Aberdeen (AAB), Pinetree (PNP), Northfield Capital (NFD.A)

All three companies hold mining/resource stocks and (likely) trade below the liquidation value of their assets.  All three are buying back stock.  Of the three companies, I like Northfield the best.  Management-wise, Northfield is clearly the best.  G&A is the lowest, insiders aren’t paid ridiculous salaries, and Robert Cudney (the CEO) has an incredible track record (compounding at over 20% AFTER tax).  While Northfield doesn’t necessarily trade at the biggest discount to its assets, superior management suggests that it is the stock to own.  It is the one-foot hurdle.

Aberdeen:  Too hard to figure out.  In addition to owning stocks in junior mining companies, they own warrants on them (because they originally bought the stock + warrants in a private placement) as well as loans, royalties, performance shares, and private companies.  They may be valuing their royalties too high, but I am not entirely sure because I haven’t looked into the expected mine life of the mines underlying the royalties.  And, the investments in private companies and the performance shares and the loans are hard to figure out.  But personally I don’t really like to see loans to their private companies since the loans may be propping up otherwise dead companies.

I don’t understand the dividend as it reduces the value of insiders’ options.  Not only that, insiders would make more money if the dividend wasn’t there.  With more assets under management, they have an excuse to charge higher salaries.  They also have more capital to invest in companies owned by Aberdeen… insiders serve on the board of directors of these companies and get to collect fees again. I’m confused by the dividend especially since Aberdeen’s presentation claims that they want more assets under management.

As a business model, Aberdeen seems to expose shareholders to a set of fees at the Aberdeen level and are hit again with fees in the stocks that Aberdeen owns (Stan Barti, the CEO of Aberdeen, is on the board of most of those companies).  Perhaps it is not surprising that Aberdeen come to market around 2007 at 80 cents (80 cents bought you a share and a warrant) and still trades below 80 cents.  And for some reason, the CEO was selling in January 2012.

Pinetree:  Pinetree has a “shotgun” approach and invests in a large number of junior miners and junior resource stocks.  Most of these companies are on the TSX Venture exchange and are highly volatile.  A sane person would not go past 100% leverage.  Pinetree… does.  This is why Pinetree’s portfolio crashed in 2011 and why they had negative retained earnings at the end of that year.

Management charges high fees and G&A is rather high.  If G&A were 0 historically then retained earnings would actually be positive.  So far, insiders have made money and shareholders haven’t really made money.

Northfield:  Of the three, Northfield by and far has the best investment track record and has lower G&A.

Historically, there hasn’t been a lot of transparency (e.g. stocks weren’t market to market and management didn’t really help investors understand that) while the CEO was simultaneously buying boatloads of stock on the open market.  The CEO no longer buys Northfield shares (he does personally buy shares in other companies which are more liquid) and the annual report does mention non-GAAP Net Asset Value, which highlights Northfield’s undervaluation.

Historically Northfield invested in private companies (wine, glass, environmental products, etc.).  Northfield is getting out of that and the only private business it is involved in is an unprofitable winery.

Northfield has almost always been undervalued and trading below liquidation value (theoretical liquidation value anyways… a lot of its holdings are in illiquid smallcap/microcap stocks).  Northfield stock is extremely illiquid and there are entire months where no trades occur.

Disclosure: Long Pinetree (only 200 shares currently), long Northfield (a lot more so than Pinetree).  Figuring out Aberdeen is not worth my time.

One thought on “Aberdeen (AAB), Pinetree (PNP), Northfield Capital (NFD.A)

  1. Pingback: Pinetree Capital (PNP) – Cigar butt situation | Glenn Chan's Random Notes on Investing

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