WTG Praetorian!

Discussion in 'Stocks' started by uptik2000, Nov 29, 2005.

  1. bro59

    bro59

    Praetorian just keeps buying that TBLC. I like the stock, and with smart guys buying that's probably my confirmation that it's bound to go much farther.
     
    #31     May 8, 2008
  2. limbo

    limbo

    Big shot Harris-- LOL------Harris my lad what is going on. Are u making dough re mi?? Please enlighten. You old pal and defender limbo.
     
    #32     Oct 7, 2008
  3. Harris blew out,, The selling never ended.

    Another rich kid bits the dust, big deal.



    To the Members and Shareholders of the Praetorian Funds:
    We just completed yet another month that was quite good in most respects; unfortunately the
    market has refused to give our companies any credit. I have mentioned this before: my job is to
    purchase large pieces of rapidly growing businesses that trade at very significant discounts to
    what an intelligent buyer would be willing to pay for them. Once we own these positions, my
    focus is on ensuring that they are performing in line with our expectations. Should they perform
    on target or better, we will make a few fold on our investments within a few years. My time
    horizon is three years at a minimum. It is this factor that makes my job so frustrating—there is
    no way to know exactly when these shares will appreciate towards fair value. They should never
    have been cheap enough for us to own them in the first place. Sometimes, a cheap security can
    decline further in value. This creates opportunity. Starting last fall, we saw a nearly universal
    decline in our positions. Many are down by more than two-thirds from their peaks. This has
    greatly hurt our performance. However, I feel unconcerned since almost every company
    reported results that were roughly in line with expectations, and quite a few significantly
    surprised to the upside. At some point the market will realize this and we will be well rewarded.
    In most cases, we still have profits on our positions—we have just reversed some of our prior
    gains. I really have no regrets about not taking profits when we were up more since I think these
    companies will greatly exceed prior highs in the next few years.
    As I write this, our portfolio trades at the largest discount (since the fund’s inception) to what I
    call ‘fair value’. The only time that was even close was the first day of trading in 2003; the
    portfolio then increased nearly five fold in the next 18 months. I felt that our holdings then traded
    at around 20% of ‘fair value.’ I would say that the portfolio now trades at about 15% of ‘fair
    value.’ For a point of reference, we only purchase shares that trade at less than one-third of ‘fair
    value,’ and on average the portfolio has traded at around 40% of ‘fair value’ since inception. I
    would caution you that these valuations are very subjective. My idea of ‘fair value’ is different
    than other people’s idea of value—that’s what makes a market. While there is no way to know
    when our portfolio will rebound, I think we are primed for very significant upside in the coming
    months; the valuation of our portfolio companies is simply unprecedented.
     
    #33     Oct 7, 2008
  4. Fortunately, this two-thirds decline in the average portfolio position has been blunted somewhat
    by the fact that near peak prices we had a third of the portfolio in cash. Even more importantly,
    consistent trading and premium-writing gains have offset our losses to a very large extent until
    April. After April, the magnitude of the losses in our portfolio positions could no longer be
    hidden by other gains which were consistent—yet small. However, cash flow from trading and
    premium writing has been used to continue purchasing our favorite companies as they have
    declined in value. Therefore, any bounce in the shares will be disproportionately beneficial to our
    performance going forward.
    I hate repetition, but the declines we have witnessed in previously-undervalued securities has
    simply been unprecedented—particularly when the businesses are performing so well. It has
    simply baffled our CEOs as well. Many of them have used the recent declines to make sizable
    open market purchases themselves. While there are many facets to stock market investing, no
    single metric is more likely to bring you profitability than buying those companies with
    significant insider buying. Investors often will purchase companies with sizable insider buying;
    if nothing else, the selling pressure comes to an end. Lately, we have seen insider buying have
    little or no impact on the market prices of securities; it seems that nothing at all can make them
    stop going down. I have a theory for what’s going on. I think that the ownership profile of the
    market has changed over the past few years, making the world we navigate even more
    dangerous.
    A decade ago, the market was dominated by huge mutual funds and their pension fund brethren
    who moved even slower. Buy and sell decisions were a slow, labored process that took weeks.
    Stocks were bought to be owned for years. Leverage was never considered and redemptions were
    rare. A secure asset base allowed investors to do their jobs and invest for the long run. No one
    cared about the little wiggles in share prices which are the very nature of the market. Businesses
    were bought to be owned—not traded like sardines.
    Then a bunch of pension consultants convinced people that they should invest in hedge funds
    because they could achieve consistent upside while trading around the downside. In itself, that
    should sound like a fallacy. These hedge funds promised low volatility and monthly liquidity.
    They used strategies that were very successful when they were small and nimble but are
    counterproductive now that these funds have grown into the billions—or even tens of billions.
    More importantly, by allowing monthly liquidity and making performance promises that were
    impossible to keep, these funds set themselves up with very dangerous capital bases.
    Multiple funds use essentially the same playbook. They all try to achieve short-term gains based
    on moving averages, valuation screening, momentum and whatnot. They use significant leverage
    which makes them larger than they otherwise ought to be. The sheer size of these portfolios
    serves to only accentuate these moves, especially because many of these funds own the same
    positions.
    For many years, this trend was in force—living in Miami, I was largely oblivious to it. Now this
    trend is going in the other direction. Even though we are somewhat offset from the herd in our
    small-cap names, we are not immune. Many of these funds are ‘blowing-up.’ They are facing
    margin calls, redemptions, liquidations, or a combination of the three. In general, they are selling
    not because they want to but because they have to. This is making an already very weak market
    all the more weak. I wish I had seen this coming. I personally thought that our smaller companies
    were immune—particularly because they were so small and had so little institutional ownership.
    Over the past few weeks, I have learned of a few dozen funds that are mining-focused which are
    liquidating. These funds at peak were nearly ten billion dollars in assets. When you consider that
    the market cap of all gold mining companies was only about two hundred billion, this is really
    quite scary. Many other hedge funds owned mining assets because they were going up. Now that
    they are going down, they sell them because they do not know why they owned them in the first
    place. The amount of selling that is done because people have to—not because they want to—is
    stunning. This is further accentuated by hedge funds with monthly liquidity terms that are facing
    massive redemptions. I do not know when this all will run its course, but it eventually will.
    Fortunately, we have only a quarter of our assets in mining shares—though these have been
    pummeled quite well. Tangentially, we have another 40% of our assets in mining services
    companies which these same funds seem to have owned. At least I now understand why these
    shares were going down so much in the past few months.
    I think that people have forgotten that the price of gold has gone from $250 an ounce to $800 an
    ounce, while silver has gone from $4 and ounce to $12 an ounce over the past seven years. These
    are big moves, even after significant recent pullbacks. I think we have reached the nadir in these
    pullbacks. Sizable liquidations happen at market bottoms, not tops. I don’t know when the
    pullback will end, but at least I know why it is so severe. Multiple funds played with too much
    leverage, they promised too much to their investors who are now redeeming, they acted
    foolishly. Fortunately, we will survive this and thrive once the selling does end. We can use
    trading and premium-selling gains to offset whatever losses we suffer in mining and small cap
    stocks. I have been here before in 2002 when I ran my own money and onwards in 2003 and
    2004 when I was running the fund.
    At one point, I was down over 30% in 2002, by year end, I was up over 90%. The next year, the
    fund made over 300%--and the year after, it made over 50% (gross of incentive allocations).
    These moves lower are what recharge massive bull runs—they eliminate companies and ensure
    that the strong survive. I think our companies are well capitalized and in good position to make
    something off of the weakness that others are experiencing. Right now is quite frustrating for me.
    I’m watching large blocks of our companies sold out at stupid prices. There is nothing we can do
    but wait for this selling to end.
    Sincerely,
    Harris Kupperman:.
     
