Myth465 Posted June 20, 2014 Share Posted June 20, 2014 I will likely trim my Clarke position after Q2. We only have a few dollars of upside at this point. I wonder who bought this stake though.... http://www.barchartx.net/headlines/story/205681/midland-sells-its-minority-interest-in-holloway-lodging Clarke? Holloway buyback? Geo? I am hoping its one of the 2. I think Holloway is dirt cheap, and they will do wonders with it. They are buying properties at 10% cap rate, will be internalizing Management, are stealing Royal Host. Also GA - has most of his background in Real Estate. Should be interesting. I am assuming one those entities bought this 34% stake, which means GA would control 70% of Holloway. Link to comment Share on other sites More sharing options...
no_free_lunch Posted June 20, 2014 Share Posted June 20, 2014 Sorry but what does GA mean? Link to comment Share on other sites More sharing options...
Myth465 Posted June 20, 2014 Share Posted June 20, 2014 george armoyan Private company which owns clarke - Mr. George S. Armoyan, P.Eng. has been the President of Geosam Capital Inc Link to comment Share on other sites More sharing options...
investor-man Posted June 20, 2014 Share Posted June 20, 2014 I will likely trim my Clarke position after Q2. Anybody know when they report Q2? I can't find any mention on their website. It looks like they reported August 12th last year, so I'm guessing they'll report around the same time this year? Link to comment Share on other sites More sharing options...
Guest Quebec Posted June 22, 2014 Share Posted June 22, 2014 I wonder who bought this stake though.... http://www.barchartx.net/headlines/story/205681/midland-sells-its-minority-interest-in-holloway-lodging Clarke? Holloway buyback? Geo? I am hoping its one of the 2. I think Holloway is dirt cheap, and they will do wonders with it. They are buying properties at 10% cap rate, will be internalizing Management, are stealing Royal Host. Also GA - has most of his background in Real Estate. Should be interesting. I am assuming one those entities bought this 34% stake, which means GA would control 70% of Holloway. Nice catch on Holloway. From the major institutions listed here: http://quote.morningstar.ca/Quicktakes/owners/MajorShareholders.aspx?t=HLC®ion=CAN&culture=en-CA It would seems that Geosam trimmed their position in HLC very much as of 2014-05-23 . In additions to your suggested buyers, Temple HoTels could be the buyer. It's a 28$ millions transaction, i doubt that an HLC buy back of this size, at a market premium, could be done while they are using their resources to swallow Royal Host. Clarke has 52 millions of cash and the new ceo has been involved in both hotel names for a while. I hope its them because it's in their core competency and scale and the RYL debentures would be made whole etc Wild speculation: May be Midland Resources is swapping this hotel position for Clarke's Sherritt position! Same stock price and similar position size! Midland seems more involved in metals and international operations. I feel that Clarke could really extract a lot from these depressed hotels. On the other hand, if it's a Geosam move, that would piss me off. I'd be thinking like they arranged to buy the Royal Host cheaply from Clarke.. In fact, that's one black spot on Clarke to me: I'm never quite sure if Georges gives its best shot at Clarke -or- at Geosam. You know, doubts about potential conflict of interests. Owning 50% of CKI means about 110 millions to Georges so it must be his first priority, but Geosam being involved sometimes in similar positions (sherritt, terravest (i think) hotels,..) makes me somewhat uncomfortable. Frankly, i'd feel much better if Geosam and Georges only held Clarke shares. It would align our interest. I bet this would push CKI to a premium to book, because i must not be the only one with some level of doubt. I used to be a Brascan/Brookfield shareholder and was most comfortable owning the top level holding co, knowing the management/partners where owning same and would buy/sell/swap/finance/manage/etc the subsidiaries as best as they could for my/our benefits. Edit: maybe morningstar is wrongly reporting the geosam position in HLC. Maybe they report the latest buy as if its the total position held while it was an addition ? Link to comment Share on other sites More sharing options...
