Readers know that I am a very slow investor, nevertheless some noteworthy news from the porfolio for Q3 in no particular order;
EVS Broadcast
Just a few days ago, EVS held their investor day, the presentation can be found here. Business performance has been very good, they predict now that they will reach the upper end of the revised target. They also announced a (small) share buy back program. ZThe investor presentation contains a lot of interesting information, especially about the competitive landscape and how they want to gain market share. Overall I think they are executing extremely well and management eem to have a clear gorwth path ahead of them. As this is a European small cap, the stock of course did exactly nothing. According to TIKR analysts expect 3,03 EUR EPS for 2024 but only 2,56 for 2025. Yes, 2025 is not an event year but I think that analysts might be too negative. I have been buying and it is now very close to a full position.
Last week has not only brought a clear win for Donald Trump but in parallel also the (final) downfall of the German “Traffic Light” coalition.
US Markets celebrated the clear outcome, further increasing the outperformance of anything US based. Everyone now tries to figure out what a Trump administration will actually do, but the “market” seems to agree that it will be “pro business” and therefore great for US stocks (and Crypto and of course Elon).
Lower corporate taxes, more oil & gas drilling and tariffs on every import with a focus on China seem to be something the US stock market really likes.
One way to play this as an investor would be to join the various “Trump/Musk/Thiel Trades” like Bitcoin, US Bank, Palantir Tesla or the likes or just switch (even more) into ever winning US stocks. My inner contrarian however is screaming “red alert” as in my opinion a lot of this or even too much is already baked into US asset prices in general. But maybe it’s just my envy that US assets are performing so much better than what I own ? Who knows.
DISCLAIMER: This is not investment advice. The Author is known for making lots of mistakes in his write-ups and will frontrun you whenever possible. DO YOUR OWN RESEARCH !!!!
As always in my longer write-up, this post only contains selected sections of the write-up- A full pdf is embedded below.
Management Summary
Sixt AG, a family-owned and -run Car rental company from Munich, has been compounding profits and shareholder returns at a double digit CAGR for the last 20 years. Following Covid, they accelerated their organic growth in the US which now represents ⅓ of their business and is growing rapidly at 20% plus p.a..
As most of their competitors (Hertz, AVIS, Europcar) are overleveraged, they will continue to take market share from them in the coming years. The recent (temporary) issues with residual (EV) car values depressed valuation multiples so that Sixt trades at a very low P/E for 2025 (~8 times for the Prefs, 11x for the common) for what I consider a high quality company resulting in an attractive risk return profile.
Background
Sixt is a company I owned several times in my investment career, unfortunately never long enough. During the initial Covid panic, I bought a “half” position as a part of a wider Covid basket” without any deep fundamental research at that time. Initially, this turned out to be a brilliant investment and almost tripled until the end of 2021, however since then, the stock struggled.
Following that Tweet, I thought it’s a good time to dive a little bit more into the rental car industry and see if I should “re-underwrite” Sixt or not.
3. Sixt History & some KPIs
3.1. Company history
Sixt was founded in 1912 and so technically is the oldest of the large car rental companies. However, only with Erich Sixt, who became CEO in 1969, Sixt started to expand significantly. Sixt went public in 1986 and opened the first US Branch in 2011. In 2021, Erich Sixt after 42 years finally passed to lead over to his two sons who now run Sixt as Co-CEOs in the 4th generation.
3.2. Some KPIs
We can see that over 10 and 20 years (based on 2023), Sixt has been a great compounder. Only over the last 5 years (EPS 2018 adjusted for DriveNow one off gain), EPS growth slowed. But one has to remember that this time period includes a beginning recession (2019), Covid, interest rate increases etc.
It’s also worth mentioning that all that growth was achieved organically. To my knowledge, Sixt never acquired another company.
As always, when a stock is cheap, the question is: Are there any perfectly good reasons for the stock being so cheap ?
Despite the general weakness in European small and midcaps, these factors might play a role:
A common theme I hear is that the rental car business is a shitty one. I think this is mainly due to the fact that the problems of AVIS, Hertz and Europcar are very public, but the success of Enterprise is not. On a P/E basis, both Hertz and Avis have traded at similar multiples (but with a lot more debt). As Enterprise is not publicly traded, some analysts might look at Sixt and decide that it is even “expensive” compared to Hertz and Avis.
