value and opportunity

Many bloggers and other market pundits are currently touting their 2013 picks.

Mcturra for instance names 5 of them, Nate at Oddball selected his 13 stocks for 2013, red has pulished 3 full portfolios for 2013 (UK portfolio, Euro portfolio, US portfolio).

So in order to contribute something here, I will show my 22 favourite investments for 2012, which by total coincidence, are similar to my blog portfolio. As an added value for the readers (and for me), I try to add 2 or 3 sentences for each investment in order to summarize the investment case.

1. Hornbach Baumarkt
Solid long-term compounder. 2012 was weaker than 2011 but Hornbach has a solid long-term strategy and is increasing market share steadily. Potential upside catalyst if main competitor Praktiker will not manage turn around.

2. AS Creation
German market leader for wallpaper. Hit by anticompetitive issues, but recovered quite nicely. Upside catalyst: Start of Russian JV in 2013. Russian JV partner has bought already 10% of AS Creation.

3. Buzzi Unichem pref
Italian based cement company, however with large international operations. Comparably low leverage, long-term strategy. Company announced a few weeks ago to squeeze out minority shareholders of German subsidiary Dyckerhoff. In my opinion a sign for increased financial flexibility and long-term thinking.

4. WMF AG pref
KKR bought majority from previous PE owner Capvis. Underlying business, esp. Coffee makers still going strong. Interesting to see if KKR will try to take WMF off the stock market or spin-off the coffee maker division. No reason to sell, downside well protected.

5. Tonnelerie Francois Freres
French “hidden champion” for oak wine barrels. Acquired major competitor Radoux in 2012, issued very good results just a few days ago. Very long term oriented company.

6. Vetropack
Swiss based producer of glass bottles, however production locally in central and eastern Europe, so no FX issues. Ultra solid company, lately no big growth because of stagnating eastern European markets. Looks like owner family will try to increase stake directly and indirectly via share repurchases. ultimately, they might want to take company private.

7. Total Produce
Ireland based fruit and produce wholesale company. Good stock price momentum at the moment. Business relatively independent from overall economy. However, a large number of smaller acquisitions in the last months, so one must scrutinze closely if this pays off.

8. SIAS Spa
Italian toll road operator. Despite overall weakness in Italy, holding up very well as tariff increases almost fully compensated traffic decreases. Has a lot of excess cash because of sale of LatAm operations. Large special dividend expected.

9. Installux SA
Unspectacular french company specialised on aluminium related products. No special story here, but ultra cheap and safe as well very profitable.

10. Poujoulat
Similar to Installux, cheap and profitable French company. 2012 might not look so good from P&L as French building activity is very low, but company invested a lot into wood pellet production. If this works out, earnings could increase significantly.

11. Dart Group
UK based operator of ground transportation and budget airline. Spectacular growth in packaged holidays. Still cheap despite share price having doubled in 2012

12. Cranswick
Very unspectacular UK based pork specialist. Very consistent, in my opinion with a certain kind of moat. Current share price does not reflect quality of business and balance sheet.

13. April SA
French based Insurance broker and specialist insurance company. Still owner managed, generates incredible high free cashflow without real capital requirements.

14. Bouygues SA
Sum-of-part undervaluation story. Bad headline news for mobile subsidiary overshadows ultra solid road and construction business. Company is very shareholder friendly for a French company.

15. KAS bank
Specialist Dutch depository bank. Currently valued at single p/E at bottom of the cycle margins. Very good mean reversion potential over 3-5 years.

16. Gronlandsbanken
Major bank in Greenland with very good margins. Will benefit greatly if any of the energy projects in Greenland will be realised. Management bought shares until recently.

17. Draegerwerk Genuesse
Special situation /capital structure arbitrage. Theoretically, the “Genuesse” should be worth 10 times the pref shares (theoretical price ~700 EUR against current price of 300 EUR). Management has already tried to buy back the Genuesse but got only back a part of them.

18. IVG convertible
Convertible bond with a 2014 put option for the bond holders. Although IVG is still struggling with some legacy real estate, very good risk/return relationship based on the short time to put exercise date.

19. Depfa LT2 bond
Special situation bond with good risk/return potential despite issuing company Having been bailed out by the Government.

20. HT1 Funding
Special situation Commerzbank deeply subordinated bond with coupon guarantee. Has profited from repeated equity raisings as more and more equity is now below the bond. At current prices stilla very solid “hold”.

21. EMAK
Italian special situation. Manufacturer of garden tools etc. Currently hit by Italian recession but with increasing international exposure. Significant reversion to mean potential.

22. Rhoen klinikum
Special situation investment, following the unsuccessful take over attempt from Fresenius. Only available “target” in the German hospital sector. I expect further take over attempts going forward. Standalone solid company, relatively low downside risks.