value and opportunity

Sometime it is scary how fast time flows. 3 years have passed since the first post appeared on this blog.

According to the statistic tool of WordPress, in 2010, the blog had 310 “hits” which translates to around 20 per day. In 2013 this number has increased by the factor of 50.

This might be the right place to say a big “THANK YOU” to all readers and an even bigger “THANK YOU VERY MUCH” to everyone who has contributed either via comments and or EMails.

Top 10 posts this year

1. How to correctly calculate Enterprise Value
2. My 22 investments for 2013
3. Operating Cash Flow and interest expenses – (ThyssenKrupp vs. Kabel Deutschland, IFRS vs. US GAAP)
4. Risk free” rates and discount rates for DCF models
5. Kurzanalyse Prokon Genußrechte
6. TGS Nopec ( ISIN NO0003078800) – an “Outsider” Company Buffet would buy if he could ?
7. P/E, EV/EBITDA, EV/EBIT, P/FCF – When to use what ?
8. Berkshire Hathaway 2012 listed stocks performance
9. Piquadro SpA – Competitors, market analysis and strategies
10. Spin off watch: Osram Licht AG

Interestingly, the “general interest” posts generate a lot of traffic. My guess is that many business administration students are using Google instead of reading their books……

Why I (still) blog

For me, this form of writing is the single best way to focus and structure my investment ideas. As I can spend only a limited time per day on this and my “physical” record keeping abilities are quite limited, the blog enables me to effectively organise my research and quickly revisit each thought.

The second most important issue of blogging is feedback. I am a big believer in getting “challenging” feedback. Yes, there are also forums etc. but via the blog it is much easier for me to keep track of discussions. I am also very proud that the comments I get are on average of much much higher quality than the discussions in many investment forums.

How I do it

Sometimes I get asked how I have so much time for blogging. To me this is surprising, as I spend “only” around 1-1.5 hours (week ends included) per day on my private investments in total. For me, researching stocks and writing a blog post has become an almost seemless process. I mostly read electronic documents. For instance, when I was researching the Metso/Valmet Spin off, I make notes already into the blog. It then takes maybe 10-15 minutes to structure the notes into a blog post. So overall, the effort of writing the blog itself is not so big and only around 10-20% of my “private investment time”. However, I have to admit that I spend the rest of the day with somehow related finance topics 😉

Interestingly, the “structuring” part is also the part where I sometimes have to change my initial opinion. I guess this is some kind of “second level” thinking. Several times, I had a pretty solid opinion early on when looking into the stock, which then changes before actually releasing the post.

On going “professional”

Sometimes I get also asked, why I am not ging into “professional” investing. One of the big issues in my opinion is the institutional set up of many investment organisations. In many cases, time horizons of such institutions are rather short and analysts are forced to specialize within categories and sectors. This leads to the strange situation that even passionate investors often don’t really enjoy working in such environments, because more often than not Asset Managers are run by “business persons” which want to increase AuM before anything else.

I sometimes dream of setting up my own fund, however so far I did not have the courage to actually do so. I guess it is not easy to find enough investors for the kind of “go anywhere, invest in potentially everything” style I prefer without a “formal” track record.

Lessons learned (hopefully)

I am not sure of my investment approach has “evolved” but it has clearly changed since I started the blog. A few subjective observations:

– I trade a less than before. I am down from around 30-40 changes in portfolio constituents per year to 10-20. That doesn’t sound much but is effectively a doubling of the average holding period
– 4-5 years ago my portfolio would have been 97% German, now it is around 25%
– I used to focus mainly on price/tangible book value, today this is a rather secondary criteria
– looking at business models has become a much more important part of my analysis. I still don’t like to pay for growth but it prevented me from investing in some potential value traps
– “special situation” investing has become a bigger part of my portfolio

Personal highlights

Finally a few personal highlights from the last year:

1. The real high light was clearly my trip to Omaha to see Charlie and Warren live.

2. The biggest learning experience was clearly the IVG case. Although I lost money with that I think I gained a lot of insight for potential future distressed situations. Especially when to stay away….

3. My goal to establish and further develop my qualitative investment checklist has worked out very well. Having such a tool really adds a lot to the investment process.

4. Finally, Dart Group, my first “triple” while writing the blog was great fun and a great success for my “boring company” philosophy.

So before it is getting too boring, once again a big THANK YOU for reading and commenting and I am looking forward to the next 3 years.

Edit: I often get mails or comments lie “I think share xyz is undervalued, can you write a post about it”. I am very sorry, but usually I will not and cannot contribute a lot of meaningful answers. Unless it is a stock which I have analysed in the past, usually my own “pipeline” is so big that I do not have the time to look at each and every stock in a meaningful way. So unless it is connected in some way to my existing portfolio or there is a special “twist” or something, don’t expect much of an answer. I am not Jim Cramer or some simlar guy who has an opinion of each and every stock in the market.