Category Archives: Capital allocation

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

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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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Performance review 2020 – “Freak Accident”

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As this is the 10 year mark of the portfolio, there will be a two part performance review. This is part 1 for 2020, part 2 for the 10 year period will follow in short time.

In 2020, the Value & Opportunity portfolio gained  +27.6% (including dividends, no taxes) against +4,5% for the Benchmark (Eurostoxx50(25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%), all performance indices including Dividends).

Links to previous Performance reviews can be found on the Performance Page of the blog. Some other funds that I follow have performed as follows in 2020:

Partners Fund TGV: +28,2% (15.12.) 
Profitlich/Schmidlin: +9.54% (30.12.)
Squad European Convictions (30.12.) +20,4%
Ennismore European Smaller Cos (30.12.) -10.9% (in EUR)
Frankfurter Aktienfonds für Stiftungen (30.12.) +0.83%
Evermore Global Value (30.12.) -7,0% (USD)
Greiff Special Situation (30.12.) +0.2%
Squad Aguja Special Situation (30.12.) +34,8%
Paladin One (30.12.) +30,1%

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10 Years of Value & Opportunity – 10 Highlights, 10 LESSONS & 10 Books

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Again, time flies. Exactly 10 (!!) years ago on December 15th, 2010, I started this blog. 

FJ-10-anniversary-logo-cropped-236x179

As every year a very special “Thank You” goes  to all readers, especially those who actively contribute either by comments or mails. I need to keep on mentioning that the interaction with readers is really driving the motivation to continue the blog in this format.

In this post I will reflect mostly on writing the blog, highlights and lessons over the last 10 years plus my 10 all time favorite book reviews. There will be a 10 Year investment/performance review in the beginning of January 2021. 

Some numbers: 

10 year stat        
Year Visits % Germany Posts Comments
2011 93,811 na 411 694
2012 178,485 49.82% 266 1,368
2013 325,240 43.14% 168 1,243
2014 430,794 32.26% 121 1,068
2015 459,992 25.94% 110 1,105
2016 521,197 28.52% 113 1,645
2017 635,741 28.79% 114 1,580
2018 452,267 28.57% 92 784
2019 325,169 31.56% 84 563
2020 YTD 483,824 39.03% 107 1,211
         
Total 3,906,520   1,586 11,261

All in all, I managed to post ~1600 posts over these 10 years which created close to 4 mn visits. The drop of visits (and comments)  in 2018 & 2019 was clearly the result of posting less due to a lack of time from my side.

So why I am still doing this ?

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SPACs vs . IPOs – Is it Different This time ?

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I have covered the current SPAC Mania already in a post in June on Nikola, but since then SPACs only seem to gather more steam.

VC legend Bill Gurley (Banchmark Capital, Uber) has released an interesting post on the three main venues for a company to go public: A “classic” IPO, a simple listing and finally the SPAC.

I’ll try to summarize his post:

  • he argues that the IPO process is “broken” and rigged by the I-Banks. His proof is that on average, IPO’s are “Popping”  ~20% on the first day of trading which means that this difference, multiplied by the number of shares placed, is “stolen” from the previous owners (i.e. himself as a VC)
  • on top of that, companies have to pay IPO fees
  • The reason is that banks prefer special clients and do not really match demand and supply
  • as direct listings (Spotify) do not allow to raise large amounts of money, reverse mergers with SPACs are preferable
  • He argues that SPACs have “lower cost of capital” than IPOs but doesn’t give any examples. His main “proof” here is that there are so many SPACs now and that companies can negotiate really hard.
  • and of course the way to public markets is a lot faster for a SPAC

Bill Gurley is clearly not an idiot as he most likely is now a billionaire following some very impressive investment successes (Uber) with Benchmark capital. However I do think that his arguments have some serious flaws.

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InterActive Corp (IAC) – Some thoughts and SOTP valuaTion

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InterActice Corp (IAC) is a company I had on my list for a long time but for whatever reason I never managed to look at them in more detail. Over the past few weeks I read in several quarterly reports of good funds that they had invested, so I decided to look at least a little bit deeper this time.

