Yesterday I attended my first Wolfpack rugby game at an event organized by an investor relations firm I had one of my portfolio companies engage to help promote the opportunity in that portfolio company to the brokerage community. See my blog Stock Ownership Begets Stock Promotion First off let me say that the rugby was fast paced and violent and very enjoyable for even a novice fan to watch. In attendance in my group were about 20 broker (advisor) types, a couple of whom I enjoyed talking to because they had been in business long enough, and had enough market sophistication to have some practical knowledge of the areas of market inefficiency that had allowed me to compound money at an approximate 20% rate for approximately… Read More »


Date Added: July 22, 2018 | | Filed under: Blog


We actually got ourselves up to 70% invested in our Income Value Portfolios for a brief period early this summer. This was the heaviest invested weighting we have achieved in the approximate 2.25 years that we have been running these portfolios. Alas, profit taking and risk management have now reduced our current invested position back down to 55%. Sold were positions in AutoCanada (-2%), Element Fleet Management (+10%), Medicure (+12%), and National Retail Properties (+20%). Each of the above was a dividend paying common share or in the case of National Retail Properties an income distributing REIT with the exception of Medicure which was simply a value arbitrage position (i.e. at purchase the Company had sold down to a price that was equivalent to the cash on its balance sheet… Read More »


Date Added: July 10, 2018 | | Filed under: Blog


As I enjoy our Canada Day weekend, I must say I’m feeling pretty good about being a Canadian right now. With our Prime Minister showing a little bit of the spirit of his late father, with the intelligent and fiery Chrystia Freeland as our Minister of Foreign Affairs, and with Canadians rallying behind the PM in our dispute with the imbecile who currently stains the White House , I’m feeling pretty positive and proud of being Canadian. Sure we’ve got our problems which in my view include a real estate and related industry (construction, real estate finance) that is responsible for far more of Canadian GDP than is healthy, and far too many shootings in Toronto, but this weekend I’m reflecting on the positives about… Read More »


Date Added: July 2, 2018 | | Filed under: Blog


On May 30 Sherritt held an Investor Day at its Fort Site refinery in Fort Saskatchewan, Alberta. We thought it would be a good opportunity to meet and talk with Sherritt’s executives beyond the formal presentations (available online ) as well as meet with some of the local management. I asked J Dominique from our office to fly to Alberta and attend the presentations. This is his report. Our overall impression is that Sherritt is showing, following a number of decisive actions, renewed strength. The march from cycle peak in 2007 to cycle bottom in spring 2016 has been painful – for the company as well as shareholders. Sherritt had the misfortune (together with many other mining companies) to enter the commodity down cycle with… Read More »


Date Added: June 18, 2018 | | Filed under: Blog


Good investment ideas can come from anywhere. They can come from your own experiences as a consumer or business person. They can come from reading both history and current events and they can come from simply observing the world around you. Often, they come from other people. Aspiring investors are often advised to watch the actions of successful professional investors for ideas as to where they should invest. I don’t disagree with this advice. However, I think it is also limiting. The fact is that almost everyone you know will have an investable idea at some point in their life, some situation within their particular expertise that they identify as an opportunity. Your job is to know when that idea is within your own circle of competence and therefore whether… Read More »


Date Added: June 8, 2018 | | Filed under: Blog


As many of you are aware, on the internet there are chat rooms or so called “bull boards” on which the pluses and minuses of stocks are discussed by posters. The quality of the posts is widely variable from chat room to chat room and also for each specific stock discussed. From time to time I will take a look at the posts for any stock in which we are involved just in case there happens to be someone knowledgeable offering a real opinion, or whom has dug up some interesting information. For example, a poster on Stockhouse wrote about a new patent application for the drug delivery system of a company in which we are involved prior to the company releasing that information. However, be forewarned. If you… Read More »


