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Shinning with Donald Smith’s New Buys

February 25, 2014 | About:
Victor Selva

Victor Selva

9 followers

Donald G. Smith is the CIO of Donald Smith (Trades, Portfolio) & Co. In the last quarter he bought three new stocks, and holds 80 in total, in a portfolio valued at $5.017 million.

New Gold Inc. (NGD)

Smith revealed owning a stake of 5,038,877 New Gold Inc. shares, worth 0.53% of his portfolio. New Gold Inc. has a market cap of $3.21 billion; its shares are trading currently at around $6.41 with a P/E ratio of 16.1 and a P/B ratio of 1.08.

New Gold is a gold producer engaged in gold mining and related activities including acquisition, exploration, extraction, processing and reclamation. Since the same quarter one year prior, revenues increased by 0.3%. Despite this growth, the company underperformed as compared with the industry mean of 3.9%. This year, the firm expects a production of 400,000 ounces of gold, and a copper production of around 100 million pounds (an increase of 12% over 2013).

Hedge fund gurus have also been active in the company. Jim Simons (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and the fund RS Investment Management (Trades, Portfolio) have also invested in it.

Pan American Silver Corporation (PAAS)

Smith reported a stake of 1,458,656 shares of Pan American Silver Corporation, sized at 0.34% of his portfolio, and 0.29% of the company. It has a market cap of $2.32 billion; its shares are trading at $15.44 with a P/B ratio of 0.92 and P/S ratio of 2.64.

Pan American is engaged in the production and sale of silver, gold and other base metals including copper, lead and zinc as well as other related activities, including exploration, extraction, processing, refining and reclamation. The company’s primary product is silver and is produced in countries such as Argentine, Bolivia, Mexico and Peru. Due to falling silver prices in the past, stock price declined but recent earnings release is attractive for investors, as well as the high dividend yield of 3.4%, which is higher than other silver mining companies.

Hedge fund gurus have also been active in the company. Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), David Dreman (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) have also invested in it in the last quarter.

Blue Capital Reinsurance Holdings Ltd. (BCRH)

Finally, Smith reported owning 712.396 shares of Blue Capital Reinsurance Holdings Ltd., sized at 8.1% of the company’s shares outstanding and 0.26% of Smith’s portfolio.

Blue Capital Reinsurance Holdings Ltd., a development stage company, intends to offer collateralized reinsurance in the property market. The company was incorporated in 2013 and is based in Pembroke, Bermuda. It has a market cap of $147.4 million, with a EV-to-EBIT of 7.4. On Feb. 10, Zacks Investment Research downgraded the company to a Rank #5 (Strong Sell).

Final Comment

I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. Let´s compare each company with the industry mean in the next table:

Ticker

ROE (%)

Industry Mean (%)

NGD

7.4

-7.3

PAAS

3.2

-7.3

BCRH

Not Available

Not Available

As we can see, both companies have a higher ROE than it peers which is considered good.

Disclosure: Victor Selva holds no position in any stocks mentioned.


Rating: 4.5/5 (4 votes)

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