Fisher Funds stocks

[Onemootpoint]

Winner (n) posted info about VSL added to KFL.

https://stocktalk.co.nz/index.php?topic=86.msg11334#msg11334

[Basil]

Kingfish Warrant issue announced.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KFL/413355/396826.pdf

[Basil]

KFL shares at $1.32 currently trade at an approx 4% discount to NTA and cum the free 1:4 warrant issue.
Record date for warrant issue is 5 July and warrants start trading 7 July.  Looks like today and Monday are the last 2 days KFL shares trade cum warrant entitlement.  I hold a reasonable number as a simple way of achieving greater diversification in my portfolio.

[Basil]

The "game" commences this Friday when they start trading, on how to price Kingfish's latest warrant KFLWH.  I have an allocation of free warrants.
I concur with some other comments posted elsewhere the exercise price is likely to be about $1.25.
Warrants have been a very happy hunting ground for this Beagle and I have very fond memories of the WF warrant series for Kingfish and especially Barramundi.
Some decent size fish landed in those two fishing expeditions...
I think it's highly likely that Barramundi will have another warrant issue, WH series later this year, probably sometime in October or November.
Disc: I have been busy buying Barrmundi shares.

[BlackPeter]

The "game" commences this Friday when they start trading, on how to price Kingfish's latest warrant KFLWH.  I have an allocation of free warrants.
I concur with some other comments posted elsewhere the exercise price is likely to be about $1.25.
Warrants have been a very happy hunting ground for this Beagle and I have very fond memories of the WF warrant series for Kingfish and especially Barramundi.
Some decent size fish landed in those two fishing expeditions...
I think it's highly likely that Barramundi will have another warrant issue, WH series later this year, probably sometime in October or November.
Disc: I have been busy buying Barrmundi shares.

Interesting. I must admit this (warrants) is one income source I Have so far completely ignored and know very little about. Is it as speculative as it sounds to my untrained ear?

Would you happen to have some reading material you could recommend?

[Basil]

Here's the warrant terms  https://kingfish.co.nz/assets/Investor-Centre/Kingfish-Warrant-Terms-2023.pdf

You can learn a bit more about warrants and the underlying call option they contain here
https://www.investopedia.com/articles/investing/071513/warrants-and-call-options.asp

Essentially owning a warrant confers upon the holder the right, but not the obligation to subscribe to one KFL share in late July 2024 at about $1.25 per share.
What's that worth at any point in time is a moving target based on a number of factors, especially the underlying NTA of the shares at any particular point in time. 

Some people find the leverage attractive, for example you might buy 100,000 warrants at just a small fraction of the underlying share price and will enjoy nearly 13 months of potential upside to KFL shares or if the market tanks really badly you might lose the purchase price of the option.

Warrant prices can vary a lot throughout their term, you can win big or lose the lot, so they are not for the faint hearted.

[BlackPeter]

Here's the warrant terms  https://kingfish.co.nz/assets/Investor-Centre/Kingfish-Warrant-Terms-2023.pdf

You can learn a bit more about warrants and the underlying call option they contain here
https://www.investopedia.com/articles/investing/071513/warrants-and-call-options.asp

Essentially owning a warrant confers upon the holder the right, but not the obligation to subscribe to one KFL share in late July 2024 at about $1.25 per share.
What's that worth at any point in time is a moving target based on a number of factors, especially the underlying NTA of the shares at any particular point in time. 

Some people find the leverage attractive, for example you might buy 100,000 warrants at just a small fraction of the underlying share price and will enjoy nearly 13 months of potential upside to KFL shares or if the market tanks really badly you might lose the purchase price of the option.

Warrant prices can vary a lot throughout their term, you can win big or lose the lot, so they are not for the faint hearted.

OK, cheers. So - its basically doing the same thing as an option, just that it is issued by the company. Great instrument for anybody who can predict the future ;

[Untamed]

For anyone who is interested, scroll down to the bottom - Kingfish investor event on 9th August:


https://mailchi.mp/nzx.com/virtual-investor-event-19jul23?e=a16d6df77c

[Basil]

OK, cheers. So - its basically doing the same thing as an option, just that it is issued by the company. Great instrument for anybody who can predict the future ;

Aren't we all trying to predict the future BP?
Company A is likely to outperform Company B that's why we choose company A.

