Saturday, September 30, 2017

My 6th Annual Schedule of Investments

So five years on, I am still posting. On each anniversary of my blog I list my dozen or so largest holdings. See this link for my past year holdings.

Position Category Business
Senvest Capital (TSX:SEC) Canadian SmallcapInvestment Company
Anthem (ANTM) US Large capHealth insurance
Seaboard Corp (SEB) US Mid capFood Conglomerate
Installux SA French microcapManufacturing
Tachibana Eletech (TSE:8159) Japanese SmallcapElectronic Distributor
European Reliance (ATH:EUPIC) Greek smallcapInsurance
IEH Corp (IEHC) US MicrocapManufacturing
Kansas City Life (KCLI) US Small capLife insurance
Riken Keiki (TSE:7754) Japanese smallcapManufacturing
McRea Industries (MCRAA) US MicrocapFootwear
New Century Hong Kong (HK:0234) Hong Kong Small capHotel, cruise line
Pacific Healthcare Organization (PFHO) US MicrocrapHealth insurance
Bruce Fund (BRUFX) Mutual fundMid-cap value


I am posting less now because I have been busy with other things and because I have less new things to say. I also don't have much to comment on my holdings. I have not found anything new in the last two years. The above table is basically a reshuffling of my past year holdings because of changes in their value and, to a lesser extent, some trades. In particular, I have sold a chunk of Mcrae and PFHO. I sold Mcrae because the company hasn't grown sales much and their stock experienced a recent spike. PFHO I sold at $10 after buying a bunch below $10. Of course I regret that one as it is now almost $15. But I remind myself that in a bull market, every sell you make is a regret in the short term. In the long term, well that's another story.

Thursday, June 22, 2017

Anne Scheiber, the Secret Millionaire


I first heard of Anne Scheiber from a magazine article about her in 1995, shortly after she passed away aged 101. Anne Scheiber was the first example I have heard of a hidden millionaire.  Hidden millionaires are low profile people who grew up in average circumstances and did not rise up very high in their careers, who lived very ordinary frugal lives. They are the sort that others never expect to be rich. But when they die, people with something to do with their estate are surprised to find out they were multimillionaires.

Scheiber died with a $22M fortune.

Because Scheiber was low profile and did not have any close relations, there isn't a lot known about her century of life. She got attention in the news because she donated her fortune to the Yeshiva school to help women like her. The school had never heard of her. What is known is that she spent her entire working life as a IRS auditor. She was great at weeding out corporate tax cheats. But despite her contributions, she never got promoted at the IRS. After she retired in the 1940's she lived a simple life in New York until her death. According to the article, she learned from years of auditing that the wealthy all invested. And that inspired her to focus on investing in retirement.  The articles described Scheiber as a miser and a recluse.

The part of the story that estimates her returns gets a bit fuzzy. The story is that she started with only $5000 in retirement and turned it into $22M which would give her a 17.5% rate of return!  That beats the like of Walter Schloss!  But after digging around in Wikipedia, I read that she probably started out with much more at retirement. And her return was probably around 13%. Her return is still phenomenal because out-strips the US market by about one percentage point. Incidentally, that's exactly the type of returns I want. Her investment style is the Warren Buffett style of buying quality companies and holding for the long term, like a lifetime!

I read about her before I had ever invested. And that article had a tremendous influence on my thinking towards investment. It helped me to start early down the investment path. Although value investing and stock picking didn't come until much much later.

I've thought about her many times since I first read about her, and my burning question is whether she was happy in her retirement years while she was accumulating her secret millions. My best guess is that she felt a tremendous sense of purpose and it was that purpose more than anything else that helped her to live to such a ripe old age.

Although Scheiber was the first secret millionaire I've heard of, she is not the only one. Every once in a while I hear of others. Like Ron Read of Vermont who was a veteran and who worked as a janitor and gas station attendant. He died at 92 worth $8 M. And I am sure there are many more that we have never heard of.


Sunday, June 11, 2017

What is The Point of All This?

I own several brokerage accounts with different discount financial companies. And I occasionally get calls from them seeking to build a relationship with me so that they can sell me some service. The first step in the conversation is to ask me about my financial goals. And I have trouble articulating it. I say something to the effect of trying to make as much money as possible. I don't mention the goal is to spend it to achieve some lifestyle. I instead say the money is the goal in and of itself.

