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Winthrop Realty Trust (FUR) Liquidation

When does a public company liquidate? The answer is …. not very often!  Management has a vested interest in keeping a business alive at all costs, since in a liquidation they lose their job. In fact, more often than not management continues to drain the coffers of ‘their’ company over many years rather than make the shareholder-friendly decision to liquidate, drawing a salary while the owners are gradually swindled of their equity. Even when equity and cash have been completely depleted, management can still make out like bandits; in a chapter 11 filing management most often oversees the liquidation, keep their jobs even after the company emerges from bankruptcy, and sometimes even get to reset all their non-salary remuneration thresholds (options, grants, bonuses, etc.) giving them greater upside. I find this a rather strange phenomenon since bankruptcy is more often than not the fault of very management that benefits.

So when do liquidations happen? Mostly they take place when either management is itself a significant shareholder, and the benefits of liquidation for management are greater than the continuing stream of cash from remuneration, or when there are significant non-management shareholders who force management to put the company into liquidation. Note that I haven’t cited the Board of Directors as a catalyst for liquidation. That’s because most Boards’ first allegiance is to management. After all, they generally owe their jobs to management and they too have a vested interest in keeping the company alive so they can remain Board members. It’s only when Board members have significant ownership in the company (and this is VERY unusual) that they actually look out for the shareholders (themselves, obviously). Otherwise it takes an activist investor to ‘shame’ the Board into providing the shareholder guarantees that they are legally bound to provide. And I really mean ‘shame’ since Board members are protected against monetary claims from shareholder legal action by mandatory insurance policies. It is thus only the potential damage to a Board member’s reputation that is at stake. This can, however, be a decisive factor, depending on who the Board members are. In the case of Winthrop Realty Trust (FUR), fortunately for shareholders, management was/is a major shareholder.

The issue I want to address here is what happened to the FUR stock price AFTER the announcement of a liquidation, with the goal of identifying in hindsight when the best time to invest might have been. Clearly this is a specific instance of liquidation, and the results cannot be used as guidelines for what to do in other situations. Nevertheless, I think there may be some lessons we can draw from this situation that we might apply to another potential liquidation I am following, the proposed liquidation of New York Realty Trust (which I will address in the next post).

Back to the liquidation of Winthrop Realty Trust. In November 2013, approx. 6 months before the liquidation announcement, FUR management provided, a NAV estimate of between $12.98 (low) and $15.01 (high). At the time, shares were trading at $11.15. On April 29, 2014 the company issued a press release stating that the Board had approved a plan of liquidation, but did not provide any estimate of liquidation proceeds. There was only a statement that the liquidation proceeds for common shareholders would not be less than the lower end of NAV estimated as of the end of the first quarter, $13.79 per share.  The share price traded up to the $14-$15 range. The Proxy statement requesting shareholder approval for the liquidation, first issued in mid-May, continued to use the first quarter NAV estimates of liquidation proceeds, $13.79 to $15.79 per share. Shareholder approval was given at the annual meeting on August 4. On November 6 a press release was issued announcing 3rd quarter results. These results used liquidation accounting for the first time and per-common-share liquidation proceeds were estimated at $18.16, subsequently increased to $18.35 later that month. On the announcement, the share price traded up to the $17-$18 range. Since then, estimates for liquidation proceeds have been included in each quarterly report but have not varied significantly. The latest estimate of liquidation distributions, made in late July 2016, was for $10.61 per share (which excluded $7.75 per share in previous distributions). In 2015 three liquidating distributions were made, $2.25, $1.25 and $1.00 per share, respectively on 1/15, 6/16 and 12/3.  A $2.00 per share liquidation distribution was made in May 2016 after which shares traded down from $12.50 to the $10.50 – $9.62 range. At $9.62 on June 17, shares were trading at a significant discount to estimated future distributions of $11.85, about $19%. A further $1.25 distribution was made at the end of June. Reflecting this distribution, shares traded down to $8.62 in late June after the ex distribution date (though note that they never traded down the entire amount of the distribution) and there was another opportunity to purchase at about an 18% discount to estimated future distributions. After this distribution, shares traded around $8.70, gradually increasing to $9.14 over the month of July, still a significant discount to estimated liquidation proceeds, up to 18% early in the month. On August 5 the shares were delisted (2 years after the approval of the liquidation) and the assets transferred into a liquidating trust with the result that the shareholders became participants in this trust with non-transferable shares.

