On Dec. 21, 2000, we added three stocks to the Contra the Heard portfolio in a one-day buying spree during the teeth of the bear market. Fortunately, we did not get sucked into purchasing busted technology stocks, which still had a distance to fall.
Luscar Coal Income Fund, at $1.48 a unit, was one of our buys. Less than three months later, we sold more than half our position at $4.17 as Sherritt Coal Partnership launched a takeover bid for Luscar. We sold the rest at $4 on the tender a few months after that.
Our second investment was Shoney's Inc. , a Nashville, Tenn.-based restaurant chain.
We bought at 37.5 cents (U.S.) a share, and many people considered our target price of $4.81 too optimistic. The stock quickly vaulted to $1.35, but the company gagged and spewed, and the stock price dived. Lone Star Funds moved in to save our bacon at 36 cents, but it left a bitter taste in our mouths.
Our third purchase was merchant bank Clairvest Group Inc. (CVG- TSX), at $3.41 (Canadian) a share.
When we purchased Clairvest stock, the company had a darn good track record; Clairvest's nine investments had achieved an internal rate of return of 26 per cent.
This month, the company announced an investment in Integral Orthopedics Inc., which acquired Obus Forme Ltd. This appears to be an intelligent demographic play, as the aging population demands orthopedic back care products and clinical treatment solutions for back and neck pain.
In April, via Clairvest's investment in Wellington Financial Fund II, a privately held specialty finance firm, the closing of a $4.25-million series B debenture financing for Calgary-based CriticalControl Solutions Corp. (CCZ-TSX-VEN) occurred.
Earlier this year, Clairvest announced another normal course issuer bid, and unlike many companies that just talk about it, they are actually buying back shares, to a maximum of 5 per cent of the common shares outstanding, or a total of $10-million.
Over the past five years Clairvest's stock price has risen smartly. The book value as of the end of 2004 was $12.27, more than 20 per cent higher than the stock's current trading price of $9.80. Profit in the third quarter was 45 cents a share.
The company pays a dividend that is now a tad better than 1 per cent. The stock price has pushed past our initial sell target of $8.70, and we are monitoring it for a sale when it reaches double digits.
One day, three investments, a spectrum of results.
Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter. This column first appeared on GlobeinvestorGOLD.com.
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