Thursday, 3 December 2009

Short (and drink) 1977 Warre, long GSI Technology


Is this the year to open the '77 Warre's? Certainly little point leaving it behind in a dusty cellar for another 30 odd years during prime eating season.

Port is easy to understand (Wikipedia have one of their better entries on it) and its "vintage" incarnation has always been the outstanding bargain of wine world. And still is - the price of the 1977 is the same as it was 5 or 6 years ago (with a little shopping around). With that kind of price appreciation it better be delicious.

Some companies, it can be said, exhibit similar 'delicious' financial characteristics and remain similarly unloved. I have one before me that holds 30% of its share price in cash; has a free operating cash yield of over 13%; trades at x1.3 book; and has been profitable for the last 14 quarters. The last 14 quarters - not easy.

The cheapness, much like that for vintage port, can be explained by a perceived lack of 'sophistication' (OK, and size). GSI find it hard to explain that they are not producing a commodity product. They don't, if you like, just produce port - they also produce the equivalent of a quite special vintage port.

A few days ago, this perception problem appeared to change when the firm announced what appeared to be a technological breakthrough on performance. Cue massive buying followed a remarkable drawback - but on much lower volume. Short term plungers got theirs and done left. We could talk technical analysis guff about "the key $4.50 level" but it really won't matter a rat's backside to DBS.

Separately, the woes with the tracker continue. Where is the freaking portfolio?!! Plus, there can be no way that label in the picture is an original from 1977...

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