To open the September 2015 Shareholder Quarterly Report click here.
To open the September 2015 Market Update click here.
At 30 June 2015 we had 7.7% of the Portfolio invested in ELDPA.
These are hybrids. More correctly they are perpetual preferred shares. The ELDPAs have some characteristics of debt and some characteristics of equity. At issue, these instruments typically offer a debt like coupon or distribution which is normally fully franked. They offer very little equity-like upside given they are callable at par or $100/hybrid, but given they are subordinated to debt, they do have downside risk. Bluntly, they offer all the upside of credit and all the downside of equity. We never buy these as new issues because the risk asymmetry
is entirely unfavourable. Fortunately the Elders Hybrids are trading well below $100/hybrid face value, which is why there is an opportunity. [Read more…]
At 30 June 2015 we had 3.0% of the Portfolio invested in AAD.
Ardent was something of a market darling and in October 2014 its stock was over $3.00 per share. First half earnings were quite disappointing, driven by negative comparable sales in Ardent’s Health Club business. At around this time, there was a change in CEO, which the market did not take kindly to, selling down Ardent’s stock to around $2.00 per share.
We think this is something of a mean reversion story for a few reasons: [Read more…]
At 30 June 2015 we had 6.3% of the Portfolio invested in ELD.
It is a little unusual to own both the Hybrid and the Common; but we can see significant upside in Elders and given the Hybrid return profile is capped, we bought the Common stock as it sold off in March 2015.
The core Elders business has been in operation for over 175 years. The name is known my most Australians and is tied inextricably to Australia’s pastoral heritage and we would assert to its future as well. [Read more…]