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.
Blog
Archive for May, 2006
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.
ActivIdentity Turnaround in the Early Stages
Yesterday, ActivIdentity (ACTI) released earnings results for the March Quarter. As expected the company burned thru more of its cash hoard, but on a more positive note signaled that the cash losses would begin to decline steadily with cash breakeven expected later this year. In addition, the company is guiding towards modest revenue growth next quarter. Finally, we should hear sometime this year what the company plans to do with its $140 million cash balance (down to $135 million by the end of the year). As mentioned in the first write-up, I think the company is way overcapitalized and I hope for a special one-time dividend to be announced.
Internap Insights
Recently I received the following excellent comment from a subscriber concerning Internap (IIP):
"On the question of high costs, have you factored in the possibility that the new FCP 10 gig boxes could really take off in terms of sales? Internap has the best route control product on the market and very little real competition at the high end. These boxes will sell for around 100k when they go on the market in June and Internap’s profit margins on those boxes are around 70%. If Internap can really start to reach critical mass in terms of selling these devices, it could significantly alter the gross margins of the business. Also, given that broadband useage will go from 38 to 88 million Americans over the next 6 years or so and video is really starting to take off with Google Video, youtube.com etc. I see the demand for Internap’s FCP and IP services growing significantly. Thoughts?"
Internap: Where to Now?
Last night Internap (IIP) delivered financial results that confirmed the strong turnaround at the company. From my perspective the most important part of the financial release was the increased revenue growth guidance for 2006, since the meager revenue growth projected last quarter was a factor in limiting the upside valuation for the company.
Web.com Continues to Make Progress
Today, Web.com announced results for their first quarter which were pretty much in line with my expectations. As is the case now with the vast majority of public companies, the financial numbers are completely confusing, due to charges related to stock options. The company claims to have had positive income after adjusting for stock option expenses, but in looking at the the company´s balance sheet (i.e. actual cash position), it appears as if the company burned thru a bit of cash this quarter. However, the amount of cash burn is clearly insignificant, and I would say that the minimal cash burn is a great accomplishment for the new management team at Web.com, given the prior history of the company (formerly Interland).
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