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WTG Praetorian!
- Thread starter uptik2000
- Start date
Harris blew out,, The selling never ended.
Another rich kid bits the dust, big deal.
To the Members and Shareholders of the Praetorian Funds:
We just completed yet another month that was quite good in most respects; unfortunately the
market has refused to give our companies any credit. I have mentioned this before: my job is to
purchase large pieces of rapidly growing businesses that trade at very significant discounts to
what an intelligent buyer would be willing to pay for them. Once we own these positions, my
focus is on ensuring that they are performing in line with our expectations. Should they perform
on target or better, we will make a few fold on our investments within a few years. My time
horizon is three years at a minimum. It is this factor that makes my job so frustratingâthere is
no way to know exactly when these shares will appreciate towards fair value. They should never
have been cheap enough for us to own them in the first place. Sometimes, a cheap security can
decline further in value. This creates opportunity. Starting last fall, we saw a nearly universal
decline in our positions. Many are down by more than two-thirds from their peaks. This has
greatly hurt our performance. However, I feel unconcerned since almost every company
reported results that were roughly in line with expectations, and quite a few significantly
surprised to the upside. At some point the market will realize this and we will be well rewarded.
In most cases, we still have profits on our positionsâwe have just reversed some of our prior
gains. I really have no regrets about not taking profits when we were up more since I think these
companies will greatly exceed prior highs in the next few years.
As I write this, our portfolio trades at the largest discount (since the fundâs inception) to what I
call âfair valueâ. The only time that was even close was the first day of trading in 2003; the
portfolio then increased nearly five fold in the next 18 months. I felt that our holdings then traded
at around 20% of âfair value.â I would say that the portfolio now trades at about 15% of âfair
value.â For a point of reference, we only purchase shares that trade at less than one-third of âfair
value,â and on average the portfolio has traded at around 40% of âfair valueâ since inception. I
would caution you that these valuations are very subjective. My idea of âfair valueâ is different
than other peopleâs idea of valueâthatâs what makes a market. While there is no way to know
when our portfolio will rebound, I think we are primed for very significant upside in the coming
months; the valuation of our portfolio companies is simply unprecedented.
Another rich kid bits the dust, big deal.
To the Members and Shareholders of the Praetorian Funds:
We just completed yet another month that was quite good in most respects; unfortunately the
market has refused to give our companies any credit. I have mentioned this before: my job is to
purchase large pieces of rapidly growing businesses that trade at very significant discounts to
what an intelligent buyer would be willing to pay for them. Once we own these positions, my
focus is on ensuring that they are performing in line with our expectations. Should they perform
on target or better, we will make a few fold on our investments within a few years. My time
horizon is three years at a minimum. It is this factor that makes my job so frustratingâthere is
no way to know exactly when these shares will appreciate towards fair value. They should never
have been cheap enough for us to own them in the first place. Sometimes, a cheap security can
decline further in value. This creates opportunity. Starting last fall, we saw a nearly universal
decline in our positions. Many are down by more than two-thirds from their peaks. This has
greatly hurt our performance. However, I feel unconcerned since almost every company
reported results that were roughly in line with expectations, and quite a few significantly
surprised to the upside. At some point the market will realize this and we will be well rewarded.
In most cases, we still have profits on our positionsâwe have just reversed some of our prior
gains. I really have no regrets about not taking profits when we were up more since I think these
companies will greatly exceed prior highs in the next few years.
As I write this, our portfolio trades at the largest discount (since the fundâs inception) to what I
call âfair valueâ. The only time that was even close was the first day of trading in 2003; the
portfolio then increased nearly five fold in the next 18 months. I felt that our holdings then traded
at around 20% of âfair value.â I would say that the portfolio now trades at about 15% of âfair
value.â For a point of reference, we only purchase shares that trade at less than one-third of âfair
value,â and on average the portfolio has traded at around 40% of âfair valueâ since inception. I
would caution you that these valuations are very subjective. My idea of âfair valueâ is different
than other peopleâs idea of valueâthatâs what makes a market. While there is no way to know
when our portfolio will rebound, I think we are primed for very significant upside in the coming
months; the valuation of our portfolio companies is simply unprecedented.
