Tuesday, July 14, 2015

Update on the Greedy Dragon portfolio



Hey guys, I hope your portfolios haven’t got fucked up as badly as mine was recently. My coal and O&G stocks were absolutely brutalized in the past few weeks. Could it be time for the Greedy Dragon to liquidate his holdings and invest in a mutual fund? While I made a couple of mistakes, overall I have confidence in my research and decisions.  I’m investing in businesses, therefore long-term profitability and actual risks to the business as a going concern are all that I care about. I would be lying if I told you I didn’t give a shit about near term share price fluctuations, because it does plant some doubt in my mind as to my ability to value companies and assess risks. However, reason must come before emotions. I’m trying to be rational by using the recent selloff in natural resource stocks to selectively add to my positions. I hope I will be rational enough not to get overexposed to the natural resource sector and to quickly realize permanent impairments in intrinsic value if they occur.      


Anyway, here are the transactions I made for the Greedy Dragon portfolio in the past couple of months or so. I hope I didn’t leave anything out. Please do your own research before investing in anything. I recently added to my position in Northern Oil & Gas, Natural Resource Partners, Cloud Peak Energy and Comstock Resources. I sold my positions in LRR energy, Mercadolibre and National Bank of Greece (NBG). NBG is the first investment in the Greedy Dragon portfolio which I believe has become permanently impaired. Maybe the stock might start to go up soon, but I don’t want to take the risk (I wish I had been more professional with this position from the start and cut my losses earlier). If Greece wants to get out of this crisis, it needs to move towards capitalism. But with a socialist as their prime minister, I don’t think that a Greek economy based on free markets is likely in the foreseeable future.


Well, that does it for this update. Take care and stay rational.

Sunday, July 5, 2015

Analysis of Northern Oil & Gas

Sup, y'all. As I mentioned in my last post, I was trying to create a professional analysis of Northern Oil & Gas to showcase my skills to potential employers. Well, it's finally done and I'm proud of that bad boy. Please click this link to go to my analysis. Please do your own research before investing in anything. As always, take care and stay rational. 

Sunday, May 31, 2015

Drinks with the Dragon, Session 2

Hey, how are you guys doing? No, I didn’t forget about you. I couldn’t really think of anything to write, so I decided to just do another “Drinks with the Dragon” post just to shoot the shit on some investing as well as personal stuff. I’ve been tied up trying to write a professional report (no using of the word bitch, fuck, shit, cunt or Mexican sticky balls) on Northern Oil & Gas, one of the Greedy Dragon portfolio’s positions. I plan to use that report to showcase my ability as an analyst to my potential employers. Hopefully the person in charge of reviewing the job applications actually bothers to read my work. I thought of just putting a link to my blog in my CV, but I think my blog is a little too gangsta for the corporate world. I will post my research on some document sharing site when I’m done so that you guys can check it out, if you want. I know I’ve mentioned that I wanted to get a job for quite some time now, but the fucking wound under my foot took fucking forever to heal up. The wound is much better now. It stopped discharging pus, so I don’t have to worry stinking up the office. I plan to send out my job applications at the end of June. I still have a lot of fat to work off. After all, one reason I wanted to get a job is to get out of the house and find a nice girl to date. I can’t really do that if I look morbidly obese. A Grand Prix for a card game I play (Magic: The Gathering) is also taking place in Singapore at the end of June, and I want to get my geek on and have a fucking good time before starting work.

Update on the Greedy Dragon portfolio: I recently added to my position in Natural Resource Partners. Please do your own research before investing in anything.   

Shale oil stocks have taken an absolute beating recently because of a presentation by David Einhorn (in my opinion, one of the best investors in the world) and horrendous Q1 earnings reports. I can’t really remember all of what Einhorn said, so I won’t try to refute him. The points I’m going to make isn’t directed at him, I’m just saying stuff just to say stuff. I don’t think you can just look at the depletion, depreciation and amortization numbers of shale oil producers and conclude they’re not viable investments. The cost of drilling wells has come down significantly and the estimated ultimate recovery of new wells has gone up significantly as well. Investors should of, of course, exercise prudence when attempting to figure out a shale oil company’s cost to develop its reserves. Shale oil producers may have also overpaid to lease acreage in the past, but that should be treated as a sunken cost. I will admit that my oil investments seem riskier than I initially thought after reading their Q1 results. I should really reevaluate those positions soon.


Coal stocks have also been hit pretty badly recently. I invested in a coal stock which I knew from the start would be one of my riskier investments. Now, I don’t regret investing in it as I knew that I could make a lot of money if it survived this downturn. Where I fucked up is investing too much money in this stock. I had an unspoken rule to never allocate more than 5% of my portfolio to riskier investments. I went full retard and put about 15% of my portfolio in investments that I deemed to be riskier. I believe my investment in one of these positions has already been permanently impaired (not the coal company, although it might if coal prices remain weak for a prolonged period of time). I will try to de-risk my portfolio whenever I can find the opportunity to do so. Maybe even realize some losses, which I fully deserve. Anyway, thank you for reading. Take care and stay rational. 

