Electrica is the only remaining “Emerging Market” stock in my portfolio. I bought the stock in December 2014 and now after 3 year and some months it maybe time to assess how the situation looks against my initial expectations.
Including dividends, the stock is up ~18% in total since then, in my portfolio however the stock is flat because I bought more of Electrica at higher prices. Compared to a +53% performance of the portfolio in the same period, the stock is clearly a underperformer and the question is clearly if I should keep the stock.
My initial thesis relied on the following assumptions:
- the stock was cheap for a grid company with guaranteed returns on invested capital
- Romania was supposed to grow significantly and Electrica as well
- As a former Government owned company, I expected significant cost savings potential
- I had expected After Tax / After minority Earnings of around 442 mn RON in 2017
What happened ?
During my Silver Chef “Post mortem” some days ago, I decided to look at the 10 biggest losses I made since I started the blog in order to check if I have actually learned from mistakes.
These were the (by absolute performance) 10 worst investments in the 7+ years of Value and Opportunity:
10. Medtronic -18,93% (2011)
Medtronic was one of the initial portfolio investments. I kicked them out in August 2011 as I was not very comfortable owning US large caps and I never deeply looked into the company myself. Medtronic since then outperformed the S&P 5000 IN USD terms (~17,1% p.a. vs. 15.3%) or ~ 233% in EUR terms. This is slightly better than my portfolio which made around 215% in the same period.
A few days ago, Silver Chef came out with their half-year update. There is the glossy half-year 2018 Investor Presentation and the 2018 half-year report.
Looking at the stock price, the market clearly didn’t like the news very much:
So what happened ?
Disclaimer: This is not investment advise !!! Do your own research !!!!
The guy who wrote this post just lost a lot of money with his Silver Chef position. You might even consider shorting his recommendations 😉
When I looked at Expedia almost exactly one year ago as part of my 2017 Travel Series my key take negative aways were as follows:
– CEO has super high salary (90 mn USD in 2015)
– top line growth, operating profit stagnant
– expensive acquisitions in 2015/2016, number of shares and debt increased significantly
– reported growth numbers not adjusted for acquisitions in investor presentation
– lots of share options
Additionally, the stock looked expensive:
At 119 USD per share, Bloomberg tells me that they have a trailing P/E of 54, an expected 2017 P/E of 22,3 and an EV/EBITDA of ~16. This means that a lot of growth is already priced in.
As we can see in the chart, the stock became at first even more expensive before dropping back to a level of around 100 USD / share:
It’s no secret that I like French family run companies. TFF Group, G. Perrier, Installux, Dom Security are just the main examples of these kind of companies.
Boiron SA is a French company which Bloomberg lists as “Specialty Pharmaceutical” company. Although “Specialty Pharma” is not exactly what they do. in fact, Boiron SA ist the only listed company that I know that exclusively produces and sells Homeopathic “pharmaceutical” products. The call themselves “World leader” of this field.
A few words on Homeopathy
As I have covered Softbank just recently (part 1, part 2 ) and as I consider Insurance companies to be somehow in my circle of competence, the news that Softbank wants to acquire 30% of Swiss Re for 10 bn USD of course sparked my interest.
The big question of course is: Why on earth would Masa Son do that ?
Looking at his vision statements, his vision is a connected world via the internet of things, lots of robots, smart AIs and a lot of computing power. So he is buying chip makers (ARM; Nvidia), data companies like Uber, mobile phone companies, robotic companies etc. So far so good, somehow this could fit together.
But a Reinsurance company ? WTF is that ?
Landis & Gyr, the Swiss based company was on my research “to do” list for some time. Why ? Because it looked very much like a “forced IPO” special situation when in Summer 2017 then almost bankrupt Japanese Conglomerate Toshiba decided to sell Landis & Gyr which was deemed to be one of their crown jewels.
Toshiba itself had bought Landis & Gyr in 2011 for around 2 bn USD from a Private Equity Seller (Bayard) who in turn had bought Landis & Gyr from KKR (via DEMAG), another PE shop in 2004. Back then, Landis & GYr had around 390 mn EUR in sales and it was rumoured that the purchase price was quite low at around 100 mn EUR (those were the days…..).