Date Added: June 1, 2018 | | Filed under: Blog


I’ve been spending time recently thinking about the central principles on which Takota was founded with respect to our investing, our relationships, and our decision making, and how we are doing in terms of living by those principles every day. I’ve always wanted to have a different kind of investment company, one which is similar to the way in which Warren Buffett ran his original investment partnerships. We got much of the way there at my predecessor firm Aquilon Capital. However, we still went down some paths that most young investment companies will go down as they try to build their businesses, paths which I have no intent of going down again at Takota. Here are a few central principles that guide our actions: Principle… Read More »


Date Added: May 23, 2018 | | Filed under: Blog


Today, as I look at our portfolios (which as always are a collection of out-of-favour, abandoned, or simply undiscovered securities) I can make the following observations: 1. By design, we prefer to build our portfolios with the types of securities that have been shown to produce superior rates of return historically, such as: – securities that are “cheap” by various fundamental metrics which outperform because of the concept of “reversion to the mean”; – securities that are smaller in market capitalization because fewer “eyes” watch them and therefore they tend to fall through the cracks and therefore to be mispriced. Finding mispriced securities is the value-add that an active investment process should provide (see “What Has Worked in Investing” – Tweedy Browne” for an extensive elaboration… Read More »


Date Added: April 23, 2018 | | Filed under: Blog


As many of you know we started a newer strategy to complement our legacy capital accumulation business approximately 2 years ago, a strategy meant to provide investors who require income with an alternative to the low yields available in today’s low rate market.  From time to time I have commented on the progress of my own Takota Income Value Account. I am pleased to report that the gross* return for my own account is 34.4% over its first 2 years + 50 days of operation (March 1, 2016 – April 18, 2018).  What’s more – this extraordinary return was accomplished with a broadly diversified portfolio (maximum 5% weighting in any security with no averaging up or down) and with fully 50% of the portfolio on average sitting in cash… Read More »


Date Added: April 19, 2018 | | Filed under: Blog


In a previous blog which you can see here I pondered the possibilities for a Company called Melior Resources which we own at Takota. Could it become as promising as our holding in Acerus Pharmaceuticals (which I wrote about here). We bought Melior as a simple corporate liquidation when it had more cash than market value and lobbied for the liquidation of the Company (see The Fight) but rather than liquidate the Board bought a previously producing but at the time idled ilmenite mine and processing facility in Queensland, Australia for pennies on the dollar. Fast forward several years and finally, and just now, the Company has completed a series of financings and offtake agreements that will provide them with the funds and the surety to recommence production in… Read More »


Date Added: April 10, 2018 | | Filed under: Blog


Now that Acerus Pharmaceuticals is receiving some initial attention from investors including its first research coverage in years, I’m getting calls and social media messages from interested investors asking what we think. I guess that many of these people remember that I wrote several blog posts on Acerus (nee Trimel) founder and former largest shareholder Eugene Melnyk and ultimately wrote about the company itself. In answer to your queries, yes we like the Company and yes we like the stock (see disclaimer at the end of this blog). I personally traded Acerus shares in large quantities between .10 and .20 cents for much of 2016 and into 2017. There was a significant change in share ownership at that time and therefore the liquidity to trade large blocks. At… Read More »


Date Added: March 26, 2018 | | Filed under: Blog


I learned long ago from a very successful investor that once I become the owner of a security, it is in my best interest to then become a promoter of that same security. Spreading the word and encouraging incremental buying is good for my position, and therefore good for my economic well- being. Such promotional activities might range from providing information on the opportunity to other investment professionals, introducing the Company to analyst coverage through established relationships, and encouraging the Company to find and engage an effective investor relations firm/professional. As we have seen with many hedge funds, other opportunities to promote a holding occur in speaking engagements at investor conferences, in making appearances on the business news, coordinating articles in the press, making comments through… Read More »


Date Added: March 21, 2018 | | Filed under: Blog


As a value investor I find myself wading through discarded or unknown securities looking for that rare cheap item that doesn’t belong in the junk pile, or that won’t remain unknown forever. After identifying such a security, studying it, and buying it begins the part of the process I dislike the most – the waiting! These cycles, these changes to investor sentiment can take a long time. I’m no Warren Buffett, and so just because I buy something doesn’t mean it immediately increase in popularity (or price).  Once an owner, I find myself becoming a promoter of the security purchased, spreading the good word to other potential buyers, and also a willing assistant to the corporation in the removal of any impediments to having my vision of inherent value… Read More »