Falling residual values for cars have impacted Sixt in 2024. Initially, an EBT of 400-520 mn had been forecasted. After Q1, where they had to book a loss because of unexpected depreciation, they had to cut the guidance again with the Q2 results in May to 350-450 mn EUR. In Q2 once again they again reduced the outlook to 340-390 mn EUR. So investors might be afraid that Q3 might contain more negative surprises.
Investors might still not fully trust the two sons to continue what Erich has achieved over more than 40 years. I have to admit that I am also not 100% convinced. Only time will tell.
Sixt is clearly also exposed to the overall economic situation. A deepening recession in Europe might soften the demand, both for vacation rentals and business customers. Or customers might trade down from Sixt’s premium offer to a cheaper competitor.
11. Summary & conclusion
The initial question that I asked myself before writing this post was: Should I re-underwrite Sixt despite the quite disappointing performance over the past months ?
Thea answer after this exercise for me is clearly YES.
Sixt is a stock that offers an interesting growth story, a strong track record for a very low valuation which in my opinion creates a very attractive risk-return profile on a mid-term time horizon.
There are clearly some risks, as mentioned my main concern is how the sons will perform once Erich is not around anymore.
In any case, I decided not only to “re-underwrite” the stock but to increase my exposure by buying an additional 1% of the portfolio of Common shares.
I might add further, both to the Prefs and the Commons in the future if no negative surprises happen. The date for the release of Q3 earnings is November 11th.
In the first 9 months of 2024, the Value & Opportunity portfolio lost -0,4% (including dividends, no taxes) against a gain of +6,8% for the Benchmark (Eurostoxx50 (25%), EuroStoxx small 200 (25%), DAX (30%), MDAX (20%), all TR indices).
Links to previous Performance reviews can be found on the Performance Page of the blog. Some other funds that I follow have performed as follows in the first 9M 2024 (values taken from public websites, no guarantees for correctness):
Partners Fund TGV: +7,5% Profitlich/Schmidlin: +9,6% Squad European Convictions: 6,8% Frankfurter Aktienfonds für Stiftungen: 1,8% Squad Aguja Special Situation: +10,8% Paladin One: -1,5% Gehlen & Bräutigam: +5,4%
Performance review:
Some Performance reviews are more fun to write, some less so. This one is clearly in the second category, as was last quarter.
Disclaimer: This is not investment advice. The guy who is writing this has problems distinguishing USD and GBP. PLEASE DO YOUR OWN RESEARCH !!!
A friendly reader alerted me that I made an error in the Ocean Wilson Special Situation NAV calculation. I seem to have gotten confused by the fact that Ocean Wilson reports in USD. I did translate the Wilson and Sons stake into GBP but not the investment portfolio. Instead of 319,6 mn GBP, the investment portfolio is worth 319,6 mn USD which equates ~ 239,7 mn GBP
So the initial calculation should have rather looked like this:
The expected return is a full -8% lower than inititally (and wrongly) calculated. Still not bad, but clearly less advantageous.
Based on this, I reduced the positon to a ~1% position.
I am deeply sorry for this mistake and a big thanks to the reader who alerted me. Going forward I will need to be more dilligent for these calculations-
One other remark: A reader congratulated that my post has moved the stock price. This is not my intent for the blog. I try to avoid writing about illiquid stocks as some readers tend not to read the posts and seem to blindly buy. With Ocean Wilson, I was very surprised how illiquid this 500 mn Market cap stock actually is. For me this is a good lesson for the future that I don’t write much about illiquid stocks. I leave that to others.
Disclaimer: This is not investment Advice. Never trust an anonymous dude on the internet. DO YOUR OWN RESEARCH!!!
As always, I have attached a pdf with the full writeup and only focus on a few sections in this post. And the Sound Track of course.
Elevator pitch:
Ocean-Wilsons, a UK listed, Bermuda domicile HoldCo which owns a 56% stake in a listed Brazilian Port/Maritime company called Wilson Sons and an investment portfolio, is trading a a deep discount (-48%) to its SOTP value. Now however it seems very likely that the Brazilian Asset will be sold by year end 2024, which could potentially trigger a re-rating of the stock on top of any premium paid in the sale.
2. Introduction:
Longer term readers of my blog know that in addition to investing into boring GARP stocks, I also invest into Special Situations from time to time. A special situation is a more short term oriented investment with a clear trigger or catalyst. In earlier times, I did more of them, these days I have less time and only look into them if they jump at me but usually with a relatively small allocation. There are different types of Special Situations. This one is of the “Undervalued company sells major operating asset” type of Situation, of which I have done a few in the past. The last one was Exmar two years ago with a decent outcome.
value and opportunity 