Its one of the oldest debates isn't it.  Do stock picking fund managers earn their fees or are you better off in a low cost ETF ?

I think its a good idea to have another look at this question as it pertains to the Kingfish group as I haven't done this for quite a long time and without fear or favour I always look at stocks over the last 5 years so will use the same timeframe for Fisher's listed entities.

In their June reports Kingfish is here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KFL/413029/396466.pdf
Kingfish noted their 5 year annualized NAV return, so that's the net movement in assets after all fees and taxes is 8.5% per annum.  Their gross performance, before fees, averaged 10.8% per annum and the NZX50 was up 6.4% per annum.  I'd give that a big thumbs up as resoundingly beating the market by more than 2% per annum even after costs of 2.3% per annum.  Top marks there.

Next let's look at Barramundi http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/BRM/413030/396467.pdf and we see annualized 5 year NAV of 11% after fees and taxes, gross performance of 13.9% per annum before fees and taxes and that compares to the ASX200 hedged 70% to Kiwi of 7.8% per annum.  I call that an outstanding success beating the index by 3.2% after fees and taxes, very impressive indeed. 

Finally let's look at Marlin http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MLN/413031/396468.pdf
Adjusted NAV is 8% per annum after all costs and taxes, Gross performance is 10.9% per annum and the benchmark is 6.4% per annum.
Another outstanding result.

Conclusion: When you look across the 5 year annualized performance of the group you have no choice but to come to the conclusion that not only do these guys earn their fees, even after fees and taxes they have impressively outperformed the index's which have no fees or taxes.

Maybe this isn't a fluke and they have real skills in predicting whether Company A will outperform Company B ?

Disc: I have a significant number of Barramundi shares and a more modest number of Kingfish shares.

[Left Field]

Aren't we all trying to predict the future BP?
Company A is likely to outperform Company B that's why we choose company A.....
.....
Disc: I have a significant number of Barramundi shares and a more modest number of Kingfish shares.

Interesting post.

Made me wonder how BRM and KFL compared to my IFT yardstick over the last 5 yrs.

This chart only shows IFT v KFL (Tho  similar results with BRM.)

Conclusion; IFT a hard act to beat...... but then cynics will say, "past performance is no guarantee of future performance."

[Basil]

Chart like that is not going to give you the full story as it doesn't include dividends (2% of NAV tax free paid per quarter with KFL), or the value of warrant issues.

That said, I am pleased IFT is 17% of KFL's portfolio.

[BlackPeter]

Aren't we all trying to predict the future BP?
Company A is likely to outperform Company B that's why we choose company A.

Its one of the oldest debates isn't it.  Do stock picking fund managers earn their fees or are you better off in a low cost ETF ?

...

Conclusion: When you look across the 5 year annualized performance of the group you have no choice but to come to the conclusion that not only do these guys earn their fees, even after fees and taxes they have impressively outperformed the index's which have no fees or taxes.

Maybe this isn't a fluke and they have real skills in predicting whether Company A will outperform Company B ?

Disc: I have a significant number of Barramundi shares and a more modest number of Kingfish shares.

No worries, I didn't call it a fluke.

I notice however, that e.g. Kingfish somewhat underperformed the NZX50 over the last 10 years ... KFL gained 28% vs NZX50 which gained 176%.

Granted, KFL paid dividends, while the NZX50 assumes reinvestment, but still - 148% more in 10 years, this equals roughly a 10% annual payout. Currently Kingfish pays 9%, and the missing 1% goes (I suppose) to the fund manager.

So - based on this example (which may or may not be fair) it looks like they have the payout of an index fund, just with higher fees attached.

But I really just wanted to understand what this warrant thingy is, and now I do. No worries.

[Left Field]

Chart like that is not going to give you the full story as it doesn't include dividends (2% of NAV tax free paid per quarter with KFL), or the value of warrant issues.

