Tuesday, February 12, 2008

Symbion, Allco, and Clime

Seems that the Symbion (SYB.AX) takeover story finally comes to an end today. Primary Healthcare (PRY.AX) announced that Monday their interests in the company including conditional acceptances exceeded 52%. Tomorrow was the deadline for reaching 50.1% and if reached declaring the takeover unconditional. I sent in my acceptance a few days ago when this deadline was announced. When I get the money I'll apply it to paying down my margin loan. Allco (AFG.AX) is apparently in talks with Macquarie Bank (MQG.AX). I bought more AEP.AX - a fund managed by Allco a few days ago. The fund is trading way under net asset value. I can't see any reason why it should lose value if Allco went under. In fact the fund managers have not been spectacular to say the least. So losing Allco management shouldn't hurt. One reason I guess the price has gone down is that shareholders have sold it to meet margin calls generated by the fall in other shares (which is part of the story of the fall in Allco itself's share price). Anyway, it's now fallen more than 10% below my recent price. Do I buy more? This seems a low risk trade, but maybe there is something I don't know. So I'm unwilling to overexpose myself to that risk.

Clime Capital (CAM.AX) share price fell steeply yesterday as one of their largest investments - Credit Corp (CCP.AX) fell 75%. This was after CCP announced that they were downgrading their profit forecast by about a third and initiating a strategic review. The chairman also resigned. But given the size of the profit downgrade the market's reaction seems overblown? The forward P/E is now just 3 if the company's forecast is realized! I ended up buying more CAM yesterday because I had a lowball limit order in place. Unfortunately, not lowball enough. The stock fell another 10% after that. The manager of CAM, Roger Montgomery is a Buffett worshipper. In Buffett's pre-Berkshire days he would often take large concentrated positions in companies and Montgomery does the same. Montgomery has been convinced that CCP was a good investment and after the price fell from $9 or so to $4 he was buying more. Maybe he's right, but this kind of result will make potential investors wary of investing with Clime (they also have unlisted products) if they are going to continue taking concentrated positions. I'm also an investor in the management company CIW.AX and it also fell steeply yesterday.

So it seems I'm not having much luck with my Australian stock investments. I guess, like Montgomery, I think I'll be right in the end.

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