PDH - Premier Diversified Holdings Inc.

[Parsad]

Hi Folks,

 

Some of you may see a SEDI filing that shows MPIC Canadian LP selling some PDH shares.  That is because we are closing the Canadian Fund and liquidating some of the PDH shares over time. 

 

Let me make something clear...Alnesh and I are not selling any PDH shares!  We will be taking at least 80% of our investments in the Canadian fund as PDH shares, and a few other partners are taking significant PDH shares.  But we are liquidating some of the shares for the remaining partners.

 

Here is also an excerpt from the annual report for the Canadian fund, sent to our partners a couple of months ago, that discusses why we are closing that fund:

 

Over the last 9.5 years since we launched the Canadian fund, through bull market, financial crisis, sideways market, fluctuating currencies and political turmoil, we have managed only half of our mandate…to avoid permanent loss of capital.  We have failed in the other half of our mandate…to grow investment capital at an above average rate.

 

Essentially, our partners have done marginally better than a 1-year GIC over 9.5 years…not acceptable!  We as investment managers, have added no value to performance, that our partners could have easily surpassed by simply investing in an index fund.

 

We are not alone in this, but almost 90% of investment managers have not surpassed their respective index over the last decade, as we have seen an enormous bull-market since the end of the financial crisis.  But if that were the only reason, then why has the performance between our Canadian and U.S. Fund been so glaringly disparate?

 

We believe there are some fundamental flaws in the Canadian Fund that do not exist in the U.S. Fund.  These include:

 

- Assets Under Management - It has been excruciatingly difficult for us to raise non-RRSP/TFSA capital in Canada.

- Operational Expenses - Our audit, legal, tax, filing costs are the same in Canada and the U.S., but the asset base is over 10 times smaller in Canada…thus a disproportionate amount of costs are being carried by partners.

- Inability to Use Options – A large part of our U.S. Fund strategy is the occasional use of call options, which have made a significant impact on our results…we cannot buy call options in Canada without using a margin account.

- Turnover of Partners – Our US Fund partners seem to remain partners significantly longer than our Canadian Fund partners.

- Liquidity – It was the departure of our largest partner in 2015 that impacted results so severely, as liquidity in the fund dried up rapidly…we were stuck with very large positions in Premier Diversified Holdings, Russell Breweries, Rainmaker and SED International.

 

We spent the better part of 2016 eliminating Rainmaker after it converted to WOW! Media, as well as other assets to restore some liquidity to the fund…that has at least put the fund in a much better position.

 

But ultimately, assets under management, operating expenses and the inability to use options are inherent flaws that we cannot change.  As such, we have made the necessary, but uncomfortable decision of closing the Canadian Fund and liquidating the assets over the next few months.  We did not come to this decision lightly…we would be doing a disservice to our partners to try and muddle through a structure that is not in their best long-term interests…and is clearly evident from nearly 10 years of data.

 

Fortunately, all of our partners except one recent addition are above water.  Alnesh and I will make that one partner whole with our own capital.  Also, Corner Market Management will take almost all of its capital in Premier Diversified Holdings (PDH) shares.

 

The U.S. Fund is over 15 times bigger and we have no plans on ever closing it.  Cheers!

[bizaro86]

Parsad,

Are Canadians permitted to invest in the US fund? My current letter recommendation to my executor has a position with you guys as one of the suggestions for when I'm no longer around to manage my own money, so if that's not possible anymore I'll update the document.

[John Hjorth]

Without being involved, I just have to say: Deep respect for your post of yesterday in this topic, Sanjeev.

[CassiusKing1]

Anybody who holds this at Schwab notice they changed the holding from PRDGF to a cusip?  There is no detail for the holding and won’t accept any trades for an unknown ticker.  Just curious if anybody has noticed this or knows what’s going on with it at Schwab.  TIA.

[JayGatsby]

Anybody who holds this at Schwab notice they changed the holding from PRDGF to a cusip?  There is no detail for the holding and won’t accept any trades for an unknown ticker.  Just curious if anybody has noticed this or knows what’s going on with it at Schwab.  TIA.

