Intrepid's Travis Likes: Fenner, Corus, Oaktree Capital (Audio)

also a gain of two tenths of one percent. NASDAK hired by four tenths of one percent. The tenure up seventeen thirty seconds, the yield one point five four percent, Gold up twenty six sixty ounce, the thirteen forty nine again there of two percent, and crude oil West Texas Intermediate up nine tenths of one percent, forty four dollars eighty five cents. I'm Charlie Palett, and that's a Bloomberg

business flash. Charlie Pellot, thank you so very much. Time now for the e t F Report, brought to you by e t F Exchange sixteen B and y Melons Annual et F Symposium September ninety one in Data Point, California. A must attend for r I A S. Space is limited, so register now at bny melon dot com slash e t F so do. The jobs report affects some of the most popular e t f s around. Katherine Cowdery is here with her report. Some e t s were

quick to respond to the latest jobs report. Bloomberg Intelligence analyst Eric val Tuna says after major economic reports and comments from Federal Reserve officials, he always checks E E M and h y G, the ICE shares, Emerging markets e t F and the I shares I box High

Yield Corporate Bond ETF. Those are the ones that will probably see and get hit hard the hardest if there were concerns over in strate hike, because if rates were to go up, it makes treasuries a little more attractive versus a risk asset, and that's why val Tuna says a low interest rate environment has been helping emerging markets this year. Emerging markets ETF is taken in two and three billion this year. That is a boatload of assets now. Emerging markets e t f s have traditionally been very

sensitive to concerns of our FED right hike. So if you go right to them and you see that e M is up one point three percent today, which is a good bump, you can see that the job's report has given investors confidence that the Fed will not raise rates. E E M gained one point six percent and h y G was up half a percent. That's your Bloomberg ETF report. I'm Katherine Cowdery. You're listening to are taking

stuff with Kathleen and Gim Fox on Bloomberg Radio. His Intrepid Capital Fund is up more than twelve percent so far this year. That's nearly double the six and a half percent increase for the S and P five hundred. Mark Travis is the president and lead manager for the Intrepid Capital Fund, and he joins us now from Jacksonville, Florida. Mark, thanks very much for being with us. Hell, I'm glad to be here. Tell people the strategy that you employ at a Trepid Capital well PIM. I like to think

of it as classical security analysis. We have a seven person analytical team and we try to discern long term business value in relation to where the shares trade in the market. Um. Some people use the term private market value, some people who use the term intrinsic value. We're trying to first ascertain the values and conservative assumptions about growth

and margins and sales um. And then we we we use some what some people consider to be kind of punitive discount rates, which helps adjust to the risk and growth um and then we try to buy those business values in a discount in the stock market. Sometimes those are one off, sometimes those are more you know macro events. UM. We haven't had many kind of macro events really in

the last five years. On the fixed income side, we want to find a credit where we know how we'll get our money back USUS there's a collateral or the free cash flows, and we don't want to make any assumptions about interest rates, so we try to take little of any interest rate risk, and we want a reasonable spread to treasuries UM. So we tend to focus in smaller cap equity where the markets are less efficient, not

only in the US but across the globe. And we tend to focus in shorter duration, high yield debts somewhere in the you know double B single B of five year maturity or less fixed income Okay, Mark, A lot of people, of course, are shortening up duration, not uncertainty over the FED and the economy and so much more.

I'd like to get into some of your the stocks you like, But I have to ask you about e T s and you're concerned that the inflows, and they've been huge, are actually laying the seeds for not only heightened volatility, but value destruction. Why well, Kathleen, I think we've got some assets that are probably not as well suited to something that has to provide liquidity daily. I mean, we've had a few, you little hiccups. We haven't had many in the market's really in the last five years.

