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%.

1. Miko

Belgian, family owned company providing Coffee workplace services and plastic packaging. Plastics division seems to profit from low oil prices. Slow and steady grower, doing small acquisitions along the way.

2. TFF Group

One of the initial investments from 6 years ago. Family owned oak barrel manufacturer. Has grown well over the past years due to Asian demand for oak aged french wines and opportunistic acquisitions. Demand for French wine in China seems to have stopped growing, but long-term I think the company is attractive. Currently, Whisky barrels are booming and driving growth.

3. Installux

logo_installux
Small French company specialized in aluminium appliances. surprisingly resilient. Still run by the founder and majority shareholder, one of the cheapest quality stocks in Europe. Downside well protected via large net cash position.

4. G. Perrier

French small cap, specialist for electric installations with a strong position in Nuclear maintenance. Good growth despite economic headwinds. Cheap (ex cash) despite attractive, capital light business model.

5. IGE & XAO

Small french software company, controlling the French market for electrical CAD software. Steady growth, highly attractive margins and still reasonably priced.

6. Thermador

Thermador is a French based construction supply distribution company. Distinct “outsider style” corporate culture. Despite headwinds in French economy still doing well. Reasonably priced, “outsider” style management.

7. Van Lanschot

Dutch based private bank, turn around story with new management. Some more progress in 2015. Still well below book value but it needs to be seen if capital will produce adequate returns. So far the results have been Ok but not great, however I bought cheap enough.

8. TGS Nopec

“Outsider style” seismic data company. Clearly influenced by the oil price but with strong competitive advantages against competitors due to “capital light” business model. Has weathered the storm, stock price almost doubled from the lows in 2016. Needs to be seen where oil prices go.

9. Admiral

“Outsider style” direct internet insurance company. UK based, large cost advantages, management/founders own signifcant share positions Several growth projects on the way. Insurance cycle seems to have turned for now in UK car market. In 2016 at first the stock price increased without reason, then came back. As it is not a full position yet, i might be tempted to increase, especially if we see good news from the US.

10. Svenska Handelsbanken

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Handelsbanken in my opinion is an “Outsider” style bank which has a strong position in Scandinavia and growing quickly in the UK. Althought they offer internet access, their focus is on branch based banking with full delegation of responsibility. Although there seems to be some concerns on real estate prices in the Nordic, Handelsbanken for me is clearly a company I want to own for the long run.

11. Bouvet

bouvet_logo
IT consulting company from Norway. Stock price had been hit hard by oil decline, Statoil is the largest client. Has continued to perform well despite the hit to Norwegian economy due to low oil prices. The stock showed a strong recovery in 2o16 and has actually hit my target price. I will need to review if there is still enough upside left.

12. Aggreko

Contrarian investment into global leader providing “temporary electricity solution”. Hit hard by lower activity in mining. However in my opinion durable business model and cheap compared to the quality of the business. Could profit by any “Black Swan” event with regard to natural catastrophes. So far, the results have to a certain amount disappointed. I would have hoped for significant free cash flow generation and maybe some stock holder friendly buybacks. I will need to look deeper into the company in 2017

13. Partners Fund

An investment into a fund run by a close friend. Mathias is a “Munger style” investor with a relative concentrated portfolio of “moat” companies, many of them from the US. I think it is a good complimentary exposure for my investment style. It has worked very well in 2016 and I assume he will do well over the next 5-10 years

14. Ashmore

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Specialist Emerging Markets asset management company. 2016, their funds seem to have delivered very good returns, however also EM funds are under structural fee pressure and Brexit causes them clearly some issues (passporting). Ashmore is a stock I clearly have to review in 2017 if my assumptions are still intact.

 

15. Romgaz

First part of my bet on a Romanian recovery . Extremely cheap producer and distributor of natural gas. Could profit from recent privatisation and efficiency gains, pays solid dividend. Stock price hit by drop in commodity prices despite, profit has been lower but much better than other Oil&Gas companies. Solid hold position

16. Electrica

Part 2 of Romanian “bet”. Extremely cheap electric grid company. Guaranteed profit increase via investment program at guaranteed returns plus extra upside if efficiency gains could be achieved. Still one of my favorite positions with significant long-term potential.

17. Drägerwerk Genüsse

Capital structure “arbitrage”. Price of Genußscheine still far below the fundamental value which should be 10x the Draeger Pref shares

 

18. Gagfah

Special situation speculating on a squeeze out under Luxemburg Law. Squeeze out didn’t materialize in 2016. I still think that something could happen in 2017, fundamentally the underlying assets should have gained significantly in value.

19. Lloyd’s Banking Group

Having been hit hard by the financial crisis and miss selling scandal, Lloyds in my opinion is the best of the big 3 UK banks. The stock price has been held down by continuous open market sales and then was hammered after the Brexit. Now things look fundamentally better. One positive sign is the December 2016 acquisition of the BofA UK Credit card business at a quite attractive price.

20. Pfandbriefbank

“Rushed IPO” by German Government. Portfolio cleaned up and enough capital to grow. Very cheap. Some trouble with a legacy transaction in 2016, but in my opinion still attractive risk/return. David Einhorn initiated a position in 2016. Stock got hammered by potential legacy issues which in my opinion was overdone.

21. Silver Chef

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Australian based financial services company which leases in a special format (rent, try , own) mainly restaurant equipment to restaurant owners. Added a second business line (GoGetta) which expands the concept to other assets. Also trying to expand into Canada, which could be big if they succeed. Stock got hammered by a relatively small online fraud case. Depending on the operational development, this could be a position to add in 2017. However it needs to be checked what if the new CEO can adequately replace the founder and major shareholder who stepped down some weeks ago (for the second time).

