Five for the Weekend #68

Here are five suggestions to fill out your weekend reading. Let's go.

• King Pharmaceuticals (KG) is among several drug companies Bloomberg reports as being potential takeover targets of private equity firms. I'd love for this to happen for two reasons. Specifically and first, because I'd like to receive a nice offer for my shares. And second because increased buyout activity would be good for the markets generally.

• Anthony Bolton is a very famous fund manager in the UK and author of Investing Against the Tide: Lessons from a Life Running Money. He writes in the Financial Times that his bullishness on China has become so great that he is putting off retirement, and also launching a China investment fund: "I recently spent three months based in Fidelity’s Hong Kong office and this rekindled my interest in the region and China in particular. After a few weeks there, I said to my wife that the exciting opportunities available in China, and my belief that the market could go a lot higher over the next few years, made me wish I was still managing money. Rather to my surprise, she said that as I only had one life I should consider running a fund again while I still had the opportunity. I spent the next few weeks discussing the idea with my family and senior colleagues before deciding to give it a go."

• Capital Southwest (CSWC) has released its semiannual report dated 9/30/09. President and Chairman Gary Martin reports finding a few things to do, some new investments plus some additions to existing ones. CSWC trades at a significant discount to net asset value, and if I inherited an all-cash portfolio the first thing I'd do is put 4% to 5% in the company. (It accounted for 4.3% of my portfolio at end of Q3.) You have to be careful because it is somewhat illiquid with less than 4 million shares out.

• George Melloan, former Wall Street Journal columnist and deputy editor and author of The Great Money Binge: Spending Our Way to Socialism, returned to the Journal this week with a must-read op-ed. It's about, as one has come to expect these days, the massive debts the US federal government is piling up at alarming speed: "Yes, things have changed in a year. Feeding the government and starving free enterprise looks like a prescription for long-term economic stagnation. It's not unlike what we witnessed in the depression of the 1930s."

• Africa Confidential runs a feature story on proposed reforms in Nigeria regarding the nation's oil reserves. Specifically, sharing oil revenues with those communities in the Niger Delta. Nigeria in particular and Africa in general continue generating interest, even though my desire for a continent-wide investment play has weakened since the global financial crisis hit.

I hope everyone in the US had a great Thanksgiving. And I will add, belatedly, that I hope all Canadian readers had a great Thanksgiving back in October. For readers the world over, may peace and fellowship find you and those you care about. Stay safe and I'll see you next week if not sooner.

Comments

[Eric]

Being in 25% cash now, is there a particular reason you don't put some of that into Capital Southwest if it is trading below NCAV?

Thank you

[John]

@Eric: CSWC clocked in at 4.3% of the portfolio at end of Q3. I've thought about adding to it, and may. I've got a list (very short) of other candidates I've been thinking about.

Just wondering -- how much of your portfolio is in CSWC?

[Eric]

Zero in CSWC.

I am looking at a value play to add, and have been watching USU. The USU idea was one of Cheap Stocks (on your blogroll) biggest net/nets last year, but is now at the same price as a year ago.

Problem is that USU had some problems with the department of energy and a loan for their American Centrifuge project, and the USU share price took a big hit. It now trades at less than half book value, but I am trying to figure out whether that book value is tangibly affected by delays in the American Centrifuge project. Plus I am hoping to get in cheaper on USU.

Eric