Tag Archives: services

The V20 Portfolio: Week 33

The V20 portfolio is an actively managed portfolio that seeks to achieve an annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read the last update here . Note: Current allocation and planned transactions are only available to premium subscribers . Over the past week, the V20 Portfolio rose by 3.8% while the SPDR S&P 500 ETF (NYSEARCA: SPY ) increased by 0.4%. Portfolio Update Conn’s (NASDAQ: CONN ) was responsible for most of the gains this week, rising 15.8% from $10 to $11.58. There were no major events other than a credit facility amendment on Friday, so much of this rally can be attributed to shifting sentiment in the market. Some of the amendments relaxed covenants while others were more restrictive. Let’s go over the restricting amendments first. Distributing restricted payments (e.g. dividends, buybacks) will now require a 2.5x interest coverage ratio for two quarters. Borrowing base was reduced by $15 million, which will be waived if interest coverage ratio exceeds 2x for two quarters. Finally, margin on the loan was increased by 25 bps (i.e. making the revolver a bit more expensive). While none of the amendments were crippling, the amendment concerning restricted payments will prevent Conn’s from making any share repurchases in the coming months, as the interest coverage ratio was less than 2.5x for Q4. The positive amendments included eliminating the minimum interest coverage ratio covenant for Q1 and lowering the total coverage ratio to 1x from 2x. Overall, this was a slight setback as buybacks will not be a possibility in the near future. Last week we discussed how Intelsat (NYSE: I ) was buying back bonds at a discount. For whatever reason (possibly the increased likely hood of a rate hike), the bonds in question declined in value from $70s to high $60s. As such, Intelsat lowered its consideration accordingly, lowering the offer by around 500 bps. Our helicopter company was the portfolio’s major laggard. There was no major development. As discussed in last week’s update, the oil and gas division will continue to battle industry wide headwinds, though the recent bounce in commodities may cushion the fall. However, it is unlikely that revenue will suddenly recover to its previous level as the oil and gas industry overall is still at a cost cutting stage. The medical segment should continue to generate profits, as it will not be affected by the commodity downturn. Risk Management Due to additional capital being allocated to Conn’s and its subsequent rally, the position now accounts for more than 10% of the entire portfolio. For a position to account for such a significant portion, it must fulfill two criteria: high expected rate of return and low probability of permanent capital loss. As we’ve seen with Dex Media, even though the shares were undervalued, 100% of the investment will likely be written off. But by allocating a small amount of capital to this speculative position, it only had a tiny impact on the overall portfolio. Conn’s on the other hand fulfills both criteria. It is not under any significant financial distress and is still growing its business. While short-term results have dampened its profitability, its long-term outlook remains bright. Performance Since Inception Click to enlarge Disclosure: I am/we are long CONN, I. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

I Love Star Wars But Should I Buy Disney?

Star Wars is awesome… but is that investable? How do you win stock picking contests? How can you exploit deadweight loss from Christmas? In the current episode, we discuss the following question: If Star Wars is going to sell a ton of tickets and if Disney (NYSE: DIS ) owns Star Wars, then does it follow that I should buy Disney? We also chat about stock picking contests and the deadweight loss of Christmas presents.

The V20 Portfolio Week #12: The Value Of Doing Nothing

Summary The V20 Portfolio increased by 5% while the S&P 500 rose 3%. Doing “nothing” has value. Dex Media and Conn’s should release material news in January. Things are looking up as we wrap up the year. The recent rally sent the S&P 500 into positive territory for the year, and the V20 Portfolio benefited as well. Although the market closed early this week, the V20 Portfolio posted a respectable gain of 5% versus S&P’s gain of 3%. There were no major news for any of our holdings and there were no major movers. Quite a boring (but profitable) week I would say. At times like this, I feel that it’s important to review the V20 Portfolio’s philosophy. Doing Nothing In 2015, the V20 Portfolio only entered into seven positions and only completely exited one (Perion Network (NASDAQ: PERI )). To some, this may seem lazy. “What? The Traveling Investor only studied seven stocks and called it a year?” Rest assured that a lot more work was being done behind the scene, much of which I’ve shared with the Seeking Alpha community, such as my Low P/E series or Diamond, Rock, Or Coal series . However, that is not the point. What I’m really trying to say is that there is value in doing “nothing.” When you know that your portfolio contains the best stocks (out of the ones you’ve studied), what’s the benefit of replacing one? There is none. While I’ve looked at hundreds and hundreds of stocks, none of them made the cut to supplant any of our current holdings (including cash). Of course, the reason why it is difficult is the result of V20 Portfolio’s high return objective. It is quite easy to identify a stable company that can return 3% annually, but it’s quite another story to spot a company that can return 20% with reasonable certainty over the long-term. Near-Term Outlook I’ll talk about some near-term catalysts that could impact the V20 Portfolio in the near-term and I’ll save the discussion of 2016 for next week. Dex Media (NASDAQ: DXM ) is nearing its third deadline. After two extensions of the forbearance period, we should receive another update by January 4th, 2016. There is no doubt that any news, both good and bad, will introduce significant volatility to the stock. However, from the portfolio’s perspective, the volatility is restricted to the upside. As of December 24th, 2015, the position only accounted for 0.5% of the total portfolio. Conn’s (NASDAQ: CONN ) will be releasing December 2015 sales data in January. Recently there has been some weakness the retail sector due to poor industry data. U.S. retail sales were below forecasts for the last three reporting periods (September to November). While Conn’s has continued to churn our very good numbers (November comps were up 8%), it is clear that the market is still betting against it given the way the stock has been performing (down almost 50% from its high in July). While I do not think that comps growth can stay elevated at 8% forever (and I don’t think any retailer is capable of such a feat), I do believe that Conn’s will not experience a sales meltdown that many investors have been fearing since it started to tighten its credit policy, and December sales data could be data that can revert investors’ current pessimism. Note: I spend a great deal of time researching every company in the V20 Portfolio (~40% YTD). If you are looking for some ideas that could complement your own portfolio, you can click the “follow” button and be updated with my latest insights. Premium subscribers will get full access to the V20 Portfolio. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.