Fortunately, this two-thirds decline in the average portfolio position has been blunted somewhat
by the fact that near peak prices we had a third of the portfolio in cash. Even more importantly,
consistent trading and premium-writing gains have offset our losses to a very large extent until
April. After April, the magnitude of the losses in our portfolio positions could no longer be
hidden by other gains which were consistentâyet small. However, cash flow from trading and
premium writing has been used to continue purchasing our favorite companies as they have
declined in value. Therefore, any bounce in the shares will be disproportionately beneficial to our
performance going forward.
I hate repetition, but the declines we have witnessed in previously-undervalued securities has
simply been unprecedentedâparticularly when the businesses are performing so well. It has
simply baffled our CEOs as well. Many of them have used the recent declines to make sizable
open market purchases themselves. While there are many facets to stock market investing, no
single metric is more likely to bring you profitability than buying those companies with
significant insider buying. Investors often will purchase companies with sizable insider buying;
if nothing else, the selling pressure comes to an end. Lately, we have seen insider buying have
little or no impact on the market prices of securities; it seems that nothing at all can make them
stop going down. I have a theory for whatâs going on. I think that the ownership profile of the
market has changed over the past few years, making the world we navigate even more
dangerous.
A decade ago, the market was dominated by huge mutual funds and their pension fund brethren
who moved even slower. Buy and sell decisions were a slow, labored process that took weeks.
Stocks were bought to be owned for years. Leverage was never considered and redemptions were
rare. A secure asset base allowed investors to do their jobs and invest for the long run. No one
cared about the little wiggles in share prices which are the very nature of the market. Businesses
were bought to be ownedânot traded like sardines.
Then a bunch of pension consultants convinced people that they should invest in hedge funds
because they could achieve consistent upside while trading around the downside. In itself, that
should sound like a fallacy. These hedge funds promised low volatility and monthly liquidity.
They used strategies that were very successful when they were small and nimble but are
counterproductive now that these funds have grown into the billionsâor even tens of billions.
More importantly, by allowing monthly liquidity and making performance promises that were
impossible to keep, these funds set themselves up with very dangerous capital bases.
Multiple funds use essentially the same playbook. They all try to achieve short-term gains based
on moving averages, valuation screening, momentum and whatnot. They use significant leverage
which makes them larger than they otherwise ought to be. The sheer size of these portfolios
serves to only accentuate these moves, especially because many of these funds own the same
positions.
For many years, this trend was in forceâliving in Miami, I was largely oblivious to it. Now this
trend is going in the other direction. Even though we are somewhat offset from the herd in our
small-cap names, we are not immune. Many of these funds are âblowing-up.â They are facing
margin calls, redemptions, liquidations, or a combination of the three. In general, they are selling
not because they want to but because they have to. This is making an already very weak market
all the more weak. I wish I had seen this coming. I personally thought that our smaller companies
were immuneâparticularly because they were so small and had so little institutional ownership.
Over the past few weeks, I have learned of a few dozen funds that are mining-focused which are
liquidating. These funds at peak were nearly ten billion dollars in assets. When you consider that
the market cap of all gold mining companies was only about two hundred billion, this is really
quite scary. Many other hedge funds owned mining assets because they were going up. Now that
they are going down, they sell them because they do not know why they owned them in the first
place. The amount of selling that is done because people have toânot because they want toâis
stunning. This is further accentuated by hedge funds with monthly liquidity terms that are facing
massive redemptions. I do not know when this all will run its course, but it eventually will.
Fortunately, we have only a quarter of our assets in mining sharesâthough these have been
pummeled quite well. Tangentially, we have another 40% of our assets in mining services
companies which these same funds seem to have owned. At least I now understand why these
shares were going down so much in the past few months.
