Markets. 2011 was extremely difficult for value investors because there was a real tug-of-war between the forces of fear versus fundamental value. As a consequence, fear overtook the value. Fundamentals on the micro side were actually quite good. 70% of companies came out with greater earnings in Q3 than most people predicted. For 2012, he expects the micro earnings to come through. Rates are still low and will be low for possibly another 2 years so cost of capital is fairly low and he expects acquisitions and takeovers making it a better year.
Sold his holdings in early 2011. Good company and good management. The biggest problem was their solar panel division in France. Until they rectify this, he wouldn't buy.
North Sea drilling. Canadian company, virtually name only. While their NAV is well through $3, they've had a number of delays. Particularly they’re waiting on a ship coming out of Dubai that has to pass through Straits of Hormuz. The longer this takes, they lose $.05 a share of cash flow from the new Athena. On the positive side, they’re producing at the rate of 5000 barrels a day. Athena will get them up to about 10,000. Would buy this one under $2 and sell it close to $2.75-$3.
Just bought it recently at about $2.10. Merging with Emerge (EME-T). He has a lot of time for management. Will be paying a dividend of 1.5 cents a month so at current prices it will be yielding about 7%.
High-risk/high reward. As a value player he does not favour the stock. Probably trading with a negative book value. Prefers Western Jet (WJA-T), which has earned money for the last 26 consecutive quarters, pays a dividend and is sitting on $1.3 billion in cash.
Contract drilling in West Africa. Management is very motivated and owns over 40% of the company and under promises and over delivers. Biggest problem is not having enough rigs. This is a long-term hold.
Construction/production business. They were penalized on the fixed rate contract for Firebag 3, which cost them a lot of money. Good management. Recently sold his stocks but owns their debentures. Prefers Flint Energy Services (FES-T). This one trades at 1.4X Book and pays a $.20 dividend and is trying to get back on the green side on their balance sheet, but suspects the easy money has been made.
Likes this company a lot. Management walks the talk. Very cheap and is trading below tangible book. Recently acquired Technicoil. Trading under 10X earnings. Likes the sector. Wouldn't be surprised to see this being a takeover candidate sometime over the next 12 to 18 months.
Fundamentally very cheap. On the right track. Revenues are probably through $2 billion. Have been remarkably conservative in terms of their outlook. Expecting will declare an initial dividend over the next 6-12 months and would be surprised if they buyback stocks. Trading roughly at BV. Likes this sector.
Profitable. Good management. The average car on the road today is 10.2 years old so there has been a lot of pent-up demand for autos and hopefully with a better economy and better psychology, there will be a lot of positive news for automobile companies. In January 2011 they acquired a German auto parts manufacturer for about $.18 on the dollar. Could see it easily trading in the double digits.
Oil services company. Provides services and rental equipment. Good management. Very cheap at slightly above BV. Expect they will earn at least $.50 this year and more next year. With oil at $100, a lot of the service companies will do quite well. Just sold one of their low-margin businesses. Expect their margins to be 25% plus.
Trading below NAV and tangible Book. Had a lot of problems with 5 government contracts. They have the Exact Earth division where they have the software that goes on a satellite and is able to cross the Earth several times a day, which will be increasing. This division should break even this year.
(A Top Pick Feb 18/11. Down 12.27%. (See commentary at beginning.)) Still like this one a lot. Did a special dividend and increased their dividend. Trading a good $5 below BV.