JZ Capital Partners (JZCP) is a listed private equity company investing predominantly in US and European small enterprises and US real estate. The company is following a value oriented opportunistic investment approach and is led by two very experienced and successful investors. While the US portfolio seems to be mature and many portfolio companies ready to sell, the European and US real estate investments are still at their infancy and possess potential for growth and add-on acquisitions. The share price is currently trading at a wide discount to NAV in absolute and relative terms compared to JZCP’s peers. I do not believe that this large discount is justified. Therefore portfolio growth combined with a narrowing discount provides decent upside at the current stock price.
The history of JZCP goes back to 1986, when the Mezzanine Capital and Investment Trust was listed on the London Stock Exchange. It was then renamed JZ Equity Partners and became JZ Capital Partners in 2008. Since the beginning JZCP has been managed by John “Jay” Jordan and David Zalaznick. They joined forces in 1982 founding The Jordan Company (TJC). Since then Jay Jordan and David Zalaznick have completed over 100 investments currently managing roughly USD 8 bn at TJC. In 2002, TJC initiated its first U.S. based private equity fund by founding The Resolute Fund, a USD 1.5 bn private equity fund, focused on acquiring U.S. domestic companies in the middle market. In December 2007, TJC closed Resolute II, a USD 3.6 bn private equity fund and in 2014 Resolute III followed with a USD 3.2 bn equity committment (with USD 200 m coming from the general partner). A more detailed description about TJC and its two founding partners can be found here.
Below you can see JZCP’s long term performance as of August 31st, 2014:
While JZCP presents its financial statements in USD, the shares are listed on the London Stock Exchange’s Specialist Fund Market quoted in GBP.
As you might have noticed, over a ten year period NAV growth and shareholder returns diverge quite a lot. This is due to a highly dilutive equity raise in June 2009 to restore the fund’s balance sheet. At that time the fund had to repay zero dividend preference shares (ZDPs), but had a liquidity shortfall of roughly USD 80 m. As credit markets had tried up and demand for private companies was non-existent, management had to issue new shares on the basis of seven for every three held at a more than 70% discount to NAV. After that the number of shares was consolidated on one for five basis. In addition to that, new ZDPs at 8% interest were issued due in June 2016. In total, USD 229 m of new capital was raised for the repayment of the old ZDPs and for new investments. At the same time, the company assets were transferred from former JZ Equity Partners to JZ Capital Partners.
Obviously, this restructuring had a severe impact on historic shareholder returns. On the other hand, the performance of the underlying portfolio was relatively good with a relatively small number of disappointing investments. From the table below you can see a summary of the latest most relevant realisations as reported in the annual filings:
A value-oriented opportunistic investment approach
JZCP follows a value-oriented investment approach including a modest use of debt. Most deals are sourced through the investment manager’s proprietary network of intermediaries in non-auction transactions. Management has focused on privately owned profitable companies at the smaller end of the middle market (i.e. micro cap companies) that have the ability to grow in their niches. Many of the companies are operating in highly fragmented non-capital or technology intensive industries. After acquisition, they add seasoned executives to existing management and provide capital for add-on acquisitions. The goal is to build so called “verticals” around an industry executive consisting of a number of businesses in the respective industry.
However, while the overall investment approach has remained unchanged, the allocation to asset classes is constantly evolving depending on management’s view where the most attractive investment opportunities can be found. Almost 30 years ago the company started with a focus on mezzanine capital but by the time JZCP was incorporated in 2008, the focus was on direct investment in small or microcap private businesses in the US. Now JZCP’s portfolio includes substantial investments in private businesses outside the US, mainly in Western Europe to the extent that JZCP’s largest single holding is Factor Energia in Spain. The Company has also accumulated a significant portfolio of real estate in Brooklyn, New York. Hence, the current portfolio is mostly invested in three areas – U.S. micro cap companies, European micro cap companies and U.S. real estate. From the table below, you can see the changes to asset allocation made over the last years (fiscal YE is February 28th):
At the end of February 2015, an extraordinary general meeting passed a resolution to provide even more flexibility to the investment policy. As management considers microcap businesses in the US to be relatively expensive and a “seller’s market”, they want to shift the focus to opportunities in similar businesses in Western Europe and in real estate. In addition, real estate is expected to be a core element of investment strategy going forward.
