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Five for the Weekend (Back for the Moment at Least)

Well, it's been a while. But here are five items you might check out over the next few days.

• McElvaine Investment Management has revamped its website. Tim McElvaine is a top-notch value manager based in Canada, and he used to be with Peter Cundill. McElvaine has virtually of his net worth in his fund, though it's worth noting the single largest investor in the fund is Cundill is himself.

• XETA Technologies (XETA) is one of my recent stock purchases. It's a small company that trades very thinly. As a result, it receives very little press coverage (which I don't mind a ibt). Here's a recent profile of the Oklahoma-based outfit in Tulsa World.

• Another portfolio holding, Capital Southwest (CSWC), has released its annual report for the year ended March 2010. You can download it by going here. I always enjoy President and Chairman Gary Martin's letters. They're not the epic works of you-know-who in Omaha, yet they fit the company and its approach to doing business perfectly.

• Check out Eric King's interview with Jean-Marie Eveillard from last week. Eveillard is one of the very best value fund managers of all time (like Cundill). The interview covers value investing, gold, Austrian economics and Japan.

• I mentioned the other day that John Hathaway of the Tocqueville Gold Fund regularly speaks with Eric King of King World News. If you've never checked out any of these interviews -- or even if you have -- give a listen to the latest sit-down.

That's it for now. I haven't been blogging as much these past months, not to mention not doing the weekly Five for the Weekends, which based on emails and comments are popular with Controlled Greed readers.

As always, I thank you for your readership and your patience. Have a great weekend.

Portfolio Holdings & Strategy: June 2010

My single largest holding continues to be the SPDR Gold Shares ETF (GLD). I’d prefer my gold bullion play to be the Central Fund of Canada closed-end fund, which also holds silver bullion, but it has been selling at a premium. So I settled for GLD.

I also own four gold mining plays: Newmont Mining (NEM), Goldcorp (GG), Agnico-Eagle Mines (AEM) and the Market Vectors Gold Miners ETF (GDX). GDX is a modified market capitalization-weighted index of publicly traded gold and silver miners. I bought GDX to ensure I’d get proper diversification of major gold miners.

Gold has been reaching all-time highs, and a correction may be in order. I think the longer trend Bull remains intact, so I’m holding. Normally gold mining stocks overtake the metal itself at the end of gold Bull markets. That hasn’t happened yet.

In the tech/media/telecom area, I hold the following stocks: Microsoft (MSFT), Geeknet (LNUX), BCE Inc. (BCE), XETA Technologies (XETA) and a small position in Media General (MEG).

MSFT has been trading in the mid-$20s, which is still up from when I bought it for less than $19 a share. I was tempted to add some, but since it is already a full position I’ve decided to hold off. The company is entering its strongest product upgrade cycle ever. BCE pays nice dividend in Canadian dollars, which feels good since I’m living in the US.

In the property & casualty insurance sector, I own Fairfax Financial (FFH/Toronto), EGI Financial (EFH/Toronto), and NKSJ Group (8630/Tokyo).  Fairfax and EGI are based in Canada and NKSJ Group in Japan. Fairfax is one of my largest holdings in the portfolio, but I’ve sold enough of it to get my original capita out, so it is a free ride. NKSJ formed out of the NipponKoa merger with Sompo Japan earlier this year. Fairfax is one of my biggest holdings, but I remind you that I’ve sold enough over time that it is a free ride for me.

King Pharmaceuticals (KG) recently got hammered because it looks like its new tamper-resistant pain drug won’t get government approval, and it also looks like revenues will fall about 15% or so this year. The next few quarters look challenging, to say the least, but the company is putting a lot into some new pain products and its animal health business should remain strong. KG has a solid balance sheet and insiders have been buying since the stock price fell.

Unifi Inc. (UFI) is the company I recently bought when I dumped my remaining stake in DirecTV Group. UFI produces yarns and related materials used in home furnishings, apparel, legwear and sewing thread, as well as industrial, automotive, military and medical applications. It looks on track to post its first full-year profit since 2000.

