What we own and Why: Our Semi-Annual Report
Just to get the substack ball rolling...
MCELVAINE VALUE FUND SEMI-ANNUAL REPORT
To my Partners:
The portfolio has not changed materially since I wrote to you in March (our Annual Report can be found on our website under What we Own and Why). I continue to believe our holdings are inexpensive.
While I do not attempt to predict the direction of markets, I do think about three things: valuation, liquidity, and sentiment. At least 2 of these 3 factors suggest one should be careful. Meatloaf may have felt “Two out of three ain’t bad” but that is not my view. In July, we established a position which I view as a modest hedge against poor macro-outcomes.
While I may not have been particularly active, our portfolio companies were. Our holdings were discussed in the Annual Report but a quick update on our largest positions is as follows:
· Maxim Power commenced hot commissioning activities for its Combined Cycle Gas Turbine expansion. This is a significant event; I expect it to be fully operational by late fall.
· Bausch + Lomb appointed Brent Saunders as Chair and CEO. Brent was CEO of B+L prior to its acquisition in 2013 by Valent. The next milestone will be the separation of B+L from Bausch Health. I am confident it will occur as it represents a path to significant value creation for Bausch Health’s largest investors which include Carl Icahn and John Paulson.
· PrairieSky had a strong six months; its balance sheet continued to improve and oil royalty production and leasing activity hit multi-year highs.
· ONEX executed several portfolio dispositions which provided cash for share repurchases. Shareholders approved a 3 year “sunset” to Gerry Schwartz’s multi-voting shares which I view as a fair outcome.
· Warner Bros Discovery improved partially on better-than-expected results from its new streaming service. The summer has been a mixed bag with successes in movie releases such as Barbie offset by the ongoing Writer & Actors strike
· Wintaai reported solid underwriting results and recently significantly expanded its operations primarily in Florida.
· CK Hutchinson results were mixed however it continues to take significant action to simplify and monetize its large telecom businesses.
· SPAC Warrants: We exited our holdings in Westrock Coffee warrants while our THCH (Tim Hortons China) position was converted to common shares.
Summing up, I like what we own but am proceeding cautiously. Most importantly, I appreciate you and thank you for trusting me with your savings.
Tim
My posts may contain forward looking information. I will not update this post even if my view changes. While I believe my comments & facts to be accurate, you should not rely on them without doing your own work.