Another week, another 10 randomly selected Swiss stocks. This time, two of them made it onto my watch list.
21. Basilea AG
Basilea AG is a 569 mn CHF “biopharma” company that was spun off in 2000 from Roche. Other than for instance Actelion, Basilea doesn’t seem to be a big success when looking at the share price:
And the next batch of randomly chosen Swiss stocks, however this time I only identified one potential “watch list” candidate.
I do have to say that I enjoy this kind of research a lot. After looking now at 20 stocks so far I have to say that reporting quality is generally a lot better than for German companies, independent from the size of the company.
11. Varia US Proporties
Varia is a listed property company that only invests in US real estate with a market cap of ~380 mn CHF. They seem to own a diversified portfolio of resdidential units. The company seems to be a “yield vehicle”, with relatively large distributions but little increase in NAV. As I am not a fan of listed real estate in any case, I’ll “pass”.
12. Lonza Group
Lonza is a 42,3 bn CHF “large cap” chemical and pharmaceuticals Group. What makes the company interesting is the fact that over the last 10 years, the share price has risen by around 10x:
At a very first glance, Tekmar Plc, a AIM listed UK company looks like a very interesting “hidden Champion”:
The company is active in a very attractive market: their main business is to provide sub sea protection systems for cables with its biggest entity providing this service to the fast growing off-shore wind farm market.
In addition, Tekmar claims to have 75% market share. the combination of a company providing an essential, relatively small ticket item to a large installation with a dominating market share makes many investors water their mouths I guess.
Even more mouthwatering looks their chart from the 2020 annual report (from August 2020):
As some of my readers might have noticed, I have been looking deeper into the topic of renewable energy and connected topics such as Climate change, Net Zero targets etc.
My current conclusion is that we might have reached a real “Tipping point” towards a significant increase in “Electrification” which in my opinion is driven by a confluence of several factors:
- The cost of renewable energy (esp. Solar) has been dropping by -90% over the last 10 years and is still dropping further. Solar is (c.p.) now the cheapest available resource of electricity on the planet
- Battery technology is making leaps and prices are dropping as well quickly, very similar to solar energy
- A few major electric appliances are already better or almost equal compared to fossil alternatives (Electric heat pumps already now, EVs in very short time, DRI & Electric arc furnaces for steel, Green ammonia etc.)
- Money is flowing into the sector like never before, driven by ESG considerations
- Governments are pushing into the same direction. Europe so far has been leading, but under Biden the US is pushing hard
- interest rates are low which makes creating new infrastructure cheaper than never before
There remain a lot of challenges, especially the “intermittency” of renewable energy and the current lack of solutions for longer term storage. However, especially in the battery space there is significant progress made. Plus, all the billions now flowing into “Green tech” will create a “Cambrian explosion” of new technologies in a few years time.
After the great fun of doing the “All German shares” Series in 2019/2020, It is time to start the new “All Swiss Shares” series in 2021. According to the Swiss Stock Exchange, there are currently 220 Swiss based listed companies, so the series will be a little bit shorter. The reason for choosing Switzerland is that I actually own already two Swiss based companies (Richemont, Zur Rose) and that I think there is an interesting mixture of companies in Switzerland, several of which I have covered over the last 10 years.
Again, mostly for my own entertainment, I will use a random approach in looking at the companies.
One difference to the German series is that I’ll try to better define what I am looking for. In principle, my portfolio comprises three different styles/buckets:
- “Long term holdings” – Stocks where I think there is good long term potential. For this group, I require high quality with regard to the business model, leadership and balance sheet
- “Value Trades” – Stocks where I think for some specific reasons there is a significant undervaluation that will materialize in a period of up to 3 years. This could be a “sum-of-part” situation, a spin-off, activist involvement or another situation where I think that I can identify the reason for the undervaluation and where I have a different view. Due to the shorter time horizon, the requirements for “quality” are a little bit lower.
- “Special situations” – in my definition, special situations are based on corporate actions (M&A, Squeeze out etc.) where the potential outcomes are clear and the main task is to assess probabilities and an expected value.
So now let’s jump into the first 10 stocks. Surprisingly, I found already 4 stocks worth “watching” out of the first batch.
- BVZ Holding AG