To me, it goes back to the debt downgrade kind of early August of eleven. We saw a little bit of action with the currency devaluation in China last August, and all of a sudden, you couldn't price I believe some ET s. We we had a problem with the open ended Third Avenue Fund late in the year. But my take on ets is the conceptually their low cost and they make sense long term, but I think the reality is they're traded quite rapidly, and at some point

that may be problematic. I think that um, you know so, I think that will be a source of opportunity for a firm like in Trepid Capital at some point in the future. Mark, I want to take you north to to to Canada, and I want you to give us the case for Chorus Entertainment. They have television, radio, as well as digital and content businesses. This is a Canadian entertainment company that pays a dividend of over nine well if nothing else, UM PIM. It's what I like to say,

you're paid to wait um. And this environment is certainly attractive, but that's really not how we got there. Honestly, I think that UM. The business in Canada, the cable TV business has gone through what we might call the States pick or pay, where they're going to allow cable TV subscribers to decide whether they want ESPN in their package or HCTV or what have you. Chorus has been very dominant in women's and children's programming. Heathershaw is h this

chairman of Chorus and Shaw Communications. They've just brought those two business together, so they've levered up somewhat, but it's a very dominant provider of those that program They also have radio uh uh radio stations as well. So it's a business that generates right at two hundred million in free cash for a lot of it comes out to us as a dividend. And when we did the business valuation,

we came up with twenty dollars Canadians. As I like to tell readers or listeners or viewers, shadow and us can be painful, um, And a lot of times things go down in price after we first initiate a purchase. So you know today those shares are where are they Canadian? Yeah? And so you multiply that today as the dollars dropping, Um, it's a point seven and seven. We think they're worth

right at twenty dollars Canadians. So if I get the nine of security in form of the dividend, and I've got it a discount, Um, I'm going to just sit and wait till that discount has breached. Okay, let's take a look at another company that you like, and that would be Center. They make conveyor belts and services for the coal mining industry. Well, Kathleen, I think at least in the US, it seems like coal mine is a

dirty word. Uh no pun intended. Um, Yeah, I would point out to Elon musk at Tesla that coal mine is probably generating a lot of electricity for the model s UM. You know it's somewhere in the range, but Fentners of British company. UM. Again, it has attractive dynamics that we like, UM, attractive dividend, and it's really a

long tenure business and it's a service model. I don't know if you've ever looked at businesses that' say service elevators, UM, but it's some of the similar properties and it's gotten beat up with what's happening in the coal mine business. So that's what attracted us to it. What attracted you to oak Tree Capital Group? The co chairman and the co founder, of course, Howard Marks, an often frequent guest on Bloomberg. Oak Tree Capital paying about a five and

a quarter percent dividend. Well, it's interesting um him. You've probably read as many people in the investment industry, Howard Marks um misses that come out quarterly, and I think they're eagerly anticipated by a lot of the stafford in TREPI Capital and I'm sure many places across the globe and Howard's insights. I think that one is a pretty complex security due to all the different partnerships they hold um and people look at the dividend that again I

would caution listeners. It's not what I call a ratable dividend, but it is one that they're committed to pay and dependent on the realizations of the underlying partnerships. So I think to me, one of the more interesting things is what they carry double on capital for on their books. They carry it for about twenty million dollars. They helped you, Jeff Gunlock, leave TCW to form Double Line. Today that

firm Double lines about a hundred billion dollars. So I've got a very well known distressed investor, which we haven't had a lot of distress recently in terms of Howard Marks, with about a hundred billion dollars worth of separate accounts and partnerships with an incentive fee I embedded in them. Couple with a rapidly growing well known fixed income manager, and again I'm paid to wait. I wouldn't. I wouldn't. Uh,

I wouldn't annualize the five percent dividend. It could be higher, it could be lower, But I think the free cash flow generation properties of an asset management business one that I'm very familiar with. Frankly Um, leave me to think that those shares are worth probably around sixty sixty dollars

versus where they are today in the mid forties. Okay, Mark Travis, thanks so much for joining us, President lead manager for the Intrepid Capital Fund I C M b X. He likes Finner, he likes Chorus, he likes oak Tree Capital and more. I'm Kathleen Haze, along with pim Fox, Dave Wilson, coming back to look at the market close with us. This is Bloomberg