Category Archives: Capital allocation

Another return of the Watch Series: FitBit (FIT) – dead horse or exciting pivot ?

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Watches again…..

Although I wrote a lot about Watch companies over the past few years (Swatch part 1, Swatch part 2, Hengdeli, Fossil part 1, Fossil part 2, Movado, Richemont), no investment came out of it. However I had a lot of fun researching these companies so it was time well spent.

When I initiated the series in 3 years ago, Smart Watches were a big thing and especially the Apple Watch was perceived to be the “Swiss Watch” killer, which, as we know now didn’t happen as they seem to coexist quite well.

Besides Smart Watches, Fitness Trackers were the “hot shit” and especially VC backed FitBit that IPOed in 2015 was taking oer the world.

This chart shows Fitbit against Fossil (blue)  and Richemont (green) and we can clearly see who had staying power and who not:

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Saga PLC (ISIN GB00BLT1Y088) – High Quality Travel / Insurance Hybrid ?

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The company:

Saga Plc is a UK company that combines two business that I have looked at quite often: Insurance and Travel.

Saga has its origin as a Seaside Hotel in England and then became a travel company before then moving into insurance in the 1980s. Saga caters specifically for the “over 50” market and claims to be the “leading provider” to people over 50 in the uK.

After a PE financed management buyout in 2007, he company was IPOed in May 2014 at a price of 185 pence / share.

Looking at the stock chart, IPO investors at first saw a decent outperformance before things went south this year:

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Boiron SA (ISIN FR0000061129) – Boring enough to invest ?

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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.

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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

From Wikipedia:

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Kinnevik AB – Better than Buffett, Watsa, Wallenberg & Co ?

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kinnevik_logo

Kinnevik is one of the more well-known “typical” Swedish investment companies. Founded in 1936 and still controlled (via A shares with multiple votes) by the 3 founding families, Stenbeck, Van Horn and Klingspor, the company now has a market cap of around 7,8 bn EUR.

Originally, farming, forestry & industrial were their main businesses but Jan Hugo Stenbeck, who unfortunately died in 2002 at the age of 59, transformed Kinnevik into a more “modern” company.

One specific feature of Stenbeck was that he didn’t only invest in listed companies but also helped to create new companies or invested in a very early stages. This is from Stenbeck’s obituary in the annual report 2002:

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Record Plc (ISIN GB00B28ZPS36) – I like that record too !!!

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

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A few months ago, fellow blogger Wexboy had a very interesting post on Record Plc, a UK based “specialty asset manager”. Go and read the whole thing, it is worth it.

I try to summarize the business & background  in my own words:

Record Plc provides so-called “Currency overlay” asset management services. Currency overlays are in principle used for two reasons.

  1. To hedge an international investment portfolio into one single currency, usually the currency of the investor and/or
  2. To gain some extra yield by hedging currency exposures more “dynamically”

It is important to know that they do not manage the underlying assets, but “just” a derivative portfolio hedging the underlying assets and that they do not use their own balance sheet but act solely as an agent for the ultimate client.

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Short cuts: Provident Financial, Topdanmark

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Provident Financial

Wow, that was fast. In November I looked at the stock but luckily dismissed it. This is what I wrote back then:

However for me, despite I do like financial companies, I don’t want to invest into a company which in my opinion runs an ethical questionable business. Some might argue that Lloyds Banking is not much different but I think that there is still a big difference between a well run main street bank and an aggressive subprime lender.

I do belive that in the long run, a company which takes advantage of clients has a higher probability to get into troubles than one which actually benefits the customer.

Although the “Crook” is out, the stock tanked an incredible -70% alone on Tuesday

So what happened ?

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Some thoughts on averaging down & averaging up

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John Hempton has a very interesting post on when to average down into a stock.

As a summary, one should not average down into a stock if

  • a company has a lot of financial leverage
  • a company has significant operating leverage
  • the company is in danger of becoming obsolete

I think this is already a pretty good advice, as a counter example he gives Coca Cola where one can average down “without much risk”. As this is a very interesting topic, I wanted to contribute my 5 cents to this:

Behavioural biases at work

In my experience, averaging down is often motivated by a couple of behavioural biases.

The major bias which “helps” investors and especially professional ones to average down in the wrong cases is in my experience the “over confidence” bias.

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