FBD Holdings (ISIN IE0003290289) – A local Irish Insurance champion for sale ?

Again this turned out to be a quite long post as I am digging a little bit deeper into the balance sheet. Therefore a quick summary:

Although FBD Holdings, the Irish P&C company looks interesting, I will not invest. The company has a very impressive track record, but in my opinion the business model is not scalable as it doesn’t have any structural competitive advantages besides a loyal client base. Additionally, the company severely screwed up their asset allocation and will be faced with ultra low investment returns going forward unless they are increasing their investment risk significantly.

At current stock prices, the company is in my opinion pretty well priced, with only a relatively small upside in a good case and equally large downside in a more negative case.

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Some links

A great (long) article on Shell, drilling in the Arctic, proven oil reserves and some more.

The WertArt blog likes Italien closed end real estate funds

A few nice graphs on oil demand.Hint:It is lower than expected.

An interesting essay about the “out-of-control” art market

On the advantages of bottom up stock picking against top down market timing

Eddie Lampert (Sears) explains the trial and error nature of retail.

Nate from Oddball with a great post on he advantages of a consistent (and boring) style of investment

And then there were 26 – Sold Energiedienst

A few days ago, I published my 28 stocks for 2015. Pretty soon after that, I already sold Sberbank.

Now I sold another stock, Energiedienst, the German/Swiss Hydro Power generator which I bought only last year.

The investment case for Energiedienst was pretty simple: Energiedienst as a hydro power generator is an “electricity price pure play” with a solid balance sheet. My expectation was that Energiedienst could profit in the mid-term if the conventional utility companies take capacity off the market, as running gas and coal powered power plants were loss making for E.On and RWE.

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Performance review 2014 – The year in review & Short outlook 2015 & Happy New Year !!!

Performance 2014

In 2014, the portfolio perfomed 5,42% vs. 2,37% for the Benchmark (Eurostoxx50 (25%), Eurostoxx small 200 (25%), DAX (30%),MDAX (20%)). This is the 4th year in a row with an outperformance but such a small difference is rather arbitrary, so nothing to get excited.

If I would need to promote my results for 2014, I would argue that the result has been achieved with significant less volatility than the Benchmark. A quick look at the monthly returns:

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Short Cuts: Flughafen Wien, Alstom, Trilogiq, Sberbank

Flughafen Wien

A quick update on my “Christmas-special situation” investment Flughafen Wien:

82,2% of the tendered shares have been accepted at the offer price of 82 EUR. With the current share price of ~ 77,5 EUR, the overall return results (pre costs and taxes) are :

(0,822*(82-79,25) + 0,178*(77,50-79,25))/79,25= +2,46% For the portfolio I assume that I would be able to close the position (sell the rest) at 77,50 EUR. Privately my broker DAB was not yet able to “release” the tendered shares.


Back in August this year, I looked at Alstom as a potential “sum of parts” play following the GE deal announcement. One open point was the issue of pending corruption charges. I had written the following:

A second big issue is that at the moment no one knows exactly how much of the liabilities will get transferred to GE. Especially with regard to operating leases (nominal ~830 mn EUR), litigation liabilities (528 mn EUR) and pension liabilites (gross 5,2 bn) there is no definitive answer how much will be transferred to GE and what remains at Alstom. In a sum of part calculation, any of those remaining liabilities will have to be deducted from the extra assets as they are economically equivalent to debt.

I had some discussion and the consensus was that litigation liabilities would be transferred to GE, although I was sceptical. It turned out that I was right in this case. Alstom pleaded guilty and agreed to pay 772 mn USD fine. For the valuation, the most important sentence is this one:

In June, Alstom agreed to sell most of its energy business to General Electric. The French company said it would not be able to transfer its fine over bribery allegations to G.E.

Due to the strong dollar, in EUR the fine is actually 100 mn USD higher han the reserves. Overall, for anyone assuming GE taking over those liabilities, this reduced the value of Alstom by 2 EUR per share.. It will be interesting to see how the transport business is actually doing once Alstom publishes annual results. So far, I do not see any reason to buy the stock from a fundamental point of view.


