The nickel market is of interest due to the forecast increase in electric battery usage for electric cars and grid storage. Nickel is a component of many battery technologies as is cobalt which is a frequent by product of the nickel mining process. nickel market update


Date Added: September 11, 2017 | | Filed under: Blog


There are four components to my personal investment programme. 1. Money in the Bank:  This money sits in a series of one year GICs, high yield savings accounts and money market/tbill funds earning next to nothing but acts as a form of insurance in the event all goes to hell, or if I became sick or disabled. There are sufficient funds here to provide income for several years and/or supplement other income streams for many years. 2. Takota Income & Arbitrage Account: This is my primary source of income unrelated to my employment, income which is provided by a broadly diverse portfolio of bonds and stocks that generate interest, dividends, and capital gains. 3. Takota Classic Value (RRSP) and Takota Premium Value Account/Fund: These concentrated value based portfolios are the source of long term capital… Read More »


Date Added: September 8, 2017 | | Filed under: Blog


In a previous blog I talked about the areas of market inefficiency that we were able to exploit to help us to earn an approximate 20% compound annual rate of return for approximately 20 years at Aquilon Capital and a predecessor employer. Furthermore, I promised to talk about possible areas of opportunity in today’s market in a future blog. This is that blog. Long Positions in Small Capitalization Stocks: It is a well-documented phenomenon that small capitalization stocks have historically provided the greatest rates of return. A partial explanation for this phenomenon is A. that “growth” has a bigger impact on a smaller economic base, and B. that due to restrictions on certain types of investors, more small capitalization stocks fly under the radar of market analysts – and thus… Read More »


Date Added: August 21, 2017 | | Filed under: Blog


Then: While employed by Midland Doherty, and then especially after founding our first firm, Aquilon Capital, we prospered to the tune of 20% per annum for 20+ years (with two down years only of approximately 5% each) in our most flexible strategy, our Premium Value Strategy and its predecessor account strategy primarily by taking advantage of opportunities in three distinct areas which were combined into one portfolio.   Value Based Long Positions: These included spin offs, liquidations, and a few concentrated positions in continuing businesses which were growing their intrinsic value.   Fully Hedged Convertible Securities: Hedged at or very near to 100% of their convertible feature when conversion premiums were below 20% and cash flows were generally in excess of 20%, and call dates… Read More »


Date Added: August 14, 2017 | | Filed under: Blog


Takeover arbitrage, also known as merger arbitrage, is an investment strategy that focuses on the successful completion of mergers and acquisitions. An investor that employs this strategy is known as an arbitrageur. Risk arbitrage is a type of event – driven investing in that it attempts to exploit pricing inefficiencies caused by a corporate event.  A couple of recent examples. Example #1: The Swiss firm Syngenta was the subject of an announced takeover bid from China’s ChemChina.  The bid was at $92.95 and one could buy the shares in the market for approximately $85 given the uncertainty of a shareholder vote, antitrust approvals, and the time value of money.  A dividend was also declared and paid.  The approximate 2 month holding period yielded us a 10% return which obviously annualizes out very  favourably. Example… Read More »


Date Added: August 8, 2017 | | Filed under: Blog


Dear Partners, Our results for the first half of 2017 were positive, quietly continuing the trend of positive returns after a remarkable 2016. This was accomplished despite still holding a heavy cash weighting. Redemption activity accelerated and we lost several of our bond positions to early redemption calls, as corporations refinance their debts. There are now very few bonds in Canada (or the U.S. for that matter) trading below par value. Those that do, for the most part should. Our job is to differentiate between those that should and those situations where the market has misperceived risk. We have found sufficient new opportunities in other securities to maintain the investment base of approximately 50% invested with the balance of capital sitting in money market funds… Read More »


Date Added: July 31, 2017 | | Filed under: Blog


In previous blogs I have talked about the value of taking down time and Getting Away!in order to recharge and come back at things with maximum energy and creativity especially as it pertains to The Project Oriented Business Life, which is the way that I like to try to organize my own business life. This past week was such a week for myself and my family as we had a week of holiday at a rented cottage way north and east of Toronto, a cottage with absolutely no cell coverage three and a half hours away. It was the break that was needed, with lots of time for family and friends, dips in the lake, afternoon naps, games and movies, and some Kan Jam. Some Highlights: The key to… Read More »


Date Added: July 24, 2017 | | Filed under: Blog


Speaking from experience, the specific experience that comes from having sat on a Board or two, I have seen both the best, and the worst of behaviours and thinking from individual board members, and Boards as a whole. The very best experiences have been when a group of individuals with a range of talents comes together and their respective skills create ideas, and actions where one plus one equals 3 or 4 or even 5, where your strong idea is bested by an even stronger idea, and the whole makes better decisions than any one individual could. The very worst experience has been when a Board is bureaucratic and slow moving, or when it is fractious, and when the members are not transparent with one another.… Read More »


Date Added: July 14, 2017 | | Filed under: Blog


My son Rob does a good job explaining the concepts behind value investing in the attached video! Value Investing Explained


