ThinkSmart (TSM)

Happy new year to everyone. 

TSM was a good investment last year, albeit I sold it a little while ago and therefore jumped off way too early. With the recent run-up in the share price, it reminded me of the Feedback Loop post I wrote last year where I analysed my decisions and identified key areas for improvement. TSM fits the 'getting bored with a situation' category to some extent however that is being a bit harsh given decent money was also made. 

A massive buy-back was undertaken toward the end of 2014 where shareholders could tender their shares in a price range of 31c to 42c. It reminded me at the time of Charlie Munger's tip to look for cannibal companies (companies that are buying back huge amounts of their stock). The founder had floated the stock back in June 2007 (just before the GFC hit) for $2.15 and was now offering to buy back a lot of stock for an absolute fraction of the price. There was some criticism about the move (and the threat to de-list the business), but I just figured the stock was incredibly cheap (PE of less than 4 from memory) and if a really smart guy is offering to buy other people's stock and not offering his own holding then the situation must be interesting. 

And boy has the business gone on a nice little tear since. Looking back over the announcements, it was only a matter of months before an upgrade was announced, an extension of the contract with Dixons Carphone and now another upgrade. Sure, some of the upgrades are FX related, but their business (now based entirely in the UK) has shot the lights out in GBP. I wouldn't be surprised to see another upgrade come and with the stock still cheap I wouldn't be surprised to see the share price march upward more. It just goes to show how buy-backs can be a great leading indicator, ignoring what the smart money is doing can be dangerous and yes - patience is a virtue.

Kristian 

Disclosure: no position in the above name.