New investment: TGV Partners Fund ( ISIN DE000A0RAAW6)

Full Disclosure:
This is not investment advice or advertisement. Do your own research. The fund manager did not ask me to write this post, it was the sole decision of the author. The author is personally and with real money invested in the fund and knows the fund manager for many years. The author will get a symbolic “liquid commission” for any new investors coming through the blog which will be disclosed at the end of the post.

In March I already wrote a “prequel” to a potential new fund investment, listing the requirements I see for giving money to another investment manager. Now I have done it.

The fund is called “TGV Partners Fund” managed/ sub-advised by “MSA Capital”. The website of the fund and more information can be found here, the website of the sub-advisor can be found here: MSA Capital.

Back then I listed the following criteria which were important to me in order to trust part of my money to someone else::

1. The manager has to be trust worthy
2. The manager should have most of or even better all his money in the fund
3. the manager has a different skill set than oneself or just better skills or access to different assets
4. The manager should still be “hungry”
5. The fund manager is not only in for the money
6. The investment vehicle should be a “fair” structure

So let’s check the TGV Partners fund against it:

1. The manager has to be trust worthy
Well, I have an unfair advantage here as I have done “due diligence” on Mathias Saggau the fund advisor/manager for the last 8 years or so, constantly exchanging ideas and talking about everything (and drinking some cold beers together…). Mathias himself has a very good “credo” to ultimately decide if he invests into a company. He asks himself the question: “Would I trust my wallet for safekeeping to the CEO ?”. If there is the slightest doubt, he will not invest. Period. Would I trust my Mathias with my wallet ? Yes, absolutely.

2. The manager should have most of or even better all his money in the fund
That’s the case, Mathias invests all of his money in the fund alongside his clients.

3. the manager has a different skill set than oneself or just better skills or access to different assets
The thing I admire most is his ability to really dig really deeply into to companies and industries. I think he is very good in judging if there are competitive advantages in the long run. His deep research combined with a long time horizon allows him to have very high convictions and run a concentrated portfolio. Personally, I think I can pretty well identify what doesn’t work, but I am less able to identify what actually works, so I do think it makes sense to “outsource” some money to someone who has this skill. We do have some overlaps but I can live with this …..

He is also connected to other great investors via the “Investmentgesellschaft für Langfristige Investoren TGV” which contains an enormous amount of investment wisdom. I know all the people there personally as well and had the privilege to attend some of their events such as the 2 day conference in Omaha before the annual meeting of Berkshire.Rob Vinal from RV Capital works under the same “roof” and with a similar structure.

4. The manager should still be “hungry”
He is just starting the fund and will “work his but off” to succeed. I know that he is thinking about stocks most of the time, including weekends…..

5. The fund manager is not only in for the money
I know that Mathias has transformed his hobby into his job. He is an absolute “stock maniac” in the most positive sense.

6. The investment vehicle should be a “fair” structure
The TGV structure is a rarely used structure, sometimes it is called the “German Hedge Fund structure” even though it is open for public investors and similar to a Sicav. One of the key features is that the fund’s interesting share class is open only on a quarterly basis. Many investors might feel uncomfortable with this. But if you run a concentrated portfolio with potential illiquid stocks, you definitely don’t want someone to call and ask for his money back the next day, especially in bad market environment. Also as an long term investor, investor you want to make sure that the manager doesn’t have to dump his shares cheaply just because another investor gets nervous because this hurts all investors. I also know the main seed investor personally and he is in for the long-term. It also helps enormously NOT to see daily movements in the value of investments.

The TGV structure allows more flexibility than normal funds, especially with regard to instruments (shorts, derivatives) and more importantly, more concentrated portfolios. One of the major disadvantages for the fund manager is the fact that this structure is much harder to sell to investors such as fund-of-funds because of the unfamiliarity and lack of instant liquidity. As an investor I find this positive because you can be pretty sure that if someone choses this structure, he will not be in for pure “asset gathering” but for performance.