Saturday, May 2, 2015

Fundamental analysis of the Greedy Dragon portfolio



Hey, I hope you guys are ready to tear shit up because it’s portfolio analysis time! To be a badass mofo in investing, I think it’s important to think of your portfolio as a holding company and your positions as businesses. That’s why you should know if your holding company/portfolio has a big enough war chest and healthy cash flow to pursue opportunities when they arise. Having an idea of the industries and countries where the businesses in your portfolio earn their profits is also important.   


Update on the Greedy Dragon Portfolio: I recently sold my entire position in Biostime. I also increased my stake in Northern Oil & Gas and Natural Resource Partners. Please do your own research before investing in anything.


Let’s start analyzing the fundamentals of the Greedy Dragon portfolio by looking at concentration risk. The following tables illustrate the exposures of the portfolio:

Banking
22.76%
Natural resources (specifically fossil fuels)
41.37%
Real estate
9.89%
E-commerce
12.03%
Others
2.44%
Cash
11.51%


United States
56.38%
Latin America
18.27%
Asia
23.84%
Europe
1.51%

While my portfolio’s exposure to natural resources may seem high, I’m actually alright staying around this level or maybe even increasing my exposure to the sector by a little more. However, natural resource stocks have to drop drastically from here before I will consider allocating more than 50% of the portfolio to the sector. I know I’m taking a big risk here. In fact, I think that most people should not have a portfolio with so much exposure to one sector. But I’m confident in my ability and I’m prepared to take the losses if the “shit hits the fan” or the “condom breaks” or whatever metaphor for being fucked that you care to use happens. I will attempt to reduce my exposure to the natural resource sector when it recovers and move into other stuff like consumer goods or industrials to reduce the portfolio’s concentration risk. Assuming that no sector is significantly undervalued, I would rather not have more than 30% of my portfolio exposed to any one sector.


In terms of geographic concentration, I think the portfolio is less risky than it looks. Yes, 56.38% of my portfolio consists of companies that operate in the United States. However, I don’t think my portfolio’s foreign exchange risk is high as a large portion of my U.S. investments are natural resource companies that tend to be more profitable when the dollar declines. Because commodities are priced in dollars, they tend to go up when the value of the dollar weakens. Despite the damage done by all the leftist and socialist bullshit, U.S.’s country risk is low as it still respects property rights and is one of the most politically stable countries in the world. America: Fuck Yeah!


I really would like to get more exposure to Europe and Asia if I can find good companies there at attractive prices. Although it may look like the portfolio has decent exposure to Asia, about half of the portfolio’s Asian assets are cash. One of the long-term goals of the portfolio is to generate a significant amount of profits (whether its paid out as dividends or reinvested for shareholders’ benefit) from each of the following regions: Asia, North America, Europe and Latin America. This would mitigate the impact a devastating event in one of the regions would have on the portfolio. I also think that there’s a lot of growth potential in Asia and Latin America over the long-term, and I want to profit from that growth by investing in companies with a presence there.


Cash made up 11.5% of my portfolio. I used up a significant amount of cash recently to invest in natural resource stocks. While my cash position isn’t too bad, I want to increase it to at least 20% of the portfolio or I just won’t feel comfortable. However, that could be a challenge as I might want to buy more stocks for the portfolio. I guess that I could exit/trim some of my positions to increase my cash buffer and make new investments. But that’s a short-term fix. My long-term goal is to increase the dividends generated by the portfolio so that I don’t find myself in the position of having to sell good stocks in order to buy other good stocks so often. Being in that position results in you paying a fuck load of fees to your broker, which is not optimal. It’s also not fun selling a stock only to see it go up 100% in less than a year. Especially if you wouldn’t have sold it if you had enough cash on hand or could build up enough cash from your income streams. Every time I look up Monster Beverage’s stock price, I feel like bitch slapping myself for selling the stock the day before Coca-Cola took a stake in the company.


Disclaimer: I’m not recommending any of the stocks mentioned in this article.


After roughly taking into account taxes, the portfolio should have a dividend yield of about 1.79%, assuming no further dividend cuts (less if you include fees). This is indeed quite low and I aim to boost the portfolio’s dividend yield to around 4% over time by investing in quality dividend paying companies if the opportunities present themselves. Another way that the cash generated by the portfolio could increase is if my current positions initiated or increased their dividends. It’s important for the income from your portfolio to 1) grow at a faster rate than inflation over the long-term and 2) have some resiliency during tough times. A good source of income is asset light companies with pricing power like a Hershey or a Nestle or some other badass company. These companies are able to maintain healthy dividends as they don’t have to keep plowing back a large portion of their profits in capital expenditures. As these companies are able to raise prices, they are more likely to maintain if not increase their dividends in real terms over time. If you don’t get hard/wet at the thought of cash streams that can keep up with inflation (and possibly grow even faster than inflation), then value investing is probably not your thing. There’s no reason to limit your passive income sources to stocks. Bonds, real estate or private businesses could also be good cash generators, assuming that you understand those asset classes.            