More specifically, JZCP will be focussed on investing in the following areas:
- Small or micro-cap buyouts in the form of debt and equity and preferred stock;
- Real estate or real estate linked investments and natural resources investments;
- Debt opportunities, including mezzanine investments, comprising loans and high-yield securities, and listed bank debt, including both senior secured debt and second lien loans;
- Other debt and equity opportunities, including distressed debt and structured and off-balance sheet financings, derivatives and publicly traded securities.
1. US Micro Cap Investments
The largest part with 43% of the current portfolio or USD 369 m contains US micro cap investments consisting of verticals and other US micro cap investments (mostly co-investments with other US private equity firms). In total the U.S. micro cap portfolio is valued at a 7.2x multiple (EV/EBITDA) compared to an entry multiple of 6.0x. The companies are modestly leveraged with a debt-to-EBITDA ratio of 1.7x.
The current portfolio comprises the following verticals:
Industrial Service Solution (ISS) for instance is a provider of industrial field services, repair and refurbishment of equipment. Equipment in which ISS has particular expertise includes valves, actuators, motors/generators, pumps and compressors that are critical to maintaining plant operations and minimizing downtime. The market is fragmented, making it difficult for major industrial companies to find a single source for repair and maintenance services. So far, ISS completed 15 acquisitions and maintains over 25 service and distribution locations across the US.
Individual verticals are managed by an experienced industry professional, who is involved in both making acquisitions and helping each business grow organically and through synergies with other portfolio companies. JCZP invests alongside Edgewater Growth Capital Partners (also JZCP’s largest shareholder). Together, they take a majority position in all of their verticals, while the remainder is often held by management. JZCP itself holds 20% to 40% of each company’s equity.
In addition to the US verticals, JCZP is also undertaking separate investments in the US micro cap space mostly by co-investing with other US buyout firms (e.g. RedBird Capital, Avenue Capital, Acon Investments). The co-investments make up 23% of the portfolio or USD 197 m. Currently, the largest investments are:
Dental Holdings (current valuation USD 37.5 m) is the parent of Dental Services Group (DSG). DSG is an operator of laboratories that manufacture oral appliances for dentists and dental centres. It runs both full service labs and “sale and delivery” sites in the United States, Canada and Mexico, making it one of the largest companies of its kind. The company generated revenues of USD 78.4 m and EBITDA of USD 2.6 m.
JZCP is also holding an interest in Medplast / UPG Holdings (current valuation USD 22.6 m; 11% share). Medplast designs, engineers and produces precision custom moulded thermoplastic, rubber and elastomer components and moulds for the healthcare and pharmaceutical and consumer/industrial markets. UPG Holdings operates as a manufacturer of precision plastic products for electronics, automotive, industrial, medical, datacentre and consumer markets. The company generated revenues of USD 268.1 m and EBITDA of USD 29.1 m.
Salter Labs (current valuation USD 15.5 m; 19% share) is a leading manufacturer of disposable oxygen delivery and respiratory therapy products operating in the home medical and acute care markets. Salter develops, manufactures and sells single-use, disposable products, primarily for respiratory therapies. The company generated revenues of USD 72.3 m and EBITDA of USD 11.4 m.
Recently, JZCP invested USD 16.2 m for 9.0 % of Cequel Data Centers, the parent company of TierPoint, alongside a group of investors led by RedBird Capital Partners. Managing nearly 140,000 square feet of raised floor data center space, TierPoint offers colocation, managed services and cloud computing through data centers in six primary US cities.
2. European micro cap investments
In 2010 shareholders approved the plan to invest in the European micro-cap sector. JZCP holds a 75% share in the Euro Micro Cap Fund 2010 (European Micro Cap Fund or EMC) managed by JZ International founded in 1999 by David Zalaznick, Jay Jordan and Jock Green-Armytage. From 2000 to 2009 JZI invested approx. EUR 109 m in 18 companies across 13 platform investments and had achieved EUR 83 m in realisations. Total realised and unrealised values implied a gross 32% IRR and 2.5x multiple on invested capital. It is noteworthy, that there are no double fees paid by shareholders (i.e. there are no management or carried interest fees charged to JZCP). In addition, the JZI management team invested a substantial amount (EUR 12 m according to the 2011 annual report) in EMC.
So far EMC invested in eight companies in Spain, one in the UK, one in Germany and one in Italy, representing roughly 25% of JZCP’s total assets. EMC together with JZI Management was one of the most active international private equity investors in Spain between 2011 and 2013 (alongside Carlyle, Demeter, Investindustrial and KKR). In total, the European micro cap portfolio is valued at a 7.1x multiple (EV/EBITDA). The companies are modestly leveraged with a debt-to-EBITDA ratio of 2.0x.
