Monthly Archives: December 2016

10 wildly Optimistic Predictions for 2017 (and beyond)

These days, negative news is everywhere. Brexit, Trump, Syria, Terrorist attacks, Monte Di Pasci etc. It is not that hard to feel depressed about the world and the future. As I mentioned earlier on the blog, sometimes it makes sense to follow Charlie Munger’s advice and “invert, always invert”. Therefore I tried to come up with some potential positive and surprising news of how the world could get better in 2017. Some of them are pure fantasy, some might actually happen, who knows ? In any case it was fun to come up with those ideas. “think positive” is clearly not a solution for every problem of the world but sometimes it just helps to change the perspective in order not to fall into the “everything is doomed” trap.

1. Italy has actually turned the corner. NPLs, which have been decreasing since Mid 2106 drop dramatically and are snapped up from investors. BMPS will be nationalized, the rest of the Italian banks privately recapitalized. Building activity soars in Italy but also in Portugal and Spain.

2. Battery technology & Electric Vehicles will make a break through, accelerated growth because of jump in new car sales and build up of infrastructure. Growth easily outpaces decline in traditional cars.

3. Break through for healthy organic food which enables many people to start farming and really make a living out of it. Rural areas get a real boost as people want to move back to the country. People eat  more healthy food which lowers the cost for health care.

4. “Robots” will free up capacity from low value creation assembly line jobs to do really meaningful jobs (customer service, integrating refugees, caring for old and sick people, educating children).

5. Refugees create a large number of super innovative startups that contribute meaningful to GDP based on their experience from their home country (do more with less or nothing)

6. The Euro Zone and UK reach an agreement for the Brexit. As a result, UK will keep access to the common market but will pay for the recapitalization of the Greek Banking system. The EU will enlarge the franchise, grant access to the market against cash and will also recapitalize Portugal and Spain.

7. Donald Trump finds out that renewable energy is even better for energy independence (and jobs) than shale oil and gas. He will turbo charge the growth in the sector and will be known as the “Greenest President” in the history of the US. His Children accidentally had bought the majority of Tesla/Solar City just before his announcement. Musk makes so much money from Tesla which he puts into SpaceX and he will start his Mars mission already in early 2018.

8. A powerful and charismatic “Mahdi” appears and declares that peace is the ulitmate goal of Isalm. Terrorist attacks stop, the Middle East stops fighting and an “all around” peace treaty gets signed. Ultra orthodox muslims and Kurds get their own countries. Immediate rebuild of destroyed cities starts, driving growth for a decade.

9. Kim Jong-un in North Korea decides that he prefers a life as team manager of a US NBA team together with Denis Rodman as coach. North and South Korea are peacefully reunited. United Korea will grow by 10% plus for the next 10 years.

10. Donald Trump decides after 10 months that being President is boring and also bad for his Golf handicap. Vice President takes over.

My 27 investments for 2017

It has become already a small tradition that I do a short review of my portfolio at the end of the year. As mentioned before I found it quite helpful to list my current investments at the end of each year and try to explain (to myself) the investment case in a few sentences.

Former posts can to be found here:

My 27 investments for 2016
My 28 investments for 2015
My 24 investments for 2014
My 22 investments for 2013

Compared to last year, Hornbach, Koc, the Depfy TRY bond, the HT1 Bond, NN Group, Citizen’s and Greenlight have been sold. New positions bought in 2016 are Dom Security, Majestic Wine, Handelsbanken, Coface,  Silver Chef, Italgas and SAPEC and Kuka. Some positions (Gaztransport and Kinder Morgan) went in and out in 2016.So 19 out of last years 27 are still in, a turn-around of 30% is acceptable and consistent with my strategy.

With 27 stocks, the portfolio is still maybe a little bit too diversified, my preference would be to have not more than 25 positions. However 2 positions (Kuka, Sapec) are special situations which will most likely be sold/terminated early in 2017. The cash level at the moment is quite low at around 4%.

Read more

SAPEC SA (ISIN BE0003625366) Still an attractive Special Situation despite +350% YTD ?

Disclaimer: This is not investment advice. The stock mentioned is relatively illiquid and potentially risky. Please do your own research !!!!

Management Summary:

SAPEC SA, despite having gained already 350% YTD is in my opinion still a highly attractive special situation. The company is in the process of selling its main business which will result in around 230 EUR net cash per share compared to a share price of 135 EUR. Deal closing is very likely and management promised to distribute a “significant amount” of the proceeds. For me this is very attractive as I expect this to happen in the first half of 2017.

SAPEC is a somewhat strange company. Although the company is listed in Belgium, business activities are almost exclusively in the Iberian Peninsula (Portugal & Spain). This is how the company describes itself:

Read more

Some links

Mexican Hotel stocks as a contrarian opportunity ?

The complete guide to Dr. Michael J. Burry’s investment style (“Big Short”)

The case for Emerging Markets equities 

Some interesting forensic details how Autonomy “massaged” its revenues prior to the HP takeover (beware of Software resellers…..)

Old School Value on Ben Graham, the “Father of Special Situation investments”

Some evidence that profit sharing does improve loyalty and productivity of employees

Finally a collection of pitches from the Sohn London conference

Updates: Kinder Morgan (SELL), Deutsche Pfandbriefbank (PBB)

Kinder Morgan

Yesterday, I sold my complete Kinder Morgan position at ~21 USD per share with a total gain of around 25% (in EUR, including dividends). Why ?

