Introducing the “Boss Score” part 3 – First test with DAX 30 and own portfolio

As already announced in the previous post, let’s have a look what results we get for the German DAX companies, sorted by the Trailing 10 year “boss score”:

Name Price Book “Boss Score”
RWE AG 29.72 31.38 0.89
K+S AG-REG 33.75 16.90 0.53
MERCK KGAA 77.15 48.72 0.44
FRESENIUS MEDICAL CARE AG & 53.15 28.75 0.30
METRO AG 23.99 19.74 0.24
ADIDAS AG 59.43 26.33 0.01
DEUTSCHE BOERSE AG 39.51 17.52 -0.07
E.ON AG 15.10 19.58 -0.13
DEUTSCHE POST AG-REG 13.02 9.45 -0.15
BASF SE 57.28 27.62 -0.19
VOLKSWAGEN AG 121.40 130.55 -0.21
SAP AG 47.28 10.95 -0.22
HEIDELBERGCEMENT AG 36.04 65.06 -0.34
MAN SE 79.59 41.25 -0.36
FRESENIUS SE & CO KGAA 75.10 37.28 -0.41
SIEMENS AG-REG 66.46 35.92 -0.53
LINDE AG 122.45 68.65 -0.54
HENKEL AG & CO KGAA VORZUG 52.98 20.76 -0.60
MUENCHENER RUECKVER AG-REG 102.85 136.28 -0.71
BEIERSDORF AG 52.20 12.39 -0.77
BAYER AG-REG 50.98 24.19 -0.87
ALLIANZ SE-REG 75.81 106.62 -0.95
COMMERZBANK AG 1.42 4.22 -2.51

It is interesting to see that only 7 companies are above 0, which would indicate that they are undervalued.

Not surprisingly, financials including Insurers look relatively ugly. Also I am not surprised that we don’t see really great scores. Everything below 0.5 is not really interesting.

To a certzain extent surprising, Henkel and Beiersdorf are not performing really well. For Beiersdorf this has to do with a big drop in shareholder’s equity from 2003 to 2004 which creates volatility plus the fact that market value is already 4 times book value.

Also Henkel has a much more volatile equity positions than earnings would indicate which increases volatility in the model. This might have to do with FX effects but combined with the relatively high valuation it is neither boring nor sexy.

Just as a comparison, how are the scores for some of my portfolio companies ?

Name Price Booc Value 10Y B-Score
INSTALLUX SA 140.00 178.16 3.11
OMV AG 22.91 34.59 2.36
POUJOULAT 132.00 124.66 2.00
AS CREATION TAPETEN 25.19 33.71 1.79
BUZZI UNICEM SPA-RSP 3.38 15.47 1.37
HORNBACH BAUMARKT AG 24.93 25.54 1.16
EVN AG 9.32 16.44 0.62
FORTUM OYJ 15.43 11.65 0.57

As one can see, for some of the stocks, the “Boss Scores” are much much higher.

At the moment I am building up a database and will then post from time to time interesting “Boss” stocks. But remeber: This is only one specific way to look at the stock and should be used as starting point only.

(More to follow)


  • @Marin: Thank, buy I’m not interested in insurances per se. I bought mu re because the opportunities created by the catastrophe-prone last year.

    @MMI: How do you choose Equity market premium? I guess quite large to reflect, the low valuation of the market as a whole. (Low P/E in contrast with historical value).

  • @Robert: You could look into HANNOVER Re, which I think to be more conservative. But I think the returns from investing the insurance rates are under pressure and the evaluation has risen compared to munich re. I don’t have data to perform the boss score for ten years myself.

  • @MMI: Thank you very much. I reworked my analysis for Munich Re taking this in account. Now I agree that MR is not attractive. (Fair value before 125 Euro, now 91)

  • You are right. I think they are too big, too. But the earnings are understated because they can only book dividends and not the retained earnings of their marketable securities.

    The goodwill seems to be justified. If you buy a whole company with p/b > 1 you have a goodwill. This could still be a bargain. I would have much goodwill in my portfolio if I were a holding. I know that shares with low p/b performed slightly better in the past, but as I want to point out book value on the balance is just a simplification of reality.

    Berkshire is too complex for me to fully understand it.

  • Berkshire has invested in its brands. You can’t activate brand value on your balance sheet. As far as i remeber investments like geico (insurance) are activated with the original purchase price. So berkshire should have some hidden assets. You can read the interesting letters to shareholders for further information

    In my opinion brand value at least grows at the same rate as inflation. This is why book value does not work for big consumer goods companies with strong brands.

    • Hi Martin,

      my score measures ONLY past return on equities compared to volatility.

      It does not take into account future growth as I do not want to pay for it.

      Berkshires “Only” made 9% p.a. TROE for the last 10 years. This includes evrything which was created by “goodwill”. What good are “hidden assets” if they don’t create ROE ?

      I think the problem with >Berkshire is that they are just too big. And in order to score well, the equity is too volatile.

      By the way, 30% of Berkshires book value is activated goodwill.


  • I am curious as to how Berkshire Hathaway scores on this scale…

    • rp73,

      good question. Berkshire was one of the first companies i checked.

      Under this model and based on NAV of the last 10 years, the score is -.06. Close to zero, which means “fairly valued”.

      In my database, I have a lot of comppanies which have increased their NAVs much more and with lower vol. Berkie has 9.7% average “TROE” and corresponing vol of. 8.5%. This is not really impressive.


  • I`m surprised MUENCHENER RUECK scores so poor. In my opinion this company is quite undervalued. Is high volatility the reason?

    • Hi Robert,

      MR scores relatively bad, because the equity position is volatile. Earnings look relatively stable, but finance companies book a lot directly into equiyt.

      Munich Re didn’t really create a lot of shareholder value over the last 10 years.


  • Interesting work. RWE is a special situation. They have written off powerplants which still generated cashflows. The decline in value due to the German decision to quit atomic energy is not fully represented with your approach, as the future is much more unknown than in prior years. Maybe I would use a weighted average and put emphasis on the last years.
    Regarding SAP: Can they activate research on their balance sheets? I think this boss score might undervalues software companies, which invest heavily in their products.
    Although I think you can find interesting companies with this approach.
    I am surprised that BASF performed so badly. I think they are stable and a good long term investment.
    Which interest rate did you use to discount?

    Your portfolio seemt to consists of smaller companies. I think for example the SDAX would have higher boss scores and could be a better benchmark.

    • #martin,

      the problem with BASF is that they have relatively volatile results and already trade at 2x book.

      Average 10 year TROA is around 12% and volatility is around 8%. This jsutifies in my model “only” 1.8 times book, because the Boss Score also relates to the P/B multiple.

      For SAP the same problem. The model only justifies ~3.6 P/B against 4.5 actual P/B.

      In general, German companies look relatively unattractive in the model including most SDAX companies.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.