Portfolio update Sept 2012

I haven’t been having a good year so far.  Going into the year, I was basically long QXM/XING, long natural gas, long junior explorers, short long-term US treasuries, and short some US stocks (AGNC and JOE mainly).  These were all the wrong trades to make.  My stock picking has not been good since I would have lost less money if I was only allowed to index asset classes.  I would have went long commodity futures (RJI is up 4.3% YTD).  I would have lost money shorting treasuries (up ~3% YTD) and also on US stocks (SPY up 17% excluding dividends).

Here’s what my portfolio looks like currently… (long junior explorers, long commodity stocks, short treasuries, short some US stocks)

Long positions

Queenston Mining (QMI.TO) – AEM has a strategic stake in this company.  This is a bet on Queenston being bought out (probably by AEM).  They have plenty of cash on their balance sheet and will survive the current crash in junior share prices.

Noront – Nickel explorer.  Highly leveraged to the price of nickel.  Faces mine development risk… there is a chance that this will not become a profitable mine.  (Though the expected behaviour in the junior sector would be to pump your stock, raise capital, and build the mine anyways.  Or pretend like you’re going to build a mine, raise capital, and then use that capital on other projects so that you can raise more capital and keep the pyramid scheme going.)

KWG Resources – Chromite explorer.  Will hopefully be bought out by Cliffs.

Contango Oil & Gas (MCF) call options – The CEO Ken Peak is on a medical leave of absence.  Brad Juneau (a superstar explorationist and one of Contango’s partners) is the interim CEO.  There will likely be reversion to the mean but I believe that Brad Juneau will be an above-average CEO.  Results for two wildcat wells should be announced in November so the options may benefit from that volatility.  At current prices ($51), it is likely that Contango will buy back shares.

Northfield Capital – Trades below liquidation value, excellent management.  Highly illiquid.

Potash (POT) calls

McDonald’s (MCD) calls – In Canada, they are #1 in their field in my opinion.  Their restaurants are generally busier than all their competitors.  In China I believe KFC is #1, so McDonald’s dominance is not global.  (In China, KFC and McD’s are considered higher-end restaurants and you could take a date there.   Things are very different.)

Tractor Supply (TSCO) company call option – growth stock with cheap call options.

Altius (ALS.TO)

INTC common

Short positions

St. Joe put options and common – Added a small number of puts now that the share price is much higher and volatility is cheap.  Still losing money on this position.

TLT put options and common – Shorting long-term US treasuries.

Tesla Motors – The borrow cost spiked to over 90% at one point.  This is nasty.

JCPenney – My thesis is that the CEO is terrible.  Let’s see how the JCP transformation turns out.

Gold Resources (GORO) – Icky borrow, heavily shorted.  Here is one article summarizing the short thesis.

Premier Exhibitions (PRXI) – I’m not sure about this one.  I might just cut this position.

IMAX, IOC, PSUN, GMCR, KBH common stock.

Closed positions, or positions in the process of being closed

Positions sold at a gain…

Premier gold – The fact that Goldstone Resources sold so cheap and that Premier is spending its capital on projects other than Trans-Canada suggests that Trans-Canada may not be economic.  I’m not sure what’s going on… so I sold.

Canada Lithium – I don’t know how its cash costs can be slightly lower than Talison Lithium’s even though the scale is a fraction of Talison’s and grades are less than half.  I’m not sure what’s going on… so I sold.

Apple – I’m not going to mess around with this anymore.  I don’t know if Android, which is the current market share leader, will make Apple the next RIM.  I still think that Apple is a great company.

Pinetree – I would rather own Northfield Capital at a smaller discount to liquidation value.  Pinetree’s shotgun approach to junior resource stocks is not a sound investment strategy (the sector is a huge value destroyer).  Management fees are excessive and management’s track record is “not as good” as Northfield’s.

Positions (being) sold at a loss…

AGNC put options

Selwyn – If you read the latest press releases carefully, management is pretty much saying that the Yukon project is not economic.  They are probably one of the more honest groups out there (and have actually built mines in the past).  Other companies would put out some bogus technical report to raise capital to stay alive.

RIM – Underestimated how quickly their free cash flow would decline.

HND.TO short – Sold this to buy Contango.

DLR short

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