Tracking John Malone (Part 2)

Where I think Malone thinks the media industry is headed

“I think it’s at a point in history when the most addictive thing in the communications world is high-speed connectivity,” he said. “Everywhere in the world that we operate, we’ve just seen the public want more and more data rate. Whether it’s wireless or wired. There’s a big appetite for it. Cable technology right now is the most cost-effective way to deliver that growth in speed.”
– John Malone, CNBC interview (http://www.cnbc.com/id/100637283)

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Tracking John Malone (Part 1)

I think that John Malone is one of the best CEOs and capital allocators out there.  Here’s what he does and why he’s good.

Selwyn: Possible $0.10 dividend on a $0.08 stock

The short story is this.  Selwyn Resources recently announced a deal to sell its flagship deposit for $50M.  After paying off its debt, it should be able to distribute $40M to shareholders (or around $0.10/share).  Most of Selwyn’s shareholders now seem to be in favour of the dividend.  It seems likely to me that Harlan Meade will eventually get kicked out (though this is not a sure thing).

Here’s RCF’s position on it:

http://www.newswire.ca/en/story/1150743/rcf-comments-on-events-at-shareholders-meeting-of-selwyn-resources-ltd

*Disclosure:  I own… 1 share of Selwyn.  I may buy Selwyn shares in the future if my orders get filled.

Issues with mining stocks

I think that institutional investors generally don’t know what they’re doing when it comes to mining stocks.  If they were smarter, many problems with mining stocks wouldn’t be so widespread.

Dollar stores and Dollar Tree (DLTR)

Dollar Tree is a quickly growing retailer with a P/E around 18 and revenue growth in the ballpark of 17%/year.  I don’t think it’s that cheap right now but it’s on my radar since it is a quality business with very high returns on capital.

Senvest Capital (SEC.TO) – good business trading below liquidation value (illiquid)

I found out about this company from Oddball Stocks, which is a great blog with a great writeup on Senvest.  It trades at a ~31% discount to book value.

Valuing mining assets

The big picture is this:

1. Mining projects in the earliest stages of development are the most difficult to value.  As more and more drillholes are sunk into a property, we know more and more about the size and the nature of the deposit.
2. When senior miners invest in a project, they will have (A) access to engineering data and (B) a team of specialized engineers.  Institutional and retail investors virtually never do this level of due diligence.
3. In general, mining assets are very difficult to value precisely or accurately.  Mining professionals will often come to different conclusions about the same property.