Myth465 Posted June 23, 2014 Share Posted June 23, 2014 I think Morningstar is off, Geosam owns 35% of Holloway. You are also right, Holloway couldnt fund that much of a buyback so its either Clarke, Geosam (not sure if they have that much fire power), or someone else. http://canadianinsider.com/node/7?ticker=HLC http://www.newswire.ca/en/story/1361435/geosam-capital-inc-increases-its-investment-in-holloway-lodging-corporation I have 11% of my port in Holloway, and would hope Clarke bought this. I thought Clarke got a bad deal with the Royal Host sale. We also didnt get full shares, but got some cash which limits our holding in Holloway. The only way to fix this would have been to lower the converts, but buying 35% of the equity would work for me as well. Here are my thoughts from last month in my private write up - GA is migrating his private money into HLC in a big way. He is also effectively stealing Royal Host and merging it with Holloway Lodging. Holloway is an easy to understand idea. Its trading at 6 times cash flow, has reasonable debt, is growing cash flow, and has great management. When you add in Royal Host and the fact that both are located in the same cities and both need to internalize REIT management then it looks like a no brainer. You get paid a small 3-4% to wait as well. I think this one could work out very well. Hopefully they are a bit more forthcoming once the Royal Host merger is complete. I expect they will do something with the convertible debentures. -- Internalizing the Management at Royal Host is huge in my opinion, but they arent just doing that. They are eliminating the Royal Host corporate structure. All C Suite costs will be gone, all filing costs, even the SG&A costs related to the headquarters will likely be eliminated. The CFO just resigned. They will run this company with the same team running Holloway, and will use the internalizating operating team at Royal Host to run Holloway ops. Royal Host was just cash turning cash flow positive. Now think about what the P&L / CF statement will look like with those extra costs which will all be removed. 6x CF for Holloway is low also. They just traded a property at a cap rate of 7 for one with a cap rate of 11. George's main background is in Real Estate, and Canada has a lost of crappy hotels trading for 10x cap rates. US REITs go for 20x CF which is overvalued, but I think 10x CF for RE which goes up in value makes sense. I think they will use Holloway as the roll up vehicle. Cash for now will go to buying back debt at below par, and buying back shares. Hopefully Clarke bought 35% and will join the ride. --- My guess is Clarke bought. Georges MO seems to buy that Geosam gets the fast money, and easy gains early. Clarke then comes in, locks in the gains for Geo and everyone wins, but Geo ends more. Look at Terravest. Most of Geos money was in Terravest. Clarke sells Terravest assets at a cheap price, Terravest runs. Geo moves money to Holloway, then Royal HOst is sold to Holloway, with Clarke coming in to validate the holding. Perhaps its a win win, because Geo and Clarke can both build positions and encircle targets ..... If given the choice, I would buy shares in Geo though.... Link to comment Share on other sites More sharing options...
Guest Quebec Posted June 23, 2014 Share Posted June 23, 2014 My guess is Clarke bought. Georges MO seems to buy that Geosam gets the fast money, and easy gains early. Clarke then comes in, locks in the gains for Geo and everyone wins, but Geo ends more. Look at Terravest. Most of Geos money was in Terravest. Clarke sells Terravest assets at a cheap price, Terravest runs. Geo moves money to Holloway, then Royal HOst is sold to Holloway, with Clarke coming in to validate the holding. Perhaps its a win win, because Geo and Clarke can both build positions and encircle targets ..... If given the choice, I would buy shares in Geo though.... Thanks for your reply and correcting me on the HLC position held by Geosam. We have similar thinking: Clarke and Geos wins, but Geos wins more. If given the choice, I would buy shares in Geo though... I feel they should clean this up. It is some shade of shady, in my opinion. They could combine force like they are just doing with HLC and RYL. Or maybe as Clarke shareholders we are not entitled to the full and best of Georges ? This said, CKI remains a 20% holding of mine Link to comment Share on other sites More sharing options...
