Category Archives: Anlage Philosophie (GoCo) – Another Spin-off that became a “Trump victim” ?

The Company / Spin-off

gc_masthead_opaque (GoCo) has been spun-off from parent Esure in the beginning of November, a week before the US elections and only a few days before Italgas SpA. As a “parting gift”, Esure took out a special dividend of about 75 mn GBP financed by some net cash and a 70 mn GBP loan before spinning the company off-

In my understanding, the major reason for the spin-off was that Esure, the listed UK online direct insurer was short in solvency capital and that this transaction improved the solvency substantially.

Every Esure investor got one GoCo share for an Esure share. Interestingly, Toscafund, the second largest shareholder only holds 14% in Goco compared to 16,7 for Esure, so they seem to have sold some shares.

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Some thoughts on averaging down & averaging up

John Hempton has a very interesting post on when to average down into a stock.

As a summary, one should not average down into a stock if

  • a company has a lot of financial leverage
  • a company has significant operating leverage
  • the company is in danger of becoming obsolete

I think this is already a pretty good advice, as a counter example he gives Coca Cola where one can average down “without much risk”. As this is a very interesting topic, I wanted to contribute my 5 cents to this:

Behavioural biases at work

In my experience, averaging down is often motivated by a couple of behavioural biases.

The major bias which “helps” investors and especially professional ones to average down in the wrong cases is in my experience the “over confidence” bias.

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Oaktree Capital Group (OAK) – Strong as an Oak ?


Oaktree Capital is an US-based listed asset manager specializing in alternative assets and more specifically in “distressed” securities. Co-founder Howard Marks became quite famous and is one of the most intelligent people in the investment industry. I had reviewed his book 5 years ago and read everything he writes with great interest.


Oaktree is clearly one of the “Highest quality” names in Alternative Asset Management with a very good long-term track record. A reader mentioned Oaktree in the “ideal company post” and as I had them on my list anyway I decided to make this my first analysis for 2017.

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10 wildly Optimistic Predictions for 2017 (and beyond)

These days, negative news is everywhere. Brexit, Trump, Syria, Terrorist attacks, Monte Di Pasci etc. It is not that hard to feel depressed about the world and the future. As I mentioned earlier on the blog, sometimes it makes sense to follow Charlie Munger’s advice and “invert, always invert”. Therefore I tried to come up with some potential positive and surprising news of how the world could get better in 2017. Some of them are pure fantasy, some might actually happen, who knows ? In any case it was fun to come up with those ideas. “think positive” is clearly not a solution for every problem of the world but sometimes it just helps to change the perspective in order not to fall into the “everything is doomed” trap.

1. Italy has actually turned the corner. NPLs, which have been decreasing since Mid 2106 drop dramatically and are snapped up from investors. BMPS will be nationalized, the rest of the Italian banks privately recapitalized. Building activity soars in Italy but also in Portugal and Spain.

2. Battery technology & Electric Vehicles will make a break through, accelerated growth because of jump in new car sales and build up of infrastructure. Growth easily outpaces decline in traditional cars.

3. Break through for healthy organic food which enables many people to start farming and really make a living out of it. Rural areas get a real boost as people want to move back to the country. People eat  more healthy food which lowers the cost for health care.

4. “Robots” will free up capacity from low value creation assembly line jobs to do really meaningful jobs (customer service, integrating refugees, caring for old and sick people, educating children).

5. Refugees create a large number of super innovative startups that contribute meaningful to GDP based on their experience from their home country (do more with less or nothing)

6. The Euro Zone and UK reach an agreement for the Brexit. As a result, UK will keep access to the common market but will pay for the recapitalization of the Greek Banking system. The EU will enlarge the franchise, grant access to the market against cash and will also recapitalize Portugal and Spain.

7. Donald Trump finds out that renewable energy is even better for energy independence (and jobs) than shale oil and gas. He will turbo charge the growth in the sector and will be known as the “Greenest President” in the history of the US. His Children accidentally had bought the majority of Tesla/Solar City just before his announcement. Musk makes so much money from Tesla which he puts into SpaceX and he will start his Mars mission already in early 2018.

8. A powerful and charismatic “Mahdi” appears and declares that peace is the ulitmate goal of Isalm. Terrorist attacks stop, the Middle East stops fighting and an “all around” peace treaty gets signed. Ultra orthodox muslims and Kurds get their own countries. Immediate rebuild of destroyed cities starts, driving growth for a decade.

9. Kim Jong-un in North Korea decides that he prefers a life as team manager of a US NBA team together with Denis Rodman as coach. North and South Korea are peacefully reunited. United Korea will grow by 10% plus for the next 10 years.

10. Donald Trump decides after 10 months that being President is boring and also bad for his Golf handicap. Vice President takes over.

My 27 investments for 2017

It has become already a small tradition that I do a short review of my portfolio at the end of the year. As mentioned before I found it quite helpful to list my current investments at the end of each year and try to explain (to myself) the investment case in a few sentences.

Former posts can to be found here:

My 27 investments for 2016
My 28 investments for 2015
My 24 investments for 2014
My 22 investments for 2013

Compared to last year, Hornbach, Koc, the Depfy TRY bond, the HT1 Bond, NN Group, Citizen’s and Greenlight have been sold. New positions bought in 2016 are Dom Security, Majestic Wine, Handelsbanken, Coface,  Silver Chef, Italgas and SAPEC and Kuka. Some positions (Gaztransport and Kinder Morgan) went in and out in 2016.So 19 out of last years 27 are still in, a turn-around of 30% is acceptable and consistent with my strategy.

With 27 stocks, the portfolio is still maybe a little bit too diversified, my preference would be to have not more than 25 positions. However 2 positions (Kuka, Sapec) are special situations which will most likely be sold/terminated early in 2017. The cash level at the moment is quite low at around 4%.

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SAPEC SA (ISIN BE0003625366) Still an attractive Special Situation despite +350% YTD ?

Disclaimer: This is not investment advice. The stock mentioned is relatively illiquid and potentially risky. Please do your own research !!!!

Management Summary:

SAPEC SA, despite having gained already 350% YTD is in my opinion still a highly attractive special situation. The company is in the process of selling its main business which will result in around 230 EUR net cash per share compared to a share price of 135 EUR. Deal closing is very likely and management promised to distribute a “significant amount” of the proceeds. For me this is very attractive as I expect this to happen in the first half of 2017.

SAPEC is a somewhat strange company. Although the company is listed in Belgium, business activities are almost exclusively in the Iberian Peninsula (Portugal & Spain). This is how the company describes itself:

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Updates: Kinder Morgan (SELL), Deutsche Pfandbriefbank (PBB)

Kinder Morgan

Yesterday, I sold my complete Kinder Morgan position at ~21 USD per share with a total gain of around 25% (in EUR, including dividends). Why ?

When I bought the stock in April I argued like this:

For me, the “expected case” would be something like a 8% discount rate and 1% growth resulting in a fair value of around 25,60 USD per share. Also, under my assumptions, the downside is relatively limited. Based on 18 USD per share (at the time of writing), that would imply an upside of around +42% which for me would be an acceptable return over my typical 3-5 year investing period (plus any dividends).

So why did I sell out now and didn’t wait for higher prices ? Well, something has changed: Interest rates went up. Since April, the 10 year USD Swap rate went up by +0,90% and the 20 year rate by around +0,70% p.a. If we look at my valuation grid from back then we can see that the value reacts significantly to change in interest rates:

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