I think that people have forgotten that the price of gold has gone from $250 an ounce to $800 an
ounce, while silver has gone from $4 and ounce to $12 an ounce over the past seven years. These
are big moves, even after significant recent pullbacks. I think we have reached the nadir in these
pullbacks. Sizable liquidations happen at market bottoms, not tops. I donât know when the
pullback will end, but at least I know why it is so severe. Multiple funds played with too much
leverage, they promised too much to their investors who are now redeeming, they acted
foolishly. Fortunately, we will survive this and thrive once the selling does end. We can use
trading and premium-selling gains to offset whatever losses we suffer in mining and small cap
stocks. I have been here before in 2002 when I ran my own money and onwards in 2003 and
2004 when I was running the fund.
At one point, I was down over 30% in 2002, by year end, I was up over 90%. The next year, the
fund made over 300%--and the year after, it made over 50% (gross of incentive allocations).
These moves lower are what recharge massive bull runsâthey eliminate companies and ensure
that the strong survive. I think our companies are well capitalized and in good position to make
something off of the weakness that others are experiencing. Right now is quite frustrating for me.
Iâm watching large blocks of our companies sold out at stupid prices. There is nothing we can do
but wait for this selling to end.
Sincerely,
Harris Kupperman:.
by the fact that near peak prices we had a third of the portfolio in cash. Even more importantly,
consistent trading and premium-writing gains have offset our losses to a very large extent until
April. After April, the magnitude of the losses in our portfolio positions could no longer be
hidden by other gains which were consistentâyet small. However, cash flow from trading and
premium writing has been used to continue purchasing our favorite companies as they have
declined in value. Therefore, any bounce in the shares will be disproportionately beneficial to our
performance going forward.
I hate repetition, but the declines we have witnessed in previously-undervalued securities has
simply been unprecedentedâparticularly when the businesses are performing so well. It has
simply baffled our CEOs as well. Many of them have used the recent declines to make sizable
open market purchases themselves. While there are many facets to stock market investing, no
single metric is more likely to bring you profitability than buying those companies with
significant insider buying. Investors often will purchase companies with sizable insider buying;
if nothing else, the selling pressure comes to an end. Lately, we have seen insider buying have
little or no impact on the market prices of securities; it seems that nothing at all can make them
stop going down. I have a theory for whatâs going on. I think that the ownership profile of the
market has changed over the past few years, making the world we navigate even more
dangerous.
A decade ago, the market was dominated by huge mutual funds and their pension fund brethren
who moved even slower. Buy and sell decisions were a slow, labored process that took weeks.
Stocks were bought to be owned for years. Leverage was never considered and redemptions were
rare. A secure asset base allowed investors to do their jobs and invest for the long run. No one
cared about the little wiggles in share prices which are the very nature of the market. Businesses
were bought to be ownedânot traded like sardines.
Then a bunch of pension consultants convinced people that they should invest in hedge funds
because they could achieve consistent upside while trading around the downside. In itself, that
should sound like a fallacy. These hedge funds promised low volatility and monthly liquidity.
They used strategies that were very successful when they were small and nimble but are
counterproductive now that these funds have grown into the billionsâor even tens of billions.
More importantly, by allowing monthly liquidity and making performance promises that were
impossible to keep, these funds set themselves up with very dangerous capital bases.
Multiple funds use essentially the same playbook. They all try to achieve short-term gains based
on moving averages, valuation screening, momentum and whatnot. They use significant leverage
which makes them larger than they otherwise ought to be. The sheer size of these portfolios
serves to only accentuate these moves, especially because many of these funds own the same
positions.
For many years, this trend was in forceâliving in Miami, I was largely oblivious to it. Now this
trend is going in the other direction. Even though we are somewhat offset from the herd in our
small-cap names, we are not immune. Many of these funds are âblowing-up.â They are facing
margin calls, redemptions, liquidations, or a combination of the three. In general, they are selling
not because they want to but because they have to. This is making an already very weak market
all the more weak. I wish I had seen this coming. I personally thought that our smaller companies
were immuneâparticularly because they were so small and had so little institutional ownership.
