Portfolio as at end September
Asset	Bloomberg Ticker
H&T	HAT LN	15.9%
AIG	AIG US	13.6%
Avesco	AVS LN	13.8%
Commerzbank	CBK GY	11.8%
Safestyle PLC	SFE LN	11.2%
Emeco Holdings	EHL ASX	13.4%
Hargreaves Services	HSP LN	6.8%
Dolphin Capital	DCI LN	5.6%
Alternative Asset Opportunities	TLI LN	5.9%
Plaza Centers	PLAZ LN	0.5%
GBP Cash		1.5%
Quarterly Return	Quarterly Benchmark Return
-0.66%	3.1928%
Return Since Inception	Benchmark Return since Inception
18.10%	24.9%
Annualised Return since Inception	Annualised Benchmark Return since Inception
11.70%	16.00%

Portfolio Today

Asset	Bloomberg Ticker
Emeco	EHL ASX	12%
Safestyle	SFE LN	12%
Exova	EXO LN	11%
Avesco	AVS LN	11%
H&T	HAT LN	7%
AIG	AIG US	7%
Commerzbank	CBK GY	6%
Hargreaves	DCI LN	4%
TLI	TLI LN	3%
Dolphin	DCI LN	2%
Plaza	PLAZ LN	0%
Cash		26%

I've been pretty sloppy, I'm afraid, in reporting my Q3 results on the blog.  The reason is that I've made lots of changes in my financial life, including selling my flat and making my pension self managed.  This has meant that my funds have increased considerably, and the composition of my portfolio has changed a lot.  I'll be blogging over the next several weeks about my additions, and also about my decision to introduce leverage into the portfolio, and how I've done it.

I must admit that part of the reason for my tardiness may be my uninspiring results thus far.  Of course, I've thought about this a lot.  Some possible reasons are:

- I'm not very good at this.

- I think a lot about permanent loss of capital so my outperformance will come when the market is down.

- 2 years is a fairly meaningless amount of time to measure one's performance.

Time will tell which of these is correct, so in the meantime I will continue to plug away, and look for things that are obviously cheap.

And when I ponder my results, it is wise to not just examine one's buying decisions, but one's selling decisions as well.  Here, it would seem I've had more success, having been an owner of both Tesco and Imtech in the past, both of which have subsequently collapsed.  The lesson that these have taught me (as well as Hargreaves Services) is not to buy mediocre business because they look "a bit cheap".  Always be greedy in looking for obvious cheapness, if you're not buying a high quality business.