 

22. Dom Security

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Small French “hidden Champion” which specialises in locks and home security. Although DOM is a small player, they have good positions in Germany and France. Still run by the founder and major shareholder, the stock looks cheap despite a significant stock price increase in 2016.

23. Majestic Wine

wine

A UK based wine retailing company. This is a “bet” on the new CEO which came on board when Majestic acquired online wine company Naked Wine. I think the underlying business is solid despite the Brexit and protects the downside at current levels and the upside lies in a continued success of Naked Wine.

24. Coface

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Coface is one of the big 3 Credit insurers in a global oligopoly. The stock was hammered in 2016 as they lost the service business for the French Government (which was known well in advance). This created an interesting contrarian opportunity.  Despite the nice rebound, there is still ~30% upside to my estimate of intrinsic value.

25. Italgas

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Italgas is a relatively simple Spin-off special situation investment. Italgas was spun off with really bad timing and dropped quickly. I think the underlying business is solid. The stock still has ~20% upside to my price target.

26. Kuka

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Kuka is a Merger Arbitrage Special situation which has almost played out. The stock traded significantly below the 115 EUR offer price as doubts existed with regard to required US approvals. The critical US business now has been sold and the deal will close in spring 2017. This position will definitely disappear in the next few months. The upside is limited and I would be prepared to sell earlier if I have new ideas.

27. Sapec

logo_sapec

Sapec, a Belgian HoldCo sold most of its operating business to PE company Bridgepoint. After the transaction, SAPC will have 230 EUR net cash of which they want to distribute a “significant” part. Despite the recent increase, I still think there is good upside for this Special Situation especially considering that there is a short-term catalyst.

15 comments

  • If I may, just started reading about one French hidden jewel that I thought you might also like. It has been long since I have been consistently getting great ideas from you, wanted to share this thoughts about aures technologies. In short, would be like the French apple of point of sale hardware. It’s cheap at 11 times earnings. It has been growing fast the last (c. 9% p. a. Last 3 years), no debt and some headwinds this year. Saw some marging expansion last couple of years, family owned… I think it has many things you like in this kind of companies. If you happen to have time to check it out, take some time. I think you will like it.

  • Pingback: Creating a ToDo/watchlist for 2017 | valuetradeblog

  • Du hast ja sehr viele Familienunternehmen. Auch ein paar sehr kleine Familienunternehmen. Ist hier nicht die Gefahr hoch, dass die besitzende Familie bevorzugt behandelt wird. Dass zb in der nächsten Generation ein unfähiges Familienmitglied das Management übernimmt, nur um hier abzukasieren. Oder aber Geschäfte mit anderen Firmen der Familie gemacht werden. Oder zb überteuerte Gesellschafterdarlehen?

    Dann hab ich noch eine Frage:
    Die Hornbach Holding wurde doch zur Hälfte von der Familientreuhand kontrolliert. Jetzt wurden ja Stamm und Vorzugsaktien zusammengelegt und eine Kommandit-ag gegründet. Die Familientreuhand kontrolliert den haftenden Kommandist die Management Ag. Bei der Aktionärsstruktur findet sich aber keine Hornbach-familien-treuhand sondern nur eine Frau mit Hornbach Nachname und etwas mehr als 10 Prozent Anteil. Haben die anderen Hornbach’s verkauft oder so wenige Aktien? Und warum wollten sie unbedingt mit der Familientreuhand das Management kontrollieren?

    Danke und mach weiter so. Ein sehr guter Blog!

    • Small-cap stocks are under-researched, hence intrinsically riskier. Accordingly they offer more upside potential. If you do the research on your own, and do a good job, then you may have some good chances to capture value or some arbitrage opportunities, while staying afloat on the risk side (ie. there will be still risk, but reduced if you do proper assessments).

      The above scenario you don’t have with large-caps: they are well-researched and their risk/return is much more difficult to beat by doing extra research on your side. I presume that’s the reason this blog is mostly about small caps, as they offer more opportunities…

    • Frage 1: Klar besteht die Gefahr, aber deswegen muss man sich das gut ansehen
      Frage 2: Ich vermute mal dass die Hornbach Familie der Komplementär ist. Und klar, mit einer Kgaa kann man eine Firma auch mit wenig Aktien kontrollieren. Die Gesellschafterstruktur kenne ich nicht.

      • Hab nochmals gegooglet: Stand Februar 2016 hatte die Familientreuhand von Hornbach noch 43,75 Prozent der Aktien. Vermutlich ist aber nur diese Gertraud Hornbach groß an Hornbach beteiligt. Es müssen viele Personen in der Treuhand gebündelt sein. Komisch dass zum Beispiel ein Albrecht Hornbach nicht stärker beteiligt ist. Egal…..aber es hat mich interessiert. …:-)

    • Thanks for the ideas. Bolore is interesting but VERY complex. Regus is also something I am not comfortable with. Metro is on watch. Although I don’t like the business and I don’t like the company.

      • Thank you for the reply! Yes, Bollore is complex. But I think it’s worth understand it, especially through the fact, that a lot of shares are held in the company and there are interesting opportunites in the businesses.
        Why are you not comfortable with Regus?
        Metro is really not the best business, but cheap with a catalyst.
        Another opportunity might be Coca Cola European Partners. It’s the biggest coke bottler with a PE around 15-16 and synergies, which might make the PE go down to 13-14. Buybacks are possible. Compared to peers, it’s cheap. Problem: The business is not growing.

  • Did you sell the Delta Lloyd position? It was there in October but seems to be gone now.

    Asking because it seems they agreed to the takeover @5.40 today.

  • Thank you. Nice summary. What broker do you use? A lot of these companies aren’t available through mine.

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