When I bought the stock in April I argued like this:

For me, the “expected case” would be something like a 8% discount rate and 1% growth resulting in a fair value of around 25,60 USD per share. Also, under my assumptions, the downside is relatively limited. Based on 18 USD per share (at the time of writing), that would imply an upside of around +42% which for me would be an acceptable return over my typical 3-5 year investing period (plus any dividends).

So why did I sell out now and didn’t wait for higher prices ? Well, something has changed: Interest rates went up. Since April, the 10 year USD Swap rate went up by +0,90% and the 20 year rate by around +0,70% p.a. If we look at my valuation grid from back then we can see that the value reacts significantly to change in interest rates:

Read more

6 years of Value & Opportunity

130_001

Exactly 6 years ago, the first (German) post of this blog was “released” into the WWW. As I have done in the past years, this is always a good time to reflect about happened over the year.

Again a big THANK YOU to all readers and especially those who actively contribute by commenting (critically) or sending Emails. I think without this input, the quality of the blog would not be the same or even the blog wouldn’t exist anymore.

Knowing that many smart investors read my post and contribute via comments or mails is really a very big part of the motivation to keep this blog up and running. Thank you again !!

So let’s move to the highlights of 2016:

Top 10 most popular posts written in 2016

1. Novo Nordisk – Great Compnay but also a great Investment
2.Uniper/E.ON Spin-off: Take one ugly Duck and transform into ….. 2 really ugly ducks ?3. Capital Allocation & Capital Managament – what is good and what is bad
4. A few Thoughts on Banking Stocks (Lehman 2.0, Deutsche Bank)
5
AQ Group (ISIN SE0000772956) – A 15 year “42- Bagger” without a Moat ?
6. Kinder Morgan (KMI): Asymetric Upside Potential
7. David Einhorn: Nice Q4 Lette but E.ON as a long Pick ? Really ? C’Mon !!!
8. Coface SA (ISIN FR0010667147) : Ultimate Death Spiral or Contrarian Opportunity in an attractive industry ?
9. Amercian Express (AXP) – Cheap “Buffett” Blue Chip or Value Trap ?
10. Armageddon Alert: WILL “Brexit” create a Black Hole that swallows Planet Earth & the Universe ?

It is interesting that mostly “big names” like Novo, Amex or Einhorn draw the most readers. Even more interesting is that some old general topic posts like “How to calculate Enterprise Value” still get clicked 5-10 times more often than the Top 10 from 2016……

Mistakes made in 2016

Buying Aixtron as a special situation without more research. I was only lucky to get out with a small loss. The timing of the Hornbach sale was very unfortunate after holding it for 5 1/2 years. Also the sale of Citizen’s, despite the nice profit was clearly too early and I missed out another 20% of the “Trump Rally”

Buying more Lloyd’s Bank after the Brexit was stupid. Banks always get punished and I underestimated the weakness of the pound.

And yes, buying Deutsche Bank in the beginning of October would have been a very good performer for “Hindsight Capital LLC” my new 100% p.a. vehicle.

Lessons learned

 

The biggest learning this year was clearly:that it is very hard to predict what will happen on a macro level. Who would have thought that we will have the Brexit and Donald Trump us US president ? But even harder is to predict what markets would do when those events happen.

If you would have told me end of last year that those events would happen and  I had to decide to invest for the full year or being not invested at all, I would have gone for the latter. Looking back, this would have been a big mistake.

So I am happy that I don’t have to earn my money with predicting macro events or timing stock markets.

Company analysis

Regarding company analysis, I think my best analysis (or at least the ones that I had the most fun) were Silver Chef, DOM Security and Majestic Wine which all became part of the portfolio.

Overall I managed to do ~23 deep dives in this “blogging” year which is pretty OK.

Favorite Books

Among the 12 book reviews this year, my personal top 3 were the following:

Capital Returns (Marathon Asset Mgt.): Great and funny letters of Marathon Asset Mgt.

The Shipping Man: This cured me from ever looking at shipping stocks

and Shoe Dog, the autobiography of Phil Knight, founder of Nike.

Goals for 2017

 

According to the bible, the seventh year is the one where one should rest and do nothing. So far I do not plan to rest. 2 company analysis per month seems to be a very reasonable target. I do have a pretty long “to do” list which got even longer after the “12 ways the ideal company should be run” post.

On the other, hand, I do plan to move forward with a plan in 2017 that I had for a long time: I want to write a book. This might mean a somehow slower frequency for blog posts. And don’t worry: It will not be the 93rd book on Warren Buffett….

 

Camellia Plc (ISIN GB0001667087) -Exotic assets at a deep discount ?

Background:

Camellia Plc is a pretty odd company for UK standards. It is a conglomerate with interest in plantations around the world, as well as some engineering businesses, a UK cold storage business, a fish trader in the Netherlands and a private bank plus an art collection, a stock portfolio and other stuff.

Some UK blogs have covered Camellia like Richard Beddard and Expecting Value.

Camellia seems to be a favourite among deep value or “assets at a discount” investors and as I do like strange companies (and conglomerates) , I decided to take a deeper look at it. Also as it is in the same sector as ACOMO makes it easier to get “into it”.

Read more

« Older Entries