Founder/ Chairman Barry Diller

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InterActive is the creation of Barry Diller, who is now 78 Years old. He had a very interesting career. As a media executive, among other things, he created Fox Network, and mentored media executives such as Michael Eisner (ex CEO of Disney).

He took control of IAC in 1995 and finally bought out “Cable Cowboy”  John Malone in 2010. The relationship with Malone was long but not always without issues.

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Active Ownership Capital Fund (BUY)

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

Background:

More than five years ago I wrote about why it could make sense to invest into other actively managed funds even if one considers oneself an active investor. I would summarize the criteria that were important to me as follows:

The interests of the manager should be long term aligned with investors and the manager should possess specific skills to complement the own portfolio as well as to enable some learning.

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Interactive Brokers (Sell), Sino AG (Buy), Tiffany & Co (Buy)

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Interactive Brokers:

As mentioned in the comments on the previous post, I sold my Interactive Broker stocks.  Why ? Mainly because of the following reasons:

  • although I still think that it is a very good company, I reconsidered some of my assumptions after reading the “Chuck” Schwab autobiography
  • Despite the fact that the  Covid-19 crisis seems to have driven an increase in new accounts and trading commissions, the long term effects of lower interest rates (and margins) will be significant as interest margins are the main driver of profitability in the mid- to long term. My current scenario is that interest rates will remain very low even in the US for a very long time.

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Panic Journal 6 – After the “Hammer”

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At the time of writing, it seems that the worst is over at least for the developing world. Numbers of newly infected persons are shrinking and in the Epicenter, Wuhan, life slowly seems to open up again. Yes, the number of deaths is still rising but this is to be expected as there is at least a 10-14 day delay in deaths compared to new infections.

All in all, it looks that “the hammer” including lock downs seems to have worked for the time being. For me time to think about two areas:

  1. What did I learn in the last few weeks ?
  2. What should I focus on going forward ?

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Panic Journal (4) – Consolidation

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Transaction summary:

The last few days were almost  “High Frequency Trading” for me with more transactions in 10 days than the 2 years before. Here is the overview (also in the comments) after my “Panic Journal 1” Post including a short assessment. I have also listed the stocks that I bought before the panic as part of my “German” basket, but which I should have clearly bought later.

Overall, I added 10 11 (!!) new positions, sold 3 positions and ended up with a cash position of 14,4% (this is also an effect of the ~-22% lower portfolio value YTD).

I was clearly too early in many case, but what I have learned over the last 20 years or so is the following: In a tanking market you always look stupid in the short term as a buyer and smart as a seller. In the long term, you look smart when you have bought at cheap valuations and you look stupid if you sold at cheap valuations.

This week I need to slow down a little more and think if everything that I did really makes sense ;-). I will try to limit daily transactions to 0.5% of the portfolio in any direction.

My overall assessment at the moment is that some sectors (Travel, events) will be hit much longer than I initially thought. I do think that “The Hammer and the Dance” scenario is a very likely one.

Here is the the transaction list:

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Panic Journal (1) – “Baby steps”

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This post is written mostly for myself in order to document my thoughts and actions and to learn from my obvious mistakes. But I promise that the blog won’t turn into a short term trading site !!

Today was a lot worse than I expected. Who would have expected that OPEC members disagree and the Oil price would tank more than 30% overnight ? In general, lower oil prices are good for most economies, but such a move will create some issues with regard to margin loans, counter party risk, indebted frackers etc etc.

So instead of the expected Monday “Corona panic” we have now the “Corona + Oil super panic”. Plus some strange moves like the EUR gaining strongly against the USD, despite Europe always being in the weaker position, even now with the Corona Virus.

Nevertheless, I started to put some money at work. Surprisingly not in the tourism sector, as I need to do more homework there.  Not everyone might have read the comments but this is what I bought today:

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