Guest Dazel Posted June 23, 2014 Share Posted June 23, 2014 Make no mistake Armoyan has a lot at stake with Clark and it is likely he will have Clark buy out Geosam or send a onetime dividend payment at Clark and have Geosam buy out a smaller Clark Inc. They are too closely related to continue the way they are in my opinion...and the added regulation and effort does not make sense. Clark shareholders will benefit from this transaction as they will get a dividend and book value. As I said on the Altius thread I will no longer be commenting on investments on the board. Good luck to all and congrats on the big gains here at Clarke Inc. Dazel Link to comment Share on other sites More sharing options...
Myth465 Posted June 24, 2014 Share Posted June 24, 2014 Thanks Dazel. You have been very helpful and this trade has been very profitable. Link to comment Share on other sites More sharing options...
xtreeq Posted June 24, 2014 Share Posted June 24, 2014 Thanks for all your contributions Dazel and good luck. Link to comment Share on other sites More sharing options...
giofranchi Posted June 24, 2014 Share Posted June 24, 2014 I have been following this thread for quite a while now. And congratulation to all of you for the very handsome gains! ;) Anyhow, I have never pulled the trigger… The business I really like and look for is headed by a smart and reliable entrepreneur, and generates steady and predictable free cash flow, for that entrepreneur at the helm to invest. The fcf it generates doesn’t need to be “abundant”… It just needs to be “safe”. It could come from franchise contracts (BH), or royalty contracts (ALS), also float would be fine (FFH, GLRE, TPRE): if float costs nothing, underwriting profitably, and grows over time, instead of shrinking… it actually functions as fcf! Even if risk profiles are quite different… Why do I look for such a business? Because over the long term I have experienced first-hand how much easier it is to make investment decisions, when you are supported by a flow of free cash regularly coming in. Investment companies, even if managed by smart and reliable entrepreneurs, unfortunately lack the second feature I always look for. Gio Link to comment Share on other sites More sharing options...
Andy Dufresne Posted June 24, 2014 Share Posted June 24, 2014 I have been following this thread for quite a while now. And congratulation to all of you for the very handsome gains! ;) Anyhow, I have never pulled the trigger… The business I really like and look for is headed by a smart and reliable entrepreneur, and generates steady and predictable free cash flow, for that entrepreneur at the helm to invest. The fcf it generates doesn’t need to be “abundant”… It just needs to be “safe”. It could come from franchise contracts (BH), or royalty contracts (ALS), also float would be fine (FFH, GLRE, TPRE): if float costs nothing, underwriting profitably, and grows over time, instead of shrinking… it actually functions as fcf! Even if risk profiles are quite different… Why do I look for such a business? Because over the long term I have experienced first-hand how much easier it is to make investment decisions, when you are supported by a flow of free cash regularly coming in. Investment companies, even if managed by smart and reliable entrepreneurs, unfortunately lack the second feature I always look for. Gio Gio I believe you are mistaken. While at the moment Clarke (after the sale of its trucking business) is essentially not producing any FCF through its own operations (I'm ignoring the 2 ships here, de minimis), its public holdings provide it with dividends or interest (the Royal Host debentures) which are essentially FCF, and what is better - FCF without any maintenance capex required! Essentially you are buying a publicly traded activist PE firm that has historically traded at roughly BV for around 0.8 BV AND its pretty easy to figure out BV as essentially all of it is either cash or publicly traded equities .... Nonetheless, I respect your judgement and methodology and hope you find more compelling investment ideas in this environment ... and please let us know when you do! :) Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2014 Share Posted June 25, 2014 Gio I believe you are mistaken. While at the moment Clarke (after the sale of its trucking business) is essentially not producing any FCF through its own operations (I'm ignoring the 2 ships here, de minimis), its public holdings provide it with dividends or interest (the Royal Host debentures) which are essentially FCF, and what is better - FCF without any maintenance capex required! Essentially you are buying a publicly traded activist PE firm that has historically traded at roughly BV for around 0.8 BV AND its pretty easy to figure out BV as essentially all of it is either cash or publicly traded equities .... Andy, I think there is a great difference! Think of this: if you like dividend paying stocks (I don’t! But let’s suppose that you do…), the free cash (ah! By the way, of course the definition of “free cash flow” itself is cash that remains after all maintenance capex!) you have at your disposal is: a) If you generate fcf yourself: dividends received + the fcf you generate by yourself b) If you don’t generate fcf yourself: dividends received I much prefer a) than b) for two reasons: 1) Quantity: