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Week 278: Shorter Posts and thoughts on Credentials

Portfolio Performance

Top 10 Holdings

See the end of the post for my full portfolio breakdown and the last four weeks of trades.

Thoughts and Review

I had such a good response from my post on Radisys that I decided to change things up for the blog.  Rather than posting monthly letters summing up all my thoughts, I am going to deliver updates in a more traditional blog format.  I will write as things come up. So this update will be more brief, and will not cover any lengthy company updates.

I had a pullback in the last month.  I guess it shouldn’t be unexpected.  The previous three months were almost parabolic.  Having a portfolio that is weighted only to a few stocks, any kind of lull in the performance of those stocks can cause big fluctuations.  Right now my portfolio is heavily dependent on the performance of Radcom and Radisys. Both stocks had corrections leading into and following their third quarter earnings.

The good news is that nothing has occurred with either to warrant a change in mind.  While I expressed some concerns about Radcom in my earlier post, I felt a lot better about the stock after their Needham conference presentation.  I even bought some back over the last couple days.

I sold out of a number of oil stocks.  I still hold positions in Swift Energy, Journey Energy, Zargon Oil and Gas and a very tiny position in Gastar Exploration.  Other than Swift Energy, none of my positions are very big.  I started by selling Granite Oil after these comments on InvestorsVillage (here and here).  Looks like I was wrong there.  Later, as the price of oil began to break down I sold Jones Energy and Resolute Energy.  Both of these are levered plays and I expect out-sized moves as oil corrects.

I added a couple of new starter positions under the theme of Big Data: Attunity and Hortonworks.  The latter has begun to work out but the former has not at all.  I’m doing some more work to understand if I just made a mistake on Attunity.  With the new blog format I will write-up the positions and my thoughts on the Hadoop market (which led to my investments) in separate posts.

I also added a position in Nimble Storage.  The company has some good technology, can compete with Pure Storage and take market share away from incumbents like NetApp.  Again I’ll give more details in a later post.

Finally I mentioned in my last post that I had taken a very small position in Supernus Pharmaceuticals.  I’ve held that position over the last month and watched the stock correct downwards almost every day.  This is a big biotech sell-off and I don’t think the move has much to do with the company itself.  Supernus is growing very fast, there appears to be plenty of opportunity for further growth, and the pipeline of new drugs seems to be quite robust.  I’m seriously considering adding a big chunk to this one.


One final thought on the topic of credentials.  As I have written in the past, I manage my own family’s money.  Recently I had an opportunity to expand that to a number of friends.  But before going too far down that path I wanted to understand the regulatory requirements.

It turns out that in Canada at least, managing money and taking any sort of payment for it is very regulated.   It requires a number of courses, which is reasonable, but also years of very specific experience under the tutorage of a dealer.

Clearly I am not going to take 3 or 4 years to work as an understudy just so I can start a small part-time business on the side for a few friends.

My frustration is that there is no distinction between someone trying to scale into a large fund, soliciting money from the general investing populace, and someone who wants to do what I was looking into; basically help out some buddies and get paid on performance to do it.  These two activities do not seem equivalent in terms of public risk.  But in the eyes of the regulator there is no distinction.

I’m not a conservative in most ways but this certainly gives me sympathy to the position that abhors regulation.  I’m in a region that is suffering, I have a ready-made opportunity to create a small business, and the government has basically said no you can’t do that, because we know best.  Because as anyone who has read this blog for the past 6 years knows, I am clearly not qualified to pick stocks.

Portfolio Composition

Click here for the last four weeks of trades.


9 Comments Post a comment
  1. woma92 #

    Great blog! I just discovered it.

    In the US and in Germany lots of fund manager are officially advisors. Because of this a friend of mine was able to start his fund directly out of college. To make this option work you need a partner like for example Fidelity who technically is the money manager.

    Maybe there is something similar in Canada.

    I hope this is helpful!

    November 7, 2016
  2. Jay #

    Why not try the offshore route and set it up in Bermuda especially if friends and family members are on board. I am surprised Canada is that strict.

    November 8, 2016
  3. Temur Perkins #

    In regards to Granite oil, 3q16 results are now out as well as a newer corporate presentation. Based on what I’ve read in those documents so far, and based on a phone conversation with Tyler Klatt last night you were probably premature in selling based on the Oct corporate presentation and the investorvillage messages.

    Specifically in regards to page 7 of the new presentation shows a 97% payout ratio at $50 WTI.

    In regards to the second message that caused you concern it scared me too and it’s still a bit of a head scratcher. I believe the source of confusion is that they presented an un-hedged payout ratio in the Oct 2016 corporate presentation, (which is no longer available on their website but I can email you my copy if you are interested). Page 22 of the October presentation shows that their dividend is not covered at $47.50 WTI which would be alarming considering their Feb guidance said 99% POR at $37 WTI. But I think we have an apples to oranges comparison problem here with the February 2016 guidance definition of “all in payout ratio” being net of hedges whereas the October 2016 corporate presentation gave a payout ratio gross of hedge benefits. Gross of hedging they will barely break even at $50 WTI, but that hasn’t changed since February, just a different definition was used of payout ratio in Feb vs Oct. I think that’s what happened, and indeed it made them appear shady. But I don’t think it’s shadiness, rather it’s lack of precision in their communication and failure to anticipate how the distress and confusion it would cause us.

    There are no EOR companies that can survive indefinitely at $37 WTI, and the “sustainable” scenario they guided back in Feb really just meant that they could still pay the div because they were hedged.

    I know you sold your position, but please check out the 3q16 results at November presentation and let me know what you think. Granite is one of my largest positions and you brought the company to my attention and I thank you for that.

    November 10, 2016
    • Thanks for all the info I will take another look

      November 10, 2016
    • Looks like this worked out like you said. I unfortunately didn’t get back in. Congrats though on the DD

      November 26, 2016
  4. hobz #

    Why not try starting a limited partnership with your friends and family, similar to how Buffett structured his original partnership? Not technically an investing company that way, more of a holding company. Just an idea. Appreciate your insights.

    November 11, 2016
    • Thanks, thats something I had not thought of. I’ll look into it.

      November 11, 2016
  5. Hey Lsigurd, I just wanted to say I’m really glad you’re considering a regular post. I have really enjoyed your longer, details posts for a while now and whether or not they continue, regular posts will be neat in their own way. Re. investing with friends, another alternative, although the costs may be set-up/compliance costs are relatively high, might be to set up a discretionary or unit trust and name friends/family as beneficiaries. I’m not too familiar with these as an investment vehicle, but it could be worth looking into.

    November 11, 2016
  6. Hey, I’m glad to see that you are posting more regularly. I think my portfolio will have to thank you. I’m really into data science and why I stopped investing seriously. I have used hadoop, but I’m not an expert. Although maybe there is something to educate me on as I see all these open source companies go public, but I still don’t understand how they make money. If you would like to talk, shoot me an email. We have talked before, just let me know: cameronfen at gmail.

    November 13, 2016

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