Quarterly Update

Asset Bloomberg Ticker H&T HAT LN 15.0% AIG AIG US 12.8% Avesco AVS LN 13.8% Commerzbank CBK GY 11.2% Safestyle PLC SFE LN 11.5% Emeco Holdings EHL ASX 13.9% Hargreaves Services HSP LN 9.1% Dolphin Capital DCI LN 5.9% Alternative Asset Opportunities TLI LN 5.8% Plaza Centers PLAZ LN 0.8% GBP Cash 0.1% Quarterly Return Quarterly Benchmark Return -7.80% 2.6625% Return Since Inception Benchmark Return since Inception 18.10% 24.9% Annualised Return since Inception Annualised Benchmark Return since Inception 11.70% 16.00% This was a poor quarter for me, reversing much of my out performance of the first quarter.  Unfortunately large idiosyncratic fluctuations are the price one pays for running a concentrated portfolio.  If a few stocks take a dive, then the effect will be substantial.  The good news for me is that I think I understand the reason for the falls and I think the declines are temporary. Emeco Holdings: Investors continue to shun stocks related to the mining sector amid the uncertainty around future prospects.  Yet the thesis remains the same.  The business will normalise to a lower level of assets and earnings in a few years, and large amounts of cash will be released. Commerzbank seems relatively healthy to me.  The stock fell sharply yesterday on news of a fine that was less than 15% of what BNP incurred and was less than what was provisioned.  This quarter they've sold the majority of their Spanish Real Estate assets and there has been little other adverse news.  I believe the stock continues to live under the cloud of the ECB Financial Stability Review.  As one of the banks with the lowest capital levels, there is a belief that it may have to raise capital.  As it is priced for this, I don't see a capital raise as too much of a threat to long term returns and indeed it may hasten the return of the perception of strength.  Things will be a lot clearer by the end of the year. Safestyle seems absurdly cheap to me.  It is priced at a P/FCF of around 10* and I believe it has suffered because the whole of the UK Small Cap has suffered, along with a swathe of IPOs. AIG continues its grind higher and I believe this will not stop any time soon.  In the context of the US market and US large caps it must be one of the few value stocks still out there!  As long as it trades below book and stock is rebought I'll be happy. Hargreaves Services was... an error. I was stupidly seduced by its optical cheapness and a write up I saw elsewhere.  While it has no doubt been hit by bad sentiment over the coal sector, and may be oversold, I fully admit to not fully understanding the business model and future prospects.  The recent profit warning it testimony to the poor quality of earnings.  This stock will struggle to ever achieve a premium multiple because any company operating in the coal sector will constantly have to adjust its business model to events.  There may be great riches to be made but will the market ever anticipate them?  H&T is another stock where I have probably not sufficiently considered the potential for multiple expansion.  The exposure to gold prices will remain in investors' minds for a long time and it will always have a certain cloud hanging over it.  That said, I do expect the upcoming interims to show positive progress on  deleveraging, margins and revenues.  The payday loan industry is being squeezed and pawnbrokers may receive some collateral benefit.  In addition, Albemarle and Bond have gone bankrupt, been bought and dramatically reduced their estate of stores.  The collapse of the gold price will have hurt many of the pawnbrokers that have opened in the last few years and H&T have indicated that the opportunity will exist for bolt on acquisitions.  In short, there appear to be multiple ways that good things can happen to this stock.  Even typing that sentence, I remembered that there is a trend towards people using their tablets and other electrical devices as collateral.  These are often one of the most valuable possessions that someone owns and many more people own tablets that gold jewelry, I would asset.  Again, I eagerly await their interim financials.  http://www.bbc.co.uk/news/business-27035109     http://www.ft.com/cms/s/0/141899d6-dcf6-11e3-ba13-00144feabdc0.html#axzz36yMLQMOr Dolphin Capital is truly a slow burner.  But read last weekend's FT and its special report on Greece, which highlighted expected growth in the luxury hotels sector and record numbers of tourists in Greece.  Dolphin are the experts in this sector and I remain happy to own assets at far less than book value. http://www.ft.com/cms/s/0/cda98386-fd41-11e3-bc93-00144feab7de.html?siteedition=uk#axzz36yMLQMOr This brings me to my recently initiated position in Avesco PLC.  I can take no credit for it, as it is the idea of Red Corner (http://quinzedix.blogspot.co.uk/2014/04/avesco-is-collection-ofbusinesses-that.html).  My investment priority is not to write a great blog or come up with great ideas.  It is to make as much money as possible, and so when I see a superior idea elsewhere I'm going to take it.  What I can add to his superb write up is that the interims have come out since, and they appear to make reality the thesis that growth Capex obscures the true earnings power of the business.  Market Cap is £21mln and trading profit (EBIT before restructuring) was £4.5mln in H1.  The management statement said all the right things, and they increased the dividend.  I am very happy to have this in my portfolio. Finally, Alternative Asset Holdings (TLI): When I bought this stock I acknowledged that there was currency risk involved but was comfortable bearing this risk.  The USD has since fallen pretty much in a straight line against GBP, cancelling out growth in underlying NAV and a promising amounts of realisations.  The company recently announced that it would start distributing cash, via returns of capital.  While buybacks would be ideal as the long as it is trading well below NAV, I appreciate that it is probably hard to execute a buy back programme with a micro cap such as this.  So, going forward, we can expect regular returns of cash.  At some point, the market has to realise the attractions of this security.