Category Archives: Capital allocation

Royal Unibrew (ISIN DK0060634707) – A High Quality Beverage Compounder at a reasonable price ?

Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!!

The company:

Royal Unibrew logo

Royal Unibrew is a Danish Beverage company that I “discovered” during my journey through all Danish shares some weeks ago (too expensive back then but “watch”). I had also seen them some months ago in the Profitlich&Schmidlin portfolio.

The company is mostly active in Scandinavia and the Baltics where they have offerings in all areas (including a contribution agreement with Pepsi), whereas in some countries (France, Germany, Italy), they are running a focused niche strategy. Despite the name, Beer is only around 35% of their offerings (as of 2021), the other 65% are mostly non-alcoholic drinks from soft drinks to water and energy drinks.

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Inflation vs. Pricing Power for Chemical companies & Nabaltec follow up (ADD)

Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!!

Inflation & Pricing power

One of the obvious strategies for for investors in an inflationary environment is to pick companies that have “Pricing power”. Pricing power means that companies should be able to raise prices at least as quickly as costs rise.

Now one could try to do some deep thinking if and how different business models react to inflation. As I am a more “hands on” guy, my solution is to look at actual numbers and then try to draw my conclusion.

For any company that is producing material goods, the best indicator for pricing power in my opinion is Gross profit, i.e. the difference between selling price of a product minus the direct costs to produce them.

A company with pricing power should keep the gross margin or ideally even improve gross margins in an inflationary environment.

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Protector Forsikring ASA – The Scandinavian “Baby Markel/Berkshire” ?

The company:

Protector Forsikring ASA is a name that came up more often in my “stream”. It is a Norwegian “Challenger” Insurance company founded in 2007 (and IPOed in 2008) that has been growing nicely over the past years and doesn’t look expensive.

The stock price has been quite volatile but recently the stock has reached new highs and long time shareholders should be quite happy:

Protector

The high level financial indicators look very attractive: A relatively Ok valuation with an impressive ROE:

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Gaztransport & Technigaz (GTT) – welcome back !!

Background:

Gaztransport & Technigaz is a company that I had looked at in early 2016 and most of what I have written back then still applies:

Imagine you could invest into a company with the following characteristics:

– Global market leader with 70-90% market share (95% new built)
– Net margins after tax of 50% or more
– business protected by patents
– almost no capital requirement, negative working capital
– a potentially huge growth opportunity
– conservative balance sheet (no debt) and “OK” management

Back then, I found the stock initially too expensive at EUR 34 per share, however I invested then at around 22 EUR but sold after a quick gain at around 31 EUR.

What did happen since then ?

Looking at the chart, I was clearly underestimating the value of the stock by a wide margin as the stock more than tripled until early 2021:

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Nabaltec AG – Boring Old Economy Dinosaur or “Hidden Champion” Electrification beneficiary ?

Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH !!!!

The company:

naba logo

Nabaltec is not a fancy Biotech company as the name might indicate, but a rather “old economy” Specialty Chemical company focusing on Aluminium-oxide based materials, located in the middle of nowhere in my home state Bavaria. This  typical “German Mittelstand” company had its IPO in 2006, and was created 1996  as management buy-out of a production facility from VAW AG. The beginnings of the plant as such seems to have been built in 1938 and looks like this:

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Tekmar PLC – Hidden “Off-shore” Champion or Cheap for a reason ?

Introduction:

At a very first glance, Tekmar Plc, a AIM listed UK company looks like a very interesting “hidden Champion”:

The company is active in a very attractive market: their main business is to provide sub sea protection systems for cables with its biggest entity providing this service to the fast growing off-shore wind farm market.

In addition, Tekmar claims to have 75% market share. the combination of a company providing an essential, relatively small ticket item to a large installation with a dominating market share makes many investors water their mouths I guess.

Even more mouthwatering looks their chart from the 2020 annual report (from August 2020):

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The new “Energy Transition” Basket Part 1 – (Siemens Energy, Orsted, AKer Horizon)

Background:

As some of my readers might have noticed, I have been looking deeper into the topic of renewable energy and connected topics such as Climate change, Net Zero targets etc.

My current conclusion is that we might have reached a real “Tipping point” towards a significant increase in “Electrification” which in my opinion is driven by a confluence of several factors:

  • The cost of renewable energy (esp. Solar) has been dropping by -90% over the last 10 years and is still dropping further. Solar is (c.p.) now the cheapest available resource of electricity on the planet
  • Battery technology is making leaps and prices are dropping as well quickly, very similar to solar energy
  • A few major electric appliances are already better or almost equal compared to fossil alternatives (Electric heat pumps already now, EVs in very short time, DRI & Electric arc furnaces for steel, Green ammonia etc.) 
  • Money is flowing into the sector like never before, driven by ESG considerations
  • Governments are pushing into the same direction. Europe so far has been leading, but under Biden the US is pushing hard
  • interest rates are low which makes creating new infrastructure cheaper than never before

There remain a lot of challenges, especially the “intermittency” of renewable energy and the current lack of solutions for longer term storage. However, especially in the battery space there is significant progress made. Plus, all the billions now flowing into “Green tech” will create a “Cambrian explosion” of new technologies in a few years time. 

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Some Portfolio updates – VEF, FBD, Play Magnus, BioNTech, JustEat Takeaway.com

My long term readers know that I am relatively sloppy with updates especially when a stock does well. When I have time then I try to look at least briefly into annual reports when they are published .

VEF (formerly Vostok Emerging Finance)

VEF had a pretty decent 2020. Share price went up in 2020 by +37%, although faster than NAV which went up by around 22%. This was however achieved with some volatility:

What I missed is that they dis a share placement in November 2020. As usual, the reporting is very transparent so one can see that 4 out of 12 investments lost value. However the biggest position, Brazilian Creditas was also the best performer. Around 2/3 of the portfolio is now Brazilian Fintech. Their only new investment in 2020 was an Indian mobile payment company which makes it their first Indian investment.

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Alimentation Couche-Tard: Cheap Quality Compounder or Gasoline Dinosaur ?

Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH !!!

Management Summary:

Couche-Tard_logo.svg

Alimentation Couche-Tard (“CT”) is one of the historically best performing Canadian companies, operating gas stations and convenience stores around the world with a focus on North America.

The company currently looks like a very interesting GARP (growth at a reasonable price) stock.  Over the last 10 years, the company showed exceptionally good numbers: 23% EPS CAGR and 10 year average returns on capital  >20% (23% ROE, ~20% ROCE).  The business model is very resilient, Covid-19 actually led to an increase in margins and profits, both on the convenience store segment as well as in fuel despite declining sales.

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