Factor Energia is currently the Fund’s largest investment (based on current valuation). Founded in 1999, the company is an energy distribution business in Spain that resells electricity to smaller and midsize companies, and benefits from the recently deregulated electric utility sector. It purchases electricity on the spot market, and sells to its customers for a fixed or variable price, depending on the relevant contract. The company has developed into a fast growing energy broker, primarily targeting the fragmented small to mid-sized B2B market in Spain. The founders of the company continue to manage the business and are holding 35% of the company, while EMC is holding the remaining 65%. According to JZCP, the company generated revenues of EUR 415 m and EBITDA of EUR 15.6 m. Based on this article, EMC is currently trying to dispose its share after buying it in 2010.
The second investment, Xacom, is a telecom products business in Spain, Chile and Mexico. Xacom provides the likes of Vodafone Group PLC and Telefonica SA (TEF) with a distribution channel by selling products to the end customer. EMC bought a 60% share in the company from management for USD 13.5 m 2011. The company generated revenues of EUR 4 m and a negative EBITDA.
In 2011, EMC made a EUR 12.7 m investment for a 75% share in Grupo Ombuds, a provider of security, surveillance and facility services in Spain. The remaining 25% of the company will stayed in hands of Rodrigo Cortina, Ombuds’ founder and CEO. JZCP also loaned the company EUR 5.0 m in a 8.0% senior debt and EUR 3.5 million in 15% junior debt (5% cash and 8% PIK). Ombuds’ service offering includes personal security protection to government officials and corporate executives, asset protection, security services to public and corporate buildings and the provision of ancillary facility services. The company generated revenues of EUR 80.8 m and EBITDA of EUR 5.1 m.
In addition, EMC holds a 45% stake in digital company Docout, which processes documents and provides storage services to banks, utilities, telecoms and insurance companies in Spain. Grupo Santander, La Caixa, Axa Seguros and Orange, among others, are among its main clients. EMC bought its share in the company from Banca Civica for EUR 13 m 2011. The company generated revenues of EUR 15 m and EBITDA of EUR 4 m.
In 2012, EMC acquired 29.7% of Oro Direct, a leading precious metals trading business in Spain. EMF invested EUR 13.5 million along side a co-investor, LPFI Group, which invested EUR 11.5 million for a 25.3% interest. Oro produces scrap gold and silver from 1,500 pawn shops and jewellers for the spot price less a commission per kilo transacted. The precious metals are then sold on to a refiner in Switzerland.
One World Packaging was spun out of Industrias San Cayetano, a traditional packaging company in Spain. One World Packaging manufactures disposable trays for the food service industry in Spain and throughout Europe. This proprietary product is biodegradable. The company plans to sell the product to large food manufacturers and distributors in European countries that value environmentally friendly and sustainable products. EMC purchased 70% of One World Packaging for EUR 5.0 m in 2013. The company generated revenues of EUR 4 m and EBITDA of EUR 1.5 m.
Since 2013 JZCP has invested EUR 16 m, alongside Avenue Capital Group, in a newly created vehicle, Toro Finance. JZCP together with Toro Finance’s management, holds 50% of Toro Finance’s equity. Toro Finance provides short term working capital financing to major Spanish companies. Toro Finance was set up to benefit as Spanish banks in recent years tightened their risk criteria and downscaled balance sheets to meet increasing capital requirements.
In the UK, EMC co-invested GBP 9.5 m to acquire 36 % of the Winn Group in 2013 a legal services firm specialising in personal injury cases and claims management. The Winn Group also provides replacement car hire, credit repair advice and medical treatment services. Founded in 2002, the Winn Group employs nearly 300 people and is expected to benefit from the consolidation of the personal injury sector in the UK. The company generated revenues of EUR 51.2m and EBITDA of EUR 14.5 m.
EMC also holds 21.1% of Fidor Bank, a German online bank. Founded in 2003, Fidor Bank is one of the only banks in Europe to allow customers to transfer money through social media. Additionally, Fidor Bank provides deposit and savings accounts, foreign exchange transactions, credit cards and crowd-funding, which enables small businesses to secure financing from individual lenders. Fidor Bank is listed on the Entry Standard of the Frankfurt Stock Exchange (In the reporting it is categorised as private investment).