dividends are double taxed, therefore the free cash at our disposal in b) is less than in a) most of the times 2) Quality: we usually have much more control in a) than b), therefore the free cash in a) is of a higher quality, meaning that it is steadier and more predictable, than in b) 0.8 x BV of course is a wonderful price… But, you already know by now I am seldom attracted by a wonderful price… Instead, I am very often attracted by a wonderful business… Because, if you want to invest in a business for the very long term, like I do (I think it is difficult, but I think the market is the most inefficient at valuing the prospects of businesses for the very long term… And I want to stay where the market is the most inefficient at! ;)), your investment returns will mirror much more the “wonderfulness” of the business than the “wonderfulness” of your entry price. Gio Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2014 Share Posted June 25, 2014 By the way, no wonder Mr. Buffett has always said he doesn’t like dividend paying stocks very much, instead he loves to purchase whole businesses (which generate lots of fcf) even more than investing in the stock market! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
writser Posted June 25, 2014 Share Posted June 25, 2014 I thought you specifically liked Lancashire because it paid a dividend? [..] I want something that keeps providing me continuously with new cash. As I have often said in this thread, I view LRE as a strategic investment: I don’t want to ever lack assets that replenish my “cash reserve” with consistency and predictability. I am willing to pay up for them. It simply makes doing business so much easier! Therefore, the only thing I am willing to swap LRE for is another cash distributing machine, as much tax-efficient as LRE, and which is selling for a lower multiple than LRE. As I have always said, if anyone knows such a machine, please let me know! ;) Though maybe this one isn't as tax-efficient for you. Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2014 Share Posted June 25, 2014 Though maybe this one isn't as tax-efficient for you. Yeah! LRE pays almost no taxes at the corporate level, because it is based in the Bermuda, and my dividends were not double taxed, because they were coming from England… It was a very special exception to the rule! ;) Hey! There are always exceptions to the rule: I have a large investment in LMCA, although it doesn’t generate any fcf by itself! Gio Link to comment Share on other sites More sharing options...
Andy Dufresne Posted June 25, 2014 Share Posted June 25, 2014 Gio I believe you are mistaken. While at the moment Clarke (after the sale of its trucking business) is essentially not producing any FCF through its own operations (I'm ignoring the 2 ships here, de minimis), its public holdings provide it with dividends or interest (the Royal Host debentures) which are essentially FCF, and what is better - FCF without any maintenance capex required! Essentially you are buying a publicly traded activist PE firm that has historically traded at roughly BV for around 0.8 BV AND its pretty easy to figure out BV as essentially all of it is either cash or publicly traded equities .... Andy, I think there is a great difference! Think of this: if you like dividend paying stocks (I don’t! But let’s suppose that you do…), the free cash (ah! By the way, of course the definition of “free cash flow” itself is cash that remains after all maintenance capex!) you have at your disposal is: a) If you generate fcf yourself: dividends received + the fcf you generate by yourself b) If you don’t generate fcf yourself: dividends received I much prefer a) than b) for two reasons: 1) Quantity: dividends are double taxed, therefore the free cash at our disposal in b) is less than in a) most of the times 2) Quality: we usually have much more control in a) than b), therefore the free cash in a) is of a higher quality, meaning that it is steadier and more predictable, than in b) 0.8 x BV of course is a wonderful price… But, you already know by now I am seldom attracted by a wonderful price… Instead, I am very often attracted by a wonderful business… Because, if you want to invest in a business for the very long term, like I do (I think it is difficult, but I think the market is the most inefficient at valuing the prospects of businesses for the very long term… And I want to stay where the market is the most inefficient at! ;)), your investment returns will mirror much more the “wonderfulness” of the business than the “wonderfulness” of your entry price. Gio Gio - I fully agree that in almost all cases CF from Operations > CF from Investments ... however: 1. If the dividend received has a long track record - say 3M or Coke, I'd venture to say that CFI it is essentially of the same quality as CFO (even better if CFO is volatile); while you are correct that there is no control over the timing or the amount of the dividend (or even its existence), dividend distributing companies tend to continue to distribute them (sometimes even to the detriment of the underlying business!) 