Thursday, 27 August 2009

some new names

L: 91% S:77% G: 168% N: 13% ~ $D 0% $G 0% $V 0% $P 0.00%

The Raven has been looking at some more small caps and off the wall names, he's noticed that the worst value stocks have been really outperforming the last week, so he's been looking at the riskiest section of the investment universe for the most beat up names he can find, he's got a watch list to keep an eye on so far.

Of the riskier names that look interesting one which did catch his eye is SONG NO, Songa Offshore, now he's looked at this firm a long time ago and a firm that rejigs its capital structure as often as this always worries the Raven, however the last couple of quarters numbers look of, they managed to get some deleveraging done and they're not looking terrible value. Its also forming an interesting technical pattern on the chart so he's looking to start a small position.

He also looked over the M&A universe again, and looked particularly at a better estimate of risk/reward, sector adjusting his downside numbers for the deals he likes and then ranking them on this risk reward metric. He was initially surprised that WYE came out as the top contender given that the hedgefunds seem to be all over the name (Einhorn & Co), however its a huge deal and I doubt the arb community has the capital to close it to a fair level. A lot of the other names become very dependant on the time frame assumptions, a 12% IRR becomes a 6% IRR very quickly if a deal gets delayed by a month for the short end deals. Depending on what you think JAVA then looks pretty attractive, the Raven thinks the EU oks the deal when they are due to review it in September, and thinks the deal then gets wrapped up by the end of that month (there doesn't look like that much downside on a break given the sector performance). IPCR looks ok on that basis as well.

The Raven is now in full position size with CYCL, he'd have to adjust his risk limits to be able to take more and he doesn't think making that sort of exception for something will so little transparency is a wise idea. Especially as he gets the feeling that he's not going to be the first grape on the vine to hear if this deal breaks. The downside doesn't look that horrendous though.

He's tempted to sell out of his IP2IPO position as its small and takes up way too much time to monitor it given the potential upside. However at 50p he still thinks its pretty cheap and transaction costs make it silly to trade this actively. With 12p per share of cash and some residual values in the businesses they own you'd think there is limited downside below 40p, with a book value of 90p then it fits his risk reward preference.

Also "interesting" and by interesting he actually means totally effing insane that Turner at the FSA is proposing Tobin taxes, this guy is a chump, thats why he's working for the government. If the financial sector is destabilising the UK real economy he's been smoking crack, the Raven would love to see the Labour champagne twits balance the budget without 20% of their tax revenue contributed by a few hundred thousand workers, go figure. It does make one wonder where the FSA finds these idiots, after all if he proposes tax increases on trading of shares and bonds, who does he think is going to invest in UK businesses, how much are pension funds going to pay out in more taxes and who in their right mind is going to buy gilts? uhm the BOE can't finance that hole all by itself without THAT becoming a huge destabilising force. Truly some of the most foolish and populist posturing he's heard this year.

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