Date Added: July 5, 2017 | | Filed under: Blog


1. The share price is completely washed out with any remaining institutional investors having exited the name over a year ago. Founder, former largest shareholder, and general pain in the ass Eugene Melnyk has sold his shares and the Melnyk crowd is pretty much gone. The Aytu Bioscience (their US distributor) block which Aytu couldn’t afford to keep has been cleared. There is no significant overhang remaining. 2. The Chairman owns 48% of the Company, is enthused about its prospects and is not going to let a $40m+ investment be put at risk by any possible modest future funding requirements. He is going to protect his position. 3. In response to a question from the floor at the recent annual meeting the Company said they don’t need cash in 2017 and in… Read More »


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


My experience with ISS (Institutional Shareholder Services) is pretty much all bad. When I engaged Ottawa based Zarlink Semiconductor in a proxy battle for control of their Board in 2008, two of my Board nominees were to meet with a representative of ISS in order that they could judge these gentlemen’s capabilities as alternatives to the incumbent directors and advise shareholders as to how to vote their shares. When we arrived for the meeting, we discovered that the primary analyst with whom the meeting was booked had gone away on summer vacation and so we found ourselves in the peculiar situation of meeting with some junior with literally no business experience grilling my two nominees who held formidable resumes as to their business qualifications and track… Read More »


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


I get a lot of questions from people as to my fitness routine. I guess I’ve been able to hold it together well enough – now in my 57th year – that people are sometimes curious. Whatever the reason for the interest, let me set the record straight. I do not “run” as in go for a jog/run. I do not ride a bike for zillions of kms like my friends and practically every other aging male that I know. I also do not do “cross – fit” or the various derivations thereof and I do eat cookies. When I was in my ‘30s I found that I was starting to sustain a lot of injuries playing the sports that I liked to play, touch football for example, and… Read More »


Date Added: June 13, 2017 | | Filed under: Blog


The Management Circular for the proposed “takeover” of Merus Labs by Norgine B.V. has been filed on SEDAR and is therefore now available to the public. The “Background to the Arrangement” starting on page 19 of the circular makes for particularly good reading. Interestingly, at one point Norgine was indicating a non- binding bid price for Merus of $1.95, which upon the undertaking of due diligence was lowered initially to $1.75 and finally to the actual bid price of $1.65. My take on this is that Norgine made their initial bid based on the publically available information and their assumed synergies with Merus, but upon signing a confidentiality agreement and gaining access to the Merus data room discovered something they didn’t like. Perhaps they found that… Read More »


Date Added: June 7, 2017 | | Filed under: Blog


It was 42 years ago today that 16-year-old Michael Slobodian walked into Brampton Centennial High School in Brampton, Ontario with a guitar case containing two rifles and shot and killed teacher Margaret Wright and student John Slinger, 17. He injured another 13 people inside the school, and then killed himself in what was the first to my knowledge of the many school shootings that have taken place since in North America. I was a Grade 9 student at Brampton Centennial and on my way to gym class that day when everyone in the hallway started to run to which my natural reaction was also to run. There was a cloud of smoke in the hallway behind us. Myself and my classmates were locked into the boy’s change… Read More »


Date Added: May 28, 2017 | | Filed under: Blog


Value investors take advantage of institutional investor constraints to buy securities at significant discounts to their intrinsic or fair value when those constraints cause institutional investors to act in irrational ways. For example, some institutions are not able to hold a security whose trading price is below a particular dollar value, or unable to hold a bond whose credit ranking is below a certain threshold. If they happen to hold such a security when it violates one of these criteria, they become sellers irrespective of price. The astute value investor, unencumbered by such artificial constraints may find an opportunity to buy a security at a significant discount to fair value in such a situation. There are many such forces at work on institutional investors that cause… Read More »


Date Added: May 26, 2017 | | Filed under: Blog


Merus Labs is a specialty pharmaceuticals company primarily operating in the various European countries, and Canada. While Valeant and Concordia were rocketing to astronomical share prices, Merus was the unappreciated and undervalued cousin, making wiser decisions about products to acquire, maintaining a responsible capital structure, and operating in a regulated market (Europe) where success was not as a result of pushing through unsustainable price increases on intermediaries and consumers, but rather in selling more product, and selling it more efficiently. The business model called for incremental product acquisitions to be marketed through the distribution network already established by Merus. The thinking was that if Merus were to receive even a part of the valuation being ascribed to Valeant or Concordia, investors would be well rewarded.… Read More »


Date Added: May 16, 2017 | | Filed under: Blog


From time to time I have documented the evolution of my own Takota Income & Arbitrage Account as a kind of live example of what I am up to with my own capital in the area of income generation. My I&A Account, started March 1, 2016 is shown in the attached file at its one year anniversary just passed. As time goes by it is my intent to add more and more capital to this Account in order that I have a source of passive investment income to supplement other sources of income and the gains that I will realize from my other investment activities.   Please remember that I do not charge myself management fees, and therefore my Account as shown is on a “gross” basis (i.e. the return in… Read More »


