The Sugar Refiner Shares We Own Are Surprising Me (and More Portfolio Updates)

I hardly ever talk about the portfolios I manage (the last time was when I added Campbell Soup to the blue chip reserve portfolio in Some Changes In the Portfolio), mostly because investment ideas are rare.  Still, I write about it to the same extent I would be willing to discuss something over coffee with fellow investors so here are some thoughts about what has been going on at Kennon Green Enterprises lately.

The shares of the sugar refiner I had one of my businesses buy only 3 months ago are already up 15.40%, giving a fantastic annualized return.  I’m thinking about selling them but need to go back through the financial statements one more time before I make a decision.

What I really want for Christmas is for General Electric to break $20 per share because if that happens, Joshua Kennon, my friends, is going to break out the champagne.  We started buying it at $6 at the height of the recession and it is already up to $15 to $16 but I have a substantial block of call options through one of my retirement plans that expire in January using a strategy that is not appropriate for anyone reading this.  At this point, every $1 change in share price means a massive gain in our position value.

I could always roll the options forward and exchange more time for a slightly higher strike price but given that I hardly ever utilize derivatives in a risky manner like this, it makes me uncomfortable.  Virtually all of our assets are plain vanilla, Benjamin Graham value investing so this stands as an outlier that definitely falls under the “speculation” category.  If I can close them out at a high enough profit, I will likely convert them directly to outright common stock and park them indefinitely.

If I recall correctly, there haven’t been any additions to our Berkshire Hathaway investments since the last time I wrote about buying stock.  I’d really like to get everything in order this year and pick up more but there is a list of other things that must come first.

Of course, all of these are mere distractions compared to the true action, which is the secret project and the operating companies.  You already know one of my investment companies, Cherrywood Capital Group, divested two of its retail businesses so it could focus on its other assets, such as Gilded Life.

I am only 1/3 the way through my second book and I am going to have to push the Kennon & Company stores off unto the future because the other opportunities look bigger.  It is going to come down to resource allocation; always put the most chips of the highest payouts.

The reality is, if my team pulls off the targets we have at the operating companies over the next 24 to 36 months, the investment portfolios will be inconsequential.  I don’t just want a home run, I want a grand slam.  I truly can’t wait to tell you all about it, but it just would be stupid to open my mouth for competitive reasons until everything is in place.  As I always say, the business comes first, even if it means restraining myself.

It’s all build up to hedge fund mode.  In the next few years, I’m wrapping the entire enterprise into an investment partnership and raising money to manage on a profit share basis.  We get so much closer each day that passes.  I just want to speed up the time frame.

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6. Berkshire Hathaway Shares Are Trading at the Lowest Valuation In Nearly a Decade
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