Boyles Fund 4Q16 Letter To Partners – Things that Don’t Make Sense

2 Feb

Boyles Fund 4Q16 Letter To Partners – Things that Don’t Make Sense

Here’s the year-end update from Boyles Asset Management, the firm we featured in our October 2016 publication.

Unfortunately, for compliance and regulatory reasons, Boyles have asked us not to publish the firm’s returns for 2016.

Here’s the rest of the Boyles letter (excluding returns) in full.


Quick Portfolio Updates

Creston

Creston, a smaller holding, was bought out by its largest shareholder in November. While we were cautious of this shareholder’s intentions, we had been comforted by the presence of unrelated large shareholders, whom we believed would counter such an offer. That comfort proved to be without merit. The 27% premium to the three-month average share price was much too low in our opinion—representing a valuation of approximately 10x free cash flow (which we believed to be below the firm’s earnings power). We voted against the offer. The total internal rate of return (IRR) since the inception of the idea in 2012 (prior to the Boyles launch) was 7.9%; without the impact of currency, the IRR was 14.4%. The modest outcome was impacted by the severe decline in the British Pound; the modest early outcome of an acquisition the company made; mediocre management which, while changed, was unable to generate organic growth; and as mentioned, the modest exit multiple.

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