Choice assets on the cheap

SharesWho wouldn't hand over 50p in exchange for £1? When the market values a company's shares at a discount to their net asset value (NAV), it's no wonder that value investors' antennae start twitching.

Yet, it's a curious thing that some companies with apparently attractive assets seem to trade interminably at a discount to NAV. Months or even years can go by without the market showing any willingness to rate the companies more highly.
One way in which value may be 'outed' is by the arrival of an activist investor on the scene. Such an investor acquires a big enough stake in the company to stir things up -- for example, by forcing through changes to the board of directors, or agitating for the sale of non-core assets, or even for the sale of all the assets, with cash returned to shareholders.

I'm going to tell you about two activist investors you can actually invest in, as well as some of the companies in which they've taken significant stakes.

Crystal clear value
Crystal Amber Fund is an AIM-listed activist fund, whose biggest backer is none other than City super-investor Neil Woodford.

The fund, which had a market value of £60m on flotation in 2008, is interested in undervalued companies of all complexions, not just those trading at discount to NAV.

Last year, Crystal Amber benefited from an offer for Pinewood Shepperton, where it was the major shareholder, having built a stake in the belief that there was considerable value to be unlocked in this iconic British asset. Crystal Amber invested at 135p per share and the offer was at 200p per share, giving the fund a profit of almost £9m.

The proceeds from the Pinewood Shepperton disposal were reinvested to build positions in TT Electronics, Renishaw and Devro-- the last two being companies that also happen to have featured in one of our Expert Stock Picks articles earlier this year.

These recent investments, as well as some of Crystal Amber's existing ones, such as home retailer N Brown -- a firm favourite of my Foolish colleague Kevin Godbold -- were stronger on other valuation metrics than assets.

But there is an interesting asset play in Crystal Amber's concentrated portfolio: Sutton Harbour Holdings . The owner-operator of a Plymouth harbour -- and a longstanding fancy of another of my Foolish colleagues, David Holding -- has been through a torrid time in recent years, but has been refinanced and refocused on its core operations, and had its old chief executive replaced.

Crystal Amber participated in the fundraising at 18p per share, and subsequently bought more shares in the market, taking its stake in Sutton to over 26%. Crystal Amber's directors have said they believe "that following the fundraising, Sutton Harbour's net asset value is in excess of 42p per share". The shares are currently trading at under 22p.

If Sutton looks too high risk, but you like the look of Crystal Amber's whole portfolio, I can tell you that Crystal Amber itself is trading at a significant discount to NAV. The NAV at 30 April was about 110p, while the current share price is around 88p.

Damille for dosh
Damille Investments , which was launched in March 2010, is an activist fund solely focused on undervalued assets. Unlike Crystal Amber, Damille itself isn't trading at much of a discount to NAV. The NAV at 30 April was under 69p, while the current share price is 66.5p.

Damille has a fixed life of four years. It has spent the first two years investing and will spend the last two realising its investments, returning all the cash to its shareholders and then be wound up.

Damille has targeted a number of small investment companies that traded at a discount to NAV. In the cases of EIH, a company with private equity assets in India, and Rapid Realisations Fund , a company with mainly UK quoted and unquoted assets, Damille's tactics included commandeering an AGM, requisitioning an EGM and ousting directors, all to achieve the ultimate goal of having these companies make an orderly disposal of their undervalued assets and return the cash to shareholders.

Another investment company that Damille has built a stake in is Blackstar , a South Africa-focused company, which also has the novelty of a small investment in Facebook. I wrote about Blackstar a year ago when its shares were trading at 83p compared with a last-reported intrinsic tangible NAV of 138p. Today the shares are 77.5p compared with a last-reported NAV of 109p.

Damille tells us it "has met with BLCK's management team and is supportive of the measures they are taking to maximise the realisable value for BLCK Shareholders".

Another of Damille's investments that looks interesting is St Peter Port Capital . SPPC was established to invest in growth companies prior to IPO (initial public offering) with the hope of generating high returns for shareholders once the company was listed on the stock market.

Damille doubled its existing stake in SPPC in March, taking it to a disclosable level. What's interesting about this one is that SPPC's directors will shortly be obliged to table a resolution whereby shareholders can elect to commence the process of winding up the company, after which the directors would have to embark upon an orderly realisation of the company's investments. That looks just the sort of move Damille would be interested in agitating for, based on past form.

For investors who like to buy tangible assets on the cheap, the Crystal Amber Fund and Damille Investments, as well as some of their individual holdings, seem to offer some promising avenues of research.

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