Casino Capitalism

Poker Investing?

Seymour Schulich is one of Canada's most successful investors.  He is most famous for selling his company, Franco-Nevada, to Newmont Mining for $5 billion. Recently he has been in the news with the sale of his largest oil investment, BlackRock Ventures (BVI.TO), to Shell Canada for $2.5 billion. So how did Mr. Schulich pull all this off? The secret may lie in his poker playing.

Baruch on Investing

During this holiday weekend, I decided to pick up Bernard Baruch's autobiography, "My Own Story". In general, very few investment books have ever really helped me make money, and I've probably learned more about investing by reading books on evolutionary theory and philosophy. However, Baruch's book was actually an enjoyable read because it provided alot of interesting market history tidbits that I never knew about. I have found that a better understanding of history, particularly how the current market is both different and similar to the market a century ago, definately helps me make better investment decisions. For the record, my favorite historical investment book is Confusion de Confusiones by Josephy de La Vega, a book about markets from several hundred years ago (can you believe how long this game has been going on?).

Pacific Internet Saga Continues

Today Pacific Internet's (PCNTF) board and management finally released the recommendation of the Independent Directors of PCNTF and the opinion from KPMG Corporate Finance to the Independent Directors, as regards to MediaRing’s offer to purchase Pacific Internet's shares at $8.25.

If you are a shareholder of Pacific Internet, I encourage you to read the full SEC filing, available by clicking here. In this post, I have summarized some of the key findings. KPMG's analysis is quite interesting, since it gives a very good basis, and an excellent valuation lesson for that matter, for determining the future value of Pacific Internet, as well as, other Internet-related shares that I follow on this blog (e.g. IIP, WWWW).

New Stock Pick: SupportSoft (SPRT)

Technology turnarounds, particularly in the software sector, can sometimes make for profitable investments. The reason is that assuming the "broken" company has a strong balance sheet and a decent product portfolio, with time, a good management team can reignite high-margin license sales yielding substantial and sustainable free cash-flow growth for quite a few years. At the same time, the downside for the business and investment is protected by recurring, albeit low-margin, service/maintenance revenue, assuming that the software is being used by customers.

Furthermore, investors generally ignore the fact that the enterprise software business is very lumpy and as such they get too optimistic when sales (on the license end) are booming and conversely become too pessimistic when sales slow. The whole business is quite cyclical, though. Therefore, assuming the stock of such a "broken" software company is trading at a low multiple to service revenue and at a value which implies zero growth in new licenses, the stock usually offers a good investment "gamble" on a potential license or product "cycle" upturn.

Web.com Inks a Deal with WebSource

Today, Web.com (WWWW) announced the acquisition of WebSource Media, adding about $9 million in annual revenue to Web.com. The acquisition price is performance-based, and includes a combination of cash and stock based on the future results at WebSource. Given that future numbers will determine the ultimate valuation, it is difficult to give a clear financial opinion on this acquisition, especially since the SEC filings omit any hard operating numbers.

Bubble Talk Continues

Talk of a commodity bubble continues. This weekend in Barron´s there were two articles about a commodity bubble. Today, the front page of Yahoo! Finance has an article by by Jeremy Siegel about the commodity bubble. What´s going on? Should you sell all your oil investments?

Eliminate Bubble Fear

As this latest market sell off drags on, the worst the market has seen in quite awhile (especially if you are deeply in oil as I am), I find it best to remind myself daily that stock prices are merely abstractions for underlying businesses. So despite the heavy price declines, it is important to reflect on the business which an individual stock represents, rather than focus on prices per se. Since many people only focus on prices and not the business, price movements, including heavy declines and huge rises, become completely exaggerated.

T-3 Energy Services Blows Past Expectations

Last night T-3 Energy Services (TTES) reported earnings which blew away even my wildest expectations. The company reported a 34% increase quarter over quarter in earnings and a 450% increase in earnings year-over-year.   Most importantly, backlog has increased to $44.6 million at March 31, 2006, a 48% increase over December 31, 2005 backlog of $30.1 million and a 325% increase over March 31, 2005 backlog of $10.5 million. We originally estimated $1.20 per share in earnings for 2006, but this number now appears to be too low. Perhaps, something at $1.40-$1.50 per share is more in line.

Network Engines Links Up with NOXS

Today Network Engines (NENG) announced a distribution deal with NOXS. You can access the entire press release by clicking here.  This is huge news for Network Engine investors, despite the fact that the stock barely reacted to the news (which is OK by me, since I just bought more).

Pulse Data Results Are Impressive

This morning Pulse Data (Toronto: PSD.TO or PLSDF.PK or in the US) reported financial results for the March 2006 quarter that far exceeded my expectations. Though the stock is down in Canada, I remain convinced based on these results and as detailed in my original writeup, that Pulse Data´s stock is quite undervalued at current levels, as compared to Seitel (SELA.ob), its chief, and much larger, US competitor. I would note that Seitel´s (SELA.ob) stock, as well as the larger PGS, continue to make new highs, and yet Pulse Data continues to lag. There are various reasons for this, as mentioned later in this post, but I think the reasons are temporary and that as Pulse´s results continue to exceed expectations and certain operational changes are completed, the stock will move alot higher throughout 2006. Overall, the risk/reward in Pulse shares is excellent and there are a few near-term triggers that can significantly increase the stock price.