Author Archives: memyselfandi007

Book review: “Merger Masters – Tales of Arbitrage”

Merger Masters, written by Kate Welling and supported by Mario Gabelli is a book similar to Jack Schwagers “Market Wizards” series, portraying some famous investors.

In this case the focus is on investors who are active mostly in the Merger Arbitrage Business, Some guys are very well known like John Paulson, Paul Singer or guy Wyser-Pratte but from other guys, who keep a low profile, most invetsors might have never heard of.

Personally I wish this book would have been written long ago and that I head read it long ago. It really offeres a very comprehensive view into this relatively arcane world of arbitrage investing with some very suprising insights.

It is also clear that there is not ONE recipe to be successful as an Arb. For instance the question on when to sell when a deal breaks divides these guys into two groups: Some of them say the only way is to sell directly after the news whereas others say that you should never sell directly but wait for a better price. Other notable differences are levels of concentration, use of leverage and if hostile deals are part of the universe or not.

I was also surprised on the depth of fundamental analysis that most of these guys seem to be doing before entering into a deal, at least they claim to do so.

What makes the book really special and even better than the Market Wizard series is the fact that there is also space for the “other side”, CEOs who have fought the Arbs in hostile deals an ultimately won. Most interesting was the story about the take over attempt of Airgas by Air Products which is described in very good detail and how Airgas Managment ultimately won although the odds were highly against them.

The content is clearly US centric, however I think most of the mentioned rules etc. can be applied internationally.

Summary:

Overall, the book is extremely well written and offers a unique deep insight into the M&A arbitrage world. There is a lot of content in the book and I think I have to read it at least a second time to digest all of it.

Overall I can recommend the book highly to any investor, because sooner or later one will be involved in such a situation. For “special situation” investors this book is a MUST. For me clearly one of the best investment books that I have ever read.

Update Cars.com & Kanam Grundinvest

Kanam Grundinvest

Kanam Grundinvest was a special situation liquidation investment I made around 2 years ago. After 2 years, the position returned ~13,5% and is therefore on the upper range of my estimated return range from 4-8% p.a.. From the initial purchase price of around 16,17 EUR/unit I received back ~ 9,50 EUR in tax free distributions, resulting in a 2,5% remaining portfolio position.

However the current price of the units at ~8.85 EUR is very close to the intrinsic value of 9,24 EUR. So there is not that much juice left and Warburg will not liquidate super fast as they keep earning their fees as long this vehicle exists.

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Update Handelsbanken – HOLD

Handelsbanken Update:

2018 was on the surface a solid year for Handelsbanken. According to the 2018 annual report, operating profit increased by +5% and net income by +8%, top line by +5%. ROE was 12,8% which is below my assumed 15% but still a remarkably good number for a large bank.

Just looking at the bottom line, the first quarter of Handelsbanken looks great:  Net income up +19%, operating profit up +18%. However top line only grew at +4% (vs. Q1 2018).

However this is solely a function of the fact that the bank reversed their provision into the Oktogonen pension fund for employees which they clearly state in the quarterly report:

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Some links

Interesting anual report from the “Scottish Mortgage Investment Trust” which, despite its name is a successful tech/growth fund (from page 11, h/t Monevator)

A wide ranging update from yetanothervalueblog

Blackrock is creating a “forever” PE fund

The number of job postings seems to be a short term leading indicator for the performance of Tech IPO stocks

A great collection of spin-off related links

Farnam Street blog on Jeff Bezos

 

 

Online Travel Updates (Expedia, Booking, Tripadvisor, Trivago & AirBNB / Google)

Expedia 

I invested into Expedia in February 2018 after the stock had become cheap enough. The idea was that a stock in a secular growth sector (online travel) should do well in the long run. After pretty decent fulll year 2018 numbers, with double digit increases in both, top and bottom, line, the first quarter 2019 showed a clear slowdown. Topline growth slowed to ~4%. Excluding Trivago which is still shrinking, topline sales would have grown +6%. Underlying profitability has improved although the first quarter is always the weakest one.

What I found interesting is the fact that Expedia performed better than Booking com. Here is a stock price comparison (including Tripadvisor  and Trivago):

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Some links

Good article how German Aldi is “disrupting” American grocery retail

Why “technical analysis” in stock prices makes no sense at all

A great analysis of Zillow’s new business model

The UK Value Investor with an in depth look at Cranswick

Portfolio updates from the GlobalStockPicking blog

Is Coca Cola Bottling an easy short ?

And finally the Graham and Doddsville Spring 2019 edition (including an interview with John Hempton, Bronte)

 

 

Some links

Whitney Tilson now has his own website / blog.

According to Andrew Left (Citron), the  recent IPO “The Amazon of Africa” Jumia is a complete fraud

Very Expensive stocks have outperformed now for some time

On Gazprom and why some Value Investments need catalysts

A16Z with a great post on why just having lots of data doesn’t create a defensible moat

Interesting perepctive: What Long term investors can learn from traders

Google is tracking a lot of stuff. For instance all your puchase receipts in Gmail, but free mobile games seem to be a lot worse

 

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