The latest investment is a strategic build-up to acquire 2-3% of Spain’s petrol station market, targeting stations in urban areas and along highly trafficked highways and roads. JZCP invested alongside Avenue Capital that has been working on this strategy since 2012. Margin enhancement is expected to come from consolidated purchasing power and a new regulatory system that eliminates fixed margin contracts for branded petrol stations. In addition, a potential recovery of Spain’s economy should lead to increased fuel consumption after a 40% drop since 2008. JZCP committed EUR 22.5 m for roughly 30% of Petrocorner’s equity.
At the end of 2014 JZCP invested EUR 2.1 m in Fincontinuo alongside Avenue Capital, a leading Italian lending platform that is distributing and servicing Cessione del Quinto loans, a niche form of consumer lending. Similarly to Toro Finance, Fincontinuo is expected to benefit from more demand for alternative financing as banks are reducing their balance sheets.
3. US real estate investments
In 2012, JZCP begun to assemble a portfolio of properties, retail and residential, in Brooklyn, a borough of New York City that has experienced a rapid gentrification in certain neighbourhoods. JZCP is backing RedSky Capital, a Brooklyn-based real estate and development and management company that has experience in buying and renovating smaller off-market properties in up and coming neighbourhoods in Brooklyn. RedSky is buying properties off-market (non-auction), adding value through refurbishment/redevelopment leading to enhaced cash flows and higher asset values.
According to management, the strategy is to profit from Brooklyn’s “renaissance” where areas that have been historically industrial, low-income and/or artist communities are beginning to see population changes fuelled by an influx of young and affluent ex-Manhattan residents.
JZCP, together with RedSky has so far acquired 24 properties. The current capitalisation of the existing portfolio is approx. USD 500 m with JZCP having invested roughly USD 135 m in equity. The properties are located in the Williamsburg, Flatbush, Greenpoint and the Fulton Mall areas of Brooklyn and in Wynwood, Miami:
In April 2012, via a partnership with a real estate developer, RedSky completed the purchase of Bedford Avenue I almost an entire square block in Williamsburg, Brooklyn. They purchased over 100,000 square feet of retail units and forty apartments. The property is in a premier location of an area that is in the biggest and most valuable retail redevelopment in Northern Brooklyn (according to the annual reporting). The team is in the process of finding new, high-end tenants for this property, which should be fully repositioned in the next two years. Renovation is currently taking place.
The second acquired property involved a JZCP investment of USD 3.5 m in the Flatbush area with 4,791 sqft, across the street from the entrance to the newly opened USD 1.2 bn Barclays Center, a 20,000 person arena in Brooklyn, home to the NBA franchise Brooklyn Nets and a major subway hub. The Barclays Center has been the focus of a newly revitalised neighbourhood in the centre of Brooklyn. RedSky plans to renovate the building and build an additional floor and premium signage and lease it to a sports retailer.
Fulton Portfolio is an assemblage of three properties on the Fulton Mall area, the third largest retail centre in New York City and second only to Times Square in terms of transit density. RedSky plans are to raze these buildings and rebuild, alongside City Point, a large mall anchored by Target.
The Flatbush Portfolio on Flatbush Avenue contains both retail and residential use with 24,000 sqft. Near the Barclays Center, these properties are expected to take advantage of the influx of higher-end shoppers and residents in part driven by the Barclays Center’s success.
JZCP invested USD 8.2 m for two mixed-use development properties on Driggs Avenue, which is adjacent to Bedford Avenue, where the first Williamsburg property is located. RedSky plans on developing these properties and renting to a national retailer looking to create a footprint in this up-and-coming area of Brooklyn.
JZCP invested USD 32.8 m to acquire a 49% interest in a development site on the Greenpoint waterfront in Brooklyn. The site allows for development of 652,000 sqft of residential and retail space, and includes a pier that acts as the Greenpoint terminal location for the East River Ferry. In conjunction with the joint venture partner, management plans on partnering with a large New York City development firm to build a residential tower on the site, containing both market rate and affordable housing, as well as 100,000 square feet of retail space.
JZCP invested USD 16.5 m to purchase several properties in Williamsburg, again nearby to the first property, with an eye to redevelop and retenant the retail and residential properties into a Class A mixed use area.
In July 2014, JZCP invested USD 8.0 m to acquire a mixed-use loft buildings in Williamsburg (Roebling) located within blocks of the other JZCP assets in the neighbourhood. According to management, this property features unparalleled window design, ceiling heights and old world character, promising post renovation to become one of the premiere rental loft properties in the area.
