Panic Journal (4) – Consolidation

Transaction summary:

The last few days were almost  “High Frequency Trading” for me with more transactions in 10 days than the 2 years before. Here is the overview (also in the comments) after my “Panic Journal 1” Post including a short assessment. I have also listed the stocks that I bought before the panic as part of my “German” basket, but which I should have clearly bought later.

Overall, I added 10 11 (!!) new positions, sold 3 positions and ended up with a cash position of 14,4% (this is also an effect of the ~-22% lower portfolio value YTD).

I was clearly too early in many case, but what I have learned over the last 20 years or so is the following: In a tanking market you always look stupid in the short term as a buyer and smart as a seller. In the long term, you look smart when you have bought at cheap valuations and you look stupid if you sold at cheap valuations.

This week I need to slow down a little more and think if everything that I did really makes sense ;-). I will try to limit daily transactions to 0.5% of the portfolio in any direction.

My overall assessment at the moment is that some sectors (Travel, events) will be hit much longer than I initially thought. I do think that “The Hammer and the Dance” scenario is a very likely one.

Here is the the transaction list:

  • I sold the full Fitbit position (Special situation, but I feel I need more cash)
  • sold the full Draegerwerke Pref position (a little too early. Short term upside as medtech, but not very well run firm)
  • sold the Metro Bank position (bad risk management from my side, should have sold earlier)
  • bought 3% position in Sixt pref. shares. Sixt is a stock I owned before starting the blog and I was following the company since then, regretting not to have invested again. Sixt will most likely be hit by decline in business and private travel. However as in previous crisis, I think the company will come out stronger, especially in the emerging “Mobility as a Service” business. A lot of start-up competitors will not survive this. The time in between for Sixt will be brutal but my assumption is that they will survive and come out stronger.
  • Bought a 1.75% position in Mutui Online. Again a company I had been following for some time. As I mentioned in the comments, Mutui is a great company in an already difficult market (b2b bank & insurance services, insurance comparison) in hard hit Italy. But the company is very profitable and run by great entrepreneurs. My hope is there too, that they also will not only survive but come out stronger.
  • Added 1% of the portfolio to TGS Nopec. TGS has been hit double, by the Virus and the unprecedented slide in oil price. On the other hand, most of the competitors are already gone and I assume that TGS again will not only survive but come out stronger. What the oil price is doing is clearly something else, but I have given up trying to figure out what is happening there.
  • Bought a 0.4% position in Sol Spa. This is a company I had wirtten about in the past with an OK industrial gases business and a strongly growing health care business, whose main business is delivering oxygen to hospitals or other care facilities. This business will clearly benefit from the crisis. However I am not 100% sure if I really want to directly benefit from this, so this position is on watch.
  • Bought a 1% stake in Brenntag. Brenntag is a mostly rail based logistics company, transporting and managing the logistics of chemical supplies. The company was on my list for a long time and has a relatively recession proof business model and nicely qualifies for my “boring company” bucket. Leverage is at an acceptable level. Yes, the crisis will hurt, but  Brenntag will most likely survive and the stock looks cheap enough to make it a long term attractive investment.
  • Increase my position in Admiral by 1%. Admiral is now my biggest position with around 8,5% of the portfolio. As mentioned before, the business model is as bullet proof as it gets and this is one of my long term holdings. In relative terms, the stock has become more expensive, but I plan to stick with them for some time.
  • I bought a 1% position in Amadeus IT, the Spanisch travel software/tech infrastructure company. I looked at them some time ago. Of course they will be hit by the crisis, but within the sector they are the strongest player. Competitor Sabre for instance has been totally annihilated. They do have debt and they do have negative working capital, therefore I will not aggressively increase this position at this point in time. if they run in trouble, I guess they will receive help from the Spanish Government as one of the leading Spanish Tech companies.
  • Bought a 1% position in Disney. Disney was always on my list for a stock to own for the long run and to allow me at some point in time to explain my little one how stocks work. However, with my current understanding of the crisis and the fact that almost 50% of the operating profit comes from parks and hotels, I am not so sure about them anymore. I won’t increase this position for the time being.
  • Bought a 0.5% position in Richemont, the luxury jewelry and watch company. LVMH would have been the other choice, but I had looked at Richemont in the past and find their business slightly easier to understand. What I like about the high end luxury sector is my assumption, that other than for instance Restaurants, demand does not simply disappear but that it will be caught up to a certain extent. If you plan to buy a watch for 100k and the stores are closed, you might buy it when the stores are open. If China rebounds early, then the luxury stocks will also benefit more quickly than others in my opinion.
  • EDIT: In the hectic I actually forgot my new 1% position in Washtec. Washtec is a company that I follow also for a long time and that has a relatively crisis proof business model (builds and services car washing facilities). At the current prices, this should be a long term attractive stock.
  • As part of the German basket, I bought a 0.5% position in SHS Viveon. This is my summary that i posted in Part Nr. 1 of my All German stocks series:
    SHS Viveon is a 16 mn EUR market cap Software company providing tools and services for Corporates to assess credit worthiness of customers. The company had troubles in past but seems to have made some progress. The stock price reflects already a lot of the turn around though. 
  • Another 0,5% position for the German basket is JDC AG.  This is my summary from part 15 of the series:
    JDC is a 89 mn market cap financial services company which is part (insurance) broker and part “Fintech”. A few month ago, Great West LifcCo, a subsidiary of Canadian Power Financial bought a 28% stake which was sold by management. The fintech part has a lot of traction (topline +30% yoy) but is not yet profitable.The stock used to be very volatile in the past as we can see in the chart:Although there are some things that I don’t like at first sight, it is still a very interesting stock to “watch” and analyze more deeply.

