Tag Archives: management

Aberdeen Reorganizes And Liquidates Arden Funds

Aberdeen, the new owner of institutional fund-of-hedge-funds firm Arden Asset Management, is shutting down and liquidating the Arden Alternative Strategies Fund (MUTF: ARDNX ) that Arden launched nearly three-and-a-half years ago. In addition, Aberdeen has reorganized a sister fund, the Arden Alternative Strategies Fund II, into the Aberdeen Multi-Manager Alternative Strategies Fund II (MUTF: ARDWX ). These moves come as the consequence of Aberdeen Asset Management’s acquisition of Arden, which was announced in August 2015 and completed on the last day of 2015. Early Success When the Arden Alternative Strategies Fund originally launched in November 2012, Fidelity Investments was the fund’s sole client. This proved to be a fruitful relationship as the fund grew to a peak of nearly $1.2 billion in assets in November 2014. With a strategic relationship in hand and outperformance in 2013 – beating the category by 416 basis points, with a return of +6.58% for the year – Arden launched a second fund in early 2014, the Arden Alternative Strategies Fund II, which was open to all investors. The original fund posted returns of -0.49% in 2014 and -3.44% in 2015, while the new fund returned +1.20% from its February 3, 2014 launch through the end of that year, followed by gains of 0.07% in 2015. Through February 29, 2016, the funds had respective returns of -2.27% and -1.14%. The Winding Down The underperformance of the original fund, along with likely re-allocations by Fidelity, caused its assets under management to fall from its peak of nearly $1.2 billion to $852 million as of the end of February 2016. While many firms would be delighted with assets at this level, Aberdeen decided to liquidate the fund. According to a February 24 filing with the Securities and Exchange Commission (“SEC”), the Arden Alternative Strategies Fund ceased taking money from new investors on February 29 and is expected to be fully liquidated by the end of March 2016. The fund’s Board of Trustees’ stated reasons for liquidating the fund were concerns over its “long-term sustainability.” As witnessed with other funds, single client risk, or client concentration, often looms large, and can result the liquidation of a fund on fairly short notice. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

The V20 Portfolio Week #24: A Change Of Heart

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 . Note: Current allocation and planned transactions are only available to premium subscribers . Existing holdings: CONN , SAVE , I , CALL , OTCPK:DXMM , ACCO While volatility is not something to which we should pay too much attention, it is nevertheless a possible indicator of material fundamental changes in our holdings. Over the past week, the V20 Portfolio declined by 0.9% while SPY (NYSEARCA: SPY ) rose by 0.8%. Conn’s (NASDAQ: CONN ) will be reporting earnings in a little under two weeks, meaning that the portfolio will likely experience higher than normal volatility. As investors, we look forward to earnings for guidance, to verify if our initial assumptions are correct. For Conn’s, much of the market’s concern revolves around the company’s credit operation. Despite a sound retail division, the market is still quite apprehensive about lending money to Conn’s. While improvements in the credit division has been foreshadowed by falling delinquency rates, earnings will shed more light on the details, hopefully providing more assurance to the market. Over the long term, whether the market recognizes the company’s value today or tomorrow is irrelevant, assuming that the management allocates capital correctly (i.e., seize growth opportunities, repurchase shares when conditions are favorable, etc.). Thus far, the management has been committed to their plan by buying back shares and expanding the store count. More on MagicJack Ultimately management’s actions will directly influence the company’s financial results. In MagicJack’s (NASDAQ: CALL ) case, capital allocation policy took a drastic turn (see my premium article here ). The gist of it is that the management decided to use half of the $80 million cash pile to acquire a company at 8-10x cash flow, when MagicJack itself was only trading at 2x cash flow. In previous quarters, the management did the right thing and created a lot of value by buying back these discounted shares. Unfortunately, as this acquisition has shown, the management has failed to choose the optimal method of capital allocation. Because the original investment thesis depended very much so on what the management has chosen to do with the cash (in a sense all investment thesis revolves around cash, but in this case it is particularly important as much of the value is tied to the cash at hand), it is unfortunate that things turned out the way it did. While the company itself is still extremely cheap, it is critical that we identify material fundamental changes in our holdings (such as changes in capital allocation policies) and evaluate them accordingly. As John Maynard Keynes is rumored to have said: “When the facts change, I change my mind. What do you do, sir?” As with anything in life, there is a certain degree of risk in investing. Financial results will fluctuate, but people’s thought process changes as well. While one can make an effort to understand the financials, there is no foolproof way to understand human psychology. This is why Buffett values a good management team so highly. As outsiders, the best way to analyze the quality of the management is by looking at their past actions, not their words. But as MagicJack has demonstrated, even that may not be enough. Many investors tend to focus on the result, not the process, of an investment decision. Unfortunately (and sometimes fortunately), the right decision can lead to a bad outcome, just as how a bad decision can lead to a good outcome, simply as the result of luck. Nothing frustrates a poker player more than a bad beat, yet professional players recognize that it is just a part of the game, and it is the initial decision that matters. Performance Since Inception Click to enlarge Disclosure: I am/we are long CONN, CALL, SAVE, ACCO, I, DXMM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Cutting Losses With Fisher’s 3 Golden Sell Rules

Returning readers to Investing Caffeine understand this is a location to cover a wide assortment of investing topics, ranging from electric cars and professional poker to taxes and globalization. Investing Caffeine is also a location that profiles great investors and their associated investment lessons. Today we are going to revisit investing giant Phil Fisher , but rather than rehashing his accomplishments and overall philosophy, we will dig deeper into his selling discipline. For most investors, selling securities is much more difficult than buying them. The average investor often lacks emotional self-control and is unable to be honest with himself. Since most investors hate being wrong, their egos prevent taking losses on positions, even if it is the proper, rational decision. Often the end result is an inability to sell deteriorating stocks until capitulating near price bottoms. Selling may be more difficult for most, but Fisher actually has a simpler and crisper number of sell rules as compared to his buy rules (3 vs. 15). Here are Fisher’s three sell rules: 1) Wrong Facts : There are times after a security is purchased that the investor realizes the facts do not support the supposed rosy reasons of the original purchase. If the purchase thesis was initially built on a shaky foundation, then the shares should be sold. 2) Changing Facts : The facts of the original purchase may have been deemed correct, but facts can change negatively over the passage of time. Management deterioration and/or the exhaustion of growth opportunities are a few reasons why a security should be sold according to Fisher. 3) Scarcity of Cash : If there is a shortage of cash available, and if a unique opportunity presents itself, then Fisher advises the sale of other securities to fund the purchase. Reasons Not to Sell Prognostications or gut feelings about a potential market decline are not reasons to sell in Fisher’s eyes. Selling out of fear generally is a poor and costly idea. Fisher explains: “When a bear market has come, I have not seen one time in ten when the investor actually got back into the same shares before they had gone up above his selling price.” In Fisher’s mind, another reason not to sell stocks is solely based on valuation. Longer-term earnings power and comparable company ratios should be considered before spontaneous sales. What appears expensive today may look cheap tomorrow. There are many reasons to buy and sell a stock, but like most good long -term investors, Fisher has managed to explain his three-point sale plan in simplistic terms the masses can understand. If you are committed to cutting investment losses, I advise you to follow investment legend Phil Fisher – cutting losses will actually help prevent your portfolio from splitting apart. DISCLOSURE : Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.