value and opportunity

Very good idea from the excellent Wexboy blog:

Send your favourite idea to him and he will analyse the stock and post it on his blog. Only very few “restrictions” apply:

– Should be accessible to the average reader – basically any company (or fund) listed on a developed market exchange (doesn’t exclude emerging market stocks if they’re listed in London/NYC, for example)

– Favourite‘s a flexible idea – might be the latest stock you bought, the most interesting/unusual, the cheapest, the least risky, the stock with the most upside potential, etc…

– You should have some skin in the game – please disclose what % of your portfolio is in this stock

– Stocks that can be bought & held for a few years are definitely preferable – so no ‘quick trades‘, or (specifically) event-driven ideas

I will be doing my own review/valuation of all stocks submitted. Remember, like most readers, I’m interested in great investments, not speculations… And I use a value perspective. This is not to suggest that I’m averse to a good growth story – I love ‘em, I just don’t want to pay too much for them!

I hesitate to call any stock in my portfolio as best idea, nevertheless I will participate with German DIY chain Hornbach Baumarkt AG (ISISN DE0006084403). Although I have analysed the stock extensively in German language, I was always to lazy to wwrte a detailed analysis in English. Maybe Wexboy will do that for me 😉

Some highligts of Hornbach:

+ honest, long term oriented management (majority family owned) with clear strategy
+ conservative balance sheet, replacement value significantly above book value
+ still cheap (P/B 0.96, PE 10)
+ only limited impact of internet on business model
+ special short/medium term growth opportunity if largest competitor Praktiker defaults
+ 5% weighting in my model portfolio (max. allowed before price appriciation, similar in private portfolio)

Some reasons why stock is cheap:

– complicated legal structure (both, holding and operating company are listed)
– low liquidity, low or almost no analyst coverage
– very competitive business
– no short term catalysts

As Wexboy wants as many ideas as possible, I would highly recommend all readers to send their proposals to him.