So, when was the best time to purchase shares in FUR subsequent to the liquidation announcement? The best time, in retrospect, was just after the announcement was made in May 2014 when the shares traded up from $11 to $14 per share. However, it must be remembered that no official estimate of liquidation proceeds had been made at that time. When the first management estimates of liquidation distributions were made in the Fall of 2014, the shares popped to between $17 and $18. In retrospect that was the WORST time to buy. Over the next 18 months the share price gradually receded, and if one waited until  30 to 75 days before the assets were put into the liquidating trust on Aug 5, 2016 this would have been the second best time to buy. The discount to management’s conservative estimate of liquidation proceeds was between 15% and 20% during that period.  I assume the discount widened to the 15-20% range when it became clear that liquidation was not going to be completed before the 2 year deadline, i.e. the remaining assets were going to be put in a liquidating trust. Certain holders would be forced to sell as institutional  mandates would preclude them from holding illiquid securities such as the participating interests in the FUR liquidating trust.

I had made a small initial investment in FUR at the end of 2014, adding to it at the end of 2015, with the idea that I would double or triple this amount opportunistically as the liquidation progressed. I viewed the August 5th trust conversion as such an opportunity, but, of course, I BLEW IT!  I purchased more shares in May (not a bad time) but then waited to double down until July when I thought institutional investors would all be running for the exit at once as they were forced to sell. This was my mistake; I was too greedy!! I was totally wrong on the timing! During July the share price gradually increased. I now have to concede that institutions were much more proactive than I anticipated, selling at least 2 to 3 months before the shares became illiquid. Needless to say I was sorely disappointed. In retrospect I can see that I invested too early, with single figure discounts to liquidation estimates, and then waited too long to make further purchases.

I console myself with the thought that the purpose of this investment was simply to park funds in a low risk situation that would provide liquidity in a couple of years when I hope the investment scenario will be more favorable. And, as always, better an error of omission than commission!

 

Update: A very uninteresting market

I’ve just logged in again after more than 12 months of silence. Why so long? The answer is simple: I haven’t been enthused about the US stock market for over 2 years. I just don’t see many ‘long term values’.  Instead I see a lot of potential downside.  When it looked like there was going to be a meaningful correction in US equities last January/February I began to perk up and take note. Unfortunately, the mini correction was over almost before it began, and now US markets are once again at or near their all time highs. I continue to believe that by all meaningful measures equity markets in North America are at historically high valuations, with price earnings ratios and operating margins at the high end of historical ranges. Many market observers justify these levels because of the continuing low interest rate environment. While I can see that using low interest rates in a cash flow valuation model leads to higher company valuations, the unanswered question remains how long interest rates will stay low. I have to admit, they have remained low for far longer than I (and most economists) expected, but, as they say, the past is no indication of the future. I think we are being lulled into a false sense of security; When we humans consider the future our brains are wired to give the recent past a heavier weighting that the distant past, and so we tend to project the recent past into the future. Valuations, in my humble opinion, are currently reflecting this bias. When interest rates do begin to march higher, I have a feeling the spell will be broken, and suddenly! Investors will be forced to face the fact that 0% interest rates are unusual, and that they will only go up. The market re-valuation will be swift and merciless.

The question remains, what to do until that day comes. And how to have enough patience to wait out the ‘general consensus’. Keep funds in cash? Possibly. But you can only hold so much cash. Cash sits in an account, earning no interest in todays environment, and makes an investor question whether indeed he/she IS an ‘investor’. No investor worth his/her salt wants to be un-invested for years. It’s kind of unnatural. The inclination to ‘put money to work’ is too strong.  Last year my solution was to park funds in several municipal bond funds under the theory that the low interest rate environment would last much longer than was, at the time, deemed possible. I sold these in January/February when the US equity market sold off with the thought of moving these funds into equities. That didn’t happen as valuations never met my thresholds.

So what have I been doing in the interim? I’ve sold off some of my smaller holdings that didn’t work out (CVEO, COV, RYAM) at a loss, pared back some other holdings, and sold out ZINC at a big loss (Shame on me for following the BIG BOYS). Most of these funds have remained in cash, but some have been put back into liquidations (Winthrop Realty Trust and NY Realty Trust) which should throw off cash once every once-in-a-while as the liquidations progress. I’m still well over 50% cash at this point and plan to continue holding more or less this level of cash until market valuations become more attractive.

