I know many readers of mine followed me over to SA from my previous newsletter days. My intention is to update readers on what I did during 2012 and update current positions. I will also lay out what I am expecting and doing in 2013.
Vietnam Opportunity Fund
This is a closed end fund that invests in the Vietnamese Stock Market and private equity deals in Vietnam. The website is here if you want to check it out. I am a big long term believer in the ascendancy of Asia this century and what I like about this fund is the net asset value of the fund is around $2.40 per share and the fund sells for around $1.75. You are getting the opportunity to buy $1.00 for around $.65 in a growing economy with many tailwinds. The management of the fund realizes the discount to NAV and has been buying in shares.
This is the oil producer in Nigeria that was my stock of the year pick for 2012 and returned well over 100%. It started paying a pretty decent dividend this year, however I have trimmed back my position. The company has had problems with pipeline thefts and recent flooding in its area of operations. Nevertheless the company has excellent upside as it has not fully drilled off its acreage. This one is risky but I still hold some shares.
This is the gold miner in Zimbabwe. The company has done a great job in bringing back its Blanket mine and the company has really delivered on the operations front. If the company was operating anywhere else it would be worth multiples of where it is now. The company continues to expand production and is the lowest cost operators in Africa. Cashflow has been impressive and the management intends on initiating a dividend early next year. This is another one with quite a bit of upside but it is risky with political risk being the biggest headwind. Zimbabwe is talking about having elections next year so expect the rhetoric about black empowerment and possibly nationalization to rear its head again. Mugabe could die at anytime and that would certainly be both chaotic but also possibly loosen things up. The company has the gold price as a tailwind and any decent political outcome could launch the shares.
Cortex Business Solutions
This is my 2013 stock of the year. I just wrote about it recently and you can read about it here.
Mongolia Growth Group
Irrespective of all the negative news that has recently come out about the political situation in Mongolia I am still extremely positive on the country. The economy continues to grow double digit and the Oyu Tolgoi mine is commissioning now with the concentrator ready to be dedicated on 12/27/12. This is going to be a major economic driver next year (A billion plus pounds of copper and 650k of gold per year). Plus we need to keep in mind there are quite a few other projects happening in Mongolia. I am a long term investor in Mongolia and I continue to accumulate shares in Mongolia Growth Group which continues to build book value and has several real estate redevelopment opportunities that could add multiples onto the share price.
Mongolia Stock Market
I am back in buying shares. I think the market has either bottomed or is near a bottom and I am scaling into some positions. I like the following companies Remicon (cement), APU (beverages), BDSEC (largest brokerage firm), E-Tran Logistics (Logistic services and expediting), Tavan Tolgoi (also known as little TT, met coal producer). Of course I have a longer term perspective so even if I don't catch the exact bottom I think I will do well buying in now.
Seems to be the flavor of the month and really no way to play it right now for smaller investors. I do have a small position in Yoma (real estate) but I bought it a while back and it is now likely overvalued. I will be watching an writing this up as soon as any vehicles for investing in Myanmar become available.
I think 2013 is going to be a great year for uranium. The bottom is in and several catalysts exist to propel it much higher. The new Japanese government has said they will be turning the country's reactors back on over the next few years. We knew this already as they have no other choice. As an aside this is more proof positive that renewables just are not scalable at this time. The country has a trade deficit due to all the fossil fuels it is importing and unless they lower their energy costs the high cost of energy could cause the entire economy to implode. The Chinese have lifted their post Fukashima moratorium on new nuke builds. The Megatons to Megawatts program with Russia ends this year and Putin has already said it will not be renewed. The major point is that the uranium spot price is $44.75 and the long term price is $60-65. Hardly any miners can make money at this price even with demand exceeding production. The price needs to rise to around $80-85 in order for sufficient capital to be attracted to the uranium mining sector to erase the supply/demand deficit. As always the cure for low prices is low prices. I am buying Uranium Participation Fund and the Uranium ETF.
I will also be writing about some more opportunities in Africa and Southeast Asia. That is where the growth and the action is. I continue to see the western welfare states stuck in their multi year decline. Yes there are pockets of opportunity i.e. shale oil and gas but it will take decades to unwind the fiscal messes and entitlement mindset in the populations of the west. Why swim upstream when the rest of the world has better opportunities and some places are growing double digits. I appreciate all the readers and thank you for another year of readership. I wish you all a Happy Christmas and safe and profitable New Year.