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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Get Rich Or Die Tryin' – Buyin' $1 For Fiddy Cent 10 comments
    Dec 12, 2013 10:47 AM | about stocks: UBAAF

    (50 Cent)

    At the beginning of the year, we suggested buying $1 for $0.50 and getting the Bombay Stock Exchange for free via purchasing shares in Urbana Corp. (GM:UBAA). Since that time, I have had enjoyed constructive communication with their fund manager, who I trust and respect. It has been almost a year, so here is an update on this investment idea. These are the early results in terms of the market price:

    (click to enlarge)

    The NAV has gone up by about 49% from $1.89 to $2.82. The fund benefitted from the takeover of NYSE Euronext by Intercontinental Exchange (NYSE:ICE). The Bombay Stock Exchange applied for an IPO withy the regulatory authorities several months ago and awaits their answer. The IPO is anticipated to forward early in the New Year. Here is the current investment portfolio:

    (click to enlarge)

    Since inception, the fund is up about 79%, over twice as much as the S&P 500 ETF (NYSEARCA:SPY) which was up about 39% over the same period:

    (click to enlarge)

    From a marketing perspective, Urbana has touted their annual compound returns of over 15%, which compares favorably to S&P 500 returns of around 5% during that period.

    Since the market price increased by 84% while the NAV has improved by 49% from the time of our last update, it currently trades at about two-thirds of NAV. Urbana's fund manager is working to close the remaining gap by aggressively repurchasing shares. In late August, he announced his intention to repurchase up to 10% of the public float, which is the maximum allowed under TSX exchange rules. Under the previous buyback, he repurchased almost six million shares at an average price of $1.18, which was quite accretive to the value of the remaining public shares.

    No key Urbana insiders have any current intentions to sell shares under the buyback plan. Urbana insiders think that their shares may be attractive and that purchase of such shares from time to time would be an appropriate use of funds. I agree.

    Disclosure: I am long UBAA.

    Additional disclosure: Chris DeMuth Jr is a portfolio manager at Rangeley Capital, a partnership that invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our partners, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

    Stocks: UBAAF
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Comments (10)
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  • steppppo
    , contributor
    Comments (225) | Send Message
     
    Chris -- question about the BSE investment. Looks like it cost Urbana about $32 million and now its market value is $15.9 million.

     

    Why the price drop and do you expect the IPO to make back that amount?

     

    I should add that this still looks like a very compelling investment.
    12 Dec 2013, 11:30 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4836) | Send Message
     
    Author’s reply » They are good at aggressively marking down non-public investments, which is one of the behaviors that has given me comfort in management. Yes, I think that they will make back that (or some significant) amount in BSE in 2014.
    12 Dec 2013, 11:36 AM Reply Like
  • Ruerd Heeg
    , contributor
    Comments (713) | Send Message
     
    Chis, thanks for this interesting article.

     

    I have a comment regarding their BSE holding:

     

    "They are good at aggressively marking down non-public investments, which is one of the behaviors that has given me comfort in management."

     

    I don't think they mark down the BSE holding at all. I think they bought most of BSE in 2008 just before the crisis, cost $26 million. And they bought for $8 million more in 2010 or 2011. In the press I see quotes for the BSE shares of 290 rupees. Urbana's valuation seems to be based on this price.

     

    The press articles are telling us that the unofficial share price has gone up much due to greedy investors anticipating the IPO. BSE is well financed but at 290 rupees the backward PE of BSE seems to be about 29? Correct me if I am wrong. So a lot of growth seems to be priced into this stock already at pre-IPO prices.

     

    Shareholders have to tender their shares if they want to sell them as part of the BSE IPO. If not enough investors will tender that then the IPO may be cancelled. For 290 rupees per share I think the chances that that will happen are slim.

     

    Stock exchanges are great companies to own but probably (most of) Urbana's loss on the BSE holding is permanent.
    14 Jan 2014, 08:36 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4836) | Send Message
     
    Author’s reply » The biggest block of BSE was bought in May of 2007 at Rs400 and a INR/USD at 40.58. It is currently valued at Rs 260 and an INR/USD of 62. They took a 35% write down in Rs value of shares and 35% drop in currency. The company has talked about an IPO for years. Pricing has ranged from a 40% to 100% markup from existing prices. The Indian government has suggested that any buyers must be institutions, which would be highly problematic for an IPO. This position is a salvage operation. We will probably get out at some step up from the current valuation but it is uncertain and hard to quantify.
    14 Jan 2014, 03:09 PM Reply Like
  • Pine Research & Trading
    , contributor
    Comments (164) | Send Message
     
    are there financials available for bombay stock exch?
    12 Dec 2013, 01:41 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4836) | Send Message
     