You may need to call their global trading desk for a trade: 800-992-4685.  I had to do that for a spinoff share that was listed on a stock exchange where they don't have direct trading. They outsource these trades to a local partner. Execution was fine, it just took a quick phone call (and more commission).

[frog03]

Parsad, has the US fund bested the indexes then?

 

Doing better than the indices by a meaninfgul amount is not easy.  For a few Mecham, Turtle Creek, etc, there are tons of professional money managers doing worse than the index...

 

 

[Liberty]

Without being involved, I just have to say: Deep respect for your post of yesterday in this topic, Sanjeev.

 

I second this.

[investmd]

New to PDH. Have gone through the pages of postings over the past 3 years and read the 2016 annual report.

See that it contains insurance business, real estate investments, private medical investments (GoEVisit and Burnaby PET CT clinic) and potential for purchasing wholly owned businesses. This is with a current market cap of approx C$12-13M. Had sustainability issues in 2014 and past 3 years has been a turnaround process - most of it successful. Future may be very bright.

 

About 3 years ago, Pabrai launched Dhandho funds with a similar goal of being a holding company able to own an insurance business, and own different asset classes outside of the equity market. Recently, Pabrai indicated that the theory behind Dhandho was flawed and he is looking to find a good exit.

Reasons given included:

1)govt regulations with insurance business are v cumbersome

2)Hard to find good businesses to buy at attractive valuations. In the stock market, able to identify mispriced equities - selling for far less than they are worth - can't do that when buying well run private businesses.

 

My question: What are the factors that might allow PDH to succeed whereas Dhandho didn't?

Realize that I'm new to this and many people following this thread have been involved for a long time. Appreciate the thoughts.

 

[rkbabang]

New to PDH. Have gone through the pages of postings over the past 3 years and read the 2016 annual report.

See that it contains insurance business, real estate investments, private medical investments (GoEVisit and Burnaby PET CT clinic) and potential for purchasing wholly owned businesses. This is with a current market cap of approx C$12-13M. Had sustainability issues in 2014 and past 3 years has been a turnaround process - most of it successful. Future may be very bright.

 

About 3 years ago, Pabrai launched Dhandho funds with a similar goal of being a holding company able to own an insurance business, and own different asset classes outside of the equity market. Recently, Pabrai indicated that the theory behind Dhandho was flawed and he is looking to find a good exit.

Reasons given included:

1)govt regulations with insurance business are v cumbersome

2)Hard to find good businesses to buy at attractive valuations. In the stock market, able to identify mispriced equities - selling for far less than they are worth - can't do that when buying well run private businesses.

 

My question: What are the factors that might allow PDH to succeed whereas Dhandho didn't?

Realize that I'm new to this and many people following this thread have been involved for a long time. Appreciate the thoughts.

 

 

Quickly off the top of my head on your item 2: I don't think PDH isn't trying to be only a holding company.  If I understand it correctly it will own stock in public companies if that is the best place it can find to invest.  So if PDH finds that identifying mispriced equities is easier than finding well run private companies then that is what it will do. If it can find well run private companies to buy, then that is what it will do.  I think it will probably end up doing some mix of both.  Certainly it is easier for a smaller company with limited assets to buy fractions of public companies than it is to purchase whole companies (public or private) outright. So I suspect PDH's investments will be somewhat weighted towards purchasing equities over whole companies until it is larger.

 

[StevieV]

New to PDH. Have gone through the pages of postings over the past 3 years and read the 2016 annual report.

See that it contains insurance business, real estate investments, private medical investments (GoEVisit and Burnaby PET CT clinic) and potential for purchasing wholly owned businesses. This is with a current market cap of approx C$12-13M. Had sustainability issues in 2014 and past 3 years has been a turnaround process - most of it successful. Future may be very bright.

 

About 3 years ago, Pabrai launched Dhandho funds with a similar goal of being a holding company able to own an insurance business, and own different asset classes outside of the equity market. Recently, Pabrai indicated that the theory behind Dhandho was flawed and he is looking to find a good exit.

