Two Fish Management is located in Indianapolis, IN, and is managed by Mike Morris and J.R. Sauder. The firm has recently released a lengthy slideshow detailing Barrick Gold Corporation (USA) (NYSE:ABX)
's investment prospects, and more specifically, "a variety of options for the ABX board of directors and management to consider to unlock shareholder value."
Down over 45% year-to-date, Barrick Gold has been caught in the same swoon that other gold miners have faced with falling gold bullion prices. According to Two Fish, Barrick Gold Corporation (USA) (NYSE:ABX) has a few avenues at its disposal to turn investors' collective frown upside down, so to speak. The slideshow is publicly available on the firm's website here
, and we've shared it below--all 78 pages of it.
To summarize, Morris, Sauder and their team believe that Barrick is undervalued because of: (1) an "excessively compensated" Board that "lacks engineering and geology expertise," (2) capital allocation issues, (3) what they call a "conglomerate discount," which we'll explain below, and (4) "poor operational execution."
So what exactly is Barrick Gold Corporation (USA) (NYSE:ABX)'s conglomerate discount?
Essentially, this buzzword describes an assumed scenario that the market is undervaluing shares of Barrick because the company owns a range of poorly performing gold mines in various locations around the globe. In the presentation (page 36), Two Fish mentions that "African Barrick, Australia Pacific and the Global Copper platform [...] have little or negative value in Barrick’s current conglomerate model," and that if these assets were shed, "a break-up of Barrick Gold would likely result in an immediate 50%-100% valuation re-rating and release entrepreneurial forces within each business segment."
More specifically, the leaner, meaner Barrick Gold Corporation (USA) (NYSE:ABX) would be able to focus on its most profitable assets with an inherently reduced geopolitical risk. In theory, this makes obvious sense, and one particular segment of the slideshow gives a useful overview of current and former Barrick execs' thoughts on a breakup. CEO Jamie Sokalsky's quote that's mentioned really stood out to us (page 56):
"It’s easier to manage a company with fewer assets...Differentiating the portfolio from a geopolitical standpoint can also change the dynamic of how valuable your assets are."
We'll quit our yapping, but the breakup case for Barrick Gold Corporation (USA) (NYSE:ABX) makes a load of sense, and is presented in its entirety below. For investors looking for a hidden gem in the gold mining industry, this might be the way to do it. Some other notable investors that hold shares of Barrick at the moment are D.E. Shaw
, First Eagle Investment Management
and billionaire Ken Griffin's Citadel Investment Group
. Needless to say, we'll be watching them closely.
In case the plugin isn't compatible with your system, here's the full slideshow