March 2013 Performance & comment: “Another storm in the teacup”
Performance:
Performance in March was again very satisfactory, with +2.0% vs. 0.2% in the benchmark (50% Eurostoxx, 30% Dax, 20% DAX). YTD this results in +13.48% against +4.90% BM performance. Since inception (1.1.2011) the score is now 49.6% against 14.4%.
Best performer was Total Produce with +15.6%., followed by Draeger with +12.5%, AS Creation +11.5%, WMF +10% and Tonnelerie with +9.7%. Biggest looser was of course the IVG convertible with -30.6%. This alone cost the protfolio ~1.5% absolute performance. Also, April SA lost ~12% in March.
Nevertheless I am still surprised how well most of the stocks performed, as many of them are nor really cheap any more. But as it is with momentum, it always carries much much longer than one thinks. Nevertheless, one should not indulge in complacency.
Major transactions
As discussed, I added G. Perrier as new stock. I also sold half of the Total Produce position and added to Gronlandsbanken.
Portfolio as of March 31st 2013:
| Name | Weight | Perf. Incl. Div |
|---|---|---|
| Hornbach Baumarkt | 4.1% | 9.8% |
| AS Creation Tapeten | 4.3% | 43.6% |
| WMF VZ | 3.7% | 76.0% |
| Tonnellerie Frere Paris | 6.5% | 96.1% |
| Vetropack | 4.4% | 8.9% |
| Total Produce | 3.1% | 75.2% |
| Installux | 3.0% | 14.9% |
| Poujoulat | 0.9% | 4.9% |
| Dart Group | 3.8% | 106.4% |
| Cranswick | 5.1% | 18.7% |
| April SA | 3.4% | 4.3% |
| SOL Spa | 2.5% | 14.2% |
| Gronlandsbanken | 2.3% | 23.7% |
| G. Perrier | 2.2% | 7.7% |
| KAS Bank NV | 5.0% | 30.0% |
| BUZZI UNICEM SPA-RSP | 5.3% | 26.3% |
| SIAS | 5.8% | 57.4% |
| Bouygues | 2.6% | 10.0% |
| Drägerwerk Genüsse D | 11.3% | 198.6% |
| IVG Wandler | 3.0% | -22.4% |
| DEPFA LT2 2015 | 2.6% | 51.6% |
| HT1 Funding | 4.7% | 54.1% |
| EMAK SPA | 3.8% | 16.7% |
| Rhoen Klinikum | 2.3% | 10.7% |
| Short: Focus Media Group | -1.0% | -10.9% |
| Short: Prada | -1.1% | -25.6% |
| Short Kabel Deutschland | -1.0% | -4.6% |
| Short Lyxor Cac40 | -1.1% | -8.5% |
| Short Ishares FTSE MIB | -1.8% | -1.6% |
| Terminverkauf CHF EUR | 0.2% | 5.8% |
| Tagesgeldkonto 2% | 10.6% | |
| Value | 49.1% | |
| Opportunity | 46.3% | |
| Short+ Hedges | -5.9% | |
| Cash | 10.6% | |
| 100.0% |
Dragerwerke is again above the 10% threshold. I will therefore sell ~1.3% asap. Also, I will reduce Total Produce to 0 in the next few days.
March 2013 comment: “Another storm in the teapot”
Following the press, Europe again narrowly escaped Armageddon in March during the”Cyprus situation”. Common knowledge now is that they broke a tabu with bailing in depositors and again, all the banks and Club Med countries are doomed.
Looking at this more realistically, one could argue that this was at first again an economic non-event. Less than 1mn inhabitants, total bailout of around 15 bn EUR. One should not call this peanuts, however compared for instance with the 57 bn the EU spends on agricultural subsidies annualy, it is clear that we are talking about a rounding error here.
Secondly, I am asking myself: What’s wrong when depositors actually share the burden to a certain extent instead of socializing everything on the tax payers ? Someone with more than 100 k EUR in the bank is actually quite rich. According to latest numbers, German households in the west have on average 132 K EUR, Eastern Germans 55 k EUR average net worth, including real estate. So people are freaking out because people with a lot of money are not being bailed out by people with an equal or lower total net worth ?
Why should a bank depositor in general be better protected than an investor in Government bonds in the same country ? Those implicit or explicit guarantees in my opinion are actually one of the root problems in this whole mess. With deposit guarantees, there is no distinction between good and bad banks. actually, managers of bad banks get a free ride and lot of optionality via this subsidized funding. The capital allocation function of the capital market is highly distorted by this kind of guarantee which is by the way free and not charged.
In the medium and long run, bailing in depositors will in my opinion contribute to the financial stability of a financial system because bad banks will have it much harder to blow up their balance sheet and support asset bubbles. Again, I don’t think we are out of the woods with regard to the “EUR crises” but for me the Cyprus depositor bail in is another small step into the right direction.
Despite the many pundits on TV who claim that they know exactly what to do in this situation, in reality know one has a clue. The best strategy in such situations is trial and error. When you are in unchartered waters or in a forrest at night without light, the most stupid thing would be to say: “Let’s go this way and full speed ahead”. What you should do instead is to go slow, test the waters, feel your way through and change directions if you see obstacles directly ahead.
Don’t get me worng though, this is not meant to be a statement that we will see share prises going up further because the EUR problem will be solved soon. There are a lot of risks out there which might or might not priced into the market. All I am saying is that the next “Black swan” or “grey swan” will most likely not come from the EUR mess but from somewhere else.
value and opportunity 