Note: When calculating my portfolio’s after tax dividend yield, I exclude income from positions where all I can buy with the dividend payments are happy meals. This is a result of the stock having a low dividend payout, me owning too few shares and high fees relative to the dividend charged by my brokerage firm.


Well, it looks like we’ve come to the end of this analysis. It certainly was longer than I expected. Anyway, I hope you guys found some useful stuff in this article. Thank you for reading. Take care and stay rational.


Tuesday, April 14, 2015

Analysis of Comstock Resources



Please read the disclaimer here:http://greedydragoninvestment.blogspot.com/p/about-greedy-dragon.html. Enjoy the article, bitches!




Sup fellow value investing hombres, today I will be analyzing Comstock Resources. The company is a shale oil & gas company. The stock closed at $4.74 per share on Tuesday, which is around the average price I paid for this stock. In 2014, the company primarily drilled wells in the Eagle Ford formation in Texas. Have I ever mentioned that I would really love to live in Texas for a while? If I was a billionaire, I think I would be there right now buying up Eagle Ford acreage, eating barbecue and hopefully dating a nice southern girl. Anyway, let’s get back to business. The following excerpt from the company’s 2014 annual report details its 2015 drilling plans: “As a result of the improved economic returns expected for Haynesville shale natural gas wells, and the fall in oil prices in late 2014 and early 2015, our drilling activity in 2015 will primarily target natural gas in the Haynesville shale.” At current well costs and service costs, the company believes that it can achieve internal rates of return of 27% to 47% on new wells and 40% to 69% on refracs at natural gas prices of $3.00 to $3.50/Mcf. You can refer to slide 10 of the company’s presentation dated 04/06/15 to get a better idea of the economics of the company’s Haynesville wells. The company also has 82,500 net acres prospective for the Tuscaloosa Marine shale play, but drilling has been suspended until oil prices recovers.



Update on the Greedy Dragon portfolio: I recently took a position in Cloud Peak Energy and LRR Energy. I also increased my stake in Natural Resource Partners. Please do your own research before investing in anything.



Comstock Resources’ cost of production was $1.97 per natural gas equivalent (Mcfe) in 2014. I calculated cost of production as the sum of lease operating expenses, gathering & transportation expenses, production taxes and general & administrative expenses. As the company is planning to shift its focus from the Eagle Ford shale to the Haynesville shale for the time being, I won’t be covering the finding and development costs. The lower end of the company’s 2015 production estimates is for 9.5 thousand barrels of oil a day and 145,000 mcf of natural gas a day. According to Comstock’s Q2 2014 earnings call transcript on Seeking Alpha, the company’s realized oil prices averaged 97% of the average WTI price; the company’s realized natural gas prices was 94% of the average NYMEX Henry Hub gas price. The company could realize $4.248 per mcfe based on the lower end production estimates and assuming Monday’s closing price of WTI crude oil of $52.03 and NYMEX natural gas of $2.51 remains constant (assuming also that the company realizes 97% of the WTI price and 94% of the NYMEX natural gas price).


As at December 31, 2014, Comstock Resources had long-term debt of $1.07 billion. This is indeed a significant amount of debt. However, the company has some breathing room as the debt only starts to mature from November, 2018 onwards. It’s unfortunate that the company had no outstanding commodity derivatives as at December 31, 2014.



I was mainly interested in Comstock Resources for its presence in the Eagle Ford as I read some good things about the play. However, if the company’s new Haynesville wells turn out to be as profitable as it believes it to be, it would be like getting Snapchat photos from not one but two girls that you want to get between the sheets with. Thank you for reading. Take care and stay rational.

Sunday, March 29, 2015

Semi-annualish performance report for the period ended March 27, 2015



Disclaimer: There may be errors in my calculations. The purpose of this article is to present the performance of my portfolio. This article does not represent advice to buy or sell any stocks. I may, at any time, sell some or all of the stocks that were presented or appeared in this article. I actually have the intention to sell half of my position in Biostime to raise some cash this week. Maybe I might sell it today. Then again, maybe I might not sell it after all.

