Author: Yale Bock,
Y H & C Investments
Covestor model:
GARPAugust 2011 was a terrible month for the portfolio, and for the stock market. A few companies in the portfolio were severely punished because they withdrew guidance for the rest of the year based on an uncertain economy, or issued warnings about possible problems in their business. However, the reality is the portfolio has badly lagged its benchmarks, underperforming by over 20% for the year.
September through the end of the year is historically a strong period for the stock market, and while the pain has been severe, I'm hopeful the businesses in the portfolio will perform better going into 2012. September should bring more clarity regarding the sovereign debt issues in Europe, and how the back to school shopping season went. There is certainly a great deal of negativity in the market, which usually means a turn is coming. Time will tell.
The Reasons for Owning the Portfolio Holdings
Gigamedia
The company reported earnings on August 15 of -12 cents per share on revenues of $8.8 million. The company reported it is looking to sell passive investment stakes that have increased in value during the rest of the year, in order to improve its liquidity position. (Company press release http://finance.yahoo.com/news/GigaMedia-Reports-prnews-744626968.html?x=0&.v=10)
The major issues with the company are the lack of scale in its Asian gaming businesses and how quickly their pipeline of games comes to market. GIGM has now pushed back its release of a few games, including the Spongebob development, to next year. Ultimately, if an internet gaming company cannot produce games in less than two years, one has to wonder whether they can ever bring the game to market. Candidly, at this point, and based on the last two years, it is hard to have any faith in the management of this company.
Digital Globe (same report as last month)
The company reported revenues and earnings of ($.01) per share for the 2nd Quarter of 2011. Revenue came in at almost $82 million, and for the first six months of 2011 versus 2010, cash flow from operations was up to $105 million from $57 million. The thesis for owning DGI remains the same, private and public enterprises all over the globe will continue to demand high quality pictures from satellites due to security and legal issues. The growth story here remains in place. (Digital Globe Press Release. http://finance.yahoo.com/news/DigitalGlobe-Reports-Second-bw- 4262950129.html?x=0&.v=1)
Corelogic
The company reported 2nd quarter 2011 net income of 29 cents per share on August 4, 2011.