My holdings in order of size now consist of:

Fortress Paper (FTPLF)
NovaGold (NG)
Resolute Forest Products (RFP)
Bank of America A Warrants (BAC.WS.A)
Winthrop Realty Trust (FUR)
Altius Minerals (ATUSF)
Gyrodyne Corp. of America (GYRO)
New York Realty Trust (NYRT)
Cherniere Energy (LNG)
BFC Financial (BFCF)
Aviat Network Systems (AVNS)

I think this is fairly defensive with two gold/commodity stocks (NG and ATUSF) and three liquidations (FUR, NYRT and GYRO). I have been looking for something in the out-of-favor oil patch for the last 6 months but have only come up with adding to my small position in LNG which I first purchased before the swoon in oil prices a year ago.

Opportunity Missed? (EPAX)

On July 13 Ambassador Group announced a plan to cease operations by year-end and liquidate the business, returning capital to shareholders. The day after the announcement the stock took a wild ride down to $1.50 a share from the previous day’s closing of $2.40, ending the day at $1.78. On the surface of things this kind of made sense since the book value as of the end of Q1 was $1.83 a share. But EPAX is (was?) in a very seasonal business where cash is received upfront as a deposit and recognized only when the trip takes place, so it behooved anyone interested in the underlying value of the liquidation to look a bit deeper. In fact, on July 16 the company issued another press release updating the amount of ‘cash available to shareholders’ at the end of 2Q; it had increased to $45.3 million from the $31.7 million on the balance sheet at the end of Q1. The stock rebounded the next day to the $2.20-2.40 per share level and has remained there since. What can I say? I was on ‘vacation’ at the seashore and missed the wild swing in the share price when the liquidation announcement was made. The lesson here is that you have to have done your analysis beforehand and be ready when Mr. Market acts so foolishly! Well, what now, you’re asking. Are shares still trading at a discount to liquidation value? For that, we needed some estimate of shutdown costs which the company has, as of today, kindly provided ($2.3 to $4.5 million). Still, the analysis is not straight forward; the company will be recognizing cash received as deposits over the balance of the year as well as prepaid and other expenses incurred or to be incurred. Assuming all sales & marketing efforts ceased as of the end of Q2, a quick and dirty liquidation analysis might look something like this:

Cash on balance sheet as of 6/30/15 (millions) $71.0
adjusted for:
  prepaid expenses $12.2
  payment of A/P ($4.4)
  deposits ($33.5)
Cash available for shareholders as of 6/30 $45.3
Balance of year cash expenses:
  Est. G&A expenses 3Q & 4Q ($4.6)
  Shutdown expense (avg of high and low) ($3.4)
Net cash available to shareholders after shutdown $37.3
shares outstanding 17.284 million
per share cash available for distribution $2.16

Now that’s not a very enticing proposition! You can pay $2.25 to buy a share today and get back $2.16 sometime over the next two years! But, as in any liquidation, there are some upsides to company projections. Do the PP&E assets have any value? Those assets are primarily depreciated computer equipment and software so I wouldn’t hold out much hope here; the company notes that this item will be written off entirely in the 2Q financials. (Remember the company has already sold its headquarters building last year). G&A expense for the balance of the year could be lower; I was using the 1Q run rate of $2.3 million but the company announced it will begin laying off staff in August. And of course, shutdown expenses could be lower. All in all, however, I don’t see that much upside. But maybe that’s just my shortsightedness. If you see the magic bunny that could be pulled out of the hat please let me know!

Edit: Sold my entire position at $2.40 today as I think there are situations with greater upside out there.

Parking Meter

Last August/September I had some extra cash just kicking around and decided to ‘park’ it somewhere that I expected would provide a small return but would be pretty safe for my principal. I posted two ‘parking’ ideas, Diversified Real Asset Income Fund (DRA) and Firsthand Technology Value Fund (SVVC). So how did the two ideas work out? The first, pretty much as expected, the other less well.