Cheung Kong Holdings ADR (CHEUY) has been up nicely since I bought it during the global financial panic. Li Ka-shing has been buying the stock. I worry that if China has a property bubble pop on the Mainland, the spillover effects would hammer Hong Kong-based stocks like CHEUY. I’ve been mulling that over in my head.

I continue holding Capital Southwest (CSWC) and a small position 3i Group PLC (III/London). CSWC is up recently yet still sells for less than book value. I expect to hold this stock for years to come. And it is the only stock I own where my broker is instructed to reinvest the dividends. 3i is down a lot since I bought it several years ago. It has made some very good payouts in the past, but I must say it may prove to be a lousy investment like MEG.

Lastly, I hold Superior Industries International (SUP). I don’t expect much from this until things pick up in the auto sector. Yet management maintains a strong balance sheet and I’m patient with the dividend near 4%.

My cash position is small -- less than 5%.

John Hathaway on Gold and Gold Stocks

The featured interview in Barron's this week is with John Hathaway, manager of the Tocqueville Gold Fund. I recommend it to you, along with the periodic interviews he does with Eric King over at King World News. Several years ago, Jim Grant wrote in Forbes that he was invested in Hathaway's fund -- though I should add that I have no idea if that is still the case.

A key part from the Barron's piece, about some of the anti-gold bias in the media:

I love it when the media, which never told you to get into gold in the first place, is now telling you to get out. It is just classic. But [investor George] Soros has said that gold is in a bubble, and that statement has to be understood. I didn't speak to him personally. But I think what he is saying is, "This thing can really get out of hand and therefore I'm positioning my investments to reflect that, because I think people are going to go nuts about it." I don't think he was being dismissive; his funds own gold stocks and they probably own physical. But the media has taken it like that.

When asked about his favorite gold plays, Hathaway first steers the conversation to gold and gold stocks:

Before we get into that, let me add that for a conservative investor who simply wants protection and is risk-averse, whatever allocation he has to gold should be more heavily weighted to the metal, because that's safer. The only risk with gold is the price you pay. But for the investor who is more of a risk-taker, and sees gold as a strategy to get positive returns in the current macro environment, then that exposure should be more weighted to the stocks.

One of the gold stocks he likes is Newmont Mining (NEM), which I own:

Dick O'Brien came in as CEO about three years ago. He is not from the industry. He is very keen on financial analysis and all the things that I think the industry has to do. It is just terrible how bad a job the industry has done. So when you see a guy like Dick come in, you say, well, that is an uptick, because that is what has to happen. Newmont isn't a growth story. They have very high-quality assets. It is more about upgrading the returns on capital, which they are doing, and that's kind of the mandate that he has given to them.

They could be an acquirer, and they certainly have made acquisitions. But I think the acquisitions they make going forward will make sense. It's a very diversified portfolio. They are in Indonesia, which isn't great. But they are in Australia, Nevada and West Africa -- those are the core operations. They have things elsewhere, too. Here is a company which has assets in place to take advantage of a rise in the gold price.

Again, good interview. And, again, you might want to check out Hathaway's audio interviews on King World News.

Kevin Duffy at Mises Circle in Manhattan

Some months ago, I linked to a Barron's interview with Bearing Asset Management's Bill Laggner and Kevin Duffy, who apply value investing through the lens of Austrian economics. I've also linked to audio interviews Laggner has done with King World News.

Here's an address Duffy gave recently to the Mises Circle gathering in Manhattan. The title is "Navigating the Financial Markets with an Austrian Compass."

What's more, you might like to check out the full list of talks and roundtable discussions available. Marc Faber is among the many notables.

Finally, last but not least, let me give a HT to David at Finance Trends Matter for giving me and the readers of his blog the head's up these audios would be available on the Mises site.