     

  • The final stock I added as a 0.5% position is Mediqon. I haven’t written about this comapny yet, but in essence it is a “mini version” of Constellation software, trying to build a portfolio of small Software companies under one roof.

 

 

 

44 comments

  • I just discovered this site and find it really useful – my compliments!

    I also thought about investing in Sixt. I think it‘s a great company, but am a bit worried about it’s prospects in a future of autonomous cars. Here is an interesting article about this topic: https://medium.com/open-road/rental-cars-carsharing-in-an-autonomous-future-1d1b90a90b1c

    Any thoughts on this?

    Marcus

  • Some Finnish Ideas for you to check: Fortum (you already have own it earlier lots have changed) and Metso – Outotec (special situation, spin-off Neles), Nokian Renkaat, Wärtsilä. Also you should follow Kone (which is still expensive but if it gets cheaper…) also Nordic insurance company Sampo might be interesting for you also.

  • The return of HFT: Sold Amadeus,switch into Richemont.

    Reason: I have reversed my outlook on travel. I do not think travel will pick up this year. However people might start buying luxury goods again much earlier.

    • AMS has a great business in providing ticketing and IT software to airports and airlines, but they are fighting a big war with a lot of different players, who all want a piece of that GDS money. It is really hard to guess with reasonable odds who will come on top of the NDC debacle. I did a deep dive on AMS, Sabre, Travelsky a year ago. Went with Travelsky, even though Amadeus seems to have the best software and management. Regarding luxury, why not Hermes?

      • Thanks for the constructive comment. Hermes is clearly also a candidate to look at. However it is still super expensive. Another candidate that I like is Brunello Cuccinelli.

        • danke dir für dein Blog. Ich finde deutschsprachige Investoren sind unterrepräsentiert im Internet, v.a. im Vergleich zu Spanien und England.