Diversified Real Asset Income Fund (DRA)
In a post last September I wrote about my rationale for ‘parking’ some funds in DRA. Part of my rationale was the prospect of participating in potentially 3 tender offers at or close to Net Asset Value each for 10% of outstanding shares. So how has the investment fared? After 9 months, 2 of the 3 tender offers have been completed, and despite a sell off in fixed income securities over the past 2-3 months, I have still come out ahead. Both the first and second tenders bought back about 15% of tendered shares as they were significantly oversubscribed. So, as you might imagine, with a significant investor like Bulldog trying to unload their position – but not being fully able to – the discount has not really narrowed significantly. It still stands at over 10%. I did purchase some additional fund shares in February, before the second tender offer, which turned out to be not a particularly propitious moment to increase my holdings, but overall, notwithstanding the negative developments in the bond market over the past couple of months, my IRR for this investment is just over 10%. Had I elected to sell just before the second tender offer my return would have been almost twice that. However, I still believe the fixed income market has over-reacted recently and that rates will once again subside when it become clear that the Fed will not be raising discount rates on the currently anticipated schedule. Clearly I am in the minority on this subject and, unlike most everyone else, remain in the deflationary camp. And therefore, yes, I’m holding my current position in DRA in the belief that the Greek problem (or perhaps the Italian, Spanish or Portuguese problem?) will eventually rattle the European financial infrastructure (and investors’ confidence), there will be a flight to the dollar and that will continue to put downward pressure on interest rates(perhaps even putting equity markets into a tailspin). But of course things will probably work out quite differently than I imagine, so I’m not beholden to my macro view. In the meantime, fund management has boosted the dividend, I believe mostly to reduce the discount (and thus make the 3rd tender unnecessary – its will only be done if the discount remains over 10%), which supports the price somewhat, and I’m getting a near 10% current yield on my investment.

Firsthand Technology Value Fund (SVVC)
Another Bulldog investment! Shares were selling at about a 20% discount to NAV when I bought last August (read about it here). My theory was that the agreement between management and Bulldog Investors would act as a catalyst to narrow the discount. The agreement was for SVVC management to sell their two largest positions, Facebook and Twitter, and distribute the profits to shareholders by a date certain, as well as repurchase up to 10% of shares outstanding. Well, the sales took place as agreed. The distributions to shareholders took place as agreed. The repurchase also took place as agreed. But guess what, the discount to NAV didn’t narrow, it WIDENED and significantly! Yep, that’s right, the 20% discount to NAV when I purchased has gotten BIGGER. At a recent price of $13.80 the shares are now trading at over a 45% discount! So much for my theory about the discount  Anyway let’s see where I stand. I purchased shares at $21.66/share and received 2 dividend payouts totaling $5.86/share in Nov./Dec. Then I was able to sell back 17% of the shares I held for 95% of NAV ($23.27/share) in January. With all of that, despite the widening discount, I’m still off only 6% on this investment, and as of now I plan to continue holding; a fund trading at 45% discount to NAV can only have good things happen (or can it?). With this kind of discount I believe the investment risks are overstated. If just one of the top fund holdings were to IPO I think the discount would narrow significantly. Also because Bulldog still holds a substantial investment in the fund, some 9.7%, I think there could be a repricing either when the Bulldog overhang is reduced (because they sell off their shares) or because there is another liquidity event.

Any thoughts from readers on these investments are welcome! As always, my meanderings are not meant to constitute investment advice; You should always do your own analysis before investing.

Steel Parners: Still selling at a substantial discount

Management at Steel Partners continues to try and simplify the LP structure, or rationalize the holdings, as they say. Two minority holdings have been fully acquired; API has been substantially purchased, and this past week HNH acquired JPS. Unfortunately, management’s efforts have not yet been rewarded in terms of a narrowing of the discount to NAV. On the contrary, the unit price continues to languish slightly above last year’s tender offer price, while the NAV continues to increase.

This is a quick post to simply point readers to the shareholder letter released in May that shows management’s (I believe conservative) estimate of the partnership’s NAV. You can view it here. Most holdings are valued at their public market prices, which I believe are substantially undervalued due to a ‘control’ discount. Also note that Webank is estimated at book value though it achieves outsize returns. With all of this the discount to management’s estimate of NAV is over 30%. What’s next? Another tender offer? I wouldn’t mind! My only fear here continues to be the creeping takeover of the company as management rewards itself with units.

