Professional Documents
Culture Documents
INSIGHT
Todays U.S. experience much to the contrary, there are unloved industries
and regions around the world. Thats where David Iben will be hard at work.
INVESTOR INSIGHT
FEATURES
David Iben
Kopernik Global Investors
Investment Focus: Seeks companies
that based on bottom-up fundamental
analysis are inexpensive, often for more
top-down big-picture reasons.
PAGE
Cameco
Centrais Eletricas
13
Juniper Networks
12
Newcrest Mining
PepsiCo
15
Polypore
14
SkyWest
I N V E S T O R I N S I G H T : David Iben
David Iben
Go Anywhere
David Ibens first job as a securities analyst was at Farmers Insurance, where he
ended up spending 14 years and learned,
he says, the value of independent thought
and an open mind: Maybe it was because
it wasnt a traditional money manager, but
no one ever told us we must be growth or
we must be value, or we must own small
caps or we must own large caps. It was all
about buying companies at good prices.
In 1998 he started his own firm, which
he sold to NWQ Investment Management and which eventually morphed into
Tradewinds Global Investors, where he
was CIO until 2012, at which point he was
responsible for $38 billion in assets, $24
billion of which were in funds he directly
managed.
Concluding that small, employee-owned
firms are the place to be, Iben in June
2012 signed on to run the Global Value
long/short portfolio of Vinik Asset Management, not long before owner Jeffrey
Vinik decided to return capital to outside
investors and focus on his other business
interests. Thus was born Kopernik Global
Investors, which Iben started last fall with a
similar go-anywhere mandate to his experience at Farmers. To not paint yourself in
a small corner is very important, he says.
Value Investor Insight 2
I N V E S T O R I N S I G H T : David Iben
ON RUSSIA:
It may be foolish to say its
a ten out of ten in attractiveness, but to say its a zero
out of ten is also foolish.
Youve been active in Russia. How do you
reconcile whats going on there with finding cheap stocks?
DI: Were always looking at where people
are irrationally afraid. When things are
going bad investors tend to take 200% of
the bad news and put it in the stock price
and when things are going well they tend
to put 200% of the good news in the stock
price. So its often right to buy from people who are emotional and selling not because theyve done the math, but because
theyre afraid.
People are correct that corruption in
Russia is much more prevalent than it is
here. That it is a more expensive and less
efficient place to do business. That its legal
system hasnt always supported property
rights. That the government is powerful
and led by someone who doesnt tend to
play by the same rules as everyone else.
That clearly increases risk.
But is Russia all bad? While weve
spent the last 30 years living beyond our
means, Russia hasnt its debt is only
37% of GDP, one-tenth the levels in the
U.S. and Europe. It has more stuff the rest
of the world wants to buy than it needs
to buy from the rest of the world, so it
generates a trade surplus. It has an eduwww.valueinvestorinsight.com
I N V E S T O R I N S I G H T : David Iben
ON GOLD MINERS:
There are legitimate concerns, but 200% of those
concerns are priced in and
the stocks are too cheap.
commercial chicken producer in all of Europe and which also owns a lot of farmland to grow its own feed. People who
know say that Ukrainian farmland is right
up there in quality with land in Iowa, but
if we isolate what we believe the market
is paying for that farmland, it comes to
around $2,500 per acre. So in owning
the stock, we not only get a profitable
and growing poultry producer at about
8x earnings, but we also have effective
ownership of high-quality farmland at a
significant discount. As you might imagine, however, this isnt a bet were willing
to consolidate on one attractive company
in the Ukraine. So we also have a basket
here, including names like SLC Agricola
[SLCE3:BZ] and BrasilAgro [LND] in
Brazil and Cresud [CRESY] in Argentina.
How in general do you think about managing risk?
sense to put all your money in an individual name where you have to worry about
management making a big mistake or a
government being overly aggressive. Its a
good industry to spread your bets around.
Are you doing something similar today
with farmland?
DI: Yes. Here were weaving together the
bottom-up and the top-down. From the
beginning of time until I was born, three
billion people were added to the planet.
From when I was born to now, another
four billion or so have come on. But there
has basically been no real change in the
amount of farmland, so farmland becomes
more valuable.
In recent years weve been happy to invest in tractors, fertilizer and other things
related to agriculture. Over that time the
price of high-quality farmland has risen
rapidly its now $7,000 or so per acre on
average in Iowa, up from $2,000 not that
many years ago. Well plead indifferent to
whether thats the correct price, but what
interests us is when we can find comparable farmland to that valued within public
companies at a fraction of the cost.
We own a Ukrainian company called
MHP [MHPC:LI], which is the largest
www.valueinvestorinsight.com
I N V E S T O R I N S I G H T : David Iben
INVESTMENT SNAPSHOT
Centrais Eletricas
(Brazil: ELET6:BZ)
Price
52-Week Range
Dividend Yield
Market Cap
BRL 10.78
BRL 7.96 BRL 12.90
n/a
BRL 9.71 billion
Financials:
Revenue (TTM)
EPS (Est. 2013)
EPS (Est. 2014)
Valuation Metrics
(Current Price vs. TTM):
P/E
ELET6
IBOV
n/a 19.9
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
2012 2013 2014
www.valueinvestorinsight.com
Cl
I N V E S T O R I N S I G H T : David Iben
INVESTMENT SNAPSHOT
Cameco
(NYSE: CCJ)
Financials (TTM):
Revenue
Operating Profit Margin
Net Profit Margin
Share Information
Valuation Metrics
(@3/28/14):
Price 23.01
52-Week Range
Dividend Yield
Market Cap
$2.49 billion
13.3%
13.1%
17.27 25.84
1.5%
$9.10 billion
P/E (TTM)
Forward P/E (Est.)
