HSO takeover offer will be huge for Ramsay, page-114

"I remember you were accummulating RHC in the low 60s not too long ago as well. Is it overweight in your portfolio now? My allocation stands at around 4%."

@thunderhead1,

I think that a snapshot at any given point in time of how much of any single share anyone owns is not that meaningful.

For example, my biggest shareholdings today are REH (>10%), CSL (10%), ARB (7%) and BRG (6%) which suggests that I am super-bullish on those stocks when, in fact, the opposite is true - I think they are all overvalued. The reason they form such a big part of my portfolio is that they grew into those overweight positions... a quality problem to have, but a problem nonetheless.

By contrast, before this week, RHC represented less than 3% of my portfolio, and today it is around 4.0%... during this current bout of weakness I have effectively increased my position by 50% which, for me, is a punchy increase.

But even though I have less RHC compared to those stocks listed above, if I was to start a portfolio of stocks from scratch today, I would pencil in RHC as a candidate long before REH, CSL, ARB and BRG.

What I am trying to illustrate here is that portfolio construction at any given point in time is often more a function of history (specifically, historical performance), than it is of relative investment attraction.'

What might be more pertinent to your question is how RHC's weighting in my portfolio has changed over time.

Checking my records, I first acquired RHC in 2005 (@$7.88), but that was not a very meaningful position (<1%, I'm guessing). I added modestly to my holdings in 2009 (@$10.10), but my first real big purchase of the stock was in 2012 ($18.13). I can't be sure, but I suspect it would have been around a 3.5% or 4% position at the time. (As an aside, it might occur to you that the share price in 2012 was a lot higher than it was in 2005 and 2009, yet it was at the much higher share price that I was effectively doubling down. That often happens: with the evolution of companies, stocks can often be better investments at higher prices and at a later stage.)
The strong performance of the share price between 2012 and 2016 meant that RHC's position certainly ended up being close to one of my top 5 holdings, and while I can't recall exactly, at times it would have been close to a 6% position when its share price got above $80 in 2016.
Since then, the fall in the share price, combined with the out-performance of other stocks, means resulted in RHC falling to less than 3%.
The first time I bought shares in the company since 2012 was, as you rightly pointed out, in September last year (@$61.90). And then yesterday, and now today again.


So, a bit of a long-winded way of saying that the actual portfolio size is not really all than meaningful as an indication; rather the path that was taken to get there is really what is relevant, I think.

For my part, I think that the current valuation justifies further buying, to a 5% position, possibly, and given that I am happy to hold up to 10% of my capital in a single stock, I envisage I will continue adding to my position should the stock continue to weaken.


As I said earlier, a business like RHC being offered on a single-figure EV/EBITDA multiple, is somewhat of a rarity.

I spend a great deal of my days waiting for moments like these.

The place RHC currently finds itself currently reminds me a lot of what happened to HSO last year (analyst downgrade), and the last time I bought CSL (Sept/Oct 2016) was also on weakness that followed a few broker downgrades (If memory serves, that particular set of downgrades related to the 'flu business CSL had just bought; ironically, that very same 'flu business that this year caused CSL to upgrade its earnings guidance... you've got to love those broking analysts!)


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