Panic Journal (1) – “Baby steps”

This post is written mostly for myself in order to document my thoughts and actions and to learn from my obvious mistakes. But I promise that the blog won’t turn into a short term trading site !!

Today was a lot worse than I expected. Who would have expected that OPEC members disagree and the Oil price would tank more than 30% overnight ? In general, lower oil prices are good for most economies, but such a move will create some issues with regard to margin loans, counter party risk, indebted frackers etc etc.

So instead of the expected Monday “Corona panic” we have now the “Corona + Oil super panic”. Plus some strange moves like the EUR gaining strongly against the USD, despite Europe always being in the weaker position, even now with the Corona Virus.

Nevertheless, I started to put some money at work. Surprisingly not in the tourism sector, as I need to do more homework there.  Not everyone might have read the comments but this is what I bought today:

  1. an increase of my TGS Nopec position by 0.3% of the portfolio value. TGS Nopec has always doing better than the oil services industry. After the merger with Spectrum they should do even better in the long run in any scenario with their asset light business model
  2. an increase of my Admiral position by 0,5% of the portfolio value. Admiral has released very decent 2019 numbers and its business is as close too bullet proof as it gets, or even benefits from lower economic activity. Plus, the reinvestment just covers the expected dividend payout for this year.
  3. I bought a 0,4% position in Sol SpA, an Italian stock I analyzed deeply some years ago. The industrial gas business might be vulnerable, but the health care part grows strongly and will benefit from Covid19 treatment in the short run (oxygen therapy)
  4. I bought a 0.4% position in MutuiOnline, A stock that I never wrote explicitly about but had on my watch list for a long time as a great company which is now available at an attractive price
  5. Already last week I put 4% of the portfolio into a special situation that I will wirte soon about

Together, I put around 1.6% of my existing cash pile to work today exclusively on companies that I know well and that I think will prosper in the mid- to long term.

TGS Nopec was relatively  spontanious, the two Italian ones were the first step towards a “Italian mini basket”, as Italy now seems to be the country hit hardest by the virus. This was a plan I made on the weekend.

I am pretty sure that this was too early, on the other hand if we see a quick rebound I will be angry of being too conservative.

However for me this is the way to do it. If I wait too long, I become too afraid to do anything. If I do too much in one go I become nervous if the market goes down further significantly. So “Babysteps” like today are my strategy which worked relatively well over the last decades.

One comment on the special situation investment: Special Situations investments in crisis scenarios are for me mostly a behavioral hedge: The money is invested, but the outcome is depending on a very different risk factor and the situation will be resolved in 6-12 months. Therefore if the market really tanks I will get some cash back in 6-12 months which I can then put to work, while ideally earning a decent spread in the meantime.



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