Hey guys, I guess it’s time for me to present the Greedy Dragon Portfolio’s performance again. I was definitely not looking forward to calculating the portfolio’s performance this time around. But all things considered, the portfolio didn’t do as bad as I initially imagined. The portfolio gained 1.69% in the 6-monthish period between September 15, 2014 and March 27, 2015. The S&P 500 gained 3.87% in the same period. In my last performance report I said that I wanted to take out Ringgit Malaysia (RM) 50,000 from the portfolio, but it turned out that all I needed was RM 40,000. So, the portfolio’s net value at the start of the 6-month period was RM 197,099.17.



The following table presents my current portfolio:


Purchase price
Current share price
Capital gain/loss
Cumulative dividends per share (after taxes and fees)
Total return
Current value of holding converted to RM
National Bankshares
US$ 35.8 (130 shares)
US$ 29.16
-18.55%
US$ 0.99
-15.78%
13836.42
Banco de Chile
US$ 72.82 (51 shares)
US$ 65.93
-9.5%
US$ 2.74
-5.70%
12272.87
Mercadolibre
Average US$ 93.68 (50 shares)
US$ 122.85
31.14%
US$ 0.08
31.22%
22420.125
First Republic Bank
US$ 46.19 (80 shares)
US$ 56.55
22.43%
US$ 0.026
22.49%
16512.6
National Bank of Greece
US$ 2.95 (700 shares)
US$ 1.27
-56.95%

-56.95%
3244.85
UOA REIT
RM 1.39 (9,000 shares)
RM 1.6
15.11%
RM 0.10
22.30%
14400
Biostime
Average HKD 22.97 (500 shares at HKD 33.85, 500 shares at HKD 25.3 and 1,000 shares at HKD 16.36)
HKD 32
39.31%
HKD 0.05
39.53%
29440
National Resource Partners
Average US$ 9.50 (300 shares at US$11.19 and 300 shares at US$7.8)
US$ 6.85
-27.89%
US$ 0.197
-25.82%
15,001.50
SandRidge Energy
US$1.85 (1,000 shares)
US$ 1.78
-3.78%

-3.78%
6,497.00
Mongolia Growth Group
CAD 1.60 (2,000 shares)
CAD 0.72
-55.00%

-55.00%
4176
Comstock Resources
Average US$ 4.71  (400 shares at US$5.83 and 400 shares at US$ 3.6 )
US$ 3.42
-27.39%

-27.39%
9986.4
Alpha Natural Resources
Average US$1.90  (1,100 shares at $2.23 and 1,000 shares at $1.54)
US$ 0.978
-48.53%

-48.53%
7496.37
Northern Oil & Gas
US$ 6.50(250 shares)
US$ 7.81
20.15%

20.15%
7126.625
Hong Leong Industies
RM 4.4 (1000 shares)
RM 4.45
1.14%

1.14%
4,450

Cash





33561.469
Borrowings





0
  

Notes to table:

Total return excludes transaction cost & forex gains/losses

I just Googled the exchange rates. I have no idea if they’re bid, ask or mid rates. I generally adjust the exchange rates down a little to take into account the spread difference when converting a foreign currency back into Ringgit Malaysia (there’s always the chance that my downward adjustment to the exchange rates is inadequate to reflect my stockbroker’s spread).

For Natural Resource partners and Biostime, the cumulative dividends per share presented underestimate the actual cumulative dividends per share I would have received if I bought my entire position from the start instead of building the position over time. This is the case as I calculate cumulative dividends per share by dividing total dividends received by current number of shares.



The following table presents my portfolio’s return for the period:



Current value of portfolio (less borrowings)
200422.23
Portfolio value as at September 15, 2014
197099.17
Borrowings
0
Portfolio return
1.69%
 
 

The following table presents the stocks I sold during the period:



Purchase price
Price sold
Dividends per share (after taxes)
Total return (excluding transaction cost & forex gains/losses)
Boardroom Limited
SGD 0.63 (7,000 shares)
SGD 0.557 (7,528 shares)
SGD 0.009
-3.49%
Ebay
US$ 50.32 (100 shares)
US$ 54.89

9.08%
KLCC Property
RM 6.09 (2,000 shares)
RM 6.64
RM 0.23
12.81%
Kumplan Fima
RM 2.00 (4,000 shares)
RM 2.05
RM 0.15
10.00%
Tifa Finance
IDR 214.47 (150,000)
IDR 201.55
IDR 8.1
-2.25%
Citizens & Northern
US$ 20 (250 shares)
US$ 19.4
US$ 0.607
0.00%
Uranium Participation
CAD 5.09 (1,200 shares)
Average CAD 5.62 (500 shares at CAD 5.6 and 700 shares at CAD 5.63)
10.41%
  
I might write another article about the fundamentals of my portfolio sometime next month. That article would look into stuff like industry exposure, country exposure, cash flow, etc. So, feel free to check my blog once in a while next month if you’re interested in how I approach portfolio management. Thank you for reading. Take care and stay rational.