For those who think this may seem like a strange answer, to me it is very similar to a person working towards a master title in chess. I do admit that unlike chess, building a nest egg does have the added benefit of providing retirement security. But considering that I live frugally and my savings are performing at or better than the market, I will probably have more than what I need in retirement. So working hard at investments at this stage for me must have more purpose than simply retirement security. So I say making money is the end in itself.

So working hard towards financial success over a lifetime should produce more money than one needs, if that person is frugal. Today I am going to describe how I think it can be done relatively easily. And what are the risks that can derail that.

Survival = Success


In this endeavor, the first thing to keep in mind is that it is a long road and to survive is to succeed. The one thing that can derail success is to have a loss and a lesson that one does not recover from. Even if one can theoretically recover a big loss over a lifetime, the psychological damage may discourage and/or prevent one from doing so. This is what others often call looking after the downside. And to me that means first and foremost, diversification. Diversification means spreading the risk across industries across asset classes and across geographies. A second useful thing is to have reasonable expectations. I have read the writings of various young investors in the blogsphere and I often sense an implied goal of 20% returns.

But in a lifetime achieving such returns on average would make that person one in a million! To get an idea how awesome 20% is, consider a 30 year old who has studied valued investing and who has some kind of a lasting edge. If that person has USD$100K and can save around $18 K per year (that's the limit for 401k retirement contributions) then that person will have $20M by age 60. That is very unlikely. I have never heard of a person who is worth $20M who didn't start out with a large capital base and who didn't work in finance or run a business but simply saved and had phenomenal returns. Instead the goal should be to simply match the market and possibly add one or two percent. So if the market does 8% for the next 30 years, then the target should be 10%. In the above scenario that 30 year old will have $1.8M at age 60. That's a huge difference, but it is also much more realistic.

Think Different


To get above average returns, I think it is necessary to have a different world-view than the greater investing community. That may seem so obvious that it needn't be said. But the actions and mood of the retail investment community seems to indicate people don't know it or forget it.

To make above average return in the market one must think differently from most people because the money made that is above average must come from others. And it is concentrated in a few; think of all the rich like the top 1%. They own a disproportionate amount of the wealth. So the rich minority make above average returns from the majority.

And surprisingly it is not hard to see errors in thought that many people make. It just takes work and practice to think differently. I can point out a few example off the top of my head.

A persistent theme in American politics is that life is getting no better or worse for the current generation than the previous. But that just flies in the face of facts. People think crime is up in this generation compared to the last. In fact, once on TV, the former House speaker Newt Gingrich did not dispute the fact that crime is down but said that it is a problem that people think US crime rate is up. I thought the job of a government entity or company is to achieve something for an end, not make you think that it is achieving something without actually doing it. Here thinking differently is echoing what Warren Buffett has been preaching: that the opportunities and life in the US has never been better.

The last US election dramatically demonstrated common faulty thinking in many ways. One reason people voted for Trump despite so much of his nonsense is that the voters simply wanted change. But society is a fragile institution, change for the sake of change will almost certainly be negative. Just look at history. Many decent societies were made a wreck by flashy orators without substance. I can think of Nassar of Egypt, the Perons of Argentina, Castro of Cuba, and on and on. These people can initially create a sense of euphoria in the general population. But their people's lot hardly gets better. And eventually that fact becomes obvious because the new leaders have taken whatever is right in their society and replaced it with something that is not well thought out and clearly worse.

So far my examples have been about politics, but it is just as applicable in investing. Take Japan for example. The common narrative is that Japan is a greying xenophobic country that restricts immigration. But it is a culture that has been very successful in the past, and they just have a labour shortage because of a low domestic reproductive rate. But I have never heard anyone mention any other way to describe the Japanese mentality. In twenty or thirty years, I believe it is possible that Japan will be forced into allowing some limited forms of immigration to replenish the population. The countries wealth and success can easily bring in as much cheap labour as needed. For example, Japan can allow a few million Chinese or Koreans legal immigration status for periods of five to then years. That can easily revive the economy when they find they have no choice. I am not saying this scenario is a certainty. But I am saying that I have not heard anyone even contemplating such a thing. The uniformity of thought in the investing community towards Japan is palpable. In my opinion, that creates a mispricing of Japanese equities in general and that is why I invest in Japan.