In August 2014, JZCP acquired a further two properties in the Downtown Brooklyn neighbourhood, both additions to the Downtown Brooklyn portfolio. These acquisitions were funded using proceeds from a refinancing of the Downtown Brooklyn portfolio, and did not require additional cash funding by JZCP.
Also in August 2014, JZCP invested US$6.2 million to acquire a 21 unit loft-style residential building in Brooklyn’s Bushwick-Wyckoff Heights neighborhood on Hart St., east of Williamsburg. They are planning to reposition this property into a modern industrial loft-style residential building by vacating, renovating and leasing up all units at market rate.
At the beginning of February 2015, JZCP announced the acquisition of two separate properties on Bedford Avenue located in the Williamsburg neighbourhood for a combined gross purchase price of USD 39.7 m. JZCP and RedSky also partnered in the first acquisition outside of New York, entering into the property market in Miami, specifically the Wynwood neighbourhood, where management sees rapidly increasing retail rents amid a thriving arts scene provide very attractive investment opportunities. The initial design for the acquisition features approx. 25,000 sqft of prime retail and flexible office space at the most important intersection in the Wynwood neighbourhood of Miami, with an additional 50,000 buildable sqft providing optionality for future development of residential, office or hotel space. The purchase price for this property was USD 10.6 m.
4. Bonds / Others
Over the last years management has increased the allocation to fixed income (corporate bonds and UK tilts) to prepare for the repayment of GBP 76.6 m of ZDPs in 2016.
Others include a recently established asset management business in the US, Spruceview Capital Partners. The business will address the expected demand from endowments, foundations and corporate pension funds for fiduciary management services also called “outsourced CIO/Endowment model”. JZCP has committed USD 50 m of seed capital in the first vehicle the Bright Spruce Fund. The fund will invest long term across asset classes (marketable equity, fixed income and alternatives). JZCP is not being charged any fees on this investment. JZCP recruited, Richard Sabo (CEO) and David Russ (CIO) as management partners. Most recently, Richard Sabo served as Chief Investment Officer of Global Pension and Retirement Plans at JPMorgan and David Russ who used to work for Credit Suisse and as CIO of Dartmouth College’s endowment.
JZCP’s capital structure
Currently, JZCP has 65.0 m ordinary shares outstanding. In 2009, in connection with the restructuring (described above), ordinary and limited voting ordinary (LVO) shares were issued. LVO shares were issued so that shareholders that are Qualifying US Persons could participate in the share issue without causing JCZP to be treated as a US domestic company for the purposes of US securities laws and/or a Controlled Foreign Company for US tax purposes. LVO shares were identical to, and ranked pari passu in all respects with, the new ordinary shares except that the LVO shares carried a limited entitlement to vote in certain respects. In addition, the LVO shares were not listed and were not admitted to trade on the London Stock Exchange. In 2012, JZCP changed the company’s capital to a single class of ordinary shares and listed them (and the ZDPs) on the London Stock Exchange’s Specialist Fund Market. As a consequence, the new capital structure provided increased access for US investors and no further US securities laws regulatory risk. However, according to JZCP’s articles of association there is still a restriction in place limiting the ownership of the large US shareholders (who already held shares in 2012) to a combined maximum of 47%.
20.7 m ZDP shares were issued in 2009 at a price of 215.80 pence and are designed to provide a pre-determined final capital entitlement of 369.84 pence on 22 June 2016 which ranks behind the JZCP’s creditors but in priority to the capital entitlements of the Ordinary shares. The capital appreciation of approximately 8% per annum is calculated monthly.
In July 2014, JZCP issued GBP 38.9 m 6% convertible subordinated unsecured loan stock (CULS). Within 12 months of the date of the CULS prospectus (July 21st 2014) management can issue a further tranche of up to GBP 38.9 m 6% CULS subject to shareholder approval. Holders of CULS may convert the whole or part of their CULS into ordinary shares. Conversion rights may be exercised at any time during the period from September 30st 2014 to 10 business days prior to the Maturity date being the July 30st 2021. The initial conversion price is GBP 6.0373 per ordinary share (a 2.5% premium to the June 2014 NAV). The ordinary shares are currently trading at GBP 4.1.
