Tag Archives: Portfolio

Caldwell Partners (tse: cwl)

I recently took a small position in Caldwell Partners and I thought I would would do a post on why I bought. Just to be clear, it’s quite a small position relative to my other holdings. As usual, I stole this idea from others (h/t Gerry Wimmer and DeepDiscount).

I view Caldwell as a position that has good risk/reward profile and will make a nice addition to a portfolio that’s primarily driven by faster growing (and more expensive companies).


Caldwell is an executive search firm that specializes in finding the highest levels of management and operations across many geographies and functions. They have been slowly expanding the number of partners over the years.

The numbers

At $1.20 Caldwell has a market cap of 24.5 mil and an enterprise value of 8.1 mil. Yeah lots of cash. It trades at about 6.5x ebit and 2.2 ev/ebit. That’s statistically quite cheap. One would expect a slow growth (or no growth) business for those prices. They also pay a dividend that is yielding 6.7%.

See below for the income statement

There is top line growth with some operational efficiencies being gained.

See below for geographical mix.

Canada has been flat to slightly up while the US has been consistently growing.

See below for some quick analysis by geography. Note the different axis min/max and Europe is starting from a relatively low base.

The last quarter was particularly strong in Europe, we have seen this before.


Positive Comments

The news release from the latest quarter had positive comments that indicates that momentum may continue.

“This was an outstanding quarter, bringing the firm to a new high-water mark for revenue,” said John Wallace, chief executive officer. “Our search teams throughout our geographic regions drove strong growth in both search volume and the value of assignments, despite pressure from foreign currency rates. We are especially pleased with the quarterly profit of our UK operations. With the largest level of new bookings and revenue in a single quarter in our history, we are positioned well for the fourth quarter. The significant increase in volume and our sustained focus on strategic additions to our partner team is creating search execution support needs, for which we will continue to hire in the fourth quarter.”
Wallace continued: “There is a lot of positive momentum inside our firm right now – our updated brand has been very well received since its debut, and we are excited about the recent expansion of our Agile Talent offering with the launch of our Value Creation Advisory Solution. We have an exceptional team of talented professionals at every level, all working towards a common goal – to provide value to our clients and shareholders – and it shows.”


I think the most obvious risk that came to my mind was LinkedIn taking away market share in executive search. Anecdotally, I would have expected this to have been a bigger impact on lower and mid level managers and not senior leaders in important roles. One would think that LinkedIn could actually be leveraged as a tool by Caldwell. I would think that given how important the roles are in the organizations that quality of candidates matter more than anything. I see the Caldwell brand as particularly important.

The other big risk that I can think of is the economy. Less hiring equals less need for Caldwell’s services. One does tend to get nervous after 9 years in a bull market.

These risks are not going away, so you will have to get comfortable with them if you take a position. For me, I will control these risks by limiting exposure to Caldwell.


  • CEO – John Wallace. He jointed in 2008 and has previous experience in another executive search division of Hudson Highland Group. John owns about 20% of the shares.
  • COO & CFO – Chris Beck. Joined in 2013 as CFO. Recently appointed COO as well. Also has experience at Highland Parnters (which is a division of Hudson Highland Group).
  • Total compensation seems a little high, but much of the total compensation is based off performance bonuses.
  • Both of these gentlemen have employment agreements in place.
  • I think a key metric to think about is revenue per partner, which has been trending in the right direction.


  • The board is comprised of 5 members with 4 of them being deemed independent.
  • The Chair of the board is not the CEO of the company.
  • The board is comprised mostly of corporate directors.
  • Many of the board members are also on the board of other public companies.
  • Almost all board meetings had full attendance in 2017.
  • Compensation is a mix of fees and shares. Average 2017 compensation was $40k/director.
  • I did some digging on the board members and there seems to be pretty good mix of strategic, operations and public market presence.

Summing it Up

I think a starter position is warranted. I would be willing to add with continued confidence in operational leverage or other positive news. Caldwell is nice because you get paid to wait.

Disclosure: the author is long Caldwell Partners at time of writing.


Filed under Company Analysis

Energy Services Bets – Postmortem

So I made some bets on energy services company’s over the last 18-24 months or so. I thought now might be a time to do some sort of postmortem on the trades and see how they have performed. Full disclosure: recently I have added to some, sold some and continue to hold some of the company’s mentioned. See the Portfolio page for current holdings.