Be Objective


For most of us who are part of mainstream society, we are conditioned to interact harmoniously with others. That is a necessary condition to be successful in our communities and organizations. The way we are taught as children illustrates this point. Many of us have heard the saying, "it's not what you say that matters, but how you say it". I believe, in the business world, the best way to get success requires the following mix. The soft skills are personal attributes that allow someone to interact effectively and harmoniously with other people.



I do not espouse the correctness of efficiency of the way the world works; it just is what it is. But I do know that I am relatively poor in the soft skills department. And I know I can get more reward for my effort by utilizing my skills a pure technical setting, like personal investing. To invest in one stock in one's personal portfolio requires the following mix. Note there is no use for soft skills.


However, this pie chart is hardly encouraging because it shows that a large component of success in picking one stock is still out of our control. It is luck. But if we buy a basket of relatively uncorrelated stocks and waiting long enough, say five years. Then the odds of success in the whole will have the following mix.


This is so because of the law of large numbers in probability theory. As the number of samples increases, the actual ratio of outcomes will converge on the theoretical, or expected, ratio of outcomes. Take a coin toss as an example. The theoretical number of heads and tails should be 50%. However, one toss, or sample, will result in either 100% heads or 0% heads. That is hardly the theoretical result. However, in the total of 100 tosses, the result will be something like 46 out of 100. The 46% result is very close to the theoretical 50% theoretical result. In simple terms, the more the samples taken, the less luck plays in the experiment.

But using one's technical skills to make investing decisions is not so simple. It requires constant vigilance. This is hard because it is very difficult to think objectively in our world. So much of what we perceive is based on subjective biases. Suppose an employee is given a point of view that he feels is wrong, but which is the view of his boss. Does the employee oppose his boss? Many times an employee doesn't because what he wants is not the success of the task or the company at hand, but it is his own personal success within the company. To do that requires being a "yes man". And when a person thinks like this often enough, I believe that person begins to believe that the expedient view is the truth. This kind of subjective mindset can corrupt our minds and has no place in personal investing. This is one of the reason's why the many people have trouble getting good returns picking his own stocks. Because they are not used to thinking this way.

I can think of many examples in the investing world where a lack of objectivity has been costly. Theranos is/was a thirteen year old private company claiming to be on the cusp of revolutionizing the blood testing world. The house of cards came tumbling down last year amidst revelations by the Wall Street Journals that the company did not do anything close to what they were claiming. Then came the soul searching. The medical and investment community were scratching their heads wondering how did they let such a scandal happen. In this video , Harvard Professor Bill George was asked if the "golden-girl" CEO Elizabeth Holmes got a pass on the scrutiny because she was a woman, and he said "..... I would like to see a lot more women successful women..... we all drank the kool-aid......". My opinion is yes, she definitely got a pass because she was a young attractive white woman in a world dominated by middle aged white men. You can see her photo below and judge for yourself.

Theranos CEO Elizabeth Holmes

As a result of this scandal reputations were destroyed, tens thousands of blood tests were recalled, and millions in investors money were flushed down the toilet. Theranos is a very poignant reminder to be very vigilant, skeptical and objective when it comes to one's own investment dollars!

Successful investing of course requires understanding of businesses, economic cycles and value/growth principles. These are technical skills described throughout this blog, in the media, in business schools and in books. But the knowledge I have pointed out here are those that I found extremely useful but which are not so well emphasized elsewhere. This knowledge is difficult to grasp, easy to forget, and can make a huge different in one's investment results.

Thursday, February 23, 2017

Trump and Chess Are Helping My Returns

Happy 2017!

I know it is already February and a bit late for that but my first blog entry in a year always requires a new year's greeting.

For those that wondered why this blog is silent, it is mainly that my portfolio has been static. A long term investor typically doesn't change his portfolio and his views. So, if I give advice or opinions, it is just a repeat of what I already said. I have learned that long-term investing is always longer than what I initially. So, most of investing is simply waiting.And that is probably repeating what I already said before.

Trump is President???


The last year has been a truly unique year. In a year when I thought Trump becoming the president was absolutely improbable, the improbable happened. I was in Europe at election time, and I really wondered if I would be allowed back in the US. And even if I was allowed back, I wondered if I wanted to come back. My native Canada looked more and more enticing.

