Avangardco

Reading the history of excellent value investors I find many started investing in statistical bargains. Securities of companies that are evidently cheap on multiples of earnings or net working capital. Working for a large institution that does not only deal with professional clients, many of these securities are out of my line of fire as they are neglected issues of small and illiquid companies - few buyers, less volume, hence more inefficient pricing (be it on the up or down side). A few respected investment blogs have mentioned a stock by the name of AVANGARDCO, who currently trades at x1 its past earnings. What a bargain it seems. What must be going on for this offer to be in place - to be so left alone that its market price must reach such a low point. Well the risk factors are the following: Ukrainian company with almost all assets in Ukraine (and now some assets in Crimea, Russia), Expropriation of assets by Russian government, assets being deserted due to war conditions locally hence not being productive, debt in foreign hard currency such as Eur, USD, major shareholder controls company with approx. 77% stake, now lose making due to above conditions. One could fear the company could be restructured to survive under such draconian conditions so current shareholders are diluted to an insignificant stake. But who would take it up today - perhaps the major sharholder only to control his grip. The major shareholder has a holding company which controls his stake in Avangardco. This was due to be listed in mid 2014 but was postponed due to the Ukranian crisis. This company is even more interesting due to their agricultural assets - indeed Cargill recently bought a stake giving an indication what it could be worth. It has been suggested Avangardco shares can be converted to that holding company when it becomes public. Shares in Avangardco, as they currently trade under distressed conditions - and the holding company will not be floated under distressed conditions - could offer an attractive entry point in that business. Note the biggest risk is 200 million USD of debt maturing in Oct 2015. Cash flow going negative mens even the large cashload they have cant rfinance the debt.

Risk run off mode

In this environment of ever decreasing bond yields, decreasing commodity prices and increasing margins and equity multiples I find myself in a clear risk run off mode as the risk - reward for many equity securities I look at just aren't attractive enough to make me deploy capital. Sectors such as energy are currently being investigated and small investments are being made here. I continue to buy bonds, recently adding to a healthcare businesses senior bond whose junk rating hides its excellent cash generative ability. A 4% yield in USD for a 6 year bond is attractive for me - as I feel the large debt burden of many developed markets will not allow them to raise rates significantly, if they do. Meanwhile commentators argue if rates will rise in Q2 or Q3..... The way I see it interest rates in USD are not likley to average more than 2.5% over the next 6 years. Hence a 4% yield over that period is an attractive premium if I am satisfied with the credit risk of the issuer and feel inflation is likely to average below 2.5%. I think this is likely at the moment.