Idea generation: Q2 2019 Investment letters
A few days ago, I posted the link to a Reddit collection of Q2 investment letters. Many of these letters plus some others in my opinion are good inspirations to lok for new ideas. With less time available for me to create “original” ideas, I mentioned some time ago that I will use these letters much more to find interesting cases than in the past.
Inittially, I wanted to create my private “to do”list of companies that I want to look at. The criteria for selcting ideas is quite subjective.
However in order to leverage my readership, I decided to create a post with my selected “stolen ideas” and hope for some constructive feedback from my readers. Here is the list what I found interesting and why.
Selected ideas from Q2 letters:
Choice Equities: Par Technology
Interesting case of a “sum-of parts” company with a SaaS business hidden behind other stuff
One of the better managed German companies. Cyclical but potentially good opportunityin a real economic downturn. Business is hard to disrupt
Alta Fox: Keyword Studios
Interesting business model (outsourcing of Video Game prodcution) and European based company. Expensive but potentially very interesting.
TGV Partners: Computer Modelling Group
My friend Mathias hasn’t given up on Energy yet. This one looks like a very interesting Oil&Gas software company.
Third Avenue Value: BMW and Bank of Ireland
Classic value stuff. BMW is on my to do list for some time but very difficult to assess with everything that is going on in the automobile space.
Curreen Capital: Kontoor
Spin-off. With my limited success in spin-off investing maybe not top priority
TGV Rubicon: La Française de l’Energie (LFDE)
French Energy company
Palm Valley: Crawford & Co
Another company on my list since a long time. Interesting insurance service company
Again a spin-off but in the animal health space which I like
Merion: KAR / IAA
Another spin-off. Saw this now in several (good) funds.
From their Q2 report:
As an example of this contrarian logic, we acquired a position in Boiron in Q2. Over the past 18 months, the world leader in homeopathy saw its share price fall due to possible non-reimbursement of its products in France. Although it is clear that non-reimbursement would be a severe blow to the Lyons-based company, the fall in the share price looked excessive to us, as only one quarter of the group’s sales are concerned by the change. Moreover, non-reimbursement would open the door to free prices –currently very low – and to advertising and promotion of homeopathic products. In addition, Boiron would react by cutting prices in response to lower volumes. The French government ended the suspense in July, when it announced that non-reimbursement would begin in 2021. The company plans to restructure and find growth avenues, and should communicate more in the coming months. Meanwhile, the valuation is very weak even on cautious scenarios.