\n<\/p>\n
Brief note on something I have tweeted about a bit and update on what I have been up to\u2026<\/p>\n
I have a decent sided position in JP Morgan Russian (c4% weight \u2013 if you assume all my other Russian holdings are a 0), it would be a lot bigger \u2013 but I already have c 25% all portfolio weight in Russia and there is only so much I am willing to lose if I am wrong on one idea.<\/p>\n
<\/p>\n The main reason I am willing to risk even more on Russia is that whilst JP Morgan Russian is valuing it\u2019s holdings at a written down NAV of 46p, it\u2019s currently trading at c80p.<\/p>\n If you value the holdings at current MOEX market values, roughly, you are looking at c600-800p depending on the exchange rate \u2013 detailed holdings here<\/a>. The 46p quoted by JP Morgan is mostly cash \u2013 and doesn\u2019t include cash held from dividends paid post-war by the Russian holdings, which is in blocked accounts with the shares. Shares are a mix of GDR\u2019s and MOEX. I am not too worried about the details, the big picture is what matters.<\/p>\n I have been told the reason for the low price is because firms refuse to deal in this. IG index \u2013 won\u2019t allow you to buy this, Interactive Brokers, won\u2019t allow you to buy it. I-web in the UK, AJ Bell and Hargreaves Lansdown will allow you to buy\u2026 Many compliance departments forbid hedge funds etc from buying this \u2013 who may be willing to buy it on economic grounds. If you are US based \/ citizen then you will need to work hard to get a broker to deal with you so you can buy this \u2013 if you know how please let me know as I know many Americans who would like to buy\u2026.<\/p>\n I have been consistently mistaken on the war, I didn\u2019t think the West would support Ukraine as much as they have, nor did I think Ukraine would do as well \/ Russia would do as badly. This has continued for far longer than I expected. <\/p>\n There is real risk something like Russia uses a nuke \/ chemical weapons, the West seizes Russian assets \u2013 in blocked Western accounts to compensate Ukraine and Russia seizes these assets, this leaves you with roughly a 50% loss at current prices, given the upside, not a bad trade in my view. <\/p>\n I tend to still think a deal will be done. Ukraine is not blameless in the conflict \u2013 they breached Minsk accords repeatedly. Russia is looking for a way out. I don\u2019t believe the narrative that Russia can\u2019t be trusted \/ that they will break any agreement. They did breach agreements when they intervened but equally so did Ukraine when they overthrew an elected pro Russian leader and didn\u2019t keep the agreements in 2015. If Putin was so inclined he could have likely taken the whole country in 2015\/2016\u2026I remain convinced the narrative that he wants to reclaim the USSR is simple propaganda. It\u2019s often quoted that he said the collapse of the USSR was one of the \u201cgreatest tragedies of the 20th century\u201d. It\u2019s far less often quoted that he said \u201cwhoever doesn\u2019t miss the USSR has no heart, whoever wants it back has no brain\u201d.<\/p>\n The other point is Russia is not an insignificant country, its 11% of the global landmass and a bigger proportion of production \/ resources in Oil, Gas, agriculture and various minerals. It can\u2019t be shut out for too long\u2026 Much of the world is not actually on the West\u2019s side and is still trading with Russia\u2026<\/p>\n On the moral aspect of investing in Russia, I have absolutely no problem with it. Here you are buying a basket of Russian stocks. They already exist, they will exist if you own them, they will exist if you don\u2019t. No new money is moving to Russia. You are not supporting Putin or the war in any way by owning an asset in Russia. On the contrary, by dumping your ownership of assets at fire-sale \/ non market prices all you are doing is enriching someone else at your own expense. Your action affects nothing in the real world, other than your wealth. <\/p>\n It\u2019s possible to argue that a higher secondary price enables shares to be issued \u2013 but none of the companies in JRS are likely to issue any equity and haven\u2019t for years\u2026<\/p>\n I believe it increasingly possible a nuke will be used in Ukraine, in that event JRS may trade down to it\u2019s cash value or thereabouts \u2013 giving you, in effect, a free option. Russia is losing and I doubt they will back down \/ or have any other option, if they want to keep Crimea. This matters more to them than us, but it\u2019s very uncertain, I recently cut my weight in this as a result (and bearing in mind) my existing large Russian position). I may well add more on lower prices\u2026 I don\u2019t believe use of nukes in Ukraine necessarily leads to cities being taken out, but it might, and it obviously increases that risk. I also don\u2019t accept that a tactical, or even strategic nuke being used against Ukraine leads to WWIII, it could, if the West acts in an unwise way but equally might not.<\/p>\n Nevertheless many people disagree with me, on morality and investing in Russia I believe they are acting irrationally. I am in no doubt, I will get at least one hate post\/message as a result\u2026 I don\u2019t believe any topic shouldn\u2019t be invested in or considered. I was born into a family without very much money and if I am to improve my situation I need to take advantage of every opportunity the world presents to me. It\u2019s that or be an employee \/ servant \/ slave for the rest of my life, usually to those born into families with far more than me, or who are wired in a way that let them better tolerate employment \/ stress\u2026 <\/p>\n The main point of this post wasn\u2019t to outline JRS or discuss likely outcomes of the war but to encourage all holders to vote against the name change \/ change in investment mandate.