No problem. The help I've had from Nani and Star Destroyer and others here has helped me no end. And I don't mind poring over the IPOs either although my wins are thinning there of late. Last August was like finding a gold nugget in ever pan.
Righto. Benjamin Hirnogold Limited. How will I thinkn through this one???
So I own some HML shares and think, do I really need this, its just his 10 best picks from HML's 25-30 universe, less the other holdings. I mean I'll catch most of the up in HML anyway...won't I?
And its NTA is $2 and share price $1 68. It also only has 4m Options against 30m shares left so minimal dilution coming up. Ergo why wouldn't I buy more of the HML instead of taking up some BHG?
Well, there are 2 main reasons that are crawing at me
1. Is the pure play on the high- conviction investment strategy.
Clearly MacAuliffe knows what he is doing, probably better than any other fund manager in Australia - those small time propeller heads over in a corner called the ASX kicking over the same 200 pebbled called stocks. Like little roosters clawing over the same patch of dung covered dirt in a small, maggotted hen house, or like 200 VD ridden prospectors digging through the same worked over slag heap, good for them and their 12%pa investment portfolios yielding 3% pa dividends. Soft wood.
But this is a chocolate wheel with some really juicy pay numbers on it. Granted the down-side risk of course. My observation there is that they are Arbitrage players and only invest when they see a win. But I could be wrong, DYOR dyor dyor
2. Is the Option. If I can come in for an allocation what I think what will happen is this will go to $0.20c off the bat. You can't really do Monte Carlo (is that the one?) simulations on his Options but I base that on most LIC options starting around 5c and this one being 3 years so has longer time value, plus he performs much better. Who knows what that could do
Warning
I expect flipping of the head stock on day one- possibly people selling as low as $0.95c retaining the Option. Not bad, you get a CGT loss on day one but are ahead overall with free carry on the Option, which, if it pays off could be worth plenty
So how much would you pay for an Option in his upside at IPO ? Lets not forget he's averages 100%pa after his Pirate Penalty Fees for the last 5 years that we know of. 5c? 10c? 20c?
If you would be prepared to pay 20c, then anything you sell the headstock for above $0.80c is a win, and gives you some nice tax losses to offset gains as well
On this basis, - provided there was an aftermarket - having written this and thought it out I would add a Zero to what I was thinking of buying. It also probably explains why he is keeping it small he has probably thought of this too
The issue is aftermarket. Why would you buy this without the Option when you will be facing 1:1 dilution of any performance he generates? You would be nuts to. So don't expect buyers for the headstock unless they are traders hoping for a 90 to 95c price uplift
Basically, if you want in on this, you have to also have the option. Which is what I think will give them a lot of value and the main driver into this in the IPO
Here is my thinking for how much I am putting into this:
Okay do a $20k IPO amount here. But this guy is a superstar I'm going to double that. Clearly he thinks this is the one or he wouldn't do this so that says something. He could raise $20m into HML if he wanted so this portfolio must be the winner he wants yeah back him. Hold on he could get it wrong I could lose 50% here so therfore only do $10k half of normal although every other crud investment ive done was as likely to potentially go down 50% so back to my normal amount $20k it is. Yes, thats right I have a 3 year option at $1 thats worth a lot and it looks like he only plays winners so yes 20k. Hang on wasn't I going to flip half my headstock post listing I'll go double here so $40k again. Oh no, its an LIC so they have thin volume if I need an exit Okay back to $20k and I've got the option free carry and if they trade under 10c I buy $10k worth and if they go under 5c I go another $10k worth but do I have my Buy orders on screen for Options hoping they get filled or does that just set a floor others will always gazump me on? Oh my head hurts I need a short black. Where was I hey its a thunder storm can I get a round in at Long Reef today, I'll think a bit more about this one and apply in 2 weeks but won't leave to last minute but better in my bank for 2 more weeks than Computershare's account I'll go Black for $20k please
exhales
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