Update on GYRO: Rights offering

Gyrodyne Corporation of America (GYRO) is a company in liquidation, or rather, it wants to liquidate. I won’t go through the history of the company, you can read my earlier posts on the company here and here. Since I closed out my earlier investment in 2012 a number of things have happened. The Company paid a large dividend then entered into a plan of liquidation. However, the plan of liquidation, in order to minimize the tax impact, provided that the company be divided into two separate entities, an operating entity (listed) and an ownership entity (non-listed and non transferable), as well as for the issuance of a dividend in the form of non-transferable notes. Unfortunately, this strategy has caused an unforeseen problem as the liquidation plan requires the corporate ‘pieces’ be remerged before the liquidation can be completed.  This ‘remerger’ requires a 2/3 majority favorable shareholder vote which has yet to be achieved despite 3 scheduled shareholder meetings; each had to be cancelled due to insufficient shareholder participation. The lack of shareholder voting has been ascribed by the company to the makeup of the current shareholder base. So we come to the rights offering. It was first hinted at after the last scheduled-then-postponed shareholder vote in December 2014. An initial S-1 was filed March 6, 2015 and a revised S-1 filed April 10. On April 28 the company announced that the record date for receiving the subscription rights would be May 6 as well as publishing updated liquidation ownership percentages (GYRO, GSD and dividend notes) for the remerged entity. The purpose of the rights offering is to get shares of GYRO into ‘friendly’ shareholder hands that will participate in a shareholder vote and approve the liquidation. Remember, the clock is running on the liquidation. Management has 2 years from the liquidation announcement on September 13, 2013, (thus, September 13, 2015) to effect the liquidation, otherwise the plan will have to be adjusted. If this latter happens there could be adverse tax effects for current AND prior shareholders, I believe in the form of tax recategorization of prior distributions.

The mechanics of the rights offering are straightforward. For each share of Gyrodyne (GYRO) owned as of May 6 the shareholder will receive 1.5 rights allowing him/her to purchase 1.5 shares of GYRO for $2.75 per share (one right, one share). Thus the number of shares outstanding will increase from 1.483 million shares currently to 3.707 million if all the rights are exercised. The rights are non-transferable and there is a provision for oversubscription if all the rights are NOT exercised. This is the key. Presumably those shareholders who did not participate in the last 3 shareholder votes will not exercise their rights, allowing those who participate to oversubscribe, become larger owners of GYRO and, if all goes well, provide the necessary 2/3 favorable shareholder vote to remerge the entities and thus provide a path to liquidation within the stipulated timeframe.

Let’s look at the value proposition for an investor. In the revised plan of liquidation of December 19, 2013 the book value of GYRO (post dividends) was $5.70 per share. As of year-end 2014 the book value had declined to about $5.16 per share. Given that the company was officially in liquidation as of September 2013, these book values should equate to (conservatively) estimated liquidation value. But the liquidation payout of each security (the public company, GYRO, the ownership entity dividend, GSD, and the dividend notes and their PIK interest) is ultimately defined as a percentage of the recombined entity. Those percentages were originally set in December 2013 (GYRO – 15.2%, GSD 55.6% and the dividend notes 29.2%) THOUGH THEY CAN BE CHANGED AT THE DISCRETION OF THE GYRO entities’ boards. As the subscription rights plan provides for an injection of an additional $5.6 million into the GYRO (and thence the combined) entity it certainly wouldn’t be attractive for rightsholders to exercise unless the liquidation payout percentages were adjusted. And that’s what the April 27th press release addresses. The revised ownership percentages now are: GYRO shareholders, 22.6%, GSD shareholders, 47.4% and dividend note holders 30%. Assuming that the revised percentage ownership in the recombined entity post-rights exercise reflects relative liquidation values and using the 12/31/14 book values we can conclude that the recombined entity currently has a liquidation value of about $58.7 million vs the $55.3 estimated at 12/31/13. Taking into account the $5.6 million capital inflow from the rights offering this would mean the estimated liquidation value has decreased by $2.2 million over the past 18 months.  On a per-share basis, the estimated liquidation proceeds per GYRO share will be reduced from about $5.16 to $3.58 if all rights are exercised. For an individual obviously the more shares purchased at the rights exercise price, the lower the average cost and the greater the potential gain at liquidation. Based on my average cost of $4.18, if I exercise only my subscription rights, my new average cost would be $3.28, so my upside to liquidation value is only 8%! (vs. the 23% under a non-rights scenario).  Hardly a great investment or even very enticing. To say the least I find this subscription rights offering structure quite disappointing! Clearly I can increase my upside by purchasing additional shares under the oversubscription facility, if they are available; the more shares I can get my hands on at the $2.75 rights exercise price, the lower my average price will be. But as the number of oversubscription shares is not linked to current share ownership, and it is unclear that ANY shares will be available for those oversubscribing, this is of small consolation. Making the situation even less appealing, any upside, in the case of liquidation proceeds exceeding the company’s initial estimate (not uncommon) is limited by the ownership structure because of reverse leverage. Since the GYRO shareholders will receive only 22.6% of the liquidation proceeds, they will only share in the upside to this extent, with GSD and dividend note holders receiving the balance. So with limited potential upside and significant downside (if the remerging of the entities cannot be achieved), I will be holding my position and possibly even pruning it if Mr. Market becomes exuberant, rather than increasing my exposure, even though, at the current share price of $3.07, there is a 16% upside to the implied liquidation value.

