SILU a best buy?Hi Travis, back in early April you stated that SILU was probably the best buy ”gem” from your portfolio at that time. Still feel that way or is something else looking more attractive right now? I’ve been researching CAT, APL, GOOG and WY a little. Something to kind of buy and hold (forget) for the family. Any thoughts?
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Sprott Resource Lending has been very, very quiet this year — I expected them to book some more deals (make more loans and jettison their last few remnant real estate assets) and they haven’t done any headline stuff but have probably been active behind the scenes.
We’ll know more next week when they release the quarter, but at 0.9X book, lots of cash and no debt, and with a dividend better than 4% I still think it’s a good buy. I have not bought any recently but it’s still in my top ten holdings. I’ve been too optimistic on this one so far, however, I thought they would have been able to ramp up their loan portfolio and cash flow more rapidly, and use that cash flow to raise the dividend more aggressively. I still think they’ll do those things, but it’s taking substantially longer than I expected — an environment with decent commodity prices but tough financing for junior miners should be perfect for SILU (and for other financiers, including the royalty/streaming folks that we’ve written about many times), but it hasn’t worked out as well or as quickly as I expected.
Anything new on SILU?
Results were again tepid on Friday — I’m looking at this during the week, I’ve been disappointed with their performance. Partly that’s because their customers, junior resource stocks, are getting clobbered so their warrants are worthless, and partly because their writedowns and sales of distressed real estate have been so ridiculously delayed. I like management’s strategy but I need to dig into it more to see if it’s worth continued patience or I should swap that into another position. I’ll share when I come to a conclusion. Right now they’re trading for less than 4X their interest revenue, and book value fell (largely due to the real estate writedown) but they still trade for less than book, so there is still certainly potential but I don’t know if I’ll be patient forever.