At 31 August 2014, JZCP had a loan facility with Deutsche Bank allowing the Company to draw down a total of USD 52.0 m. At the period end the loan outstanding was USD 2.1 m and a further USD 49.9 m was available to draw down. The loan is secured by the Company’s investment in corporate bonds and UK gilts. The interest rate is charged at 30 day Libor + 75 basis points. In addition, on June 16th 2014, JZCP entered in to a USD 50.0 m loan agreement with Jefferies. Proceeds of USD 49.0 m were received after deduction of a 2% original issue discount. Loan interest is payable at 7%, after allowing for transaction costs and the initial discount the effective interest rate applied is 9.6%. The loan is due for repayment on June 16th 2016.
Edgewater Growth Capital Partners, JZCP’s investment partner for US micro cap verticals, is the largest shareholder holding 20.8% of the company. Jay Jordan and David Zalaznick both hold a substantial share in the company. Jay Jordan has an 11.9% share and David Zalaznick is holding 9.2% of the company. Recently, the company announced that David Zalaznick has sold a 2.6% share at GBP 4.0 per share without providing any reason. While this is somehow puzzling, it is also noteworthy that both Jay Jordan and David Zalaznick increased their share in the company in 2012. Other shareholders are prominent value investors including Third Avenue (7.8%), Abrams Capital (7.6%) and Leucadia (7.0%).
JZCP’s shares are currently trading at a 36% discount to NAV. While a holding company discount seems to be warranted, JZCP is trading at a wider discount relative to its peer group of listed private equity companies focusing on direct investments:
Over the last five years JZCP’s NAV growth is one of the highest compared to the other members of the association of listed private equity companies.
While the company is currently not repurchasing shares to close the discount, management introduced a new dividend policy in 2012 by paying out an annual dividend of 3% of NAV. As a consequence of the current discount, the shares are currently yielding 4.7%.
The following table provides a chronological overview of the share’s discount to NAV:
As for most alternative investment managers, fees charged are relatively high. Jordan/Zalaznick Advisers, JZCP’s investment adviser, is entitled to a base management fee and to an incentive fee. The base management fee is an amount equal to 1.5 % p.a. of the average total assets under management.
The incentive fee has two parts. The first part is calculated by reference to the net investment income of the company and is payable quarterly in arrears provided that the net investment income for the quarter exceeds 2 % of the average of the net asset value of the Company for that quarter (i.e. an 8 % annualised hurdle rate). The fee is an amount equal to (a) 100% of that proportion of the net investment income for the quarter as exceeds the hurdle, up to an amount equal to a hurdle of 2.5%, and (b) 20 % of the net investment income of the company above a hurdle of 2.5% in any quarter.
The second part of the incentive fee is calculated by reference to the net realised capital gains of the company and is equal to 20 % of the realised capital gains of the Company for each financial year less all realised capital losses of the Company for the year less (b) the aggregate of all previous capital gains incentive fees paid by the Company to the Investment Adviser.
Comparing management fees to some companies with comparable asset allocation, it seems that JZCP fees are rather at the high end of an industry range. However, it is difficult to assess this as fees are highly dependent on recent performance/realisations due to carried interest:
There are a couple of reasons why market participants are neglecting JZCP’s share. First, the investment strategy is very flexible and asset allocation will be even more flexible going forward. So JZCP is not a streamlined investment business focussing on one area. Combined with an unusual capital structure, this company provides for some complexity. Also, the trading volume on the London Stock Exchange’s Specialist Fund Market is relatively low given that most shares are in firm hands. From an historical point of view, the highly dilutive equity raise which was necessary due to a liquidity constraint in 2008/2009 might still be a stigma for JZCP. Apart from that, David Zalaznick’s recent sale of JZCP shares might have led to some irritation.
Personally, I like JZCP’s opportunistic approach to investing very much. I think that they have a great advantage in sourcing ideas anywhere just depending on valuation and not geography/asset classes. Their current portfolio provides a lot of growth opportunities in Europe (e.g. with the Spanish economy recovering) and a concentrated exposure to a very promising real estate sub market. In addition, JZCP has now the opportunity to harvest their US micro cap investments and reinvest the proceeds in cheaper assets. The realisations might surprise on the upside as the US portfolio seems to be modestly valued compared to listed US small cap equities. Management has been in the business for more than 30 years. Their track record is pretty good. They are holding a significant share in JZCP (however, a large part of their net worth is also invested in other businesses) together with Edgewater Growth Capital. Also, I do not believe that management will tolerate the large discount to NAV to persist over the long term and might take further steps to lower the discount.
From today on I will establish a 3% position for the portfolio with a limit price of GBP 4.3 per share.
The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!