Mmmmm full story looks pretty good IMHO..... IFT 26.5% pa after tax total return in the last 4 yrs.

[Basil]

IFT have done exceptionally well, no argument about that Left Field.
BP Kingfish probably had 5 warrant issues in the last decade so if you factor in the value of those as well as the 8% tax free dividends, I am confident they have beaten the NZX50 over your preferred measurement timeframe too.

Be interesting to see where the latest warrants list tomorrow.    Lot of speculation in the other place about that.

Warning, lengthy flippant rant on "valuing" these warrants follows...none of this should be considered to in any way whatsoever representing anything vaguely resembling a professional valuation, read on a load of mindless claptrap if you dare LOL

NAV is $1.41 and exercise price of the warrants is probably going to be $1.25 so a real quick and easy calculation suggests the difference at 16 cents = warrant price.  Gosh this is easy eh, primary school stuff.

It can't be that easy I thought so I dusted off and polished up my trusty Black and Schoals option pricing model and played around with that almost endlessly with all sorts of different adjustments for different estimated volatility ratings of the market, anything from the current VIX on the US market of 14 to a more common recent average of 19.  Risk free rate varying from 5% down to possibly as low as 4%, 8% of dividends over the next 12 2/3rd's months, tried plugging in the current share price, then using the NTA, then adjusting the NTA for the dilutionary effect of the exercise of approx 80% of warrant holders and one or two other things and got answers varying from 12.3 cps to 14.5 cps.  I then decided that none of these answers are probably right because the fundamental weakness of this model is it's based on the random walk theory that nobody can predict the future direction of the market.  I reckon BP would have stopped right there and called it a day and said fair value is 12.3 - 14.5 cents and I am sure some professionals will get results like this and be happy with that answer.  But not this wily old Dog who picks up the distinct smell of this answer anywhere in that range being B.S..   Beagles always trust their nose because most of the time its right. So after about 2 hours of doing what I proudly thought was a pretty good professional job of looking and analyzing this I realized that the random walk theory probably doesn't hold water when you are at the top of the interest rate cycle.

So after doing all that I got to thinking the Black and Shoals model with its random walk theory probably needs to be "Beagalised" for the top of the interest rate cycle factor and what effect coming down off the peak has on the market over the next ~ 13 months.

But how much net present value does this add to the warrant ?  Gosh that's a really tough question.  Too hard really.  There must be a shortcut answer.  Not having a Beagle any more I decided to check how many claws Tony the Pony has on his four paws...maybe the answer to this mystery lies in there I mused after having probably consumed one too many beers and pondering how to Beagalise the Black and Shoals model for probably far too long LOL.

What do you know, he has 16 claws in total so at this point I have concluded the answer is that no matter if you take a really quick and dirty look at valuing this, as per my opening paragraph of this somewhat mindless rant of 16 cents, or you Beaglise the Black and Shoals pricing model for how many claws my dog Tony has to account for the top of the interest rate cycle, the answer is the same, 16.  This cannot be a coincidence, surely ?

We'll see how silly this all is tomorrow. or maybe it's right on the money and Beagalising the Black and Shoals model no matter how ridiculous it sounds, is actually a very cunning methodology....but then again I could have used the first quick and easy method, saved myself hours of musings and calculations and got exactly the same answer LOL

Disc: No confirmation bias was involved in adjusting the Black and Shoals model for how many claws Tony has or that it coincided with the first quick and easy valuation answer LOL   

So there you have it Ladies and Gentleman, the warrants will trade at about 16 cents tomorrow.  Gosh this stuff is easy.
Opps, I forgot his dew claw on each of his front feet, so maybe its 18 cents LOL

[winner (n)]

Good work there Basil

Pricing mechanisms bit too sophisticated for most so punters will do the easy sums and buy/sell what they think is fair

But as you pointed out previously these warrants are a vehicle to leverage returns over the next 12 months from KFL ......whether one is intending to take the 125 cent shares or capture what could be 100% to 200% returns if you time  exit right.

Your trusty Black-Scholes thingie will be useful when punters try to understand the warrants price in 3 or so months time .....so don't put it away