A few days before Christmas, Trilogiq reported 6m figures (30.09.2014). For some reason, the report is not on Trilogiq’s homepage, so one has to look at secondary sources like this one. Sales were slightly lower, gross margins more or less equal to last year. Net income was significantly lower but still positive.

They attribute the lower result to special marketing expenses and new hires:

la hausse de 13% des autres achats et charges externes, notamment du fait de la multiplication des actions marketing destinées à faire connaitre la nouvelle gamme GRAPHiT à travers le monde, l’augmentation de 12% des charges de personnel qui ont été grevées par d’importantes indemnités de départ et par de nouveaux recrutements

Cash is till around 22 mn EUR or 6 EUR per share. If Trilogiq manages to return at leat to 2/3 of the old profitability, (earnings were between 1,45 EUR per share and 1,75 EUR from 2008 to 2013), the stock would be priced at 6-8 times earnings. It remains to be seen if the temporary effects are in fact temporary. A friend forwarded me this equity research piece on Trilogiq where they expect 1 EUR EPS in 2016/2017 which to me looks quite conservative. Nevertheless, I think the further fundemental downside for Trilogiq at the current stock price is rather limited.


Over the holidays, I decided that I will exit my Sberbank position still within the old year at today’s prices. In the private account this also leads to “tax loss harvesting”. For the portfolio it became clear to me that my investment decision now has been invalidated 2 times. First, I estimated that the Ukraine conflict would be over quickly which was clearly wrong. Secondly, I did not account for the drop in oil prices and the ruble. I have honestly no idea how exposed Sberbank is directly or indirectly to oil and the ruble, but the prudent decision is to sell now and look at the stock (and the Russian market) again next year.

It might look very pro-cyclical selling near the low, on the other hand, if an investment case has deteriorated as much as in this case one should better exit before “behavioural biasis” such as “breaking even” etc. kick in.

My 28 investments for 2015 (and maybe a few too many….)

As every year, I will do a short summary of my portfolio for 2015 with comments on each positions. One thing that I recognized is the fact that my portfolio now has 28 positions which is on the high-end of what is manageable. So I have to put a few of them on the watch list to do a deeper review in the coming weeks. New ideas have to replace an “old stock” in 2015.

1. Hornbach Baumarkt

One of my initial positions, family owned Hornbach is a slow and steady grower, their market share in Germany for instance increased from 8,7% in 2009 to 13% in 2013. The stock performance in the last year lacked a little bit as the market did not allow multiple expansion. Very limited downside in my opinion despite hard business. Hornbach could additionally profit from the end of the Baumax chain in Austria, similar to the boost in sales in Germany after Praktiker went bankrupt.

2. Miko

Belgian, family owned company providing Coffee workplace services and plastic packaging. Plastics division could profit from low oil prices. Slow and steady grower, doing small acquisitions along the way.

3. TFF Group

Another initial investment from 4 year ago. Family owned oak barrel manufacturer. Has grown well over the past year due to Asian demand for oak aged french wines and opportunistic acquisitions. Demand for French wine in China seems to hae stopped growing, but long term I think the company is attractive. Next year will be rather unspectacular.

4. Installux

Small French company specialized in aluminium appliances. surprisingly resilient. Despite the nice stock price appreciation in 2014 (+30%) still one of the cheapest quality stocks in Europe. Downside well protected via large net cash position.

5. Cranswick

Uk based “butcher”, producing pork and sausages with a dominant market position. Despite the problems of its biggest clients, Cranswick is still doing well although the stocks are a little bit on the expensive side. This is a stock I will have to review soon.

6. Gronlandsbanken

Gronlandsbanken is the only bank in Greenland and a long bet (or hedge against) Global warming. The ice is melting in Greenland which should contribute to ecominic activity, however a lot of that is commodity related. Stock pay an attractive dividend which looks very safe.