2.Buffett LOVES getting those nice dividend checks from Coke (and others) - he just doesn't like to distribute any .... and with his capital allocation skills I understand why ... which brings us to the third point: 3. Dividends are a form of capital discipline for management - yes, it would likely be better to have share buybacks, nevertheless, it forces management to treat equity capital with more respect - I do not think this is such a bad thing given the lively discussion on the Sense of Entitlement thread! I think there are many ways to skin the proverbial cat :o and I agree we need to focus on whether the business is wonderful, not whether it pays dividends - in the long run this isn't the crux of the matter ... what I will say is that while I do not think that Armoyan is in the 99th percentile 8) he has a respectable track record and to get his skills at a 20% discount to BV when it is essentially all cash and securities seems to me like a bet with low downside and decent upside ... I am not yet a wise or experienced enough investor (I think) to recognize a Fisher-type / 20-punch card type company to buy and hold for a long time, so I try to find situations where I think I have a good understanding of what is going on and where the odds are well in my favor as a means of preserving and building capital. Andy Link to comment Share on other sites More sharing options...
Sportgamma Posted June 25, 2014 Share Posted June 25, 2014 Gio I believe you are mistaken. While at the moment Clarke (after the sale of its trucking business) is essentially not producing any FCF through its own operations (I'm ignoring the 2 ships here, de minimis), its public holdings provide it with dividends or interest (the Royal Host debentures) which are essentially FCF, and what is better - FCF without any maintenance capex required! Essentially you are buying a publicly traded activist PE firm that has historically traded at roughly BV for around 0.8 BV AND its pretty easy to figure out BV as essentially all of it is either cash or publicly traded equities .... Andy, I think there is a great difference! Think of this: if you like dividend paying stocks (I don’t! But let’s suppose that you do…), the free cash (ah! By the way, of course the definition of “free cash flow” itself is cash that remains after all maintenance capex!) you have at your disposal is: a) If you generate fcf yourself: dividends received + the fcf you generate by yourself b) If you don’t generate fcf yourself: dividends received I much prefer a) than b) for two reasons: 1) Quantity: dividends are double taxed, therefore the free cash at our disposal in b) is less than in a) most of the times 2) Quality: we usually have much more control in a) than b), therefore the free cash in a) is of a higher quality, meaning that it is steadier and more predictable, than in b) 0.8 x BV of course is a wonderful price… But, you already know by now I am seldom attracted by a wonderful price… Instead, I am very often attracted by a wonderful business… Because, if you want to invest in a business for the very long term, like I do (I think it is difficult, but I think the market is the most inefficient at valuing the prospects of businesses for the very long term… And I want to stay where the market is the most inefficient at! ;)), your investment returns will mirror much more the “wonderfulness” of the business than the “wonderfulness” of your entry price. Gio Gio - I fully agree that in almost all cases CF from Operations > CF from Investments ... however: 1. If the dividend received has a long track record - say 3M or Coke, I'd venture to say that CFI it is essentially of the same quality as CFO (even better if CFO is volatile); while you are correct that there is no control over the timing or the amount of the dividend (or even its existence), dividend distributing companies tend to continue to distribute them (sometimes even to the detriment of the underlying business!) 2.Buffett LOVES getting those nice dividend checks from Coke (and others) - he just doesn't like to distribute any .... and with his capital allocation skills I understand why ... which brings us to the third point: 3. Dividends are a form of capital discipline for management - yes, it would likely be better to have share buybacks, nevertheless, it forces management to treat equity capital with more respect - I do not think this is such a bad thing given the lively discussion on the Sense of Entitlement thread! I think there are many ways to skin the proverbial cat :o and I agree we need to focus on whether the business is wonderful, not whether it pays dividends - in the long run this isn't the crux of the matter ... what I will say is that while I do not think that Armoyan is in the 99th percentile 8) he has a respectable track record and to get his skills at a 20% discount to BV when it is essentially all cash and securities seems to me like a bet with low downside and decent upside ... I am not yet a wise or experienced enough investor (I think) to recognize a Fisher-type / 20-punch card type company to buy and hold for a long time, so I try to find situations where I think I have a good understanding of what is going on and where the odds are well in my favor as a means of preserving and building capital. Andy Andy, I recommend you read this from Ericopoly, on why Buffett would actually prefer dividends over f.e. buybacks from Coke: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bac-wt-bank-of-america-warrants/msg170078/#msg170078 Link to comment Share on other sites More sharing options...