Date Added: March 13, 2018 | | Filed under: Blog


Back in the dark days for commodities, in March of 2016, we purchased the Sherritt 8% 2021 senior bonds at $47 per $100 of face value for a running yield of 17% and a yield to maturity of 26.6%. This past week we tendered our bonds to a buyback initiated by the Company at $95 per $100 face value for a total return of 135%. Thanks bond market for remaining inefficient!  Thanks Sherritt for misallocating capital to an unnecessary debt reduction (my view). Why did we tender with the bonds still providing a new owner with a running yield of 8.4% and a yield to maturity of approximately 9.6%? 1. I’m generally happy to achieve liquidity in my distressed debt holdings at 95 cents on the $1.00. 2. More importantly, when Sherritt successfully extended the maturity of these bonds… Read More »


Date Added: February 23, 2018 | | Filed under: Blog


Takota Asset Management had an issue with Sherritt International’s [TSX:S] efforts to raise capital to firm up its balance sheet, co-founder W. Scott Leckie told Activistmonitor. “It was poor judgement,” he said. “Their recent decision to raise equity at current share prices was an example of poor capital allocation where they diluted shareholders of 20% of their interests in exchange for a modest reduction in debt of about 10%.” In May 2017, Sherritt entered into aggreement with Sumitomo and Korea Resources to eliminate USD 1.4bn in debt, in exchange for part of its stake in the Ambatvy nickel mine in Madagascar. Sherritt retains a 12% stake and operates the mine until at least 2024. Leckie is pushing for “management to make good capital allocation decisions” so shareholders can “fully… Read More »


Date Added: February 9, 2018 | | Filed under: Blog


What should one do when the market is falling like it was on Friday, and like it is as I write this blog on Monday? Well, what I did Friday morning was to do what I always do: Check to see if there was any news of relevance concerning items in which we are invested. Then I considered whether the market turmoil had offered up any opportunities that would cause me to want to invest some of the large cash reserve we have sitting in our Income Value Strategy Accounts, or cause me to want to trade out of any of our current holdings in exchange for something else in our capital accumulation oriented Classic Value and Premium Value Strategy Accounts and Partnership. Finally, I… Read More »


Date Added: February 5, 2018 | | Filed under: Blog


While Takota portfolios have returned a solid gain in 2017, far above the Canadian market return, the gap between the current market value and the intrinsic value we calculate for these portfolios hold remains at historically wide levels. To give you a sense of the current undervaluation, my expectation for our portfolios is that they should be worth at maturity at least three times their current market value (without reference to new opportunities). The financial crisis, and the subsequent period of previously uncharted monetary policy, designed to stem the crisis, restart demand and stimulate global growth has, in my opinion, reinforced and rewarded the kind of investor behaviour which had always previously been unsuccessful during the course of my 30+ years in financial markets. Meanwhile,… Read More »


Date Added: January 31, 2018 | | Filed under: Blog


With great frustration we learned last week that Sherritt International has entered into a dilutive equity financing by selling Units of common shares + a warrants to the public at a share price that is greatly depressed relative to Sherritt’s intrinsic business value potential. The financing will ultimately dilute current owner’s interests by as much as 20% upon the exercise of the accompanying warrants. The purpose of the financing is primarily to reduce debt. How the Board ever approved of such a transaction, and such a misallocation of capital is beyond me. The Board and management group are clearly still shell shocked by the desperate conditions that the nickel pricing trough of the commodity cycle produced in conjunction with their unending obligation to a project in Madagascar (Ambatovy/… Read More »


