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Monday, April 30, 2012

Bill Ackman on Seeking a New CEO at CP


Once you have a big stake in a company, you can usually influence its strategy. Before we pick a target we run an algorithm we call Return on Invested Brain Damage—the return has to be high enough to justify the work. Most of the time, management is not the problem. At Canadian Pacific (CP) [of which we own 14 percent], you have a CEO who has underperformed for six years and runs the worst-performing railroad in North America. We’ve sought to replace him with a man who had the best track record in the industry at Canadian National (CNI): Hunter Harrison.
Soon after we disclosed our stake, I spoke to [CP] Chairman John Cleghorn. We agreed to meet at the Montreal airport on Nov. 2. Although I’d said we wanted to talk about a management change, he and [CP CEO] Fred Green were there. After three of us made a presentation, Mr. Cleghorn said, “I’ve spoken to the board and want to let you know we’re 100 percent behind Fred.” I couldn’t believe the board made its decision before hearing our case. I asked to speak to him alone and said, “Look, the last thing we want here is a proxy contest, but if you’re not open to alternatives, we’ll go to the shareholders for support.” I got back on the plane. After the doors were closed and the engines started, the pilot said, “Bill, do you recognize this gentleman on the tarmac?
Remainder of article:

Pacific Rubiales Partnering Up With Short Sale Target Interoil !


TORONTO, April 30, 2012 - Pacific Rubiales Energy Corp. (TSX: PRE; BVC: PREC; BOVESPA: PREB) announced today that it has signed a binding agreement with InterOil Corporation (NYSE: IOC; POMSoX: IOC) whereby it can acquire a 10% net participating interest in the PPL237 Petroleum Prospect License and the Triceratops structure located within PPL237, onshore in Papua New Guinea for an estimated total investment of up to approximately U.S.$345 million. The investment will be comprised of an up-front down payment of U.S.$116 million cash, funding of an agreed exploration work program, and cash payments based on the independently certified resources of the Triceratops structure. The Company's net participating interest is calculated after accounting for a 5% total project back-in right of the Government of Papua New Guinea.
Ronald Pantin, Chief Executive Officer of the Company, commented: "This is an exciting opportunity for the Company to participate in a low risk, high return investment. This farm-in has been structured in a way that limits the Company's down side risk in a very prospective region. The bulk of our investment will only be made if we receive independent certification of the resource potential at the Triceratops structure and once Triceratops is in production, our share of the investment will be funded through a portion of the production Proceeds."

http://www.pacificrubiales.com/2012/382-30042012-pacific-rubiales-announces-farm-in-on-ppl237-license-and-triceratops-structure-onshore-papua-new-guinea-

Tilson on Trading Barnes and Noble

Went long last week (had been short), up 69% since:

Petrobank Arbitrage Continues

Petrobank continues to take advantage of Mr. Market's inefficiency.

Sell some of their Petrobakken shares:


Toronto Stock Exchange

Company Name : PetroBakken Energy Ltd.Last Updated: April 27, 2012
DateSymbolInsider
Buys
Volume
Insider
Sells
Volume
Insider
Buys
Value $
Insider
Sells
Value $
Insider
Buys
Transaction
Insider
Sells
Transaction
Currency
04/27/2012PBN052,9000.00755,597.000210CAD


Then reacquire those shares (and the parent assets) by buying Petrobank at a lower price:


Toronto Stock Exchange

Company Name : Petrobank Energy And Resources Ltd.Last Updated: April 27, 2012
DateSymbolInsider
Buys
Volume
Insider
Sells
Volume
Insider
Buys
Value $
Insider
Sells
Value $
Insider
Buys
Transaction
Insider
Sells
Transaction
Currency
04/27/2012PBG65,1000912,551.000.001750CAD


Thank you Mr. Market.  Please let Petrobank take advantage of this opportunity for a long time.

Tilson Analysis of Three Largest Holdings

Hot off the press

T2pres-4-12

Man Hits Head - Becomes a Genius

Now where did I put my hammer...

Recent Buffett Meeting With Students - Transcript

Which is time better spent....reading a Buffett Q&A or watching Fast Money?  It is close, but I'll go with Buffett.