Reasons given included:

1)govt regulations with insurance business are v cumbersome

2)Hard to find good businesses to buy at attractive valuations. In the stock market, able to identify mispriced equities - selling for far less than they are worth - can't do that when buying well run private businesses.

 

My question: What are the factors that might allow PDH to succeed whereas Dhandho didn't?

Realize that I'm new to this and many people following this thread have been involved for a long time. Appreciate the thoughts.

 

 

Quickly off the top of my head on your item 2: I don't think PDH isn't trying to be only a holding company.  If I understand it correctly it will own stock in public companies if that is the best place it can find to invest.  So if PDH finds that identifying mispriced equities is easier than finding well run private companies then that is what it will do. If it can find well run private companies to buy, then that is what it will do.  I think it will probably end up doing some mix of both.  Certainly it is easier for a smaller company with limited assets to buy fractions of public companies than it is to purchase whole companies (public or private) outright. So I suspect PDH's investments will be somewhat weighted towards purchasing equities over whole companies until it is larger.

 

Any suggestions on the best brokerage or method for accumulating shares?

[rkbabang]

I used Fidelity to buy PRDGF, but there is a $50 fee per trade because of the exchange that it is on.

 

[ourkid8]

Q3 2017 MD&A released. Sequent Re continued to burn cash and still no revenue.  Sanjeev, is there a point we are going to cut ones's losses?

 

I also thought we are shutting down the Chinese operations and liquidating the business, are you changing directions? 

 

http://thecse.com/sites/default/files/Premier_-_MDA_Q317_-_FINAL.PDF

[gary17]

I'm surprised Sanjeev's lawyer is okay with a wording like this in the MD&A

 

 

In accordance with the Company’s Investment Policy (available on www.sedar.com), one-third of cash assets were

set aside in an investment account with ScotiaMcLeod shortly after the 2015 Annual General Meeting. The CEO of

the Company, Sanjeev Parsad, has full discretion to allocate this capital into public market securities to generate

the maximum return for shareholders of the Company.

[CassiusKing1]

Q3 2017 MD&A released. Sequent Re continued to burn cash and still no revenue.  Sanjeev, is there a point we are going to cut ones's losses?

 

I also thought we are shutting down the Chinese operations and liquidating the business, are you changing directions? 

 

http://thecse.com/sites/default/files/Premier_-_MDA_Q317_-_FINAL.PDF

 

I think Sequant Re is being counted on to be the engine that runs Premier.  The cash generating piece that allows Sanjeev to do his thing.

 

Without Sequant Re, there is no Premier.  What says you Sanjeev?

[ourkid8]

No.  Sequent re was supposed to be an option as we bought into the medical clinics and Sanjeev's ability to allocate capital.  Sequant re has become much more than an option as Premier depends on its success since it continues to burn through cash causing dilution to shareholders of PDH.  Not impressed at all.

 

Q3 2017 MD&A released. Sequent Re continued to burn cash and still no revenue.  Sanjeev, is there a point we are going to cut ones's losses?

 

I also thought we are shutting down the Chinese operations and liquidating the business, are you changing directions? 

 

http://thecse.com/sites/default/files/Premier_-_MDA_Q317_-_FINAL.PDF

 

I think Sequant Re is being counted on to be the engine that runs Premier.  The cash generating piece that allows Sanjeev to do his thing.

 

Without Sequant Re, there is no Premier.  What says you Sanjeev?

[John Hjorth]

New to PDH. Have gone through the pages of postings over the past 3 years and read the 2016 annual report.

See that it contains insurance business, real estate investments, private medical investments (GoEVisit and Burnaby PET CT clinic) and potential for purchasing wholly owned businesses. This is with a current market cap of approx C$12-13M. Had sustainability issues in 2014 and past 3 years has been a turnaround process - most of it successful. Future may be very bright.

 

About 3 years ago, Pabrai launched Dhandho funds with a similar goal of being a holding company able to own an insurance business, and own different asset classes outside of the equity market. Recently, Pabrai indicated that the theory behind Dhandho was flawed and he is looking to find a good exit.