This post will be structured in 4 parts:

  1. Was it wise to bet on Energy Services sector relative to the overall market for the given time period? This should provide an indication of whether looking at the sector from a top down standpoint was a wise decision.
  2. Within the sector, did I pick stocks that outperformed? This should help me understand my stock picking abilities on an individual company basis for the time frame.
  3. Did the stocks that I chose outperform the market?
  4. Did the stocks chosen produce a positive total return?

Before getting started, below are the 4 companies I bought shares in. The first 3 are based in Canada, with the last one being Nasdaq listed.

Ticker Purchase Price Purchase Date Dividends Current Total Return Hold Time (yr)
psd.to $2.30 22/11/2016 $0.20 $3.10 43.5% 1.22
hwo.to $4.75 11/05/2017 $0.12 $4.01 -13.1% 0.76
ave.v $0.49 16/10/2017 $0.00 $0.53 8.2% 0.33
pfie $1.26 20/07/2017 $0.00 $2.19 73.8% 0.57

*Note the average hold time is 0.75 years (or 9 months)

Was it wise to bet on Energy Services sector relative to the overall market for the given time period?

When grading the bet on energy services vs. the overall market I chose the XIU.to (iShares S&P/TSX 60 Index Fund) and SPY (SPDR S&P 500 ETF Trust) for the overall market. For the energy services sector I chose the XEG.to (iShares S&P TSX Capped Energy Index Fund) and IYE (iShares Dow Jones US Energy Sector (ETF)) for the energy services sector.

Here’s how the bets have panned out:

Date Energy Services Market
22/11/2016 -17.6% 5.0%
11/05/2017 1.9% 2.5%
16/10/2017 -7.1% -2.4%
20/07/2017 4.5% 7.8%
Average -4.6% 3.2%

The results show that buying this sector because it was depressed may not have been the wisest strategy.

Within the sector, did I pick stocks that outperformed?

Using the same dates, how did the stocks that I chose do against their peers in the sector? This is definitely a nuanced question. Especially if you look at all the names in the ETF. Not sure it’s fair to grade a 50mil market cap Canadian company against a much larger company. Regardless, the results are below:

Date Energy Sector Stocks
22/11/2016 -17.7% 43.5%
11/05/2017 1.8% -13.1%
16/10/2017 -7.2% 8.2%
20/07/2017 4.5% 72.2%
Average -4.7% 27.7%

As you can see, on average I did better than the energy services sector during the time frame.

Did the stocks that I chose outperform the market?

When you stack up my picks against the market, you get the following results.

Date Market Dean
22/11/2016 5.0% 43.5%
11/05/2017 2.5% -13.1%
16/10/2017 -2.4% 8.2%
20/07/2017 7.9% 72.2%
Average 3.2% 27.7%

This is with the most recent pullback in the markets.

Did the stocks chosen produce a positive total return?

The results showed an average return of 28% over a 9 month time frame. No complaints here. Not sure I can really draw much of a conclusion over a 9 month period and with only 4 stocks being chosen.

Regardless, I wanted to share the results and invite any feedback readers may have.




Disclosure: See portfolio tab for current holdings.

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New Page…Portfolio

I know that posts have been light these days. But I am having trouble keeping up the blog with the recent flurry of activity at work.

I have added a new portfolio page. You can view it and feel free to comment on it.



PS. I have been selectively putting my cash to work in the market.

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Queue the top…

Pretty dramatic headline. I mentioned in a previous post that I would be doing something to minimize my exposure to the Edmonton housing market. I have already slowed down the pace of making extra mortgage payments in favour of investing in my RSP and TFSA. The only reason I post this publicly is because I wanted to allow for feedback and experiences to help be get a better understanding of what can go wrong.

I have decided to try the Smith Manoeuvre. It is really risky if you don’t understand the potential outcomes to your thesis. What I am essentially doing is borrowing against my house to invest. It is really a function of cost to borrow vs. total return. Right now the cost to borrow is 3.5% FOR NOW. We all now that it will move up. If I invest in a Canadian dividend paying company that pays a 3.5% dividend then I will have enough dividend income to cover my interest expense. This factors in tax deduction on the interest expense as well as the dividend tax credit at my marginal tax rate (36%).

