regional bank picks, but recently moved into a couple of REITs that manage and own the equity of CDO’s (Gramercy being one and Newcastle, mentioned below, being the other).  I am buying into these financials both for the opportunity and the learning experience; and in the case of GKK I have to admit I’m still wrapping my head around all the details of how this complex little company works.  What is clear to me however is that the upside leverage to a stabilization of the CRE market in the United States is substantial.  There have been a number of great blog posts by a fellow by the moniker of Plan_Maestro posted here.

8. Oneida Financial Corp ONFC (5.1%): A small (market cap less than $100M) regional bank in upstate New York paying a 5% dividend, trading at less than 10x earnings, with low nonperforming loans (< 0.5% of total assets), and with a deposit base that is growing at 13% per year.  The stock has done nothing since I bought it, but I am confident that eventually the market (or some other regional) will recognize the value here.  I’ve posted about it here and here.

9. Leader Energy Services LEA.v (4.9%): An oil services company that provides coiled tubing and nitrogen services.  This stock has been a bit of a mistake.  I am down on the stock in my actual portfolio, having bought in at an average of 0.98.  I probably bought too much stock at the time, and I am sort of trapped by the lack of liquidity right now.  Why did I make the mistake of buying as much as I did.  Because its cheap on comparables and its in a growth industry.  I’ll probably post on this in more detail in the near future, but on an EV/EBITDA ttm basis the stock is trading at 3.1x, which is less than half of a lot of its larger peers.  The problem is the company has a lot of debt; its debt to equity is about 1:1.  Still this is one of those stocks where at some point the oil services will come back into favor and suddenly volume will go up and the share price will rise.  Its just the waiting and low volume slide that is hard to stomach.

10. Home Federal Bancorp of Louisiana HFBL (4.3%): This is not Home Federal Bancorp (HOME), but HFB of Louisiana.  They are a very small ($38M market cap) regional bank.  I’ve been searching for Mutual Holding Company conversions and this is one I found that looked especially good.  MHC’s tend to hold large amounts of equity, which lines up the bank for strong growth.  That’s the case with HFBL, which has had some astounding loan and deposit growth numbers, as I detail here.   A more general overview I made of the company is available here.

11. OceanGold (3.1%): I cut back on the stock as it fell below my stops.  Still is the cheapest 200koz plus producer out there.  The company trades at a tremendous discount to other gold stocks, with a ttm price to cashflow multiple of around 4x.  This is a stock that I will dive back into if it appears that gold stocks are returning to favor.  I talked about OceanaGold a while back here.

12. Mercer International MERC (3.3%): Mercer used to be the largest stock in my portfolio.  It and Tembec were my biggest winners of 2010.  I bought MERC at under $4, kept adding up to $6 and watched it go to $14.  I sold, but bought back into the stock just last week when it got below $10 ($9.80 to be exact).  I’m not sure how long I will hold this.  Mercer is too volatile, it can go up and down 20% in a couple days.  Its also still cheap, but not like it was when it was $4 back last summer.  I’ve talked about Mercer on numerous occasions on the RNO board.  One of the better posts was here.

13. Coastal Energy CEN.v (2.9%): The story here is best read here.  There is nothing I can add that hasn’t been said better there and by someone more informed.  I only wish I had bought more.

14. Newcastle Investment NCT  (1.9%): Newcastle is a similar company to Gramercy.  They manage and hold equity in a number of CMBS based CDO’s.  The underlying value of the company is fairly close to teh current share price, but management has the opportunity to improve returns by buying back senior tranches of the CDOs they own at a substantial discount, as well as by investing unused cash in high yielding CMBS investments.  On the Q1 conference call management said they had been investing at an average rate of return of 18%.  It makes sense.  When there are distressed conditions there is bound to be opportunity, and who better to capitalize on it then a company that was right in the middle of the collapse.  There are a number of good articles on Newcastle at the Gator Capital Blog, including the latest liquidation analysis.

15. Open Range ONR (1.6%): Here’s a stock that I just keep buying in the mid $4’s and selling in the low $5’s.  I got another opportunity to do so on Thursday.  Apparently there is some sort of issue with the ERCB that investors are worrying may limit the growth of Poseiden.  Maybe.  This one is more of a trade for me, I’m hoping I can sell the stock again shortly at around $5 per share.

16. Skywest SKW (1.6%): A little oil and gas company with good Cardium land in Carrot Creek and Willesdon Green.  The stock has been falling out of bed since March, and I unwisely tried to catch a falling knife, first at $0.55 and then again at $0.49.  The stock kept falling and so I stopped buying.  The reason for the fall came out last week, production was down and the capital expenditures were enourmous considering the wells drilled in Q1.  Still for a company this size a few good wells would create a turnaround quickly.  And they aren’t expensive; on a flowing barrel basis they are trading at $60,000 per flowing using their latest production estimate of 1,636boe/d, and they have a NAV of $0.62 as per their 2010 reserve report.  I don’t like to add to a losing position, but if this moves strongly above my purchase cost I will consider adding.

17. Klondex (1.6%): I really like this gold stock, I have owned much more of it at times, and I wish I owned much more of it right now.  I sold out of 2/3 of my position here about a month ago.  It really had less to do with the company and more to do with the market.  I didn’t like what the market was doing and so I was selling down my junior positions.  Unfortunately I never bought back in.  They had big news on Thursday; a dissident shareholder group who had been championing for a change in the board of directors reached an agreement with existing management and as a result some of the board has been replaced and the current CEO, who is a major shareholder and founder of the company but who maybe isn’t the best person to bringing a deposit into production, has stepped down.  Klondex has a gold deposit that looks good on paper, but it also scares me a bit.  They have high grade (8g/t to 10g/t) underground deposit, but it appears to be discontinuous (think high dilution like Jaguar has experienced) and I’m not sure about the metallurgy required.  The dissident shareholder group mentioned these concerns on their call as reasons that investors have shied away from Klondex, and why its as cheap as it is.  Still, ~3Moz high grade oz and a market cap of less than $100M…

18. Community Bankers Trust BTC (1.6%):  My third regional and it is a bit of a flyer.  This is not a low nonperforming loan, high quality company that I feel safe with, like I do with ONFC and HFBL.  BTC has nonperforming assets of 9.5%, but the stock trades at 25% of book.  I did some work on it here, and I have more work to do if I do decide to buy more than this starter position.

19. Geologix GIX.v (1.6%): Purely a bet that there is a rally coming.  Geologix has a copper-gold deposit in Mexico.  Its low grade, it has fairly high capex, and apart from a small oxide top the metallurgy is going to take some work.  But the stock is at a fraction of NAV.  As per the NPV5 the enterprise value is at about 15% of that.  I calculated NPV10 and EV is at about 25% of that.  What I’m looking for here is we get a bit of excitement back in the commodities and the stock jumps back up to 65-70cents. And I make 10K or so.

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