Author: Brian Skally, Absolute Returns
Covestor model: Absolute Returns
Disclosure: HLSS, XLS,BP,VIV, ABCP, EQU, BAC, GKK
This past month saw some notable corporate actions from a number of the portfolio holdings. Home Loan Servicing Solutions (HLSS) reported earnings and a distribution following their initial public offering. Excelis (XLS) reported earnings following its recent spin off. BP (BP) reported very poor second quarter results.
Vivendi (VIV), the media conglomerate, made public its plans to investigate the opportunities to divest its stake in Activision and sell its Brazilian subsidiary.
Entering the month of August the portfolio is substantively composed of securities with one of the following characteristics: A short to medium term catalyst to unlock value, or in the absence of a near term catalyst, a distribution or accrual which pays us to wait for the value to emerge.
In the first category, Vivendi (VIV), AmBase Corp. (ABCP) and Equal Energy Ltd. (EQU) represent excellent risk reward propositions in the medium term, pending the results of extraordinary corporate events.
Portfolio holdings such as financial preferred stocks from Bank of America (BAC) and Gramercy Capital Corp. (GKK) provide an attractive return either in the form of a dividend or accrual, and our common stock selections provide a secure dividend pending the resolution of operational difficulties.
By holding securities where there is an understandable pathway toward the creation of shareholder value and insisting upon an adequate margin of safety, the portfolio is well positioned for the coming months.