Though this sounds simple enough, there are huge risks to employing leverage. For one thing my cost of borrowing can (and most certainly will) go up. I could also buy at a market top and suffer a significant decrease in my holdings paper value.

The biggest advantage I have is that my outstanding mortgage is only 20% of the appraised value of my house. Secondly the household income will cover the outstanding mortgage balance more than 2x in one year. A rise in interest rates won’t affect my debt load too much.

I have the following rules for my Smith Manoeuvre:

  • Outstanding balance will remain small relative to money that can be readily accessed (liquid securities).
  • Negative net value (LOC – securities) will not be allowed for more than a few months. If I have to stop putting money in an RSP and pay down some HELOC balance, then I will.
  • Dividend yields must be 4% or larger.
  • Companies must employ minimum debt and have a history of raising dividends.
  • An assumption that borrowing costs will be 5% in 3 years has be factored in to the model.
  • All purchases will be tracked against an index to monitor the author’s ability to pick stocks. The Smith Manoeuvre stocks will the their own separate portfolio that will be different from the “growth” names and bench marked accordingly.

I only plan on doing this while it makes sense. I doubt that it will make sense to do this for more than a few years. I have essentially planned a 4 year timeline where dividend income covers interest expense and I get the capital appreciation as a bonus.

I have read a ton of blogs (like this one) and articles on the fallacies of this type of investment. From what I can figure, most people lose on this investment because they bet the farm on it. They get a 350k house,  it goes up and then they maximize leverage at the wrong part of the cycle. Then they panic and sell at the worst time.

There are 2 things that give me confidence in this decision.

1) I feel that a methodical approach to picking stocks will give me enough margin  of safety to employ this strategy.

2) I haven’t changed my lifestyle even though my income has risen dramatically over the last 5 years. I mean value investing doesn’t just happen in the stock market. It transcends into the rest of your life.

Any feedback is welcome.



Filed under Portfolio Performance

2011 Performance and Thoughts

Another tough year.

I was down around 4%. Not too bad, but certainly not good.

Where did I go wrong?

The biggest issue was position size. I strayed too far and didn’t have any cash when the market tanked. I had to sell cheap to buy cheaper.

My ideal portfolio would have 3-5 core holdings making up 40-60% of my portfolio and 6-10 smaller positions. The core did OK in 2011. What I did was average down mindlessly. The two best examples are AEY and MGO.to.

AEY was kind of cheap when I first bought it around $3. Then I bought more at 2.75, 2.50, and 2.25. Not a bad idea, but I ended up overweight the company. Now I face the dilemma as to whether I should sell at this really cheap price or hang on. I still haven’t decided. Don’t get me wrong, I think AEY is a buy. But I only want 5% of my portfolio in at these prices.

MGO I also averaged down. I didn’t fully understand the risk of Chinese RTOs at first. Only after I turned my attention from operations to legitimacy did I made a mistake. Maybe MGO.to is a buy, but I only have so much room in the portfolio.

In order to prevent this in the future I have decided to make harder rules for position sizes.

The other factor was just my timing of adding to my portfolio. I was quite unlucky this year. Money was tight for a while as I was on parental leave for 3 months and also had some emergency house issues that required immediate attention. I seemed to add right at the peak and ran into liquidity issues at the wrong time. For example, when FES.to went below 10 I would have bought hand over fist. But I didn’t have the cash.

I have also learned to watch comps yoy. Really understanding where the company is on the industry map is important. Many companies are growing top line numbers, but with rising commodity prices have a lag in time before they can pass on costs. This is what is happening to HPS.A. They had some margin pressure, but have passed on higher costs. This means that 2012 comps should be better than 2011 as long as the top line sticks where it is at (or improves).

Let’s hope 2012 proves to be better.


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Yet More Updates…

I have been making some changes to the portfolio. To keep track I have been just spitting out one sentence reasons as to why. These positions deserve more than one sentence in the middle of a post. I will do a post for each sell after I have taken the action.

Why would I do this? I doubt people reading the blog care. I need to track my thinking at the time in order to monitor performance long term. I am still reluctant to post on anything other than investments. I did have a post on the housing market, but that was to track what the mentality was at the time of writing. I was ready to post/rant something on labor unions, but have decided against it.

