Short cuts: Greenlight Re, Hornbach & TGS Nopec

Greenlight Re:

One reader Emailed me that I had made a mistake in my initial post with regard to the book value and P/B ratio. This is what I wrote in December:


2007 2008 2009 2010 2011 2012 2013 2014 2015
P/B Ratio 1,24 0,96 1,23 1,23 1,08 1,03 1,19 1,05 0,78
P/B Ratio adj. B Shares 1,48 1,15 1,46 1,47 1,29 1,23 1,42 1,25 0,93

For some reason, the official Bloomberg ratios do not include the class B shares held by David Einhorn, so I adjusted them accordingly.

Actually, the B shares are included in the stated Bloomberg Ratios despite showing the wrong number of shares, so the “true” P/B ratio is around ~0,79 which then of course makes the “mean reversion” story even more compelling.

Additionally, Greenlight already released the monthly investment return for December which was -0,1% against -1,6% for the S&P 500. So at least its going into the right direction.

Maybe one quick point on comparisons of Greenlight Re to Berkshire, Markel or Fairfax: Although it is true that the other companies have better track records, I do think that Greenlight has one big advantage: The company is transparent and relatively easy to value as the whole investment portfolio is marked-to-market. And as I pointed out, Greenlight for me is not a long-term compounding story but a mid-term special situation betting on a David Einhorn outperformance.


After Hornbach’s profit warning in December, a lot of people asked me: What are you going to do ? Are you selling now ? Why do you own Hornbach at all ?

First thing: I wil do nothing and watch. For me , the profit warning was very surprising as I thought that they are on a good track and have the right strategy, although the business they are in is very tough.

For me, Hornbach is a pretty low risk position. My expectation was that I can make around 10-12% p.a. with very little risk. Until Q3 2015, that was on track but now of course it looks like a clear underperformer.

One of the reasons for this is clearly the fact that in contrast to almost any other stock in Germany, Hornbach did not enjoy any multiple expansion over the last 5 years. For a capital intensive, real estate dominated business like Hornbach, book value is one of the relevant measures. If we look at this we can clearly see that Hornbach now is valued at the low end of the historical range of P/B which ranged from ~0,8 – 1,8 in the past 15 years:

P/B BV/Share
30.12.1999 1,86 8,335
29.12.2000 1,46 8,679
28.12.2001 1,07 11,654
30.12.2002 0,99 11,642
30.12.2003 1,09 12,103
30.12.2004 1,10 13,201
30.12.2005 1,17 13,661
29.12.2006 1,33 15,182
28.12.2007 1,31 16,441
30.12.2008 0,81 18,784
30.12.2009 0,89 20,584
30.12.2010 1,09 22,947
30.12.2011 0,93 24,900
28.12.2012 0,99 25,881
30.12.2013 1,03 27,101
30.12.2014 1,04 29,023
Jan 16 0,84 31,230

Obviously, Hornbach does have some issues. Personally I think one needs to watch the E-Commerce issue most closely. So far I thought that DIY does not have big issues with Amazon & CO but this now needs to be tested.

TGS Nopec

Tgs Nopec released preliminary 2015 figures and a first outlook for 2016. Naturally, the outlook is rather subdued. Combined with the drop in oil prices, the stock got hammered. For shareholders, the only positive aspect is that TGS still is doing a lot better than its capital-intensive competitors, for instance PGS or CGG:

For the moment I will not do anything. Clearly the oil price went lower than I ever thought but TGS has net cash and will manage the cycle conservatively. So I don’t think one has to panic now.

Overall I think the best advice in such a situation is: Either you panic early or you don’t panic at all. For the early panic it is already too late for oil related stocks in my opinion, so the only alternative is to sit it out.


  • Hi, thanks for blogging. I have one name that I’m researching that you might find interesting: Inversiones Y Repstn SA IRA (IRSA).

    Here’s a few links:
    Long side:
    Short side:

  • “Either you panic early or you don’t panic at all. For the early panic it is already too late for oil related stocks in my opinion, so the only alternative is to sit it out. ”
    IMHO this is a quite bad, perhaps even dangerous advice.

    I think it is OK to revisit and reassess the single share in regular periods only, like once a year, and not everyday. But blindly holding a share only because you missed selling it in better times is IMHO not much different to throwing good money (the remaining money in the share) after the bad (the money already lost due to a missed time of selling.)
    When reassessing the share the question should be “Feel I comfortable with the share for this price right now?”, but not “How much did I win or loose with thisshare in the past, so can I afford to sell it?

    For TGS, but even more for Hornbach I miss the objective analytical decision I am used from from you. A sample of questions like
    – At what times do you want to reassess these shares? (Perhaps after reading the annual report?)
    – What would be objective factors for you to sell or hold them or even to add additional shares?
    – Which answers toward the actual stresses would be OK and which one would be in the No-Go-Area?

    • Just to be clear: Nothing on this blog is ment at as advice. This is my personal “diary” and anyone can read or ignore it.

      With regard to TGS Nopec and Hornbach: Both are long term holdings for me. I would sell them if I see individual problems for those companies. For TGS I don’t see them and for Hornbach I described already what I will be looking for.

      As discussed many many times: I am not in the market timing game.

  • Happy new year:)
    Have you considered increasing your position in Hornbach and/or TGS after the share prices dropped?

  • TGS looks like a very good long-term buy to me, at these levels =)

  • Regarding HB. Reading your initial post about HB you seem to prefer the Baumarkt stock.
    To me it seems that the Holding would have less downside due to being more like a real estate company.

    From what I can gather the Holding is valued less than the market value of the real estate and due to that
    the Baumarkt is in a seperate company there is less downside risk.

    The problem with Baumarkt seems to be the margins and not the revenues. If margins go up the upside would be quite higher for the Baumarkt.

    What are your thoughts on the downside/upside for Baumarkt vs Holding?

  • Have you considered pairing Greenlight Re (long) with a market index (short) – possibly dollar neutral – to limit market exposure and focus on the alpha of the investment portfolio. Seems compelling given the aberrational underperformance in ’15? Or, do you think this is redundant as Einhorn is a long/short manager. Thanks a lot, love the blog.

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