Update No. 157 – 05/04/14

A pretty large (well above market) spike took EGP’s share price to an all-time high this week. This spike was in a large part driven by a single stock.

This stock, which I have mentioned several times in the blog is Dicker Data, I last mentioned it when I made a sale of some of our holding at $1.28 per share a few weeks back. At the time, I said I hoped to regret the sale. I didn’t expect the regret to be so large and so fast…

The price of Dicker Data shares moved from $1.45 each to a high of $1.88 this week before closing at $1.75. This 30c move represents a 20.7% rise in the price at market of the firm in one week. Believe it or not, our internal rate of return on our Dicker holding at current prices exceeds 150% per annum (without including the value of the many Franking Credits we have received through dividends). They now represent more than 10% of our equity assets, so Dicker shares were responsible for close to 100% of our gain this week. I have said before, I have been surprised at the level of correlation between EGP and the market, but this week we felt the positive benefits of ‘concentration’, though I would caution fellow owners, from time to time, we will suffer down weeks for the same reason.

I am not sure of the reason driving the increase, prior to the recent Express Data acquisition; I would have valued the firm at around $1.20. If the acquisitions integration is even modestly successful, the value of the firm will rise sharply. If the acquisition goes very well, the current price could be very reasonable, but I will neither a buyer nor a seller be at these prices, CEO David Dicker recently said that at some point before September 2015 he intends to raise some equity to increase the liquidity in the stock (and reduce the debt taken on to facilitate the acquisition), he has stated he expects to raise the equity at a price of at least $2 per share (.pdf), I have spoken with David several times previously and always found him to be extremely cautious on matters of valuation, so I am inclined to wait and see how the acquisition pans out. In the meantime, if the price of Dicker (and consequently EGP) is a little volatile as the market tries to pinpoint value in an illiquid stock, don’t be too surprised.

I will leave in a few weeks to spend about a fortnight in the US. My followers on Twitter this week saw my mention having received my Annual Report and Berkshire Hathaway AGM and voting information. This year, for the first time, I will attend the largest corporate AGM in the world. The Berkshire holding is a direct personal holding – EGP Fund No. 1 is committed to holding cash and Australian listed shares, in time an International fund may develop if there is sufficient investor interest. As always, you, fellow shareholders are not paying for this extravagance, the costs are entirely my own.

If I have any US based readers, potential investors, or other interesting people who would like to catch up, my Wife and I will be in Los Angeles (West Hollywood) on April 23, 24 & 25. We will be available in Las Vegas on April 27, 28 & 29. We will be in Omaha May 1, 2, 3 & 4. We’ll also be spending some time in Minneapolis and Detroit, but already have full schedules there. Let me know if you’re around and would like to catch up (email: Tony@eternalgrowthpartners.com) – Tony Hansen 05/04/2014

P.S. I will give a rare recommendation for a business I used this week. I had cause (unfortunately) to need to replace the windscreen in a car this week. If you are Sydney based and need a glass repair or replacement for your car, I strongly recommend Russell at Ace Windscreens. So good to see a young businessperson with the right attitude to business and customer service.

EGP Fund No. 1 Pty Ltd. Up by 2.99%, leading the benchmark by 0.36% since January 1^st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 69.21%, leading the benchmark by 40.65% all-time (April 1^st 2011).

^{*1 after 31May 2013 dividend of 2.333 cents per share plus 1 cent per share Franking Credit}

^{*2 calculated based on dividends reinvested}