I was preparing to readjust my portfolio in reaction to the market fallout. Donald Trump won the election in the early hours of the morning local time. The Asian market dropped in reaction to it. So I thought the US market will be a bloodbath in the morning. However, I was pleasantly surprised that the market rose! Even stocks I thought would suffer under a Republican government went up, including my managed care stock Anthem. I didn't buy anything that day. And in the following three months hardly touched my portfolio. But what a blessing Trump has been to the market, especially value stocks which makes up my entire portfolio.

I make politics off limits on this blog except as it pertains to the market. And the recent US election is one such case. The last US election taught me a lot as does much of politics. I am not talking about Trump the person. What I learned from the election is about Americans. The US population is not a cut above all other countries. They are prone to the same hysteria, xenophobism and gullibility as people of all other countries. Its institutions are exceptional, I admit that. But in think in the next four years, we will see it put to the test like no other time in recent history. I wonder if a single man can do as he wishes despite the constitution and laws that forbid what he wants to do. The recent Federal court decision to block his immigration ban from seven Muslim countries is one such example. And there will be more I am sure.

The makeup of the US population has made me even more eager to diversify away from the US. I am thinking more of countries like Europe and Japan. I already have investments in those places but maybe I should look again for more.

The recent election has also taught me that strange things often happen. In fact people are so caught up on avoiding past mistakes that one should not focus on that. Instead one should focus
on exactly the not-so-obvious. For example, last 8 years has seen extreme scrutiny of banks. So extreme that probably it has unnecessarily hobbled the banks. Banks are doing fine now. Maybe dismantling Dodd-Frank is the best thing to do. In that, maybe I do agree with Trump!

And I found it even more bizarre that the market rallied in the months after Trump got elected. It just reinforces the common wisdom that you cannot time the market.

And this leads to my main idea. My portfolio picks in this blog have almost all fundamentally not disappointed. But my portfolio hasn't done as well as I expect because I often sold too early because I was impatient. Sometimes I would wait 1-2 years for something to happen to a new investment. If nothing happens I'd sell. And the following year it doubles. This was the case for ITIC and ADW:TSX.

Play Chess to Enhance Returns


Investing needs skill and temperament. Many discuss the skill aspect, but it really isn't that technically hard as Buffett and Munger say. And I have found solutions for the skill aspect. Others may not find it suitable for them but it works for me. But I need a better solution for the patience issue. I looked at the habits of other great investors. They all seem to be comfortable under their own skin and they have good balance in their life. Warren Buffett's wife once remarked that Warren doesn't care much for money as one can see from the way he lives. But he is competitive and his net worth is a way of keeping score against the competition. It is very satisfying to know you have some innate superior skill that others cannot deny. You read the same stuff as everyone else, but you are able to perform so much better financially.

Some may see him as a big philanthropist or a humanitarian who makes money for the good of others. But I think his wife's description is the main reason that has motivated him throughout his life.

I also think many successful investors are very competitive. But one has to be very careful in channeling that energy. Millions of people have tried the short term investing game and have lost dearly. Some may be successful at it, kudos to them. But I believe in long-term investing. And it is very unsatisfying for the competitive spirit to do nothing but wait everyday. So in that way being competitive is detrimental to long-term investing success because it can spur the investor to be more active and less patient. And that is the case with me as I described earlier.

So looking at the habits of big investors like Buffett, I noticed that a lot of them channel their competitive and mental energy. Buffett, David Einhorn, James Cayne, Alan Greenberg, are just some of the people in the investing and financial world who play bridge. Einhorn is also a very successful Texas Hold'em poker player.

Less well known are several hedge fund managers who are excellent chess players. Boaz Weinstein is a master and also a fund manager. And Patrick Wolff is a 2-time US Champion who ran a fund aptly named Grandmaster Fund. Chess was my youth passion and I quit just short of expert level.

I started reading and watching videos on chess last few years and thought about the pattern of investors who have mental stimulation outside of finance. And I thought it would be fun to get back into it, as well as helping me channel my mind and competitiveness away from frequent trading. So about 5 months ago I got back into playing. First it was online and then over-the-board (OTB). And I am as passionate as ever as a child. I have so far played two OTB tournaments and I have achieved a 1996 rating. The two tournaments were the first face-to-face competitive chess I played in 28 years! The diagram above is from one of my games, which unfortunately I lost. But my performance so far is better than when I left the game so long ago. My goal is to be a master, which is a person with a rating above 2200. I don't want to put undue pressure on myself but I am making a serious effort to get there. I have even hired a grandmaster to coach me!