Reasons given included:

1)govt regulations with insurance business are v cumbersome

2)Hard to find good businesses to buy at attractive valuations. In the stock market, able to identify mispriced equities - selling for far less than they are worth - can't do that when buying well run private businesses.

 

My question: What are the factors that might allow PDH to succeed whereas Dhandho didn't?

Realize that I'm new to this and many people following this thread have been involved for a long time. Appreciate the thoughts.

 

Sanjeev's investment universe is not identical to the investment universe of Mr. Pabrai.

[CassiusKing1]

Bought more MyCare MedTech.  Saw this release dated the 22nd.

 

Item 5 Full Description of Material Change

5.1 Full Description of Material Change

Premier has acquired 572,000 Units MMI, a private telemedicine company which uses communication technology to deliver virtual medical consultations with licensed healthcare providers for non-emergency conditions through its app GOeVisit. The purchase price of the Units was $0.35 per Unit, for total consideration of $200,000 in cash.

Each Unit is comprised of one Class A Common share ("MMI Share") and one half of a share purchase warrant ("MMI Warrant") of MMI. Each whole MMI Warrant will be exercisable to purchase an additional MMI Share at $0.50 until December 31, 2018. Premier holds a total of 4,572,000 MMI Shares, approximately 30.50% (undiluted) of the issued and outstanding MMI Shares. Sanjeev Parsad, Premier President and CEO, sits on the board of directors of MMI.

[ourkid8]

This was part of the initial agreement to purchase units in two tranches (July/Aug).  Each one of the units has warrants to potentially acquire additional units by end of 2018 if I remember correctly. 

 

Bought more MyCare MedTech.  Saw this release dated the 22nd.

 

Item 5 Full Description of Material Change

5.1 Full Description of Material Change

Premier has acquired 572,000 Units MMI, a private telemedicine company which uses communication technology to deliver virtual medical consultations with licensed healthcare providers for non-emergency conditions through its app GOeVisit. The purchase price of the Units was $0.35 per Unit, for total consideration of $200,000 in cash.

Each Unit is comprised of one Class A Common share ("MMI Share") and one half of a share purchase warrant ("MMI Warrant") of MMI. Each whole MMI Warrant will be exercisable to purchase an additional MMI Share at $0.50 until December 31, 2018. Premier holds a total of 4,572,000 MMI Shares, approximately 30.50% (undiluted) of the issued and outstanding MMI Shares. Sanjeev Parsad, Premier President and CEO, sits on the board of directors of MMI.

[CassiusKing1]

yes, you are correct.  Warrants are $0.50 and expire in 2018.

[CONeal]

Looking at the September monthly report and noticed the following

 

"The Issuer's management completed and filed a formal application for conditional acceptance of the

listing of the Issuer's common shares on the TSX Venture Exchange."

 

Will is provide better liquidity/  make it cheaper to buy for US shareholders (thinking about the Fidelity fee)?  Not familiar with this exchange, just wondering what makes this one different.

 

How long does it normally take to be accepted to a new exchange?

 

 

[ourkid8]

I am rather disappointed by this news as this will increase OH and burn rate which would in turn require additional unnecessary dilution. This has been one of my worst investment decisions...

 

Looking at the September monthly report and noticed the following

 

"The Issuer's management completed and filed a formal application for conditional acceptance of the

listing of the Issuer's common shares on the TSX Venture Exchange."

 

Will is provide better liquidity/  make it cheaper to buy for US shareholders (thinking about the Fidelity fee)?  Not familiar with this exchange, just wondering what makes this one different.

 

How long does it normally take to be accepted to a new exchange?

[CassiusKing1]

Hopefully Sanjeev is by shortly to help explain the strategy.

[CassiusKing1]

Where do you find the "September Monthly Report"?  Thanks.

[CONeal]

Where do you find the "September Monthly Report"?  Thanks.

 

http://thecse.com/en/listings/diversified-industries/premier-diversified-holdings-inc

 

Scroll down to CSE Filings on the right hand side of your screen.

[CassiusKing1]

Found it, thanks!