A time to reflect

My four plus month hiatus from blogging has been a time of reflection. Yes, I could have continued to focus on the micro aspect of investing (stock selection, if you must) following some kind of modified Graham discipline. And, yes, in time, I’m sure this kind of approach would have produced respectable investment results. Instead I’ve been reflecting on the overall equity market and why my portfolio has underperformed the S&P 500 for the past 3 years, possible causes and possible solutions. My conclusion regarding the latter, perhaps delusional, is that my underperformance is structural in nature, due in large part to the fact that we are in the middle of an artificially protracted cycle, a bull market that is being kept alive by a fiscal respirator. I am hoping that during the waning parts of the cycle my portfolio will finally pull its weight. What do I mean by the ‘artificially protracted’ cycle? Consider the US equity market. Over time it tends to move gradually upward in waves, with troughs and peaks along the way. The current wave has been unusually long; the market has been trending upwards without much backtracking since March 2009, over 6 years, first rebounding from the liquidity panic and earnings compression of 2008/2009 then levitating further, fueled by interest rates artificially depressed through Quantitative Easing. And the effects of QE have certainly been more P/E expansion than revenue growth! Nothing new here. I think most market observers would agree. The question is, can multiple expansion continue? I think not, at least not in the long run. Again, I think most market observers would agree. Yet strangely, the equity markets continue climbing higher. I can only ascribe this to market participants’ fear of missing yet more P/E expansion, addicted as they have bec0me to valuation inflation. In short, I think the market is where it is right now because of GREED! And we know what a powerful force that can be even in the face of hard facts. Greed renders us delusional! That’s where I think we are right now, in the delusional phase. A recent example from another ‘market’ might help to put today’s equity markets in perspective. Remember last year at this time when oil was hovering around $100 a barrel? Then suddenly the price began to drop? It started slowly, then continued dropping and then dropped further! Now its bumping around the $50-$60 mark and who knows whether this is the bottom. Given the benefit of retrospect everybody seems to agree this price drop was inevitable, brought on by oversupply from additional shale oil production. But the shale oil revolution began well over 5 years ago, and we all had a pretty good idea as early as a couple of years ago what the impact was going to be. So why the big drop in oil prices only last year? I think it was because nobody WANTED the price of oil to drop, so it didn’t….. until the storage tanks were full, until traders began hiring tankers to just sit offshore and hold the surplus oil until prices began rising, etc. So the price stayed high… until it didn’t, then it fell hard and fast! I think that’s where we are with the stock market now. Greed and inertia keep most investors in the market and keep valuations high … and it will stay like this until the market starts going down. Then all hell will break loose!

Enough prognosticating! I don’t know when the market will begin its descent, though I know it will eventually (but maybe I’ll be dead by then!). For me, as the averages creep higher and higher I feel like I have to hold more and more cash, or at least move into investments that are less market correlated, special situations and such.

When last I posted I had just sold 1/4 of my largest position, AIG, and reinvested the proceeds into a number of special situations; three spin offs (COVS, RYAM and CVEO) a net-net (EPAX), two liquidations (FUR and GYRO) and a classic Fisher investment, (ZINC). The results have been less than spectacular. Actually, for the 1st quarter the results were horrendous, but recently there has been a bit of a turnaround in the shares of these companies, although overall they are still lagging the market. I did make a few changes to my portfolio during the first quarter that I didn’t note here (adding to my ZINC and GYRO positions, opening a new position in BFCF and closing out my Liberty Media positions). However, these were all part of the strategy to move funds into special situation investments, away from positions closely correlated with market moves into more market-uncorrelated positions. I have just now sold another half of my remaining AIG position, which I plan to partially reinvest in a liquidation situation (that will remain nameless until I have made the investment).

I look forward to posting more regularly about my positions in the near future.