EV/EBITDA (TTM)
CCJ
S&P 500
28.0 17.7
17.0
15.6
17.2
35
30
30
30
25
25
25
20
20
20
15
15
2012
2013
2014
15
The companys giant reserve base and industry-leading cost efficiency make it a prime
beneficiary of the dramatic shift in the supply/demand balance for uranium that David
Iben expects over the next two to three years. He estimates that a rise in uraniums price
to the $75 marginal cost of production could double the value of the companys stock.
Sources: Company reports, other publicly available information
www.valueinvestorinsight.com
Cl
I N V E S T O R I N S I G H T : David Iben
INVESTMENT SNAPSHOT
SkyWest
Valuation Metrics
(Nasdaq: SKYW)
(@3/28/14):
SKYW Russell 2000
P/E (TTM) 11.0 19.3
Forward P/E (Est.)
11.6
12.1
EV/EBITDA (TTM)
3.6
Share Information
(@3/28/14):
Price 12.28
52-Week Range
Dividend Yield
Market Cap
11.56 17.29
1.3%
$630.9 million
Financials (TTM):
Revenue
Operating Profit Margin
Net Profit Margin
$3.30 billion
4.6%
1.8%
Company
% Owned
Dimensional Fund Adv
8.5%
BlackRock 7.9%
Franklin Templeton
7.2%
Vanguard Group
5.9%
Acadian Asset Mgmt
3.8%
Short Interest (as of 2/28/14):
Shares Short/Float
2.1%
20
15
15
15
10
10
10
5
5
2012
2013
2014
Given that its well-managed, provides a valuable service, has an advantaged competitive position in a generally improving industry, and owns a long-term record of growing
book value, David Iben believes the companys stock should trade for at least book value.
Were that to happen, the shares would roughly double from their current price level.
Sources: Company reports, other publicly available information
www.valueinvestorinsight.com
Cl
I N V E S T O R I N S I G H T : David Iben
managed company that provides a valuable service, has an advantaged competitive position and has a history of growing
book value should trade for at least book
value. The closest comp, Republic Airways [RJET], has a negative free cash
flow yield and trades at more than 80% of
book. Its hard for us to imagine why SkyWest doesnt trade at a premium to that.
Why is Newcrest Mining [NCM:AU] the
largest of your gold-miner holdings?
DI: As I mentioned earlier, for gold miners
we believe the market is being excessively
harsh on volatility, excessively harsh on
the values its willing to put on assets in
the ground, and excessively harsh on pricing legitimate bad news into stock prices.
The negatives are real. Mining is a
pretty lousy business, where you move a
ton of earth trying to find small amounts
of precious metals. Once youve mined the
part that has eight grams per ton of earth,
you move on to the part that has only
six grams, then the one with four grams.
Costs are high and are likely to remain
high. At the same time, governments are
likely to continue to try to take a bigger
piece of the proceeds from miners. That
leaves companies very vulnerable to weakening gold prices, which weve had more
or less over the past couple of years.
We dont dispute any of that. But share
prices have gotten so cheap that we can
buy them at or below asset-liquidation
values. Buying at liquidation value tends
to provide a nice margin of safety.
For any scarce resource we like companies that own huge quantities of it and
operate in less-risky areas. Newcrest is
one of the five largest gold miners in the
world and its mines are in politically relatively benign areas like Australia and Papua New Guinea. At its current stock price
youre paying roughly $200 per ounce of
gold it has in the ground. Youll get different answers from different people, but
we believe were being conservative in assuming it costs them roughly $1,000 per
ounce to get that gold out of the ground.
So at todays gold price of around $1,300,
less the purchase price and cost of extracMarch 31, 2014
INVESTMENT SNAPSHOT
Newcrest Mining
(Sydney: NCM:AU)
Price A$9.80
52-Week Range
Dividend Yield
Market Cap
A$6.96 A$20.29
n/a
A$7.51 billion
A$3.77 billion
(-161.0%)
(-153.0%)
Valuation Metrics
(Current Price vs. TTM):
P/E
NCM:AU
AS51
n/a 19.3
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
2012
2013
2014
Given that he believes the company could be bought and its gold assets liquidated at
a $100-per-ounce profit, David Iben says the shares provide an attractive option on an
eventual rise in gold prices. Even assuming the current cash margin the company earns
on mined reserves persists, he pegs its current NAV at 70% above todays stock price.
Sources: Company reports, other publicly available information
www.valueinvestorinsight.com
clo
I N V E S T O R I N S I G H T : David Iben
www.valueinvestorinsight.com
30
% of MSCI ACWI*
25
20
15
10
5
0
Cons Disc
Cons
Staples
Energy
Info Tech
Materials
Telecom
Utilities
% of MSCI ACWI*
60
50
40
30
20
10
0
Canada
Emerging Markets
Europe ex UK
Japan
Pacific ex Japan
UK
US
Portfolio Characteristics
Harmonic
Weighted Avg
* MSCI ACWI data is iShares MSCI ACWI ETF and sourced from Bloomberg Finance L.P. Index returns reflect applicable expense
ratio fees. The MSCI ACWI Index is an unmanaged index. Individuals cannot invest directly in the Index.
Portfolio weights are reported as a percentage of total portfolio and are subject to change.
Important Information: Past performance herein should not be construed as an accurate indication of future returns. All investments
contain risk and may decrease in value. The material herein is not an offer to sell or a solicitation of an offer to purchase securities of
any kind. The opinions expressed in this article are those as of the date of this article and are subject to change without notice.
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performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict.
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This material is not to be reproduced in whole or in part or used for any purpose except as authorized by Kopernik Global Investors,
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