Author Archives: Scalper1

The V20 Portfolio Week #21

The V20 portfolio is an actively managed portfolio that seeks to achieve an annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read the last update here ! Current Allocation *Only available to Premium Subscribers Planned Transactions *Only available to Premium Subscribers ————– It’s been a while since I gave a public weekly update. Premium subscribers have continued to receive weekly updates regarding allocation and planned transactions. It was quite encouraging to have some readers email me regarding this short hiatus, I am glad that I have provided value to you. Since the last update , the V20 Portfolio rose by 12.8% while the S&P 500 (NYSEARCA: SPY ) was virtually flat. As we wrap up February, the V20 Portfolio suffered a minor setback towards the end of the month, shedding 2.3% while the S&P 500 gained a modest 1.6% over the past week. Portfolio Update When the portfolio declined significantly in January, we took the opportunity to make some moves. Now that the portfolio is rebounding, we shall sit and wait patiently. One of our minor holdings, Intelsat (NYSE: I ), reported earnings on Monday. Shares have almost halved since then, falling from $3.01 to $1.69 as of Friday, contributing to 81% of the decline over the past week. On the bright side, the company is now trading at less than 1x TTM P/E. As I’ve mentioned in previous updates, the problem with Intelsat is not a matter of profitability, but one of liquidity. As the result of the meltdown in the high yield market, it is becoming increasingly probable that a restructuring will take place due to the company’s large debt load ($15 billion), assuming current market conditions persist. While it sounds scary, it is a risk that we should be willing to take. For one, the underlying business is still generating healthy amount of cash flows. Secondly, I believe that the equity holders (Silverlake, BC Partners, and Fidelity, controlling 80% of shares) have enough incentives to put together a deal that would be favorable to shareholders in the event of a restructuring. Of course, this is not just blind faith. Given the fact that they haven’t sold shares during the IPO, it is fairly clear that it is in everyone’s best interest to not let creditors get away with a low ball offer. Furthermore, the risk to the portfolio is also contained through Intelsat’s small allocation in the V20 Portfolio (2.4%). Looking Forward While half of our holdings have reported earnings ( SAVE , ACCO , I), Conn’s (NASDAQ: CONN ) and Magicjack (NASDAQ: CALL ) (58% of long position) have yet to announce their fourth quarter results. In Conn’s case, two big questions have already been answered thanks to the company’s monthly updates. Sales have continued to grow at a rapid pace (+7.4% in Q4) and delinquency rates have started to decline. As for MagicJack, the company recently initiated two previously announced initiatives: a new service offering with Movistar and a new SMB (small medium businesses) subsidiary. There isn’t significant fixed costs for the Movistar deal, but for the SMB initiative, there will be an initial investment of around $10 million this year. However, both of these initiatives will drive growth, which is a critical component to turning around investor sentiment, an important step that could push the stock back to its fair value quickly. Performance Since Inception Click to enlarge Disclosure: I am/we are long ACCO, CONN, CALL, I, SAVE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Market Lab Report – Premarket Pulse 2/29/16

Markets closed Friday mixed on higher but below average volume near the lower ends of their respective ranges, On a bright note, utilities and food took hits as well as some other defensive groups while telecom and retail finished higher suggesting possible rotation. The longer-term rate of inflation doubled in January to 1.3%, closing in on the Federal Reserve’s 2% target and potentially raising the odds of another interest-rate increase later this year. The core rate that excludes food and energy climbed a sharper 0.3%. Over the past 12 months the core rate has advanced 1.7%, the biggest year-over-year gain since the end of 2012. Meanwhile, fourth quarter GDP was marked up slightly to 1% from 0.7%, but that was mainly due to larger stockpiling of inventories that could weigh on the economy in early 2016, thus this mark up was more of a mark down. Slower growth and higher inflation, should these measures worsen, equals stagflation. Nevertheless, futures have bounced and are now trading slightly higher on news China’s central bank will monetarily ease further by lowering the amount of deposits banks hold in reserve by 0.5 percentage point due to liquidity shortage concerns. This will free up about 700 billion yuan, or about $108 billion, in funds for banks to make loans, analysts estimate. Keep in mind that government economic data should be taken with a grain of salt. The government has changed the way it calculates inflation scores of times over the past three decades, and many economists estimate that true inflation lies somewhere between 5% and 8%. In addition, if the government understates inflation, it then by definition overstates GDP growth such that current “growth” numbers might easily be contractions. This then gives them reason for further easing in their attempts to manipulate markets higher. China’s two big concerns are avoiding negative interest rates and potential currency wars. But liquidity concerns are at the forefront, thus forcing China’s hand to ease further. This naturally could prolong the current bounce, but the overall trend remains down.