Selling some RCG and feeding on the Poker minnows
Portfolio now £21,900 (+16% in around 4 months). Cleverly (?) and sadly, I had to bite the bullet and de-risk my portfolio, so I sold £6000 of RCG and £10,000 is left. It’s not that I don’t like the company, but my profits had grown and coupled with the fact I’m short term trading on them too, the risk was too high. My pension is a long term thing, right? Events could shape the short term price too much and piss me off . Unrest in China, North Korean nukes, USA striking N Korea before Bush leaves office, a foreign object in Mao’s cornflakes, Hong Kong people working 20 hrs less per week by adopting European working hours etc etc. Also, Warren says stuff like, sure put all your eggs in one basket, but take very good care of that basket. Could I take total care of it? No. There’s no great margin of safety, but there is a good one, the price and the company’s prospects. One of Warrens biggest % holdings was American Express where he bought 40% for his partnership, so he doesn’t mind big holdings, but perhaps not 70%.,
Stop press. RCG are at the Biometrics event in London, http://www.biometrics.elsevier.com/, and many investors are meeting with the Chairman Dr Chu. Wish I could be there, but I’m in Bonnie Scotland, so I’ll have to miss that. I really think I’m missing a beat here. Perhaps I will fly down to get more of a grasp of the competition in the industry and where RCG fits in. The conference is free after all.
Also, I’ve still not found another company to become an owner of. I looked again at Party Gaming, after their complete collapse of share price to 40p, but couldn’t deal with the stress of further countries banning and enforcing Internet Gambling prohibition. But more so, I think the churn factor of new players is big news (sorry couldn’t find an article to link to but see below) and their new sporting book isn’t really ‘internet’ changing, betting exchanges with better odds like bet fair will always have a competitive advantage.
My view on online poker churn: New users come in and lose money to the experienced algoithmics spreadsheet players. When normal users realise the odds are always stacked against them, they won’t play and feed the big fish, then the big fish will leave. Sad and simple isn’t it!
Companies I’m looking at are TAN – Tanfield, Premier Foods and PZ Cussons. However, I don’t think Warren Buffet would buy into them as they haven’t suffered a short term hit in price and their not that cheap. Tanfield may be a growth story though, and they are a leader in their field so the next financial model I will do is theirs. Also, I sadlly eliminated Tate and Lyle from my candidate list. Share price risen so much on Splenda sugar substitute. Could be a mistake, but certainly no big money to be made. Heck I want 50% per year. I can’t buy fairly priced companies. Mr Market has to be wrong when I buy.
This brings me back to Santander (sitting on £18,000 - £15,000 of this isn’t in my SIPP) - its no 50% growth story, but they impress me no end. Just bought Drive in the US for around 6.9 earnings as there’s fear of car financing slowdown in the US. Sounds like a Buffet buy to me. Buy when everyone is scared. Buffet might be pissed off he missed it. I wonder if Chairman Botin at Santander is near Buffet in his growth of Santander compared to Berkshire. Can’t be far off. He certainly buys low and sells high.
Till next time.