C stands for Canada, Clarke and Compounding Capital.

I upped on my already substantial Clarke position.

Clarke is a Canadian investment holding that specializes in buying distressed, underappreciated or under-utilized assets. They have a rather great track record, that is somewhat hidden in the Book Value CAGR due to regular special dividends.

In my book, I regard them as great capital allocators when it comes to spotting undervalued assets and monetizing on those assets with great rates of return.

After a 25% special dividend in the form of Terravest shares (50% on my initial buying price) and -I’m guessing- due to their investment in a basket of energy related stocks, there was a big sell-off.

Personally, I do not believe we have seen the depth of this crisis yet, but still I converted 5% of my portfolio from cash into additional Clarke shares at 6 a share.

Which makes it a 15% position for me (including de received Terravest “dividend” shares).

Well, that’s a high conviction pick, isn’t it?

The thing with Clarke is, you have to live through it, side by side, to appreciate how great they are. It’s sometimes hard to see in retrospect, but it is easy to see when you are on the journey together.



Screen Shot 2020-04-01 at 09.38.02

Emilia Clarke. Not that Clarke, you silly.

I first came to know about Clarke Inc through their ownership of Keck Seng Investments. Keck Seng is a real estate holding, out of Hong Kong, but with some real estate in the US.

George Armoyan, majority shareholder and chairman of Clarke, also has a US real estate development firm, called Geosam Capital.

I was researching Keck Seng during a classic Graham bargain hunt, with the added twist that opening a bridge to Macau would stimulate tourism and thus the occupancy rate of their hotels.

Back then, I decided Keck Seng was –although obviously cheap- out of my circle of competence and didn’t pull the trigger.

Screen Shot 2020-04-01 at 09.42.13.png

As an aside, Keck Seng recently announced results. They paid a dividend of 0.08 per share in 2019.

Equity was 4,37 billion HK$ back in December, including an impairment loss of 274 million HK$ on their New York Sofitel Hotel. Debt is covered by cash.

Market cap is 900 million.

It is still cheap, it is still growing year by year, although modestly,.

Screen Shot 2020-03-30 at 08.19.33.png


But I am still not buying.

I bought Clarke instead.

Not so much as a sum-of-the-parts (although the math is favorable in that aspect as well), but as a matter of trust in their great capital allocation skills.

I think the Armoyan brothers (don’t know how much Simé is involved, since George is the “face” of the family) are at their best when there is blood on the street. Maybe some of the best around.

They are patient, conservative and disciplined. They only love a great bargain. And they like tangible assets.



This is my thought process : with a share price under 6, what are the chances that book value per share will be 18 in 2025?

I reckon that probability is rather high. And moreover: I reckon the chances of BVPS to be less than 6 in 2025 are close to zero.

As an argument let’s see how they did in 2009, compared to 2014.

Screen Shot 2020-03-30 at 09.25.45.png

During the 5 years following the Banking Crisis BVPS did triple and you received a cumulative bruto dividend of about 30% on the share price.

Also, they are great and disciplined at cannibalizing shares under book value…

Screen Shot 2020-03-30 at 08.25.56.png

Plus: they are ramping up insider buys, as we speak. Brother Simé on the common stock, George on the Debentures. And their G2S2 private holding on both. (Maybe I’m counting double, I’m not sure)

The Debentures have a conversion price of $19.23 per Share and are due on February 28, 2023. So, this tells us what?

Either way they are now holding over 53% of Clarke, up from 43% less then a year ago.

Moreover, they have currently a NCIB outsanding for 5% of the shares and 10% of the Debentures, but it would be “in character” if they expanded on that.

Screen Shot 2020-04-01 at 09.49.36.png

In the most recent filings they said to be expanding their share in Trican Well, way-way-way under book value.

Screen Shot 2020-04-01 at 09.50.49.png

Suprised Trican Well quotes under book value right now?

Now, if –through buybacks, acquisitions and operations – they would only be able to grow Book Value for 20% a year in the coming 5 years, and thus double their book value – it still might be a triple at current prices.