In the future I may even post some of my games with annotations! Would any of you be interested in that? Let me know your thoughts in the comment section.

Thursday, December 1, 2016

My 5th Annual Schedule of Investments

So four years on, I am still posting. On each anniversary of my blog I list my dozen or so largest holdings. This year I am posting three months late but the following are my holdings at the anniversary. See this link for my past year holdings.

Position Category Business
Senvest Capital (TSX:SEC) Canadian SmallcapInvestment Company
Seaboard Corp (SEB) US Mid capFood Conglomerate
Installux SA French microcapManufacturing
IEH Corp (IEHC) US MicrocapManufacturing
McRea Industries (MCRAA) US MicrocapFootwear
Kansas City Life (KCLI) US Small capLife insurance
Anthem (ANTM) US Large capHealth insurance
Tachibana Eletech (TSE:8159) Japanese SmallcapElectronic Distributor
New Century Hong Kong (HK:0234) Hong Kong Small capHotel, cruise line
European Reliance (ATH:EUPIC) Greek smallcapInsurance
Riken Keiki (TSE:7754) Japanese smallcapManufacturing
Bruce Fund (BRUFX) Mutual fundMid-cap value
Lewis Group (JSE:LEW) S Africa large capRetail


I am posting less now because I have been busy with other things and because I have less new things to say. I think I will have a lot more to say once my thesis for many of these stocks have played out. That said, I have written this blog for four years and, to me so far, I see that my investment strategy is working out. By this I mean that my active investing is worth the time. I am beating the market and I should continue to beat the market. The edge is not big. I think I am beating and can continue to beat the market by 1-2%. But as we all know from the principle of compounding, such an edge will become a fortune over long periods.

Tuesday, September 13, 2016

Lessons of the Last Four Years

Wow, it has been a long time - four months - since I last posted. Well, no, I haven't stopped blogging but I have definitely slowed down. I have been busy with work while my investment activity has virtually halted until recently. Besides, I probably needed a break as I have been blogging for four years.


During the last few months, I have reflected on what I've learned in the last four years. For one thing, I am still learning new aspects of value investing. The value investing concepts seem to be straightforward, but different people can interpret the same thing differently and even the same person can interpret the same thing differently at different times.


I have heard from Peter Lynch and Walter Schloss, among others, that an investment needs about 3-5 years to play out. That is a long time to get the feedback on whether you are right. But it's the easiest way I know of to get outsized results. By now or soon from now I can see whether my investment ideas were sound.  One example is Installux. I bought it originally 3 1/2 years ago and it has more than doubled in addition to a nice dividend. Which is as good as I can expect. But I didn't believe this concept as much as I should have.  Take the case of Andrew Peller (ADW:TSX), which I bought 3 years ago at CDN$14. Today it is CDN$32.  But unfortunately, I got impatient and sold and barely eked out a gain.  This is a hard lesson learned. I will redouble my efforts to see my investments through the 3-5 year period.

A second investing concept I've genuinely learned is that buy and hold can mean forever. I read this from in Fisher's book Common Stocks and Uncommon Profits. What it means is that if a company's prospects grow with the price at any given time, then one should hold the stock until that changes. And if that doesn't change then one should hold on indefinitely. This is more of a growth investing approach but one can argue that growth is part of value. Stocks that used to undershoot can now overshoot beyond my wildest expectations. I've learned this lesson the hard way when I sold Phillip Morris (MO) after 12 years. By then this cigarette company had a PE in the low teens.  Who would have thought that cigarette companies now have PE above 20 and MO would triple in the last 4 years!


Thirdly, I often wonder what drives the market of months or years when it doesn't behave quite rationally. And from watching the market for almost 20 years, I have concluded that often there simply is no rhyme or reason for its behavior. Nobel Laureate Robert Shiller drove this point home to me in his book Irrational Exuberance. He points out example after example of long periods of mispricing in different times and different countries because it is human nature. For example, I've owned MSFT off and on for years while its PE was in the teens. Then, over the last 2 years, it expanded to over 20. This hasn't consistently happened since around 2000.  And I cannot see any significant change to the company's growth prospects.  And I cannot even see any good reason why the market changed its sentiment, other than the fact that investors feel bullish about the market.  The market is quite overpriced but I don't feel more money chasing yield is a good reason for a stock to go up. Or at the very least I don't think I can count on excessive multiple expansion for my gains.