    #34     Oct 7, 2008
  5. Praetorian Capital Investments LLC
    Praetorian Offshore Investments Ltd.
    Performance Summary
    August 2008
    Current Month Year-To-Date
    Performance Measures
    Time-weighted Rate of Return (Gross of
    Performance Allocation)
    -8.85% -36.12%
    S&P 5001 Rate of Return 1.22% -12.64%
    Exposure (as % of Equity, including the notional
    value of futures positions)
    Long 95.0%
    Short 0.0%
    Net Exposure 95.0%
    Holdings (as % of Equity, including the notional
    value of futures positions)
    Precious Metals Mining Equities 21.7%
    Base Metals Mining Equities 1.1%
    Mining Services Equities 39.9%
    The fund’s performance was frustrating again. Trading gains of 2% and a good return
    from the option book at month end helped to somewhat offset the declines in our shares.
    In particular, two separate funds that had sizable mining services positions are in the
    process of liquidating. This has greatly hurt our performance. Simultaneously, multiple
    other funds with heavy commodity exposure are either liquidating or scaling back. This is
    all weighing on our shares where there is almost a complete dearth of buying other than
    insider buying.
    I wish I could tell you when this will end—there is no way to know. However we own
    great companies where business is going quite well. At some point, we will get paid on
    these investments.




    Its a wipe out!! Another rich kid bites the dust.

    God, you guys will follow anyone!
     
    #35     Oct 7, 2008

  6. Fund closed ?
    Do you have any performance stats ?
     
    #36     Oct 7, 2008
  7. western

    western

    Sounds like praetorian is still hanging in there. His fund might be down 30%+ but he's not leveraged and as long as his investors' money is locked up, he hopefully will be able to ride this out.

    Too bad he stopped posting here on ET, as he is an incredible trader.
     
    #37     Oct 7, 2008

  8. Keep on believing lalalalala

    NEGATIVE 36% in AUGUST markets have collapsed since this time...

    Cant believe investors would buy these lines and the resultung shit companies. Ya just cant have that volatility and survive.
     
    #38     Oct 7, 2008
  9. An incredible ET poster maybe.

    Ya gotta be kidding about this trust fund being a trader, he bouht LONG SHOTS and it worked out sometimes. Tat aint trading, thats a lucky gambler who can BS.

    Why not ask the investors?? I sure they disagree. They isnt happy with the skilled trader, LOL
     
    #39     Oct 7, 2008
  10. limbo

    limbo

    Christ, didn't know I'd popped in at such an auspicious time. Thank U Mr. Menace for the update. But as Prae's defender I will have to kick your butt. Is the fund down and out? 2 things -1.. it isn't "the world we navigate"-- it's the slime hole we crawl about in--the mkt. 2. Harris U maybe trading to large to use your best talents--execution--getting in and getting out.
     
    #40     Oct 8, 2008