7. G. Perrier

French small cap, specialist for electric installations with a strong position in Nuclear maintenance. Good growth despite economic headwinds. Cheap (ex cash) depite attractive, capital light business model.

8. IGE & XAO

Small french software company, controlling the French market for electrical CAD software. Steady growth, highly attractive margins and still reasonably priced.

9. Thermador

Thermador is a French based construction supply distribution company. Distinct “outsider style” corporate culture. Despite headwinds in French economy still doing well. Reasonably priced.

10. Trilogiq

A French supplier mostly to the automobile industry. Capital light business model including some consulting. However issues in 2014 due to complete change of product offering and resulting disruptions. Despite lower profits still oK priced but I will need to thoroughly review the position next year.

11. Van Lanschot

Dutch base private bank, turn around story with new management. Some progress in 2014. Still well below book value but it needs to be seen if capital will produce adequate returns.

12. TGS Nopec

“Outsider style” seismic data company. Clearly influenced by the oil price but with strong competitive advantages against competitors due to “capital light” business model.

13. Admiral

“Outsider style” direct internet insurance. Uk base, large cost advantages but difficult part of the insurance cycle. Several growth projects on the way.

14. Bouvet

IT consulting company from Norway. Stock price hit hard by oil decline, Statoil is the largest client. Will need to check if investment case still valid as a 50% drop in oil prices and the potential impact on Norway’s economy was not part of my analysis.

15. KAS Bank NV

Specialist bank from the Netherlands. Cheap but good and safe dividend yield. Would profit significantly if interest rates would go up again.

16. Energiedienst

Swiss/German Hydroelectric utility. Still suffers from renewable energy driven chaos in German electricity market. Solid cash generation, defensive position. Could profit from restructuring of the large German utility groups, although electricity prices will stay low if oil and other fossil fuel stays as cheap as currently.

17. Koc Holding

Family owned conglomerate, dominating Turkey’s economy. Low oil price should benefit Koc in several ways.

18. Ashmore

Specialist Emerging Markets asset management company. 2014 was difficult year due to EM volatility. I am still positive as EM is basically the only part of the market where there is any yield left. CEO owns significant part of the company.

19. Sberbank

Biggest Russian bank. When I bought it, I did not expect that the conflict in Ukraine would escalate as much and of course I didn’t expect the oil price go down so fast. Will need to review the case asap.

20. Depfa 0% 2022 TRY

Combined Emerging market investment (Turkish Lira) and bet on Spread tightening for DEPFA.

21. Romgaz

First part of my bet on a Romanian recovery supported by the election if the new, ethnic German president. Extremely cheap producer and distributor of natural gas. Could profit from recent privatisation and efficiency gains, pays solid dividend.

22. Electrica

Part 2 of Romanian “bet”. Extremely cheap electric grid company. Guaranteed profit increase via investment program at guaranteed returns plus extra upside if efficiency gains could be achieved. On of my favourite long-term bets.

23. Drägerwerk Genüsse

Capital structure “arbitrage”. Price of Genußscheine still far below the fundamental value which should be 10x the Draeger Pref shares

24. DEPFA LT2 2015

Tier 2 bond with good yield and low risk. Will mature in 2015.

25. HT1 Funding

Still a “safe spread” subordinated bond with 5% yield until 2017 where it will be most likely called by Commerzbank.

26. MAN AG

“Squeeze out speculation” with guaranteed dividend.

27. NN Group

“Forced IPO” from ING Group. Still relatively cheap.

28. Citizen Financial

“Forced IPO” from RBS. Valuation below US peer group, could profit from higher interest rates.

Some links

Eddy Elfenbein is out with his buy list for 2015

Looks like an interesting book: Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance plus a good list of investing books

Morgan Hounsel on what to avoid as role model

Very good story on Amazon’s Kindle and the future of books and Henry Blodget interviews Jeff Bezos

BMW’s growing troubles in China

A 3 month old but maybe still interesting post on Paragon Offshore drilling

Via market folly: Howard Marks on oil

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