The same anomaly can occur in the negative direction. Entire markets can be depressed for as long as a decade. I am not referring to Japan, which one can argue is depressed for good reason. But the Hong Kong market should be much higher because it's price to book ratios are extremely low. And Hong Kong does not have the demographic problems that plague Japan. That gives the Hong Kong investor like me a huge margin of safety.  And I hope this margin of safety will give an edge over other investors who may not be inclined to invest in such markets.  I am also buying and waiting for multiples to revert to more normal values in other markets like Russia.


Fourthly, while concentration is needed to maximize gains, don't overdo it! The concentration argument is that one should bet big when one has conviction. Extreme concentration is warranted only in a few types of situations. For example when Charlie Munger levered to buy BCP, or when Warren Buffett bought the Washington Post.  In the first example, Munger was waiting for the outcome of an impending court decision which would either determine if he breaks even or makes a profit. In the second, the Washinging Post was a diversified media company with many assets which are spread out in different media and different locations. And he knew he could get an offer on those properties if they were for sale. And the Washington Post was selling for a fraction of book.

However, very often people have more conviction than they should. When a person concentrates like this investing becomes gambling because a few events can make or break a portfolio.  The purpose of diversification is to prevent catastrophic loss of the entire portfolio. And often even successful investors make this mistake. And when that happens it isn't just bad luck, it is because they've been playing Russian roulette one too many times.  They may have been lucky for many years but eventually the odds catch up to them.  Earlier I said value investing gives feedback in 3-5 years, so a few feedback cycles can take over a decade, and maybe over that time they may have been lucky.

Recently, the internet chatter has been buzzing with two big disasters: Valeant and Horsehead Holdings. Both were companies with big stories of potential gains. But Horsehead was betting on one plant coming online as the low-cost producer. If that did not happen, well it's complete equity wipeout. And that's exactly what happened.  Valeant was a company with a suspicious business model and it also came crumbling down with a 90% loss of shareholder value.  Those two situations wouldn't have been so bad except that some big fund managers put 20% or more into these stocks! And they threw in new money after the companies started to stink! I think putting in new money was an obvious case of denial.  This was a timely reminder to me that no matter how long I can have success, I should stay diversified.  Bad things happen at the most inopportune times.


I don't know whether my investing strategy will ultimately succeed. However, I will keep learning and relearning value investing concepts. I will also learn the mistakes of others and stay vigilant


Friday, April 8, 2016

2015 Year End Results

By March every year all companies with fiscal year end on Dec 31 should have announced their annual results. Six of my holdings are summarized below. Overall all results are reasonable and make all six stocks overvalued. But I don't know why the market trades these stocks so cheap. I am not one to think too much of catalysts so I have no clue when will it end.

EUPIC PFHO SEC KCLI Soundwill KARE
Price
(April 1)
€ 1.49 10.15 CAD$ 125.70 9.20 HK$ 9.20 € 240.00
Marketcap M € 40.98
($ 46.71)
8.12 CAD$ 354.47
($ 270.59)
384 HK$ 2616.20
($ 337.57)
€ 662.40
($755.14)
PE 3.66 4.84 loss 13.15 loss 12.40
ROE 0.14 0.33 - 0.04 - 0.15
PTBV 0.51 1.58 0.53 0.58 0.16 1.89
Div Yield % 0.00 12.32
(one time)
0.00 2.70 2.17 3.54
Vol (basis) 0.51 6.89 1.06 5.52 2.41 4.13


The table summarizes the key metrics. I mostly focus on PE and PTBV. And for each company, one or the other shows the company is cheap. The last row gives the average daily volume divided by the total shares. The fraction is showed in basis points units. So PFHO daily volume, which is 6.89 basis points, is actually 0.0689% of total volume. I have found most companies with healthy volumes should trade at about 20 to 30 basis points (0.2% to 0.3%). The table shows that all the six companies trade at extremely low volumes. None are at 20 or 30 basis points. This may explain why the stocks trade so cheap, they have extremely small interest.