Date Added: May 10, 2017 | | Filed under: Blog


FIRST QUARTER 2017 A pause in the materials related sector. Dear Partners, Our results for the first quarter of 2017 were positive again (see details below), continuing the good returns that we were able to achieve in 2016. This was accomplished despite continuing with a heavy cash weighting. During the quarter we saw the materials related sectors which had been leading the market for the past months pause and retreat in price. I see this as a normal retrenchment within an ongoing change of market leadership. It is reminiscent of the 1986 through 1990 period which saw the darlings from the early 1980’s, the steady-state, consistent earning growers (who in many case had smoothed and manipulated their earnings) start to falter and be replaced by… Read More »


Date Added: May 3, 2017 | | Filed under: Blog


In light of the Home Capital implosion investors need to acquaint themselves with two terms: A Run on the Bank: A bank run (also known as a run on the bank) occurs when in afractional-reserve banking system (where banks normally only keep a small proportion of their assets as cash), a large number of customers withdraw cash from deposit accounts with a financial institution at the same time because they believe that the financial institution is, or might become, insolvent; and keep the cash or transfer it into other assets, such as government bonds, precious metals or stones. When they transfer funds to another institution it may be characterized as a capital flight. As a bank run progresses, it generates its own momentum: as more… Read More »


Date Added: April 30, 2017 | | Filed under: Blog


Lying in bed Easter Sunday trying to recover from the worst cold/cough combination I have ever had, I picked up a message from a good friend, with a request to call him back as soon as I could, and I knew right away something was wrong somewhere. Three of my friends had been out training for the Ride for Cancer that morning and I figured one of them had an accident. It turns out that one of the guys had suffered a significant heart attack a few hours after returning home. He had been resusycitated at North York Hospital but transferred to Sunnybrook for further treatment/testing. Sunnybrook is right around the corner from where I live and I was at the hospital in short order to see my good… Read More »


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


The Noranda Income Fund is a Canada-based open-ended trust. The Fund’s primary objective is to provide stable, monthly distributions. The Fund owns an electrolytic zinc processing facility and its ancillary assets (the Processing Facility) located in Salaberry-de-Valleyfield, Quebec. The Processing Facility produces refined zinc metal and various by-products from zinc concentrate purchased from mining operations, and sells refined zinc products to customers in the open market. Canadian Electrolytic Zinc Limited acts as the Fund’s manager, which is a subsidiary of Glencore Canada Corporation. In the simplest of terms, the Fund has historically enjoyed a contractually fixed return for processing zinc ore. That contract expired. The Fund must now operate under “current market terms”. Current market terms are not anywhere near as attractive as those enjoyed in the past.… Read More »


Date Added: April 3, 2017 | | Filed under: Blog


A couple of times per week I work from my home office. I find that is allows me to focus and get a lot of work done. In my line of work, getting a lot done means reading extensively, analyzing, talking to other market participants/client partners, trading around core positions and from time to time making or monetizing an investment. Yesterday I managed to get a fair bit of work done in the morning, fretting about a now correcting stock market and as per my usual schedule road my bike to the local Good Life gym shortly before noon for a weight circuit (6X6  full  back squats at 225 lbs with 5X10 body weight dips, and 5X6 single arm rows at 100 lbs interspersed between squat sets).… Read More »


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


In this month’s issue of Reflections J Dominique covers a lot of ground – from the recent annual PDAC convention – including commentary on electric battery technologies and commodities – to the recent love affair between Trump and Russia – including some surprising statistics on the size of the Russian economy vs that of other important US relationships.  To read the entire paper, click here Scott


Date Added: March 21, 2017 | | Filed under: Blog


“One glaring oddity is the discrepancy between what businesses are earning and what those same businesses are paying out to shareholders. Over the past two years, companies in the S&P 500 lavished more cash on investors through dividends and share buybacks than they generated in profits, according to Aswath Damodaran, a professor of finance at New York University. The discrepancy between payouts and earnings is a remarkable state of affairs. It’s also unsustainable. At some point, the amount that companies are paying to equity investors must fall back into line with what the companies actually earn.” -from the Globe and Mail Boardwalk Equities Real Estate Investment Trust is an example of such an unsustainable situation. Consider the 2016 year end cash flow statement available on… Read More »


Date Added: March 15, 2017 | | Filed under: Blog


Reversion To The Mean: A reversion involves the return of any condition back to a previous state. In cases of mean reversion, the thought is that any price that strays far from the long-term norm will again return, reverting to its understood state. The theory is focused on the reversion of only relatively extreme changes, as normal growth or other fluctuations are an expected part of the paradigm. -Investopedia In light of the heady real estate markets in Canada and elsewhere around the world, I wanted to reflect upon some personal observations and experiences with real estate through previous cycles: I remember working as a summer student in Brampton, Ontario, Canada 1979- early 1980’s for the local hydro utility. My work took me into many existing,… Read More »


Date Added: March 14, 2017 | | Filed under: Blog



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