Sentieo: a better way to perform due diligence

Since January 2015, I’ve been using a research platform called Sentieo (website).  The main attraction of Sentieo is “Document Search”, a tool that searches through EDGAR filings, investor presentations, and conference call transcripts at the same time.  It allows me to find key pieces of information that I otherwise would not find.

For short selling, Sentieo is incredibly useful since almost all of my short selling involves tracking down scumbags.  Much of my work is spent searching through SEC filings for names of people, company names, and addresses.

Advertisements

Kingsway Financial’s activist battle with Kobex Capital

(KXM is an illiquid Canadian stock with a market cap of $26M.)

Kingsway Financial’s plan:

1. Buy back shares because this company trades below NAV- roughly seventy cents a share in NAV trading at 50-55 cents currently.
2. Cut director’s salaries to $10k/person.
3. Not issue options below intrinsic value.  On August 19, 2015 Kobex issued options at $0.55/share.

The incumbents’ plan:

1. Waste shareholder money entrenching themselves against Kingsway Financial.

Kobex Capital: A pile of cash, trading at a discount, with an impending catalyst

(KXM is an illiquid Canadian stock with a market cap of $26M.)

Kobex’s liquidation value is in the ballpark of 70 cents/share and currently trades at 55 cents/share.

Kingsway Financial Services is going activist on Kobex Capital.  This makes me like the stock a little more as the catalyst of activism should raise the internal rate of return on a position in the stock.  However, I’m a little wary of activist investing mainly because management teams often like to fight activists with shareholder money. The legal fees and any severance payments will likely reduce the value that’s left for shareholders.

Mine economics explained

This will be a long post that will cover:

• What a mine’s cash flows look like over its life.
• Crazy accounting rules.
• Uneconomic behaviour caused by stock promoters and charlatans.

Figuring out the skill of mining CEOs

In my opinion, the best method for a CEO to make shareholders richer is to be good at wheeling and dealing.  CEOs like Brian Dalton and Kevin Mcarthur (Tahoe and ex-Goldcorp CEO) are very good at valuing assets and structuring deals.  These CEOs are good at shuffling paper around and making deals in a way that more wealth accrues to their shareholders.  They look for undervalued assets and sell shares/assets when they are overpriced.

Mining Shorts Roundup

Here’s what I would looking at shorting among mining stocks.  Currently, the two stocks I am most interested in shorting are UUUU ($105M market cap) and NG ($1.08B market cap).

Contango Ore revisited (October 2014)

Contango Ore recently announced a joint venture with Royal Gold (press release).  Royal Gold will invest $5M initially with an option to increase its ownership in the project.  It looks like I was too optimistic in my assessment of the company.  I thought that the company was ready to advance the deposit to production.  The terms of the joint venture suggest that this isn’t a sure thing.  The partners will likely need some luck to find more ore to make the deposit economic.

Looking back on my analysis of junior miners, I did not do a very good job in spotting deposits that would turn into profitable mines.  Nevertheless I managed to make money by playing the volatility and by being lucky.