    Author’s reply » http://bit.ly/1bZugDj
    12 Dec 2013, 01:46 PM Reply Like
  • Pine Research & Trading
    , contributor
    Comments (164) | Send Message
     
    thanks
    12 Dec 2013, 09:57 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4836) | Send Message
     
    Author’s reply » Fund offers top-tier businesses at one bargain price: http://bit.ly/1m83OMw
    16 Apr 2014, 02:47 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4836) | Send Message
     
    Author’s reply » http://mwne.ws/1tDTdv4

     

    /NOT FOR DISTRIBUTION TO U.S. WIRE SERVICES OR FOR DISSEMINATION IN THE U.S./

     

    News Release Listed: TSX and CSE: URB.A
    URBANA CORPORATION - NOTICE OF INTENTION TO PURCHASE SHARES
    Toronto, Ontario – August 27, 2014 – Urbana Corporation (“Urbana”) (TSX: URB.A) announced today that the Toronto Stock Exchange (“TSX”) has accepted its notice of intention to conduct a normal course issuer bid to enable it to purchase up to 4,855,693 of its non-voting Class A shares (the “Class A Shares”), representing 10% of the public float, pursuant to TSX rules.
    Purchases under the bid may commence on August 29, 2014, and will terminate on the earlier of August 28, 2015, the date Urbana completes its purchases pursuant to the notice of intention to make a normal course issuer bid filed with the TSX or the date of notice by Urbana of termination of the bid. Purchases will be made on the open market by Urbana through the facilities of the TSX or the Canadian Securities Exchange (“CSE”) in accordance with the rules and policies of the TSX. Caldwell Securities Ltd. will make all purchases pursuant to the bid on behalf of Urbana. The price that Urbana will pay for any such shares will be the market price of such shares on the TSX at the time of acquisition. Class A Shares purchased under the bid will be cancelled. Urbana will not purchase in any given 30 day period, in the aggregate, more than 980,000 Class A Shares, being 2% of the 49,000,000 issued and outstanding Class A Shares as at August 26, 2014.
    Pursuant to a previous notice of intention to conduct a normal course issuer bid accepted by the TSX on August 27, 2013 for the period of August 29, 2013 to August 28, 2014, Urbana has purchased, as of August 26, 2014, 5,386,000 Class A Shares on the open market at an average purchase price of $1.78 per share.
    To the knowledge of Urbana, no director, senior officer or other insider of Urbana currently intends to sell any Class A shares under the bid. However, sales by such persons through the facilities of the TSX or the CSE may occur if the personal circumstances of any such person change or if any such person makes a decision unrelated to the bid. The benefits to any such person whose shares are purchased would be the same as the benefits available to all other holders whose shares are purchased.
    Urbana believes that the market price of its Class A Shares at certain times may be attractive and that the purchase of Class A Shares from time to time would be an appropriate use of corporate funds in light of potential benefits to remaining shareholders.
    Please contact Elizabeth Naumovski, Investor Relations at 416-595-9106 for further information.
    Forward-Looking Statements
    Certain statements in this press release constitute “forward-looking” statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Urbana to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Unless required by applicable securities law, Urbana does not assume any obligation to update these forward-looking statements.

     

    You are receiving this email because you have expressed an interest in Urbana Corporation. You may unsubscribe if you no longer wish to receive commercial electronic messages. Please note that even after an unsubscribe, you may still receive certain important electronic messages from Urbana Corporation as permitted or required by law.

     

    Member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. Disclaimer: This e-mail (including attachments, if any) is confidential, may be privileged and is intended for the above-named recipient(s) only. Any distribution, use or copying of this e-mail or the information it contains by other than the intended recipient(s) is unauthorized. If you have received this e-mail in error, please advise the sender by return e-mail immediately. Caldwell Securities Ltd. will not accept any trading instructions by way of e-mail or voice-mail. If you would like to buy, sell or switch any positions in your account, please contact your Investment Advisor by telephone.
    27 Aug 2014, 04:15 PM Reply Like
  • TimeOnTarget
    , contributor
    Comments (2945) | Send Message
     
    Thanks for the update Chris.

     

    By coincidence I had just gone back and read your original article from early 2013. I was thinking it sounded very cool. Naturally, I didn't act, just thought about it.

     

    I had, however, missed this blog, which kind of definitively showed that yes, it was cool. You regularly come up with or find stuff that seems almost too good to be true, but darn near all of them work out pretty much exactly like you think they will.

     

    I was more than a little intrigued by that Fondul Proprietatea opportunity you pointed out earlier today. Thanks to Fit Investment Ideas the cool blog and you for flagging it.

     

    I've always thought that those pundits that blather on about people not being able to beat index funds like SPX on a long-term basis were full of it. I have a feeling you annually treat the treat the SPX like a piñata.
    27 Aug 2014, 07:47 PM Reply Like
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