Friday, November 11, 2005

Portfolio Update 11-5-2005

Sorry I can't be at IAG this week. Got an engagement going on with the girl :)
Here's a written portfolio update:

We are up quite a bit compared to last week.

The main drivers for this is the upside in ETLT, which amounted to a 50% increase.
- We plan to remain in the position until third quarter earnings which should be around Friday of next week (during which a portion of the $15m contract will be realized)
- Although we feel our fingers getting itchy, and want to sell out of this already very lucrative gain, we feel that we are currently do not have enough information to change our thesis of at least 100% upside from an earnings multiple standpoint.
- We maintain… “The show is not over until the third-quarter fat lady sings.”

Sold out of Ampex…
- Yes we did buy it only last Thursday
- But we feel that perhaps we were too trigger happy when we bought the company. Most of the licensing revenues they realized are actually not expected to repeat too much over the next couple of quarters, at least not until April, and even then, the revenues that they will be able to get from Sony remain very unpredictable.
- The low earnings multiples we are seeing currently is a result of one-time pre-payments from their licensees that are not expected to appear on subsequent statements, or if they are—they will be impossible to quantify.
- We hate things we cannot at least quantify to with a reasonable degree of certainty.

- We want to halve the position due to some uncertainty regarding some written agreements with the Kazakh government
- It has just dawned upon us that a 15% position might be a bit excessive considering the new political risks that have just surfaced.
- We plan on reducing the position until it comprises 5% in the portfolio.
- Plus… we feel that with the gains already made by the portfolio, the excessive risk with BSKO is unnecessary.

YELL… maintain position until price reaches target of $50

We will be approximately $70,000 cash soon, and we hope that we can find other ideas to put in the portfolio. We are well on our way to that 10% alpha :D

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