Category Archives: Anlage Philosophie

6 years of Value & Opportunity

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Exactly 6 years ago, the first (German) post of this blog was “released” into the WWW. As I have done in the past years, this is always a good time to reflect about happened over the year.

Again a big THANK YOU to all readers and especially those who actively contribute by commenting (critically) or sending Emails. I think without this input, the quality of the blog would not be the same or even the blog wouldn’t exist anymore.

Knowing that many smart investors read my post and contribute via comments or mails is really a very big part of the motivation to keep this blog up and running. Thank you again !!

So let’s move to the highlights of 2016:

Top 10 most popular posts written in 2016

1. Novo Nordisk – Great Compnay but also a great Investment
2.Uniper/E.ON Spin-off: Take one ugly Duck and transform into ….. 2 really ugly ducks ?3. Capital Allocation & Capital Managament – what is good and what is bad
4. A few Thoughts on Banking Stocks (Lehman 2.0, Deutsche Bank)
5
AQ Group (ISIN SE0000772956) – A 15 year “42- Bagger” without a Moat ?
6. Kinder Morgan (KMI): Asymetric Upside Potential
7. David Einhorn: Nice Q4 Lette but E.ON as a long Pick ? Really ? C’Mon !!!
8. Coface SA (ISIN FR0010667147) : Ultimate Death Spiral or Contrarian Opportunity in an attractive industry ?
9. Amercian Express (AXP) – Cheap “Buffett” Blue Chip or Value Trap ?
10. Armageddon Alert: WILL “Brexit” create a Black Hole that swallows Planet Earth & the Universe ?

It is interesting that mostly “big names” like Novo, Amex or Einhorn draw the most readers. Even more interesting is that some old general topic posts like “How to calculate Enterprise Value” still get clicked 5-10 times more often than the Top 10 from 2016……

Mistakes made in 2016

Buying Aixtron as a special situation without more research. I was only lucky to get out with a small loss. The timing of the Hornbach sale was very unfortunate after holding it for 5 1/2 years. Also the sale of Citizen’s, despite the nice profit was clearly too early and I missed out another 20% of the “Trump Rally”

Buying more Lloyd’s Bank after the Brexit was stupid. Banks always get punished and I underestimated the weakness of the pound.

And yes, buying Deutsche Bank in the beginning of October would have been a very good performer for “Hindsight Capital LLC” my new 100% p.a. vehicle.

Lessons learned

 

The biggest learning this year was clearly:that it is very hard to predict what will happen on a macro level. Who would have thought that we will have the Brexit and Donald Trump us US president ? But even harder is to predict what markets would do when those events happen.

If you would have told me end of last year that those events would happen and  I had to decide to invest for the full year or being not invested at all, I would have gone for the latter. Looking back, this would have been a big mistake.

So I am happy that I don’t have to earn my money with predicting macro events or timing stock markets.

Company analysis

Regarding company analysis, I think my best analysis (or at least the ones that I had the most fun) were Silver Chef, DOM Security and Majestic Wine which all became part of the portfolio.

Overall I managed to do ~23 deep dives in this “blogging” year which is pretty OK.

Favorite Books

Among the 12 book reviews this year, my personal top 3 were the following:

Capital Returns (Marathon Asset Mgt.): Great and funny letters of Marathon Asset Mgt.

The Shipping Man: This cured me from ever looking at shipping stocks

and Shoe Dog, the autobiography of Phil Knight, founder of Nike.

Goals for 2017

 

According to the bible, the seventh year is the one where one should rest and do nothing. So far I do not plan to rest. 2 company analysis per month seems to be a very reasonable target. I do have a pretty long “to do” list which got even longer after the “12 ways the ideal company should be run” post.

On the other, hand, I do plan to move forward with a plan in 2017 that I had for a long time: I want to write a book. This might mean a somehow slower frequency for blog posts. And don’t worry: It will not be the 93rd book on Warren Buffett….

 

Camellia Plc (ISIN GB0001667087) -Exotic assets at a deep discount ?

