The Official Stocks and Shares Thread

To all reading this thread, has anyone had their hand in penny stocks? I've been tempted for some time, and as long as you trade the right strategies the risk is less than people think. But... you have to be looking at the screen all day long

Who do you guys invest with? Any online brokers that I've found offer quite an expensive trade fee starting from about £6.50... which is a lot, if you're looking to trade perhaps 1 or 2 hundred pounds worth of shares.

Yes, almost all companies who issue anything in most developed markets need to issue a prospectus (for completeness, the only exception tends to be issues targeted for institutional investors but these still require an abridged prospectus of some sort). If you want to find some go to rankandfiled.com and search for "registrations"...the first example I found was this...http://www.sec.gov/Archives/edgar/data/1621364/000119312514369335/d800131d424b5.htm...an ABS backed by auto loans.

To the question above, it depends. If you think it is worth more than the current price then sell, if not then hold. However, what you should always do is think about the position at the current price rather than the price you bought at. If you are down 50% on a £10k investment then work out if there is anywhere else better you could deploy the £5k (don't think about in terms of the £10k).

In the vast majority of cases, it tends to be best just to cut and get out. If you made a mistake the first time then it seems unlikely that you are going to it right the second time (i.e. there is something you fundmentally aren't understanding). At the very least, you should revisit your logic and actually think over what has happened, as opposed to just trying to forget about it. Finally, if you are employing any kind of momentum-based strategy, you should definitely get out asap and just move on...a bit more context might help if you are still stuck though...what size is the position relative to your portfolio? why did you buy? what happened? was it something truly random or your idea not playing out? I can sympathise though, I have had more than one position go 20% offside in the space of a few weeks, doesn't feel great.

Thanks for your answer. Just to confirm is the largest us hedge find to have gone public och ziff and is the largest hedge fund to have gone public in the world man group? I know there was a lot if interest when Blackstone Group and the other big private equity firms went public after 2007 and now their valuations are increasing after analysts are including performance fees as well as management fees in their valuations and a bumper year last year. Though I don't know as much about hedge funds and why so few of them have gone public compared to the private equity firms or as they now span different industries including real estate, credit, M&A advisory etc "Alternative Asset Managers" as the private equity firms like to be called.


Posted from TSR Mobile

Ok I am not 100% sure what you are asking here so it is really hard to answer your question...for example, blackstone runs hedge funds too and Man Group also runs a ton of retail money. Do you mean largest AUM/employees/profit/what? Also, to prevent confusion, it isn't the actual hedge fund going public (there are quite a few actual hedge funds that are public i.e. Third Point, BH Macro, Pershing Square, Greenlight Capital, Chenavari, etc.) but the guys who advise the hedge fund. So I am not too sure what you are asking, all I can say is that Oaktree, Fortress, and Apollo are all other places that are doing similar kind of things.

I wrote out a long explanation but it can be summarized this way: HFs don't suit listings. All the gains accrue to staff and the main asset (people) tend to be quite flighty. PE firms tend to need more staff, scale economies are lower, and there is a far more secure corporate environment (brand) that investors feel they can rely on (equity is perpetual after all). If you bought, for example, 100% of Greenlight Capital from David Einhorn, what would happen? At the very least, he wonder why he is doing all the work for none of the reward...more likely, he would thank you for the money and then start up a new HF the next day...it just doesn't work. The original Man Group and GLG were both very established (in fact, the original buyout of GLG didn't work for the exact reason mentioned, a ton of staff just left as it became clear they couldn't make anywhere near the same amount of money at a public company) so they attracted long-term money (unfortunately so for investors).

Sorry I meant by AUM as I thought in the Forbes article hedge fund and private equity stock train wreck article from 2012 http://www.forbes.com/sites/nathanvardi/2012/05/07/the-hedge-fund-and-private-equity-stock-stock-train-wreck/ och ziff are mentioned at that time as well as man group (who are mentioned as the largest publicly traded hedge fund at the time) thus they may have been a select few hedge funds that are public I thought until your explanation which cleared it up lol. Also you say " it isn't the actual hedge fund going public (there are quite a few actual hedge funds that are public i.e. Third Point, BH Macro, Pershing Square, Greenlight Capital, Chenavari, etc.) but the guys who advise the hedge fund" so who advises the hedge fund in Pershing's case for example? I thought Pershing itself has decided to go public recently, or is this not the case? Sorry I didn't understand what you meant by guys who advise the hedge fund go public?

It was said that the advantages of private equity firms going public was they would get perpetual capital/constant capital why doesn't this help hedge funds as well don't they need capital as well? They fundraise like the private equity firms so why don't they need perpetual or constant capital like private equity firms it could be said that some of the activist investor hedge funds third point, Pershing for example) even have a not too distant business model to private equity firms they need capital to buy shares so they can tell the company what to do/make changes correct? So why not sell/float a day a 30 percent stake in a hedge fund to get this perpetual/constant capital?

Also Your explanation of hedge people moving away if a hedge fund went public didn't happen in the pe industry, apart from Peter Peterson retiring and I'm sure Jonathan Grey could leave Blackstone to set up his own real estate fund and Joe Baratta could do the same to set up a private equity fund, Stephen Schwarzman may be worried about this but it doesn't happen, so why would it happen if more hedge funds go public? Is there any reason why hedge fund staff are more flighty than Jonathan Grey and Joe Baratta etc? Tony Hamilton James perhaps was thrilled he had the liquidity to sell his Blackstone shares last year because they were public when they were going up in value, right? Thus isn't going hedge funds going public a good thing for owners like Einhorn more liquidity as well with their stake?

