iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings III

Part III

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MSWG said...

• Hi Moola,
  
  Further to my points yesterday, i've another thoughts on your insistence of lack of disclosure of iCapital.Biz. quarterly announcement.
  
  We all know disclosure is good, be it good or bad news, in relation to the well-being of the Company.
  
  However, one has to ask to what extent is disclosure deems adequate in the first place? No amount of information is enough for the hunger of investors' knowing.
  
  Being the only closed end fund listed in Bursa (another closed end fund Amanah Millenium was liquidated a year ago), iCapital.biz main business is to buy and sell share listed in Bursa and its main objective is to attain long term capital appreciation for its shareholder. Since it's a listed fund, one of the most visible benefit is to provide a platform for shareholders to join in and leave at immediate time via buy/sell to the market. The business is still there, regardless the change of shareholder. The value of the fund is still intact. If it's a listed company by other nature, do you expect another company to report their trade secret (as against iCapital's quarterly holding of shares) to the public on quarterly basis? i doubt so.
  
  In addition, SC and Bursa must have their very own understanding of the nature of this business i.e. closed-end fund so as not to include the detail investment holding on quarterly basis on their requirement list. Are you saying SC and Bursa are not thorough enough when introducing this investment scheme to investor?
  
  my 2cents.

Hello again.

• If it's a listed company by other nature, do you expect another company to report their trade secret (as against iCapital's quarterly holding of shares) to the public on quarterly basis? i doubt so.

Let's have a look at where we stand. :)

I hope you understand now my points on why I seek disclosure. :D

On the other side of the fence (nothing absolutely wrong being on the other side), the main argument for not disclosing is that iCapital should be allowed to protect its so called trade secret. (Poor Berkshire)

Let's consider a potential investor .. say me.. I want to buy this closed end fund.

As suggested, perhaps I could use the NAV as a guide.

NAV per share of icapital.biz as at 8 April 2009 was RM1.59

NAV per share of icapital.biz as at 4 March 2009 was RM1.48 (link here )

NAV per share of icapital.biz as at 4 February 2009 was RM1.52. ( link here )

NAV per share of icapital.biz as at 7 January 2009 was RM1.56. (link here )

NAV per share of icapital.biz as at 31 December 2008 was RM1.57. (link here )

Which means from 31st December 2008 to 8th April, iCapital gained only 2 sen or up some 1.3%.

On comparison. The KLCI closed 31st December 2008 at 872.09. (do verify this figure as I am reading it off OSK's chart). On the 8th April 2009, KLCI closed at 907.87. Up some 35.78 pts or some 4%.

Now, as a potential investor or perhaps as a current minority shareholder of the fund, won't one ask why is iCapital (as per the NAV indicator) under performing the KLCI?

Now obviously some would say that since iCapital is a 'value investing' company it should not be gauged in such a manner and some would use the long term view to justify the current under performance of iCapital. Some could argue back and say that it would appear that iCapital should not be deemed as a 'value investor' because iCapital was actively buying and also selling shares and it would appear that iCapital was more of a trader. Reasoning was iCapital actively SOLD a huge chunk (some 50 million worth) of its shares early last year.

Ah, the disposal of shares. You had mentioned the trade secrets. How ironic it is that iCapital contradicted itself in the public that it was bullish in the market early last year when it was in fact selling? How ironic it is that iCapital frequently mentioned their LONG-HELD and CONSISTENTLY BULLISH VIEWS. Such a contradiction, yes? ( Do see What Do You Think of ICap's Recent Disposal Of Shares Held? and More Rumblings On Tan Teng Boo's ICapital's Disposal Of Shares )

Anyway... as it is now... it would appear that iCapital is under performing the KLCI.

For the potential investor of the fund (how ironic, if the potential investor cannot be convinced to buy this closed-end fund, how would the stock go up in price?), surely one wants to find out why iCapital is under performing.

Yes?

And where would the potential investor gets the conviction and justification to invest in this fund?

Wouldn't the potential investor wants to know more information?

Or how about the current minority shareholder fund? Should the minority shareholder place all their hope that in the long run, this fund should do good? Isn't this like blind faith? Investing based on the reputation of the fund manager.

Take the case of the legendary investor Bill Miller and his LMVTX fund.

You have heard of Bill Miller right? If no, here is an old article, The greatest money manager of our time

• As it stands now, Miller has compiled one of the most remarkable records in the history of investing: His fund has outperformed the stock market for 15 straight years. That's right, 15 years, starting in 1991 - during George Bush the elder's presidency - through the tech bull market, then the crash and now the recovery

That was back in 2006.

Sadly his fund LMVTX has plunged. In May 2007, LMVTX traded as high as 78.00. Yesterday, LMVTX only traded at 25.80. (you can see the dramatic plunge in LMVTX here )

Why?

Blogged on it before too: Bill Miller Featured on WSJ: The Stock Picker's Defeat

• Mr. Miller was in his element a year ago when troubles in the housing market began infecting financial markets. Working from his well-worn playbook, he snapped up American International Group Inc., Wachovia Corp., Bear Stearns Cos. and Freddie Mac. As the shares continued to fall, he argued that investors were overreacting. He kept buying.

He bought the wrong stocks and he kept on buying!

Now, could what had happened to someone as good as Bill Miller not happen to iCapital.Biz?

Is there a zero chance of it not happening?

Well if you insist that there is zero chance of happening, then I have nothing more to say. It's your right of opinion, really. :)

But... for the minority shareholders and the potential investor.. the disclosure via the 13-F Sec filings helped. They saw that Bill Miller was making decisions to buy stocks such as American International Group Inc., Wachovia Corp., Bear Stearns Cos. and Freddie Mac.

And from the disclosure, the minority shareholders of LMTVX has the option of considering what Bill Miller was doing was correct or perhaps Bill Miller and his LMVTX was making the mistake of buying the wrong stocks? And worse still, the filings showed he kept on buying.

Without the disclosure, to wait for the annual report, would have been deadly, yes?

So back to iCapital.Biz. With disclosure, one could understand what the fund is doing and one could see if the fund is making a mistake or not. Mistakes is possible, yes? Everyone makes mistakes, yes? Dare one say that a closed-end fund like iCapital.Biz will not make a mistake?

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Little Bear said...

• "In addition, SC and Bursa must have their very own understanding of the nature of this business i.e. closed-end fund so as not to include the detail investment holding on quarterly basis on their requirement list. Are you saying SC and Bursa are not thorough enough when introducing this investment scheme to investor?" - MSWG
  
  Let's not get moola started on the SC and Bursa, he will need hundreds of posts to list out his gripes.

:)

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