Over the past few weeks, I have learned of a few dozen funds that are mining-focused which are
liquidating. These funds at peak were nearly ten billion dollars in assets. When you consider that
the market cap of all gold mining companies was only about two hundred billion, this is really
quite scary. Many other hedge funds owned mining assets because they were going up. Now that
they are going down, they sell them because they do not know why they owned them in the first
place. The amount of selling that is done because people have toânot because they want toâis
stunning. This is further accentuated by hedge funds with monthly liquidity terms that are facing
massive redemptions. I do not know when this all will run its course, but it eventually will.
Fortunately, we have only a quarter of our assets in mining sharesâthough these have been
pummeled quite well. Tangentially, we have another 40% of our assets in mining services
companies which these same funds seem to have owned. At least I now understand why these
shares were going down so much in the past few months.
I think that people have forgotten that the price of gold has gone from $250 an ounce to $800 an
ounce, while silver has gone from $4 and ounce to $12 an ounce over the past seven years. These
are big moves, even after significant recent pullbacks. I think we have reached the nadir in these
pullbacks. Sizable liquidations happen at market bottoms, not tops. I donât know when the
pullback will end, but at least I know why it is so severe. Multiple funds played with too much
leverage, they promised too much to their investors who are now redeeming, they acted
foolishly. Fortunately, we will survive this and thrive once the selling does end. We can use
trading and premium-selling gains to offset whatever losses we suffer in mining and small cap
stocks. I have been here before in 2002 when I ran my own money and onwards in 2003 and
2004 when I was running the fund.
At one point, I was down over 30% in 2002, by year end, I was up over 90%. The next year, the
fund made over 300%--and the year after, it made over 50% (gross of incentive allocations).
These moves lower are what recharge massive bull runsâthey eliminate companies and ensure
that the strong survive. I think our companies are well capitalized and in good position to make
something off of the weakness that others are experiencing. Right now is quite frustrating for me.
Iâm watching large blocks of our companies sold out at stupid prices. There is nothing we can do
but wait for this selling to end.
Sincerely,
Harris Kupperman:.
Praetorian Capital Investments LLC
Praetorian Offshore Investments Ltd.
Performance Summary
August 2008
Current Month Year-To-Date
Performance Measures
Time-weighted Rate of Return (Gross of
Performance Allocation)
-8.85% -36.12%
S&P 5001 Rate of Return 1.22% -12.64%
Exposure (as % of Equity, including the notional
value of futures positions)
Long 95.0%
Short 0.0%
Net Exposure 95.0%
Holdings (as % of Equity, including the notional
value of futures positions)
Precious Metals Mining Equities 21.7%
Base Metals Mining Equities 1.1%
Mining Services Equities 39.9%
The fundâs performance was frustrating again. Trading gains of 2% and a good return
from the option book at month end helped to somewhat offset the declines in our shares.
In particular, two separate funds that had sizable mining services positions are in the
process of liquidating. This has greatly hurt our performance. Simultaneously, multiple
other funds with heavy commodity exposure are either liquidating or scaling back. This is
all weighing on our shares where there is almost a complete dearth of buying other than
insider buying.
I wish I could tell you when this will endâthere is no way to know. However we own
great companies where business is going quite well. At some point, we will get paid on
these investments.
Its a wipe out!! Another rich kid bites the dust.
God, you guys will follow anyone!
Praetorian Offshore Investments Ltd.
Performance Summary
August 2008
Current Month Year-To-Date
Performance Measures
Time-weighted Rate of Return (Gross of
Performance Allocation)
-8.85% -36.12%
S&P 5001 Rate of Return 1.22% -12.64%
Exposure (as % of Equity, including the notional
value of futures positions)
Long 95.0%
Short 0.0%
Net Exposure 95.0%
Holdings (as % of Equity, including the notional
value of futures positions)
Precious Metals Mining Equities 21.7%
Base Metals Mining Equities 1.1%
Mining Services Equities 39.9%
The fundâs performance was frustrating again. Trading gains of 2% and a good return
from the option book at month end helped to somewhat offset the declines in our shares.
