Category Archives: Fundamentalanalyse

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 ?

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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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Staffline Group Plc (ISIN GB00B040L800) -Growth machine or Brexit victim ?

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Due to the well-known Brexit troubles in the UK, my contrarian instincts seem to motivate me to look more at UK companies these days. One of the UK companies on my watchlist was Staffline Plc, a recruitment and “human resources outsourcing company”.

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The company got on my radar screen because friends mentioned that it looks like an interesting company and that the have a “great CEO”.

Those are the usual multiples:

Market Cap 232 mn GBP
P/E 2015: 15,6
P/E 2016: 7,4
EV/EBIT 11,7
EV/EBITDA 7,0

The company grew sales almost 10-fold over the last 10-12 years. Interestingly however GAAP EPS in 2015 was at the level of 2006.

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Some thoughts on index funds & market efficiency (including some empirical material)

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Currently there are a lot of articles in the financial press about the perceived “fight” between active and passive asset management styles.

The passive guys make the point that on average, after fees, active funds have to underperform against the index and low-cost index funds, which is difficult to counter. On top of that, “alpha” created by large active funds is not very persistent.

From the active side, there is the argument that if there is too much money invested in index funds, market efficiency will suffer and stocks will go up and down together because not enough people are analyzing single stocks. If stocks go up and down together without reflecting fundamentals, at some point in time “good stocks” should be too cheap and bad stocks to expensive. Which then should be some easy money for any good stock picker.

Is the market already inefficient ?

This argument  reasonable at first but is there any evidence that the market is less efficient ?  Let’s look for instance at the DAX 30, the major German index. It is hard to come up with good numbers but I do think that maybe between 10-15 % of the DAX is somehow invested via index funds with a clear trend towards more index ownership.

So let’s look how the DAX constituents have performed so far this year (as of Nov. 2nd). The Dax itself ytd is down -2,8% This is the YTD performance of the constituents:

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Amsterdam Commodities (ISIN NL0000313286) – a 60-bagger over 20 years -but why ?

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Amsterdam Commodities (Acomo) is a Dutch based company which “trades and distributes agricultural products”.

The company went on my “to-do list” some time ago because at first glance it looked like a company which managed to grow nicely over many years by maintaining very health returns on capital.

This resulted in very healthy shareholder returns over the last years as we can see in the chart:

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Including dividends, ACOMO Shareholders made 27,2% p.a. over the last 10 years and (10-bagger), 25,2% p.a. over 15 years (29 bagger) and 22,5% p.a. (60-bagger) over 20 years. So a real success story. Interestingly, despite these mind-boggling returns, only 2 analysts cover the stock according to Bloomberg.

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Metro Bank Plc – “The Apple of Banking” or “One-trick Pony” ?

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Readers of my blog know that I do like “outsider” like financial companies and that I do like UK banking (Handelsbanken Lloyds).

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Therefore it was highly interesting to read about Metro Bank, a recently listed “UK Challenger bank” in a letter of an investor I greatly respect. I had a look at “online only” UK challenger Bank Aldermore but didn’t like it too much, but as Metro Bank runs a “Branch strategy”, I decided to look into them.

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DOM Security (FR0000052839)- A Hidden Champion with a “key to unlock” higher profits ?

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Executive Summary:

Dom Security is a small French company specializing in commercial lock systems. The business itself is attractive, the valuation relatively cheap, although the company is a small player. The “kicker” in my opinion is the fact that the largest subsidiary, DOM Sicherheitstechnik Germany, had significant R&D expenses over the last few years, which, if things normalize, could lead to a significant profit increase within the next 2-3 years to the extent of +40-45% which should translate into a similar upside for the stock price.

Additionally, the rebranding in 2015 could lead to better profitability in other units and in turn to potentially higher multiples, which at the moment are only a fraction of the listed larger competitors.

WARNING: This is not investment advice. Do your own research. The presented stock is very illiquid, so be extra careful.

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Exor SpA: Buying a Reinsurance company doesn’t mean that you’re the “next Bershire”

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Following my Old Mutual “sum of parts” valuation I saw the following Ira Sohn presentation of Exor Spa, the Agnelli family holding (FiatChysler, CNH etc.) as a potential  “Sum of part” value investment.

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To summarize the presentation  in my own words:

  • Exor Spa is basically a “Berkshire like” company at a “Graham” valuation
  • Exor is managed by a “great capital allocator” and trades at a discount as people see it as an Italian company
  • After the acquisition of Reinsurance Partner Re Exor should trade at similar valuations as Berkshire or Markel
  • Big upside potential as FiatChrysler, Ferrari (and CNH) are severely undervalued (“Coiled springs”)

The study sees a potential upside of several times the current share price. They forecast a 150 EUR NAV per share (vs. ~50 EUR now and 30 EUR share prices), driven by a quadrupling in value of the FCA and the CNH stakes.

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Deutsche Pfandbriefbank (ISIN DE0008019001) update

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In July last year I introduced Pfandbriefbank as a “forced IPO” special situation. That’s what I wrote at the end of the post:

As I have said in the beginning, PBB is a simple case: I do think that the “forced IPO” of PBB from the German Government has created a typical special situation with good upside potential. This is clearly no “shooting out the lights” grand slam home run. In golf terms I would say that this is a “solid 6 or 7 iron” shot.

Looking at the perfomance of the stock since then, it looks like in Golf language that my “solid 6 or 7 iron” nevertheless “landed in the rough” with the stock being down -23% vs. -9% in the CDAX.

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