<\/p>\n JRS have proposed their mandate be altered so that they can:<\/p>\n Invest in a diversified portfolio of quoted investments in Central, Eastern and Southern Europe (including Russia), the Middle East and Africa<\/p>\n https:\/\/data.fca.org.uk\/artefacts\/NSM\/Portal\/NI-000062414\/NI-000062414.pdf<\/a><\/cite><\/p><\/blockquote>\n The issue arises due to the uncertainty as to what the Russian Assets are worth. Any raising of equity at \/ above NAV could dilute me significantly. I believe the NAV is c 600-800p, not 40p. I believe the best solution for the fund is for it to be put into liquidation, cash \u2013 ex a few millions for running costs then we will see what it is ultimately worth when the whole affair is over\u2026.<\/p>\n I don\u2019t trust JP Morgan. They are likely embarrassed to have been involved in running a fund investing in \u2018evil\u2019 Russia. It\u2019s easy for them to screw me over in multiple ways, particularly if this becomes a \u2018live\u2019 investment trust again \u2013 issuing shares, transferring assets at a low price \u2013 albeit over the ridiculous price it\u2019s in the NAV for, giving up the assets, who knows? They are already depressing the share price, by, in my view, using an erroneous valuation. I don\u2019t know how they managed to get their auditor to sign off on it.<\/p>\n If you own this I urge you to vote against the change in the investment mandate, given the risk there is no advantage in allowing them to invest the cash. Far better to wind this thing up so you don\u2019t get screwed over. I\u2019d also suggest voting against all resolutions going forwards to reappoint directors due to their handling of this. I believe they had authority\/ funds to buy back shares but chose not to!<\/p>\n On another topic aware I haven\u2019t posted much of late \u2013 been investing in Oil & Gas, or trying to\u2026 I have to diversify, taking up my time as these stocks are subject to random issues I hold (in order of Size PTAL, SQZ, JSE, HBR, KIST, 883.HK,GKP and a tiny, tiny bit of IOG. They are very, very cheap at current oil and gas prices, PTAL is on a forward PE of 4, has $178m cash \/ receivables (154m vs \u00a3394m MCAP). Serica also has a lot of cash, \u00a3418m+ vs MCAP of \u00a3916m rough PE of 4, talk of a raised windfall tax is depressing the share price but if the government wants investment they can\u2019t raise the tax too much\u2026 JSE \u2013 \u00a3139m cash, MCAP \u00a3307m and a PE of 2-4 depending on production, which is currently reduced due to operating problems (a corroded tank \u2013 that I can\u2019t imagine will be too hard to fix). I also bought some GKP \u2013 oil so low cost it practically pumps itself, yield of 20-30%+, but in Iraqi Kurdistan, with a license best regarded as disputed \u2013 with what I believe is serious expropriation risk. I have mitigated that risk in a way only available to retail, I don\u2019t want to write about it here but DM me if you are interested\u2026 <\/p>\n Pretty much all of these are down vs when I got in but with cash adjusted PE\u2019s of c2 either the oil price plummets sometime in the next 2 years, they waste their cash piles on M&A \/ capex \/ management or I make a lot of money. I suspect these stocks are all down due to ESG \/ woke investing concerns. Their shareholder registers are full of sharp-elbowed hedge funds, it could be a while before more mainstream money joins in, if it ever comes back. Even if it doesn\u2019t value hedge funds and value retail can push these above the current low valuations given even a slight change in sentiment. I have a couple more I want to add but am currently researching \u2013 at the moment these are around a 22% weight \u2013 want to get it up a little \/ shift around a little bit\u2026 The good news for you is I am pretty much underwater on all of them so you can get the satisfaction of a lower price than me!<\/p>\n I also have a short on SMWH (I tried to trade it, gave up and am just letting it run). Its on a 2023 PE of 15, but that assumes profit doubles from 2022, which I doubt. Their offering \u2013 newsagents at railways \/ airports is extremely expensive \u2013 \u00a31 for a chocolate bar vs \u00a31\/\u00a31.25 for 3\/4 in a supermarket. Will a stretched consumer cut back? I think they will. This, coupled with higher utilities costs to me, means they should be trading far lower. I am also short CPG \u2013 compass for much the same reason, though it may be more resilient as an outsourcer with cost+ contracts 2020 results show that they are not immune to dips in sales and with the move to WFH at least for the moment, and businesses are likely to be tightening their belts and offering fewer free food bribes to entice people back into Final reminder \u2013 if you hold JRS \u2013 vote against all resolutions, do it ASAP, this stock is dominated by many small shareholders so if you act you have a chance\u2026<\/p>\n I post more often on Twitter \u2013 follow me there @deepvalueinv (also here \u2013 http:\/\/www.deepvalueinvestments.wordpress.com<\/a>)<\/p>\n As ever views \/ ideas \/ comments welcome. Particularly the reason why these oil companies are so cheap!<\/p>\n \t\t\t<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" Brief note on something I have tweeted about a bit and update on what I have been up to\u2026 I have a decent sided position in JP Morgan Russian (c4% weight \u2013 if you assume all my other Russian holdings are a 0), it would be a lot bigger \u2013 but I already have c […]<\/p>\n","protected":false},"author":1,"featured_media":108380,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[96],"tags":[3767,7001,1308,1636,1510,11237,49147,9018,1640,323,6182],"dealstore":[],"offerexpiration":[],"class_list":["post-108376","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-blog","tag-change","tag-cheap","tag-deep","tag-gas","tag-investments","tag-jrs","tag-mandate","tag-oil","tag-shorts","tag-vote"],"yoast_head":"\n\n
chains<\/s> the office\u2026<\/p>\n