value and opportunity

BMPS

Today I sold my BMPS “special situation” position at 1,80 EUR per share, a small loss compared to my 1,80 EUR entry price when I factor in transaction costs. The subscription rights stopped trading already yesterday. Overall, the case did not work out very well. The stock was volatile only the very first day and didn’t do a lot ever since as the chart shows:

It seems to be that the regulator has been quite succesful this time to warn market participants against any kind of option based short squeezes. So no “Italian Job” this time. As I have mentioned in the comments of the last post, I do not consider BMPS as a longer term investment. I do think the risk/reward profile of this special situation was good but it just didn’t work out. For the record, I consider the whole transaction as one trade so I still have one potential transaction open or June 😉

Quick look at Turkey

The Turkish Lira and the stock market got hit hard this week as the ruling party did not get the majority of votes.

Politically, one might say that this was actually good news because it clearly enforced democracy in Turkey. Or how the linked Reuters article said:

Erdogan loses his chance to become Turkey’s Vladimir Putin

Financial markets in the short-term however seem to prefer potential dictators to democracy. Although I really like the FT guys, this video shows clearly the opinion of many “pundits”. Especially the currency got clobbered and is almost back (in EUR levels) to early last year’s levels:

In the long run I do believe that a functioning democracy is positive, both for the country and business despite “uncertainties” due to elections. Especially as a public shareholder it is very important that the institutions in a country are properly working. With Erdogan gaining more and more power, I did have my doubts. I don’t know that many positive examples that stock markets with dictators in charge do really well.

Koc

My Turkish stock investment Koc Holding is still doing well. In EUR Term, I am still up around +50%. This is mostly due to a quite lucky entry point back in February last year. I still could not motivate myself to increase the position as Q1 results haven been operationally good but net income was lower yoy because of one-offs.

For Koc, a weaker Erdogan/AKP should be clearly positive in the long run as it reduces risk.

Depfa “Kebap bond”

My second “Turkish” investment is the 2020 Depfa TRY Zerobond which I bought almost exactly one year ago. Again I was lucky with the purchase timing. Although I bought at a more expensive exchange rate (2,85 TRY/EUR), I made some money on the bond price so that I am only slightly down.

The interesting thing is the following: Relatively speaking, the bond has become more attractive. This is what I wrote back then:

At a current yield of ~13% p.a., the bond trades around 4% p.a. wider than a 2 year longer EIB Zero bond and around 3% wider than similar Turkish Government (coupon) bonds.

Well, one year later, the bond actually trades 4,2% wider than Turkish Govies and 4,3% wider than the EIB bond. I still believe that there is very little credit risk in a senior Depfa Bond and that at around 50% and a yield of 13,8%, the bond is good value at an Exchange rate of 3,10 TRY/EUR. I might increase the position slightly in the next few days.