          True, but Hermes almost never gets below expensive. I haven’t done the work on that brand, but it seems newer. Indeed it’s trading on a lower multiple, but If valuation was my main concern on luxury I would go with Moncler. I am waiting for Hermes to go down a little bit more, since the management is top notch and the company is more established and diverse. I don’t traverse in this world, so I can’t really ascertain right away if a brand it’s losing its appeal or not and I don’t want to end with a “Prada”.

          ps: We are fellow shareholders in Gruppo Mutuionline. For me it’s still just a quarter of a full position. Will add the rest on further downside. I can imagine a future where they merge with check24. It would be amazing. An european aggregator in the making. I am not getting my hopes up though

  • After reassessing the situation, especially the potential impact of a missed complete tourist season for Italy, I reduced Mutui and reinvested the proceeds into Richemont

  • Draegerwerk !! Sold them last week….

  • Draegerwerk Genuessscheine….. and I sold them last week…

  • Sold my Disney Shares at 95,10 USD. This was one of the new purchase that I actually had never researched. Mistake. But lucky timing.

  • What bothers me is the fact that in many cases this “historical panic” has only led to wiping out the (excessive ?) development since the middle of 2018. Many stocks are trading around that level. If I remember correctly the market in the middle of 2018 was under the impression, that everything was perfect and that this party would go on for as long as central banks want it to.
    So I find the assumption that a 30% decline is in itself a great correction hard to follow (maybe that´s just me).
    The S&P500 trades at the level of Dec 2018. Since then earnings growth has been weak, especially if you exclude the effect of share-buybacks. And of course balance-sheets are leveraged even more than they were in 2018.
    This is not meant to be market-timing. Just a company-by-company conclusion.
    Are you looking at the corporate debt market?

    • This is a very important perspective.
      The relative performance from the most recent high is/feels/seems devastating!
      A change in perspective is important here I believe: relative performance during a longer time period looks different and maybe tells a different story…

    • Oskarr, good point, but one should not use just one index and on random point to make this assessment.

      The Dax for instance is now at a level that we have seen in late 2013.

      I think looking back is not 100% helpful to assess what is in front of us as this is an absolute unique crisis in financial history.

      • That is correct and I have made that mistake in the past (looking at historical data). I agree with you that this is a different animal because the effect on the real economy will be very severe over at least a few quarters. There are also disruptions to be expected (think retail, travel, untangling globalized production-chains) that will speed up changes of industries.
        The point I am trying to make is that even once the virus is (hopefully) no longer the issue, the framework of the financial markets / private finances / risk-tolerance and others will possibly be different from 2 or 4 years ago.

  • Aren’t you trying to catch a falling knife?
    There is not a first sigh of relief in the markets. Maybe you should not have sols Draegerwerke.
    Draegerwerke is seen as a ventilator business in the Netherlands, but I prefer Medtronic at this moment. Really cheap!

    • Good point. We will see in a few weeks/months. Draegerwerke: Well, it is not exactly a “Ventilator business”. I owned the stock now for more than 9 years and I am very disappointed in the Management. Again, you might have a different opinion and maybe you even make a lot of money with it.

  • In such an uncertain environment selling Fitbit was a mistake in my view.
    That is a non correlating asset and the buy criteria did not change with the new environment

  • Re. Disney: more than the Parks & Hotels segment (very bad in the short term, not a problem in the long term), I’m more worried about Media & Network: Disney is very much still dependent on linear TV, and ESPN in particular could be a big drag going forward. And debt is definitely “not marginal”, especially after the Fox acquisition.

  • Regarding Admiral: What do you mean with “relatively more expensive”?
    Relatively to the stock market, or also relatively to its own historical price?

  • Regarding Admiral: What do you mean with “in relative terms, the stock has become more expensive”?
    Relative to other stocks/the stock market, or relative to its own historical price?

  • Nice write up.
    Sadly, my list of researched companies is quite short. So I do not have enough companies where I am certain of their high quality and current undervaluation…
    I like your current approach of buying in small tickets.
    Happy investing.
    s4v

  • Wow, A LOT of transactions. Fits very well with #1 of your 20 crisis rules: 😉

    1. Move slowly. Don’t buy /sell on impulse. If you have the urge to do something, wait at least until the next day to reconsider

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