My single largest holding continues to be the SPDR Gold Shares ETF (GLD), which holds gold bullion in London.
I also own four gold mining plays: Newmont Mining (NEM), Goldcorp (GG), Agnico-Eagle Mines (AEM) and the Market Vectors Gold Miners ETF (GDX). GDX is a modified market capitalization-weighted index of publicly traded gold and silver miners. I bought GDX to ensure I’d get proper diversification of major gold miners.
Gold recently corrected and, if I didn’t already have so much exposure to it in my portfolio (roughly one-third of total assets), I’d have seen this as a good entry point (fully realizing it could fall further here). GLD and NEM are up from my purchase prices, with GG, AEM and GDX slightly underwater or about where I bought them earlier this year. All the miners just reported great results, though NEM didn’t meet analyst expectations. Big deal -- the company increased its dividend.
I think the longer trend Bull remains intact, so I’m holding. Normally gold mining stocks overtake the metal itself at the end of gold Bull markets. That hasn’t happened yet -- but I’m confident it will.
In the tech/media/telecom area, I hold the following stocks: Microsoft (MSFT), Geeknet (GKNT), BCE Inc. (BCE), XETA Technologies (XETA) and a small position in Media General (MEG).
MSFT has been trading in the mid-$20s, which is still up from when I bought it for less than $19 a share. I was tempted to add some, but since it is already a full position I’ve decided to hold off. The company recently reported blowout earnings, which confirmed that its strongest product upgrade cycle ever is underway.
BCE just reported excellent earnings exceeding analysts’ expectations, and announced it is increasing its already fat dividend -- paid in Canadian dollars -- by 5%. The company has also been buying back stock.
Geeknet has changed its symbol from LNUX to GKNT. Much more importantly, Kenneth Langone has been named Executive Chairman and interim CEO. Langone stated on the analyst’s call last week that he and his partners own about 30% of the stock. I’m anxious (in a good way) to see what’s in store for Geeknet.
In the property & casualty insurance sector, I own Fairfax Financial (FFH/Toronto), EGI Financial (EFH/Toronto), and NKSJ Group (8630/Tokyo). Fairfax and EGI are based in Canada and NKSJ Group in Japan. Fairfax is one of my largest holdings in the portfolio, but I’ve sold enough of it to get my original capita out, so it is a free ride. It too just reported excellent results. NKSJ formed out of the NipponKoa merger with Sompo Japan earlier this year.
Unifi Inc. (UFI) just reported good results and has had its first profitable year since 2000. Ken Langone also serves on UFI’s board of directors.
I continue holding King Pharmaceuticals (KG), Capital Southwest (CSWC) and a small position in 3i Group PLC (III/London). CSWC still sells for much less than book value. I expect to hold this stock for years to come. And it is the only stock I own where my broker is instructed to reinvest the dividends (not that the dividend is big, it yields less than 1% last time I checked).
Lastly, I hold Superior Industries International (SUP). I don’t expect much from this until things pick up in the auto sector. Yet management maintains a strong balance sheet and I’m patient with the dividend near 4%.
My cash position is less than 10%.
For the year through June 30, 2010, the portfolio lost -2.9% including dividends. The S&P 500 lost -7.6%.
Here's how the portfolio positions looked at the end of June:
Gold Mining Holdings 23.0%
SPDR Gold ETF 12.0%
Fairfax Financial 7.3%
Unifi Inc. 5.6%
Microsoft 5.3%
Superior Industries 5.3%
BCE 5.2%
Cheung Kong ADR 4.9%
Capital Southwest 4.8%
EGI Financial 4.8%
Geeknet 4.8%
King Pharmaceutical 4.5%
XETA Technologies 4.4%
NKSJ Holdings 4.2%
Cash under 3%
Media General about 1%
3i Group about 1%
Some notes. These figures are not audited, just my calculator and me. So if I'm off a bit, sorry.
The portfolio stretches over three accounts: my regular brokerage account and two retirement accounts. The VAST majority of my liquid net worth is in the positions above. The "Controlled Greed portfolio" isn't some little portfolio on the side. It is real money. I’m working like the dickens not to lose it all and live out my life in soup kitchens.
The gold mining holdings listed above (and grouped as a single position) include Newmont Mining (NEM), Goldcorp (GG), Agnico-Eagle Mines (AEM) and the Market Vectors Gold Miners ETF (GDX).
I’m holding my SPDR Gold ETF, the double-sized position established in the summer of 2009. This means that my gold ETF and gold mining stocks together account for 35% of my portfolio.
Fairfax Financial is a nice-sized holding. Remember that I've sold enough of this stock a while back to get my original capital out of it. The holding is a free ride.
I'm mostly content with all these stocks, except for Media General and 3i Group. MEG has been a disastrous investment and represents money lost.
Let’s see what the second half of 2010 has in store. The “will we or won’t we” debate on a potential double-dip recession is interesting, but also baked into the cake. Much more interesting is the probability that the Fed will resume massive money-printing it calls “quantitative easing” -- also known as QE2 -- this fall.
My single largest holding continues to be the SPDR Gold Shares ETF (GLD). I’d prefer my gold bullion play to be the Central Fund of Canada closed-end fund, which also holds silver bullion, but it has been selling at a premium. So I settled for GLD.
I also own four gold mining plays: Newmont Mining (NEM), Goldcorp (GG), Agnico-Eagle Mines (AEM) and the Market Vectors Gold Miners ETF (GDX). GDX is a modified market capitalization-weighted index of publicly traded gold and silver miners. I bought GDX to ensure I’d get proper diversification of major gold miners.
Gold has been reaching all-time highs, and a correction may be in order. I think the longer trend Bull remains intact, so I’m holding. Normally gold mining stocks overtake the metal itself at the end of gold Bull markets. That hasn’t happened yet.