I believe the original source for this is http://www.bengrahaminvesting.ca/:

2012 Buffett Notes

And a Little More Ackman

Ackman on Running a Better Railroad

Ackman on Canadian Pacific

Bill Ackman - On Searching for the Next Big Deal






Tiny Company Hunting Elephants

Updated presentation from micro-cap IPC Oil and Gas Holdings which is getting close to the date of drilling for its high impact offshore Israel exploration targets:

IPC+Presentation+April+Conference+2012

Energy Transfer to Buy Sunoco

The acquisition of Midway Energy which was an early position in my subscription newsletter portfolio was completed last week.  The portfolio is full of small producers and I can't help but wonder which one gets taken out next.

More M&A in the energy industry this morning:

http://www.theglobeandmail.com/globe-investor/energy-transfer-to-buy-sunoco-for-53-billion/article2417600/

Article on Watsa

Covers some of his comments from the annual meeting:

http://www.bloomberg.com/news/2012-04-27/watsa-who-models-buffett-sees-housing-bubble-corporate-canada.html?cmpid=yhoo

GMO Q1 Update

GMOQU1Q12

Hugh Hendry Latest Letter

Had this link e-mailed to me, I believe http://www.zerohedge.com/ to be the original source:

April 2012 TEF Commentary


Saturday, April 28, 2012

Bidding Wars Back in the Housing Market?


A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages.
"It's a little surprising because we thought bidding wars were done with," said Andy Aley, who is looking to buy his first home in Seattle's Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions.
Entire article:

Reuters Keeps Digging Into McClendon


(Reuters) - As Chesapeake Energy Corp.'s board of directors moves to distance itself from loans taken by CEO Aubrey McClendon, documents reviewed by Reuters show that at least one former board member had undisclosed personal financial ties to him in the past.
Now-retired board member Frederick Whittemore lent money to McClendon in the late 1990s, the documents show, even as Whittemore helped determine how much the CEO should be paid to run Chesapeake.
This week, the energy giant reversed an earlier statement that its board was "fully aware" of up to $1.1 billion in personal loans that McClendon has taken in the last three years. "The board of directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions," the company said.
Entire article:

Time Magazine 100 Most Influential

http://www.time.com/time/specials/packages/0,28757,2111975,00.html

Friday, April 27, 2012

Canadian Taxpayers Exposed to Housing Collapse?

http://www.thestar.com/business/article/1168550--canadian-mortgage-and-housing-corp-to-be-overseen-by-canada-s-financial-regulator

More On Aubrey and Chesapeake


Shareholder confidence in Chesapeake Energy Corp. (CHK) sank to its lowest point since the 2008 global economic meltdown as company directors reversed course on the need to examine Chief Executive Officer Aubrey McClendon’s personal financial transactions.
Chesapeake’s board, propelled by a plunging stock price and potential conflicts between McClendon’s personal finances and corporate duties, said yesterday it would end a program allowing its chairman and CEO to buy stakes in the company’s wells and review loans McClendon obtained by using those investments as collateral.
“Simply letting the Founders Well Participation Program expire is too little, too late,” said New York State Comptroller Thomas P. DiNapoli, who oversees 3.1 million Chesapeake shares held by the $140 billion New York State Common Retirement Fund. “Much more needs to be done to restore investor confidence.”
Link to entire article:

Latest Commentary From Eric Sprott


When Fundamentals No Longer Apply, Review the Fundamentals

By: Eric Sprott & David Baker
This may not come as a surprise, but we're still not seeing it. We're not seeing a US recovery.
Here we are, well into 2012, and the fact remains that the US housing situation is still a bust. There is simply no housing recovery happening in the United States. US New Home Sales fell for the fourth time in a row month-overmonth in March, representing a seasonally-adjusted annual rate of 328,000, down from 353,000 in February.1 Do you know what the annual rate of New Home Sales was back in 2006? About 1.21 million.2 No recovery there.
Same goes for US Existing Home Sales, which fell unexpectedly by 2.6% in March to an annual rate of 4.48 million units.3 Again - would you care to know where they were in the same month back in 2006, before the financial system fell apart? Approximately 6.92 million units.4 No recovery there either.
Then there's unemployment. Judging by all the recent earnings-release cheerleading, March's jobs numbers seem to have been forgotten, but they were plainly weak. The US Labor Department showed US hiring slowing to a mere 120,000 new jobs in March, below expectations of 200,000+.5 That's not a recovery. That's simply weak data.
Same goes for the most recent jobless claims numbers, which have been running above 380,000 for the last two weeks, above the 375,000 threshold that supposedly signals future unemployment increases.6Again - this is not positive data, this is weak data. How high will it have to go before the economists admit that it's weak? 400,000? 425,000? We're asking - we'd like to know.
Then there are US tax receipts, which continue to point in the same direction. If the US is recovering so strongly, then why are employment tax receipts only up 2%? ($484 billion fiscal year-to-date as of March 2012 vs. $475 billion over the same period to March 2011).7 A 2% increase is explainable by inflation alone, which was last reported running at 2.7% according to the Bureau of Labour Stastics.8 Shouldn't the tax receipts be much higher than that? Wasn't unemployment down so far this year? As the Associated Press plainly states, "The unemployment rate has fallen to 8.2% in March [2012] from 9.1% in August [2011].Part of the drop was because people gave up looking for work. People who are out of work but not looking for jobs aren't counted among the unemployed."9 Oh! Sorry,… now the numbers make more sense. There hasn't been any net new employment at all. Question: if everyone "gives up" looking for work next week, will the US unemployment rate go to zero? We're asking - we'd like to know.
Link to entire commentary:

