Risk profile view for EFG is totally forward looking and based on my view of worst case scenario...essentially wind up the business over the next two years. Best guess is 10 cents a share. Thus, I see rock bottom on EFG as 10 cents. But agree, upside is limited unless they make major change. Thus, I am happy to hold as essentially no downside, and better than putting the money in the bank. Some investments you go for blue sky, and others modest returns with very little downside.
For instance, if HFA lost its Lighthouse team or they start losing large mandates, then our HFA investment could go to zero given large US$ debts. Whilst a low probability, still a chance of losing it all. Whereas, EFG worst case IMO is 10 cents. Thus, from an investment perspective, HFA and EFG are in totally different risk buckets in my portfolio.
Whilst they are in the same space, they have materially different businesses and risk profiles. HFA has a very strong underlying business and successfully built a retail distribution and acquired manufacturing, but incurred massive debts which now need to be paid off...if they can eat through it, and a good chance they will, then we should get rewarded. However, the whole hedge fund space is going through considerable change, so no certainties as to what comes out the other end.
In terms of EFG, their business is not in a strong position IMO, but fortunately they have no debt. If they had debt. They need a complete rebuild IMO, but will take 3-5 years, which I may not see out as a shareholder if we see another rally to 12.
Re comparison...a bet on BEPPA vs HFA probably a fairer comparison.
EFG Price at posting:
79.0¢ Sentiment: Hold Disclosure: Held