Background:

Camellia Plc is a pretty odd company for UK standards. It is a conglomerate with interest in plantations around the world, as well as some engineering businesses, a UK cold storage business, a fish trader in the Netherlands and a private bank plus an art collection, a stock portfolio and other stuff.

Some UK blogs have covered Camellia like Richard Beddard and Expecting Value.

Camellia seems to be a favourite among deep value or “assets at a discount” investors and as I do like strange companies (and conglomerates) , I decided to take a deeper look at it. Also as it is in the same sector as ACOMO makes it easier to get “into it”.

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Trump, Brexit, Renzi – The result of evil big data geniuses or just Confirmation Bias at work ?

This is a somewhat “off-topic” post but at the end there will be a turn to investing, I promise !!!

Background:

A Swiss magazine published an article on the Weekend, where a “Data scientist” claimed that a method that he developed had made Donald Trump President.

This method, which claims to identify (and of course influence) people by 5 basic character traits was used by a company called “Cambridge Analytica” in order to secure Trump’s victory. And by the way, they were responsible for Brexit too. The article seems to be quite popular, I received the link 5 times over the weekend from very different sources

There are a couple of Youtube videos about Cambridge Analytica, for instance here. But there is a longer one which is more interesting

In the video from September, they are claiming that they managed to make Senator Cruz popular from scratch. They also claim that they can segment down to very small groups and deliver them the right message in a way that will more or less “guarantee” results. As an example they showed how they targeted very small sub groups in Iowa with targeted ads about guns to make them vote for Cruz in the caucus.

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12 Ways how the “Ideal Company” should be run

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Introduction:

Some years ago I introduced a 27 point  “beta version” of an investment check list. This check list contained a lot of quantitative aspects, such as P/E, P/B or other multiples as well as some qualitative aspects. I used this as a rough guideline for analyzing potential long-term holdings but I found out that the quantitative aspects in a check list are not very helpful, because it leads to discarding really well run companies at a very early stage.

On the qualitative side however some things were missing, especially how a company is run for me became more and more important over the past years.

I think this aspect is not well covered by many other investors as most concentrate (only) on the “what”:

  • What moat does a company have ?
  • What industry  are they in ?
  • What ROE/ROIC/EBIT Margin does the company generate ?
  • At what EPS/EBIT/Book multiples does the stock trade ?
  • What is the “Magic Formula” that generates Alpha without actually looking into the companies I invest

For me the “what” in many cases is actually only a secondary result of the “how”. Moats for instance are not created out of thin air.

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Provident Financial (PFG): A very profitable subprime lending company run by a “Crook” ?

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Provident Financial is a UK-based “financial service provider”. What makes Provident “special” is that the company is extremely profitable:

Market Cap 4,2 bn GBP
P/E 16,1
P/B 5,7
ROE 47%

Among its shareholders there are many “famous” investors for instance Marathon AM, Neil Woodford and  Tweedy Brown.Stock analysts are quite bullish, according to Bloomberg 9 out of 12 have the company as “buy”, although the target price at 31,00 is only a few percent higher than the current price.

The stock has done pretty well over the last years, “the great financial crisis” had almost no impact on the share price:

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Novo Nordisk (DK0060534915)- What now ?

When I looked at Novo Nordisk 3 months ago, I found the stock too expensive at 315 DKK/share. That was my summary back then:

What could make the stock interesting again ?

Well, that’s simple: Either a lower stock price or higher growth. Maybe management has low-balled growth ? Who knows. Maybe the market over reacts if the next quarters don’t look that good ? According to Bloomberg, analysts officially still expect double-digit earnings per share growth well into 2019. Even adjusting for share buy backs, this will be difficult to achieve based on the growth rates communicated by management.

For me, the stock would become more interesting at around 250 DKK under the current growth assumptions. I think I would also like to see more negative comments from analysts.

With the stock now trading at ~229 DKK, it is clearly necessary to revisit the stock again.

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