Portfolio Performance February 2012 & comments


In February 2012, the portfolio performed suprisingly strong with a monthly performance of +6.7% against +5.1% of the benchmark.

Why is this a surprise ? As written before, I try to construct the portfolio in a way that I expect to get around 2/3 of any upside moves, but (hopefully) limiting the downside to max 50% of the benchmark. So a performance like February, with an outperformance in a still strongly rising market is definitely an exception.

The major reason for this outperformance were mainly the two “catalyst” events, the 210 EUR offer for Draeger Genußscheine and the buy back offer of Commerzbank for the HT1.

YTD the portfolio is up +10.4% against +13.9% in the benchmark. With a 75% participation rate of the upside move, this is still above my expectations and should be viewed as not typical.

Since inception (01.01.2011), the portfolio is now up +5.9% against -1.9% of the benchmark.

Current Portfolio:

Name Weight
Hornbach Baumarkt 5.1%
Fortum OYJ 5.2%
AS Creation Tapeten 4.0%
Autostrada Milano Torino 4.9%
EVN 3.1%
Walmart 3.9%
WMF VZ 3.9%
Tonnellerie Frere Paris 4.0%
Vetropack 4.8%
Total Produce 5.2%
OMV AG 2.1%
Nestle 2.2%
Piquadro 1.1%
Drägerwerk Genüsse D 8.6%
IVG Wandler 2.3%
WESTLB 6.9% 5.6%
DEPFA LT2 2015 3.4%
AIRE 5.1%
HT1 Funding 5.1%
DJE Real Estate 4.4%
Short: Kabel Deutschland -2.1%
Short: Green Mountain -2.2%
0 0.0%
Short Ishares FTSE MIB -1.0%
Terminverkauf CHF EUR 0.2%
Tagesgeldkonto 2% 9.7%
Summe 100.0%
Value 54.8%
Opportunity 40.6%
Short -5.1%
Tagesgeld 9.7%

As posted over the month, there had been quite some changes in the portfolio.

Completely sold /exit

Frosta AG (limited upside due to increasing costs and limited power to raise prices)
Westag (same as Frosta)
Sto Vz (fairly valued at current prices)
Magyar telecom (assumption in investment thesis did not play out, fairly valued)
KSB Vz (fairly valued at current prices, BRIC exposure)
Draeger Short (tactical move, price of Genußschein “floored” at current offer price)

DJE Real Estate (continued buying to reach fuel position size)
Tonnelerie (increase to full position, potential “catalyst” with Radoux deal)
Vetropack (increased to full position as “long term compounder”.
Autostrada (increased due to catalyst event to full position)

The total number of positions is now 24, which is a managable number of stocks. The split between “value stocks” and “special situations” is now 55% / 40%, cash is at the target level of 10%.

On the buy list are currently Tonnelerie and DJE until 5% are reached, as well as Piquadro under EUR 1,50 per share. For Piquadro, I will enter into a half position max.

Potential sells are mainly the large caps (Walmart and Nestle). If I sell Nestle, I will need to close the GMCR short as well as this was set up as a pair trade.


All in all, I still expect a “sideways market” over the next view years and the protfolio will be positioned accordingly as described above. Short term tail risks especially for Europe seem to have diminished somehow through the ECB intervention. The outcome of the Greek PSI is in my opnion not very relevant on a macro perspective. Even a further decline for Portugal seems to be priced into the market already.

The one spot I am most concerned at a macro level is the situation in China. We clearly see a clear slow down in construction activity. Despite the rhetoric of China seamlessly moving to a stable, consumer oriented society through the wise hands of the communist party, this would be the first time in history that such an epic construction boom would not end in a prlongued recession or depression. “This time its differnet” is a concept which doesn’t work against common sense and historical evidence.

If China would actually go into a severe recession, especially the now successful large international companies would be hit, which currently show record margins despite the “western world” being more or less in depression.

The general argument in the moment runs like this: Large International stocks are “cheap” and they are more secure because they are less effected by the “European crisis”.

Volkswagen is a good example. Based on recently announced earnings for 2011, they trade at a trailing P/E of 4. Howver, the net Income margin of 2011 at 9.67% is around 3-4 times above the avaerage of the last 12 years at around 2.8%. So one could ask now: Has Volkswagen revolutionized the car business and gained a significant competitive advantage or are they just reaping the “fruits” of the current China boom. As I cannot identify any significant competitive advantage for Volkswagen, I assume that at some point in the not so far future, margins will “normalise”. Under this assumption, Volkswagen is currently farily valued. Not overvalued, but also without real potential. As we have seen in 2008 and 2009, the situation for car campanies can virtually change over night.

So for the protfolio, I am actually looking for increasing the share what I call “special situations” in order to protect the downside. Although the “lure” of “cheap” large caps will stay.


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