In the tech/media/telecom area, I hold the following stocks: Microsoft (MSFT), Geeknet (LNUX), BCE Inc. (BCE), XETA Technologies (XETA) and a small position in Media General (MEG).
MSFT has been trading in the mid-$20s, which is still up from when I bought it for less than $19 a share. I was tempted to add some, but since it is already a full position I’ve decided to hold off. The company is entering its strongest product upgrade cycle ever. BCE pays nice dividend in Canadian dollars, which feels good since I’m living in the US.
In the property & casualty insurance sector, I own Fairfax Financial (FFH/Toronto), EGI Financial (EFH/Toronto), and NKSJ Group (8630/Tokyo). Fairfax and EGI are based in Canada and NKSJ Group in Japan. Fairfax is one of my largest holdings in the portfolio, but I’ve sold enough of it to get my original capita out, so it is a free ride. NKSJ formed out of the NipponKoa merger with Sompo Japan earlier this year. Fairfax is one of my biggest holdings, but I remind you that I’ve sold enough over time that it is a free ride for me.
King Pharmaceuticals (KG) recently got hammered because it looks like its new tamper-resistant pain drug won’t get government approval, and it also looks like revenues will fall about 15% or so this year. The next few quarters look challenging, to say the least, but the company is putting a lot into some new pain products and its animal health business should remain strong. KG has a solid balance sheet and insiders have been buying since the stock price fell.
Unifi Inc. (UFI) is the company I recently bought when I dumped my remaining stake in DirecTV Group. UFI produces yarns and related materials used in home furnishings, apparel, legwear and sewing thread, as well as industrial, automotive, military and medical applications. It looks on track to post its first full-year profit since 2000.
Cheung Kong Holdings ADR (CHEUY) has been up nicely since I bought it during the global financial panic. Li Ka-shing has been buying the stock. I worry that if China has a property bubble pop on the Mainland, the spillover effects would hammer Hong Kong-based stocks like CHEUY. I’ve been mulling that over in my head.
I continue holding Capital Southwest (CSWC) and a small position 3i Group PLC (III/London). CSWC is up recently yet still sells for less than book value. I expect to hold this stock for years to come. And it is the only stock I own where my broker is instructed to reinvest the dividends. 3i is down a lot since I bought it several years ago. It has made some very good payouts in the past, but I must say it may prove to be a lousy investment like MEG.
Lastly, I hold Superior Industries International (SUP). I don’t expect much from this until things pick up in the auto sector. Yet management maintains a strong balance sheet and I’m patient with the dividend near 4%.
My cash position is small -- less than 5%.
Earlier this week I established a new portfolio position in Unifi Inc. (UFI), a producer and processor of multi-filament polyester and nylon textured yarns and related materials. UFI is headquartered in Greensboro, North Carolina, and its products are found in home furnishings, apparel, legwear and sewing thread, as well as industrial, automotive, military and medical applications.
My average cost is $3.44 and the stock ended the week at $3.95. The market cap is more than $200 million, with 60 million shares outstanding and about 44 million of float.
I bought the stock at 81% of book value and one-third annual sales. There is no dividend. The Current Ratio is more than 4 and Quick Ratio is over 2. There is some long-term debt the company is working to get rid of.
At the end of April, UFI reported its third straight positive quarterly performance and management expects its first profitable year since 2000. The company has achieved these results despite the lingering effects of the recession and continued high unemployment. Management is focused on generating cash and continuing to deleverage the balance sheet.
Retail sales in UFI’s core markets still remain well below pre-recession levels -- Apparel is off 4%, Automotive is off 29% and Furnishings off 13%. I like the company’s performance in this environment so far, and think it is becoming well-positioned for when a recovery arrives.
The risks with this are most prominently the world sinking back into a deep recession or even global depression. I believe the company would survive, yet the stock price would get hurt. Another risk is with raw material prices. UFI has done well despite increases in raw material prices -- but if they shot up even more it could hamper the performance.
As always, anyone interested needs to do their own due diligence. And UFI is another stock that can trade thinly at times.
Last week I established a new position in XETA Technologies (XETA), which sells, installs and services communication technologies for small, medium and large (Fortune 1000) companies. My average cost is $3.83 and the shares closed Friday at $3.77.
XETA was founded in 1981 and is based in Broken Arrow, Oklahoma. This is a small company, the market cap is around $40 million or less, with 10 million shares outstanding. There's not much float most days, and it took me a long time to fill the position. Of course, the market sold off big the day after I finished building my holding. But that's the way it goes.
There's no dividend, and the stock trades at 1.2 times book value and less than 0.5 times sales.
XETA has greatly improved its balance sheet. The company has grown its cash balance from $63,600 in October 2008 to more than $5.4 million as of January 31, 2010. During that same time frame, total debt has been cut from $3.9 million to zero. Cash flow from operations has funded all of the cash increase. XETA will report its Q2 results later this month. Needless to say, I'll be particularly interested to see what it says, and also listen to their analyst call.
The industry for what is often called "enterprise communications solutions" is large and competitive. There are many regional players. XETA, despite being a micro-cap stock, operates nationally and this gives it a competitive advantage, particularly when bidding against the regional outfits. It has also announced agreements to buy two companies in the past month or so.
The risks with this holding include the fact that there is some customer concentration risk. Marriott accounted for 10% of XETA's sales last year, and the Miami Dade County Public School system accounted for another 5%. Also, XETA uses multiple vendors such as Avaya, Mitel, Nortel, Hitachi and Samsung, and there is some talk of pricing on Avaya products, which could negatively impact the company.
Anyone interested should, of course, do their own due diligence. And remember -- there is VERY LOW liquidity in the shares.