P.S it's nice to find someone who knows a lot about private equity and hedge funds, thanks for your help 😊.


Posted from TSR Mobile

Right, ok...yeah, it is kind of complicated but basically you aren't going to get any pure-HF (like Appaloosa) listing...it just doesn't make sense for anyone.

The fund is actually separate from the guys who advise it. So you have the fund that holds all the equities (or whatever) then you have a separate company that advises the fund. The reasons for this are fairly obvious when you think about it (the only funds where this isn't the case are unit trusts, I think), the fund has to be independent to make sure no-one is stealing money or anything. Pershing Square is a perfect example (I actually skimmed the IPO doc today)...what actually listed was a 30% share in a fund that they raised in 2007 (I think). This isn't Bill Ackman selling a bit of his company but, as you say, him getting permanent capital (the reason why he has listed a minority share is so no-one turns it and goes activist on him...this can happen and advisers can get booted off the funds they raise).

The reason for permanent capital is that it is hard to raise funds when they are most useful and most funds have to offer daily or weekly liquidity. So if I run a HF and the markets go down I might see lots of great stuff to buy but then my investors start redeeming and I end up selling into the market...not what you want. A really great case of this is Michael Burry. Another way to think about this is maturity transformation (as in banking), Ackman wants to make long-term investments but he has to offer his investors daily liquidity. To make long-term investments you need to permanent capital (this is why Rothschild and the Cazyer family have listed vehicles in London too).

Well yes, it did happen in the PE industry and it happened at IBs too when they went public. The reason why is simple...to make the most money you have to work somewhere where lazy shareholders aren't skimming the money made from your labour. Yes, liquidity is good...but, as I said already, who is going to buy Einhorn's stake when he can just turn around and do his own thing. Look at what happened to GLG, pretty much all the key people left...Coffey turned down $200m to go to Moore Capital...unsuccessfully it turned out but he isn't stupid, he did this because he knew that he could make more money there. More to the point, the guy is worth 3/4 of a billion dollars. We can assume most of this was made at GLG, do you think that today's GLG shareholders would let them take that kind of value out (the company probably isn't even worth that much today)? No way in hell. Even more to the point, why should someone like Coffey even give $1 of what he has created to someone who did absolutely nothing to deserve it.

The only way this works is if you have some kind of business, like KKR, with a brand or a repeatable formula that is ingrained in the company...then you have something to sell to the public. GLG is trying to build that up now and places like Oaktree definitely have it...there is a charismatic leader (like Schwartzman/Marks/Goettsman) but there is also a culture that ensures that you turn people with no imagination/talent/intelligence into private equity hotshots. Two other businesses to examine in this regard are Aberdeen Asset Management, very strong "team approach" that turns MBA-types into something modestly useful (and they just took over SWIP, precisely the opposite), and New Star, which had a ton of high-profile, high performing, high paid managers (it actually attracted them by paying them what they actually created, at most fund management houses the majority are subsidised by one or two people who actually know what they are doing) but flamed out in the financial crisis. The question of culture in fund management is interesting and is worth pursuing if you want to understand the biz (watch out for the partnership units when you are looking at PE though).

Thanks for your help it was a very interesting read your answer. I'm not sure if you follow Blackstone Group nit do you think people like Joe Baratta (head of global private equity at Blackstone Group) and Jonathan Gray (head of real estate at Blackstone Group who recently did the amazing hilton hotels deal exit ipo, record profit for a lbo apparently ~12 Billion dollars) will stay at Blackstone since it is public citing your einhorn example of why would they stay?

Also since KTM AG stock has gone up ~400 (If I recall correctly may be mistaken) percent since the financial crisis until 2012/2013 approx, a decent strategy look for industries that are affected badly by a recession (like the motorcycle industry which may been seen as a hobby especially off road which KTM are big in) buy them cheap and hope they go up in value? Same thing with Blackstone that went from $3 a share in 2009 to over their ipo price of ~$31 last year?


Posted from TSR Mobile

No, I don't know really know about Blackstone. The stock looks kind of interesting but it is tremendously complex. I also suspect that if I did know about the business, which I don't, that Fortress would be cheaper.

Yes, the play is usually operating leverage with those companies. What happens...usually...is volume goes down 50% in a year, the company has debt, people (correctly) **** themselves because there are a lot of fixed costs and the company is losing money now (and probably writing off goodwill too), customers then have a ton of inventory they can't shift so pricing power disappears. This is the point you make a decision, it really isn't straightforward at all though...the key is to understand the industry and understand the risk-reward of the investment (you also understand the latter without understanding the former). However, a significant proportion of these companies don't come back (usually it is the creditors who take the company). Visteon is one example of a company that went into BK and then was turned around. Arctic Cat and Masonite are perhaps two present-day examples of this type of situation. So yeah...even Blackstone/KKR ****s these ones up sometimes, they need to get the cycle and their financing right.

Btw, just as point of interest...BX probably went to $3 for two reasons...first, it is a complex business and second, and more interesting, it was a busted IPO. Busted IPOs can be really good buying opportunities.

How are you guys with Russian exposure going?

The combination of sanctions and now oil falling to ~$80 per barrel must be putting some pressure on the general Russian economy.