Portfolio & Investment style

The portfolio composition as of 30.06.2015 can be found here. The largest position is Google with a 15% weight followed by National Oilwell Varco (11%) Distribution NOW (9%) and Verisign (7%). As one can easily see by looking at some of the stocks (Amazon, Morning Star etc,) this is clearly no Graham style “deep value” portfolio. I would describe his investment style as “Munger meets the 21st century with a contrarian angle” kind of investing which means using the underlying framework of competitive advantages (“Moat”) and good management but transporting it into relatively new sectors such as software or internet related companies. As Mathias is still in a relatively early stage of his carreer I expect that his investment style and “circle of competence” will further evolve and he will become even better than he is now.

For any further information I can only recommend the freshly published shareholder letter (Englisch, German). He discusses his philosophy and three specific stocks: Admiral, Amazon and TGS Nopec.

Let’s talk about “commissions”
Normally I don’t take any kick backs etc. for recommending something on my blog. But in this case and based on my special relationship with Mathias, I had to make an exception. The deal is the following: For every new investor who mentions my blog before (or after) investing with him, I will receive one “Kölsch” (0,2l) at a bar of my choice in Mathias hometown, independent of the amount invested.

Just to be clear: Mathias has to pay this out of his own pockets (not from the fund) and neither Mathias nor I will receive or pay any other “commissions”.

Portfolio transaction:

For the portfolio, I assume I have bought a 4% position at the price of 30.06.2015. As this is a “special” position, it does not count towards my 1 transaction per month limit.

Some links

A TED interview with HF legend Jim Simons

James Tisch (Loews) on value investing in cyclical industries

Geoff Gannon with a kind of rebuttal of my “Cheap for a reason” post

The Brooklyn Investor likes Charles Schwab

A good write-up on Interactive Brokers. I you compare that with Schwab, IBKR seems to have significant competitive advantages

Highly recommended: A great post why writing down one’s thoughts (“Journaling”) is a fantastic decision-making tool

Value Investing Strategy: Cheap for a reason

Value investing is all about investing into stocks where the current price is “cheaper” than the underlying value.

The problem is clearly that although we know the price of the stock at any point in time, we can never be sure about the “true” value of a company as the future is uncertain.

So quite logically many value investors start searching for undervalued stocks within the group of “optically” cheap stocks. I often get emails like ” What do you think of stock xyz, it’s only trading at a P/E of 3 or P/B of 0,2 – isn’t this a great opportunity ?”. Isn’t it a great BARGAIN ?

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Short cuts: Bilfinger, FBD Insurance, ABN Amro IPO


It’s “bloodbath time” at least when it comes to accounting. Bilfinger released 6M 2015 figures a few days ago. As often the case with new CEOs, the new one tried to write down as much as possible, in this case ~423 mn EUR or roughly -9 EUR/share:

Charges of 430 million euros ($476 million), including a 330 million write-down of the Power division and 30 million in restructuring costs for Industrial, pushed Bilfinger to a 423 million euro net loss from a profit of 47 million a year ago.

The CEO has sent a letter to all employees, similar to the “burning platform” letter at Nokia some time ago. In Nokia’s case back then it was already too late, let’s see how it works out for Bilfinger. I do think there is some good substance in the company but the transition will be very difficult. For me personally, Bilfinger is still on the “too hard” pile as I cannot judge the viability of the remaining business.

Overall my impression is that the “accounting blood bath” is less aggressive as for instance at Vossloh. I think this has to do with the motivation of the shareholders. At Vossloh, the biggest shareholder Thiele clearly wants to buy more shares at a price as cheaply as possible. At Bilfinger, Cevian clearly does not want to take over the company but rather exit sooner than later.


I looked at FBD, the Irish Insurance company in January and decided to not invest as a didn’t like a couple of things (non-alignment of incentives, aggressive reserving, stupid investment strategy).

