value and opportunity

Just right before Christmas, Hornbach Baumarkt issued its Q3 report.

Hornbach again showed an outstanding quarter:

As well as substantially boosting its sales, Germany’s fourth-largest DIY group also achieved disproportionate earnings growth in the first nine months of the 2011/2012 financial year (March 1 to November 30, 2011). While the Hornbach Group increased its ninemonth sales by 6.6 percent to Euro 2,581.9 million, operating earnings (EBIT) for the same period grew by 12.8 percent to Euro 191.2 million. The DIY megastores with garden centers in Germany were once again the key growth driver. With cumulative like-for-like sales growth of 6.0 percent, these continued to outperform their sector by a clear margin.

Hornbach earned already 3.17 EUR in the first 9 months vs. 2,88 EUR last year, a remarkable 10% increase yoy.<

I find this especailly remarkable against the problems of Praktiker .

However it is still amazing, how cheaply the Hornbach stock sells. Of course the problems from Praktiker might have supported this years performance as well as the mad rush of Germans into real estate because of the EUR crisis.

Also, Hornbach does not buy back shares, but increases its investments which (for free cash flow fetishists) could be a bad sign.

However for someone who is looking for a defensive long term growth investments at “value prices”, Hornbach is a “must have”. The long term oriented startegy of the Group (e.g. developing its own real estate, owning 50% of the stroes) should prepare the company well for the future.

P.S.: I just saw, that First Eagle Investments reports a 2.43% stake in Hornbach Baumarkt, as well as a significant increase in the Hornbach Holding Preference shares as of June 30th. So at least some international investors seem to “discover” this outstanding company.