European Reliance Insurance (ATH:EUPIC) continued its growth streak by increasing pre-tax profits by 6.6%. Even better is equity growth at 13.3%. The stock is still super cheap. I presume the reason is the ongoing crisis situation in Greece. Warren Buffett used to say he could find stocks that trade at 2 or 3 or 4 times earnings. They exist now and you just have to look. Well, I found one here trading at less than 4x earnings! On top of that it is trading at half of book. Now if only the market can cooperate.

Pacific Health Care Organization (PFHO) had a rough third and fourth quarter. The stock went from the high twenties to as low as $6.50 after announcing that they will lose their biggest customer Amtrust in Q4. But after their official annual report, the stock managed to recover to $10.15. Q4 results show that subtracting Amtrust's waning revenues in the quarter, the company still did $1.2M in business. So at that conservative trend, the company can do $4.8M for 2016. At their current profit margin of 20%, that is still more than $1 a share. The company said in the report that they employed 36 people in mid-March. That is still more employees than they've ever had except for their record year in 2014. And the company is continuing its IT expansion. I am cautiously bullish on PFHO.

Senvest Capital (SEC:TSX) reported FY15 EPS CAD$(35.39), which is pretty much expected. However, the book value per share increased because of a 19% rise in the Canadian dollar relative to the USD throughout the year. That would give per share book value of CAD$271 at year end. And also with estimated hedge fund losses from the company's 13F and its website, we can expect expect book value after Q1 to be about $237. Today it trades at $127. So the stock trades at 53% of book. That is too low even by Senvest standards. And one big reason for the huge discount is the market's view that the company charges excessive fees. This year has been kind of flat, and so there is little if any incentive bonus. The salary drawn should be all the employee expense on the books which is $12.5M. Other operating expenses, which may include costs for expanding their New York office is $16.8M. I am not thrilled about the expense. But for a company that manages about $1.4B in net money for common shareholders, minority interests and hedge fund holders. One can argue the cost is reasonable.

Kansas City Life Insurance (KCLI) reported for the first time after delisting from NASDAQ. The company revealed it bought back 1.1M shares for an average price of $51.13. The shares included normal buybacks and the odd-lot tender offer of 906,500 shares at $52.50. There are now 9.6M outstanding shares. The company earned $29.2M for the year, which is flat compared to the previous two years. However comprehensive income was $(9.0)M due to unrealized losses in fair value of securities. The comprehensive loss along with the 1.1M reduction in shares, minus the dividend, meant that the book value per share was flat from 2014 to 2015 at $68.55. I anticipate that unrealized gains will be much higher in 2016 because interest rates will be lower than expectations at late 2015. Lower interest rates mean a higher valuation on the company's stock portfolio, with the drawback that the company may receive less revenue as people avoid the company's products due to their low yield.

Soundwill Holdings (HK:878) is a real estate company that renovates and develops buildings as well as lease properties, primarily in Hong Kong. It is dirt cheap on a price to book basis. But last year it turned a small loss mainly due to fair value adjustments on its investment properties and almost no property sales.

Soundwill owns some of the best retail properties in Hong Kong. But rents were ridiculously high. I heard some of their properties were the highest retail properties in the world! But now that less tourists are coming from China, rent prices have fallen. Along with rents the fair value of Soundwill's properties have also fallen.

In 2014, the company sold HK$2.5B worth of properties for a $1B gross profit. But last year they had virtually none. But that could be a simply a quirk of timing. The following table shows the company's yearly property sales as well as the total money held as deposit on properties under development. The sales seem to oscillate every two years, with a high amount on year followed by a low. But the amount under deposit on the low years does seem to foreshadow good sales the following year. So, I expect 2016 to have significant property sales as in 2014.

2015 2014 2013 2012 2011 2010
Property Sales (HK$ M) 10.40 2466.00 199.00 1310.60 483.20 591.20
Deposits 735.00 421.00 1277.00 482.00 529.00 422.00


Karelia Tobacco (ATH:KARE) reported year end earnings of € 19.35 versus € 22.44 a year earlier. Revenues were up 15% and gross margins, net of excise taxes, were up to 14% from 12.7% a year ago. The difference in the bottom line is from a previously mentioned € (14M) adverse tariff decision. The appeal is ongoing which, if successful, would return € 14M to income.