Date Added: January 22, 2018 | | Filed under: Blog


The numbers are in and the Takota Premium Value Partnership returned +24% in 2017 (+40% return 2016). While the 2017 return was solid, and far above the Canadian market return, the gap between Unit price and intrinsic value remains at historically wide levels, and the expectation is that the Unit price will be 3-5X higher on maturity of the current portfolio (without reference to new opportunities). In general terms 2017 saw positive returns in pharmaceuticals and materials stocks held in the portfolio. Modest short selling activity contributed positive return with the exception of short selling meant to hedge long exposures which was modestly negative (as insurance premiums are). The financial crisis, and the subsequent period of previously uncharted monetary policy, designed to stem the crisis,… Read More »


Date Added: January 11, 2018 | | Filed under: Blog


The numbers are still being compiled and won’t be available for a week or so but after a +40% return in 2016 it looks like the flagship Takota Premium Value Partnership will have appreciated by approximately +24% in 2017. Decent return numbers to be sure but given the late state of the business cycle and the orientation of the portfolio toward certain economically sensitive situations (in addition to the usual special situations), and the nature of the return distributions for such economically sensitive situations (i.e. big tails – meaning the weight of the return is skewed toward the latter part of the business cycle and holding period) more significant positive return numbers are immediately possible. I’m not a successful stock market forecaster (nor do I believe is anyone else) but I… Read More »


Date Added: January 2, 2018 | | Filed under: Blog


When I came home from my regular weekly hockey game the other evening, I was struck by how warm and Christmassy our house felt as I came in the front door. This got me to thinking about how grateful I am for all that I have. I have my health which allows me to enjoy all of the other blessings in my life. I have a partner who loves me, who believes in me more than I sometimes believe in myself, who sees me the way I have always wanted to be seen, and with whom every day is an absolute pleasure. I have the treasure of my boys, with whom I enjoy strong and close relationships. Why I even get invited to play shinny with my… Read More »


Date Added: December 22, 2017 | | Filed under: Blog


From the Takota Monthly “Reflections” Partner Letter “Therefore, while the small size of the cobalt market may have allowed speculative interest to prosper until now, it might well be the nickel market that will offer the best rewards from the development of the EV market.” To read “Reflections” please click here!


Date Added: December 20, 2017 | | Filed under: Blog


At Takota we like to uncover unloved disregarded and cheap securities that have enough going for them in terms of assets that they have a good chance of surviving whatever it was that made them cheap in the first place, and hold them while they revert to a higher price. In fact studies have shown that a focus on very cheap and mean reverting securities is the best way to earn superior investment returns. We followed the saga of Acerus Pharmaceuticals and its destructive and ego driven major shareholder Eugene Melynk and blogged about this on several occasions, finally writing a positive blog on Acerus in June of this year which you can read here. We followed that up with a blog a few weeks ago when the… Read More »


Date Added: December 18, 2017 | | Filed under: Blog


In June I blogged about Acerus Pharmaceuticals, and talked about why we found it an “compelling option on a developing pharmaceuticals business”. You can read that blog here! At the time I was intrigued by the immense size of the U.S. market for the condition that Acerus’s lead product Natesto treats (hypogonadism in men). That is, men who require testosterone replacement therapy to maintain an age appropriate level of testosterone. The testosterone replacement market in the US is estimated to be a $2b USD market. Natesto has a unique delivery system (a convenient nasal applicator) which delivers testosterone without the significant transference problems that exist for the various gels with which it completes, gels that must be rubbed on the shoulders and can often be transferred to other family members… Read More »


Date Added: November 27, 2017 | | Filed under: Blog


Someone asked why we have been reporting our Income Value Strategy returns on a gross basis when all of our other reporting (legacy capital accumulation business) is done on a net basis. The explanation is simple. The Income Value Strategy, offered through segregated managed accounts(SMAs), was started with my own capital in March of 2016 when I invested $1 million in the strategy.  While other investors have subsequently opened Income Value Accounts the fact that the management fee is on a sliding scale depending upon the amount of money invested (see below), and given the fact that this strategy is only 18 months old it is difficult to present a meaningful composite of like account returns as we have varying amounts of capital on deposit from… Read More »


Date Added: November 23, 2017 | | Filed under: Blog



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