Today's Update on the Petrobank Buyback

Buying from yesterday:


Toronto Stock Exchange

Company Name : Petrobank Energy And Resources Ltd.Last Updated: April 26, 2012
DateSymbolInsider
Buys
Volume
Insider
Sells
Volume
Insider
Buys
Value $
Insider
Sells
Value $
Insider
Buys
Transaction
Insider
Sells
Transaction
Currency
04/26/2012PBG107,30001,518,226.500.001770CAD


And taking advantage of the silly market inefficiency by selling shares of Petrobakken to increase value per share:


Toronto Stock Exchange

Company Name : PetroBakken Energy Ltd.Last Updated: April 26, 2012
DateSymbolInsider
Buys
Volume
Insider
Sells
Volume
Insider
Buys
Value $
Insider
Sells
Value $
Insider
Buys
Transaction
Insider
Sells
Transaction
Currency
04/26/2012PBN085,9000.001,243,380.000328CAD


Repeat continuously until ownership of Petrobakken is just over 50%, then spin those Petrobakken shares out to us shareholders.

I Want A Change In Leadership At Chesapeake Energy


A hedge fund manager that I enjoy following is the very well known Whitney Tilson of T2 Partners. Tilson is an investor focused solely on buying shares of companies trading at material discounts to intrinsic business value and shorting shares of companies trading at significant premiums to intrinsic business value.
Tilson speaks very openly about the positions that his fund holds and more importantly why his fund owns shares of specific companies.
So I read with interest the following excerpt from T2 Partners March letter to investors:
Panicked Headline Investing
As value investors, we often invest in companies and industries that are deeply out of favor because that's where bargains - babies thrown out with the bathwater - often lie. At the extreme end of this spectrum is what we call "panic headline investing." The opportunity arises when something goes terribly wrong at a well-known company, resulting in very negative headlines that lead to the widespread view that the company is so toxic that its stock is uninvestable at any price - and thus panic selling. We love buying from sellers who don't care about price.
Sometimes panicked headlines affect an entire sector such as financial stocks during the credit crisis and, to a much lesser extent, last August and September at the peak of the European sovereign debt crisis (we took advantage in 2008/09 with Berkshire Hathaway, Wells Fargo and American Express, and last fall with Citigroup and Goldman Sachs, among others). But during normal times, it's usually something company-specific. A classic example is BP during the oil spill in mid-2010 (another one we profited immensely from). Over the past year, other examples we'd cite are News Corp last August (phone hacking), Hewlett Packard last August and September (management shakeup), Netflix last October (Qwikster debacle), Jeffries Group last October (MF Global bankruptcy), Sears Holdings last December (bankruptcy fears), and Diamond Foods in February (accounting scandal).
We look closely at all of these situations and occasionally invest in one. For example, of the six recent ones noted above, we invested in two: Netflix, which has been very profitable and which we continue to own, and Jeffries Group, which we have nearly entirely exited after almost doubling our money. Why did we invest in these two and take a pass on the other four? It's hard to say - to some extent, after all of our analysis, it comes down to gut-level comfort. Given the success we've had doing this type of investing, perhaps we should try harder to get comfortable with these situations more often…
I thought this topic was a perfect for the daily headlines we are now seeing for a company that I own, that company being Chesapeake Energy (CHK).
Of course you likely already know the details of the Reuters specialreport on Chesapeake CEO Aubrey McClendon's Founders Well Participation program and how McClendon has financed this participation with a massive amount of debt borrowed from a company that Chesapeake also deals with.

Link to Remainder of the Article:

 http://seekingalpha.com/article/535971-i-want-a-change-in-leadership-at-chesapeake-energy