In the meantime, quite a lot happened:

The CEO left, the CFO took over and the stock lost around -50% since then. On monday, FBD issued its 6M report and things look even worse than back then, as at Bilfinger, they created a nice “blood bath”. The Farmer’s journal interestingly has the best coverage for FBD. Here are the highlights from the 6M report:

– the had to increase past reserves by 88 mn EUR (!!!)
– they will sell their hotel JV at book value, the proceeds at Farmer’s side will be reinvested into FBD
– they will go for a subordinated bond issue (50-100 mn)

Overall, the lost over 1/3 of their equity in the first 6 months (from 275 mn to 180 mn). The current equity position includes a retroactively implemented restatement which boosted equity by 30 mn EUR. I honestly didn’t fully understand the reason for this restatement.

Within the 6M presentation, they give the following interesting statement with regard to Solvency II:

JV sales and pension scheme actions take FBD solvency capital levels to the regulatory minimum (~100%)

Debt raise will bolster the firm’s capital buffer, taking Solvency II capital to within the firms target range of 110-130% by December 2015

This clearly shows that FBD is extremely strained from a capital perspective. The biggest unknown in my opinion is how the proceeds of the sold JV will be reinvested into FBD. They don’t comment on that 45 mn EUR at current prices (5,8 EUR per share) would be more than 20% of the company. I don’t know about Irish company laws, but this normally needs to be done on a subscription rights basis. Or the Farmers provide the subordinated capital ?

Anyway for now I still don’t think that FBD is investible, one really needs to understand how the capital increase will be executed. From a positive side, my analysis in January was actually quite good and saved me a lot of trouble. Still, FBD will go on my “focused watch list” as it could develop into an interesting “turn around” case as the underlying business, if run well, is still attractive. I ususally don’t invest into turn arounds but in this case I would make an exception as I consider this inside my circle of competence.

Funnily enough the price adjusted almost directly to the new “book value”. It seems as this is kind of the “anker” for investors.


The upcoming ABN Amro IPO could be another chance to invest in a “forced IPO” kind of special situation. However, for the time being it doesn’t seem to be a real bargain according to this Reuters article:

The government has said the bank is currently worth about 15 billion euros, just under its just-reported book value, suggesting a paper loss of about a third on the initial share sale. To break even, the bank would need to fetch a valuation of 1.4 times forward book value – higher than rival ING, which trades at 1.2 times.

For a wholesale/corporate/investment bank like ABN I would not be prepared to pay book value, so for the time being I will watch this from the sidelines, unless they come up with a clear discount to book value.

Peyto Exploration & Development Corp – Canadian Cowboys or “Outsider” company ? (part 1)

A few days ago, I linked to a shareholder letter where the CEO of the Canadian NatGas Fracking company Peyto discussed his opinion on the book “The outsiders”.

As some readers might have noticed, I started to look into the energy sector some time ago. First reading some books (Exxon, The Frackers) and a quick look into Cheniere Energy, the NatGAs liquification play.

As I try to expand my knowledge in the energy sector and a CEO reading and discussing “The Outsiders” made me very curious, I started to read the CEO’s monthly letters (going back to December 2006). They are 2-3 pages reports which cover various topics. Although some things are repeated, the information content was extremely high.

I found myself reading report after report until I had read all 105 (!!) of them (you’ll find notes on the memo at the end of the post).. I found them fascinating for 3 main reasons:

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Some links

Rob from RV capital has released his semi-annual investor report with some very good insights (registration required)

A very interesting “idea watchlist” from ClarkStreetValue

Whenever markets go down, Jim Chanos gets more airtime. Discusses China, EM, Solary City, HP and others.

Another half year report, this time from Zeke Ashton’s Centaur Total return fund

Damodaran vs. China

The ViennaCapitalist has an interesting perspective on commodity traders (Glencore)

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