Petty Cash is about helping me, and hopefully other beginner investors. I do better analysis when I know someone else can read it. There are enough blogs out there that provide more useful information than mine.

I will do a post for each WJA, FES and EQI (all on the TSX) outlining my reason for selling.


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2010 Performance and Thoughts

2010 is done and gone. There are some very important lessons that I learned. Before I get to that, I want to take some time to talk about how I look at performance.

First I wanted to say that I don’t go too in-depth when measuring my performance. I only have 2 methods I use.

Method #1 (Purchase Tracking)

First is my batting average. Every time I buy or sell a company, I take a look at how I would’ve done relative to the appropriate index. I include dividends for realized positions. This gives me a sense of how well I can pick stocks. Also, I track the sources of the investment idea (blog, screen, friend, etc.), this helps me see if I can pick stocks with or without outside sources. It lets me know if I should even be reading certain blogs, books, or analyst research. Since 99% of bloggers are more versed than me, seeing if I am able to pick up on any risks that have been missed. Even though my sources can be different, I perform due diligence myself on every company, so the ultimate blame lies in my hands.

How have I done? Quite well. I have tracked my picks back to when I really started taking value investing seriously, 2008. Pick that I have come up with have averaged 26% with an average hold time of 9.5 months. The reason the hold time is so low is that I have many positions still open that I had just started, and the run-up in 2009 led some picks to reach fair value in a short amount of time. Some winners were JNJ, KOF, NAL (tsx) and CWB (tsx). And some major losers were BLZ, MS, IDG and GAS (all on tsx). During that time the corresponding indexes have returned and average 16%. With ideas that I generated by myself the return jumps to just over 40%. This is a function of me concentrating on businesses that are close to home and that I can understand.

Method #2 (Overall Performance Tracking)

For this method I monitor my performance relative to what I would earn if I had a completely hands off portfolio. The hands off aspect tries to demonstrate if I should even be managing my own money. Maybe I could focus on other things and only manage a portion (or none) of my money.

The “hands off” portion is 3 different ETFs, CBQ (25%), XIU (50%) and SPY (25%), with no cash to try to market time. CBQ and XIU trade on the tsx. I started out the year with the same amount of money in my brokerage account and every time I contributed money, I would buy a predetermined mix of the 3 different ETFs. This mock portfolio takes into account dividends, transaction costs, currency fluctuations and “lumpiness” of contribution. I also rebalance annually. My thinking is that if in 3 years I haven’t outperformed, then I should consider handing over the reigns to somebody more capable.

This years results are disappointing. The market returned around 8% and I returned around 4.5%. Being 3.5% behind is not great considering I did have a few good ideas for 2010, but I guess my bad ideas could have been worse.

The contributions to my portfolio are lumpy. Sometimes I contribute (though don’t purchase anything) at market highs and sometimes they are at market lows. This method shows whether or not I can even find good ideas fast enough to prevent cash from building up. This year I contributed over 20% of my gross income and if my portfolio was flat, I would have added an extra 30% to my portfolio. So you can see that finding good ideas is paramount.

This method shows my ability to “manage” the portfolio. Position sizing, cash size, currency fluctuations are key. The positives have been MCB, FES, and MGO (all on tsx). While the negatives have been NTRI, the banks, and MHH. Taking profits when the Mr. Market is giving you the chance is huge. Waiting for an extra 5-10% for a fair value you thought would take years to reach is RISKY.

There are also some companies that have been purchased recently that are showing some minor losses due to volatility and frictional costs.

In 2008 I was down around 25%. In 2009 I was up around 60%. And 2010 I was almost flat. Volatility seems to be the norm.

Why do I not care about mean, variability, alpha, Treynor, or any other measurement? I buy my groceries in dollars, I pay my mortgage in dollars, not anything else. When I turn grey, or hit my mid-life crisis, I will by my muscle car with dollars. If a person can time the market and pick low quality stocks, does it matter in 20 years how they generated outsized returns..NO! What if it was a person who only really understood one or two industries, and he/she still was able to do better than the market? To me all that matters is dollars and cents. I don’t manage others money, and I dont’ have to worry about withdraws at the wrong time. I can focus on the portfolio.

The lesson of 2010 is to focus on managing the portfolio, not just picking stocks. I guess the portfolio is kind of like a tamagotchi pet; if you leave it alone too long you will have a mess to clean up.


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