Let’s do the math.



Market Cap is now under 100 million.

What do you get for that?

At year end BVPS was still 15.06 per share, or close to 250 million.

Since then, they spun off their Terravest shares a as special dividend to shareholders – valued at the time at 5,99 per share.

Still included are the 18 hotels of fully owned Holloway.

Screen Shot 2020-04-01 at 09.52.42.png

Max Holloway. Not that Holloway, you silly.

You have to consider Holloway as a “hotel flipper”: they buy distressed hotels, do the redesign, run it a few years maybe and sell at a premium.

They also started a hotel management business under the Holloway brand, but that’s not material yet.

You also get your own ferry business, that is valued at 1.2 million.

In terms of securities hold, the main factor is Trican Well shares.

At year end they owned 34,961,900 shares of Trican and have since been a buyer. Off course Trican Well’s share price has evaporated since then and declined over 50%.

It now trades lower then 0.2 of book value, while –incidently- Clarke considers book value to be fair value for Trican.

At under 0.50 a share, we have to deduct a virtual 1/share of Clarke BVPS.

All in all we can say to have 8 a share right now, or 130 million – more or less, give or take.

Mind you: the share count will be at least 5% less in a year. So 16,215,484, – 810,774 = 15,404,710. Also debt will be less, so equity will grow on that end.

Since I consider them great in allocating capital when there is a crisis, I assume they can compound BVPS at 20% a year in the coming 5 years.

When this materializes, you would be looking at 18 a share in 2025.

Now, not to predict that BVPS will actually be 18/share in 2025 – along the way there will be dividends and buybacks and all sort of (positive) shenanigans to reward shareholders along the way.


Great, conservative capital alocators.

Screen Shot 2020-03-30 at 07.20.23.png

Great at rewarding shareholders.

Putting their skin in the game.

A great conviction pick for me.

3 reacties

  1. Haha. Thank you for this and for you espectacular sense of humour!

    I am been flowing Clarke Inc, as well, and I too appreciate their way of investing.

    But let me just point out a few aspects that might lead to a justified widening of their NAV in the current environment.

    1) NAV discount is likely to increase when one goes from holding mostly listed assets to holding mostly non-listed assets since NAV becomes much more difficult and imprecise to calculate; I am also a bit puzzled on the reasons why they distributed TerraVest as a special dividend. I actually send them an e-mail inquiring about it, but they just said they did not provide the market with a rational.

    2) BV is likely overstated as we stand right now since the current environement will be brutal for their hotel operations – not only because of covid but also due to their high exposure to O&G affected regions. The hotel operations (Holloway) were recently brought private and they booked a €20.7m bargain purchase, meaning that the BV is actually more than what they paid for the hotels in 2019, whereas their real value is likely worth less.

    Having said this, I agree you might still be likely to make money alongside them on the long (…really long?) run.


    • Hey Goncalo,

      True that. Maybe current BVPS is not quite 8 ? I’m looking out a few years down the line, though – and I’m suspecting eventually they might sell those hotels at a premium.

      As for Terravest: I think they saw it at fair value around 8 times EBIT and it’s now up to 10 (at the time of the disinvestment even more?) So, I guess they see it as slightly overvalued?

      Someone on the Corner of Berkshire and Fairfax forum had this comment today about Clarke:

      “This is nothing but at vehicle to pay dividend income tax at this point. While they have been hiring investment analyst lately, the competitive, value investing Clarke of a few years ago is dead. George has a really good tax guy in Halifax, named Rob Jeffery, who will be driving the bus for all of Armoyan’s companies for the foreseeable future. The focus has defiantly transitioned to Gerorge’s sons and capital preservation for their future needs. ”


      Now – I have read these kind of comments for a few years now, but that hasn’t stopped me being satisfied with their work and my returns. 🙂

      As an aside: G2S2 Capital has upped their investment in Torrent Capital as well. So, I’m inclined to look in that directions as well…


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