Myth465 Posted June 25, 2014 Share Posted June 25, 2014 You guys are ruining a perfectly good thread to discuss "theories". I can see why Geo doesnt like this one, but not sure why we should convince him, or why we have to have so many posts on it. Its like posting in a bank stock recommendation saying I dont like banks..... Link to comment Share on other sites More sharing options...
Andy Dufresne Posted June 25, 2014 Share Posted June 25, 2014 Sportsgamma - thanks! Myth465 - well said - it was not my intention to hijack the thread ... hint taken :) Link to comment Share on other sites More sharing options...
giofranchi Posted June 25, 2014 Share Posted June 25, 2014 Andy, I am not saying Clarke won’t be a very good investment… It probably will, and I respect Dazel’s ideas very much… Btw, I also think LRE will probably be a wonderful investment, and I respect twacowfca’s ideas very much… All I am saying is that I know very well what I am looking for, a number of requisites must be satisfied and, if something is missing instead, I just prefer to let the opportunity go and look for something else… that’s exactly what I have done with LRE as well! ;) But here I stop too: don’t want to bother Myth too much! ;D ;D Gio Link to comment Share on other sites More sharing options...
sbalsam Posted June 26, 2014 Share Posted June 26, 2014 A quick note on Clarke's cash position following the June 12th presentation. The presentation showed $55M cash. However, not included in that total are: (i) $10M to be repaid by TeraVest following the Company's $20M equity raise completed on June 3rd. (See the use of proceeds discussion in the Terravest prospectus.) This repayment brings the $25M note receivable down to $15M. (ii) $6M cash portion of consideration in the Holloway takeover of Royalhost (expected to close on or about July 1). So, near-term cash (ignoring any uses of cash since June 12 for buybacks or new purchases and any further sales of Sherritt) is about $71M. Steve Link to comment Share on other sites More sharing options...
Guest Dazel Posted July 3, 2014 Share Posted July 3, 2014 Congrats to all that have believed in our thesis...enjoy your profits...don't be shy to do something good with your money...give some away! Dazel. Link to comment Share on other sites More sharing options...
Ghost Posted July 5, 2014 Share Posted July 5, 2014 Many thanks Dazel, for the idea. 33% in less than 2 months plus a dividend, not bad at all. Link to comment Share on other sites More sharing options...
bizaro86 Posted July 14, 2014 Share Posted July 14, 2014 How is everyone considering the hold vs sell choice here? This was a 10% allocation for me when I bought at $7.XX, so it has become a material portion of my portfolio at the same time as its become less obviously very cheap. There's still a bit of room before you're paying full price for everything, maybe another $1 or so, but then this becomes a bet on the holdings and the management. I've taken a bit off the table here now that we're over $12, but am interested in what others are doing. Link to comment Share on other sites More sharing options...
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