Following an annual tradition since 2013, by the end of the year, I review my portfolio by writing/updating very short summaries for each individual position. 17 of the 23 positions from last year are still in the portfolio and I have added 6 new positions. That turnover has been mostly driven by reviews (Admiral, ABO Energy), or the price target had been reached (DEME) and by finding new ideas. A more comprehensive Performance review will follow in early January 2025.
A short user guide: My preferred style of investing is a bottom up approach, focusing on 20-30 small/midcap stocks that in my opinion have a good return/risk profile over the next 3-5 (or more) years. Many of these stocks are not household names and are unlikely to make spectacular gains in any single year. Many of them look interesting only after the second or third glance and are rather boring, which is exactly what I am looking for. So if you are looking for a “Hot stock for 2025”, this post won’t help you much.
And always remember: THIS IS NOT INVESTMENT ADVICE. PLEASE DO YOUR OWN RESEARCH.
As last year, I have created a portfolio overview chart based on holding periods which I proudly present here:
As always there will be a separate performance portfolio review in the beginning of January. After a short break, I had to do a new “Panic Series” post due to the result of the US election.
With the rather “mixed” performance of my portfolio this year and the many headwinds, the motivation to write clearly has suffered a little bit, but having seen these situations before, of course I will continue to blog with the clear goal to become the longest running financial blog on the planet. In the subcategory of non-paywal financial blogs with a transparent investment portfolio, I would guess there are not many challengers.
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.
Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!
As always with my more detailed writeups, I will focus on the general sections in the post and attach the full pdf for anyone interested in the details. And of course the Bonus Sound Track.
Elevator Pitch
Fuchs SE is a 4,5 bn EUR market cap, family owned and run Lubricant manufacturing and distribution company that had been a super star performer until 2013/2014. Since then, the stock traded more or less sideways and had to fight some margin compression. Since early 2023 however, Fuchs seems to be back on a growth and margin expansion path.
This very well managed company earns double digit EBIT margins and Returns on capital of >20%.The valuation is very moderate with 13,5x 2024 or 12x 2025 earnings for this very boring but high quality small cap company. Based on company projections, EPS should grow organically by ~9% plus any additional effects from share buy backs and M&A over the next 4-6 years and the current dividend of around 3,5%.
If you are looking for actionable investment insights, you can skip this post. This post is more about satisfying my own curiosity why the two UK traded battery funds have been doing so badly in the recent months. In the unlikely case you are interested in that, I invite you to read on.
The UK was for some time a lighthouse country for rolling out “grid scale” Battery Energy Storage Systems (BESS) in Europe. Relatively benign regulation and support schemes allowed a significant amount of BESS capacity to be developed in the UK, well ahead of other European countries.
So why now selling it just after 2 years ? First, the stock price nicely recovered from 17,5 GBP per share 2 years ago to around 30 GBP when I sold after the earnings announcement. Secondly, it seems that Admiral is really not able to “copy&paste” its formula outside the UK.
As IPO prospectuses often contain some quite interesting information, I wanted to quickly look through and extract what I find interesting. Especially on a hot day like today, reading a lot about cold storage is quite comforting 😉
Valuation
Let’s look at the new price point we got through the IPO. Unfortunately, Lineage Cold Storage is not yet available in TIKR, so let’s hae a quick look at comps “by hand”:
These days, more and more offerings for Private Investors are popping up to participate in Private Equity, which until now was mostly exclusive for Institutional investors and very wealthy people. In Europe, the socalled ELTIF II format allows now fund companies to directly target individual investors from as low as a few thousand EUR.
Private Equity in my opinion has its place. The good Private Equity funds are indeed “value investors” that have a decent ability to identify undervalued assets. However, Private Equity Investing also is not directly comparable with investing into public markets.
In particular, any prospective investors should take any returns stated by PE funds with a grain of salt and I want to explain why these “PE IRRs” cannot be directly compared with Stock market performance. This is due to 2 main differences:
Critical point 1: IRR calculation– critical assumption: Reinvestment at the IRR is possible
value and opportunity 