In particular, two separate funds that had sizable mining services positions are in the
process of liquidating. This has greatly hurt our performance. Simultaneously, multiple
other funds with heavy commodity exposure are either liquidating or scaling back. This is
all weighing on our shares where there is almost a complete dearth of buying other than
insider buying.
I wish I could tell you when this will endâthere is no way to know. However we own
great companies where business is going quite well. At some point, we will get paid on
these investments.
Its a wipe out!! Another rich kid bites the dust.
God, you guys will follow anyone!
Quote from dennismenace:
Harris blew out,, The selling never ended.
Another rich kid bits the dust, big deal.
To the Members and Shareholders of the Praetorian Funds:
We just completed yet another month that was quite good in most respects; unfortunately the
market has refused to give our companies any credit. I have mentioned this before: my job is to
purchase large pieces of rapidly growing businesses that trade at very significant discounts to
what an intelligent buyer would be willing to pay for them. Once we own these positions, my
focus is on ensuring that they are performing in line with our expectations. Should they perform
on target or better, we will make a few fold on our investments within a few years. My time
horizon is three years at a minimum. It is this factor that makes my job so frustratingâthere is
no way to know exactly when these shares will appreciate towards fair value. They should never
have been cheap enough for us to own them in the first place. Sometimes, a cheap security can
decline further in value. This creates opportunity. Starting last fall, we saw a nearly universal
decline in our positions. Many are down by more than two-thirds from their peaks. This has
greatly hurt our performance. However, I feel unconcerned since almost every company
reported results that were roughly in line with expectations, and quite a few significantly
surprised to the upside. At some point the market will realize this and we will be well rewarded.
In most cases, we still have profits on our positionsâwe have just reversed some of our prior
gains. I really have no regrets about not taking profits when we were up more since I think these
companies will greatly exceed prior highs in the next few years.
As I write this, our portfolio trades at the largest discount (since the fundâs inception) to what I
call âfair valueâ. The only time that was even close was the first day of trading in 2003; the
portfolio then increased nearly five fold in the next 18 months. I felt that our holdings then traded
at around 20% of âfair value.â I would say that the portfolio now trades at about 15% of âfair
value.â For a point of reference, we only purchase shares that trade at less than one-third of âfair
value,â and on average the portfolio has traded at around 40% of âfair valueâ since inception. I
would caution you that these valuations are very subjective. My idea of âfair valueâ is different
than other peopleâs idea of valueâthatâs what makes a market. While there is no way to know
when our portfolio will rebound, I think we are primed for very significant upside in the coming
months; the valuation of our portfolio companies is simply unprecedented.
Fund closed ?
Do you have any performance stats ?
Quote from western:
Sounds like praetorian is still hanging in there. His fund might be down 30%+ but he's not leveraged and as long as his investors' money is locked up, he hopefully will be able to ride this out.
Keep on believing lalalalala
NEGATIVE 36% in AUGUST markets have collapsed since this time...
Cant believe investors would buy these lines and the resultung shit companies. Ya just cant have that volatility and survive.
Quote from western:
Too bad he stopped posting here on ET, as he is an incredible trader.
An incredible ET poster maybe.
Ya gotta be kidding about this trust fund being a trader, he bouht LONG SHOTS and it worked out sometimes. Tat aint trading, thats a lucky gambler who can BS.
Why not ask the investors?? I sure they disagree. They isnt happy with the skilled trader, LOL
Christ, didn't know I'd popped in at such an auspicious time. Thank U Mr. Menace for the update. But as Prae's defender I will have to kick your butt. Is the fund down and out? 2 things -1.. it isn't "the world we navigate"-- it's the slime hole we crawl about in--the mkt. 2. Harris U maybe trading to large to use your best talents--execution--getting in and getting out.