Category Archives: Opportunities

Cars.com (CARS) – Interesting spin-off opportunity ?

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

 

logo-cars

Cars.com is a recent (May 31st) spin-off from publishing company Tegna, which itself is a spin-off of the Gannet publishing Group. Interestingly, Gannet/Tegna only bought control of cars.com in 2014 for a total value of 1,8 bn USD.

Cars.com – The business & Market

Cars.com is a typical “Online classified” business, meaning that it collects offers of merchandise (in this case cars), aggregates and sorts them and then shows it to as many potential customers as possible.

The economic value of such a “service” is relatively easy to explain: For a potential customer, it saves time because he can look at and compare different offers at one place. For the sellers, such a service is basically an advertising and/or sales channel which ideally reaches many potential customers.

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Spin-off/IPO updates: Metro/Ceconomy, Brighthouse Financial, ALD SA

Metro/Ceconomy

I had briefly written about the Metro/Ceconomy Spin-off in January. After some legal hassles, the spin-off took place last week last.

This is what I wrote back then:

With 327 mn shares outstanding, this would translate into ~6,20 EUR per share as a lower bound value for Ceconomy under my (very rough assumptions).

It think at or below this price, Ceconomy could be an interesting “Ugly duck” spin-off investment.

Interestingly, Ceconomy had a very good start, opening around 9,40 EUR and has gone above 10 EUR per share, far above my buying threshold.

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Special Situation Updates: Actelion/Idorsia, Gagfah, SAPEC & Stada

A lot has happened over the last few weeks for my 4 largest special situation investments:

Actelion / Idorsia

The original Actelion idea was very simple: Buy an M&A target at a small discount which is relatively safe and get something (the Idorsia spin-off) extra which no one seemed to have noticed.

Although the case played out exactly as I thought and Idorsia even seems to be worth more than I assumed, I only made around +4% on it. Not bad for around 5 months but not great either.

Looking back I think I made 3 mistakes:

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HP Enterprise (HPE) – Spinning-off its way to happiness ?

DISCLAIMER: THIS IS NOT INVESTMENT ADVICE. PLEASE DO YOUR OWN RESEARCH !!!!!

Management summary:

  • HPE, the enterprise arm of the old HP looks attractive on a sum-of-part valuation
  • following 3 spin-offs in 2 years, my model indicates an upside of ~40% in the base case and ~70% in an optimistic case
  • Some “soft catalysts” are on the horizon such as the upcoming Software “spin -off merger”, further share buy backs and a “normal” financial year
  • management acts shareholder friendly, has a clear strategy and has created significant shareholder value since 2011
  • major risk is clearly a further detoriation of the Enterprise solution business which had a bad start into fiscal 2017

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Special situation: Stada Arzneimittel AG – swimming with the sharks (again)

Disclaimer: This is not investment advice. please do your own research !!!

Stada is a company I had been looking at many times in the past. A business which in principle is quite good (Generics and OTC drugs) but the company was run by a long time CEO who acted as it was his own company without owning a single share. He paid himself huge salaries, employed his son in a non-sensical but highly paid job, the company afforded itself a huge corporate center and so on. As a result, the company created little to no shareholder value in the 10 years up to mid 2016. As a comparison, the 10 year return of Stada until 03/2016 was only around 1,8% p.a. compared to 7,5 % p.a. for the MSCI Europe health care index, a significant underperformance.

Then however something happened which is still very rare in Germany: A local activist investor (Active Ownership Capital) and some other funds acquired a significant stake in the company and pushed for change.

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My 27 investments for 2017

It has become already a small tradition that I do a short review of my portfolio at the end of the year. As mentioned before I found it quite helpful to list my current investments at the end of each year and try to explain (to myself) the investment case in a few sentences.

Former posts can to be found here:

My 27 investments for 2016
My 28 investments for 2015
My 24 investments for 2014
My 22 investments for 2013

Compared to last year, Hornbach, Koc, the Depfy TRY bond, the HT1 Bond, NN Group, Citizen’s and Greenlight have been sold. New positions bought in 2016 are Dom Security, Majestic Wine, Handelsbanken, Coface,  Silver Chef, Italgas and SAPEC and Kuka. Some positions (Gaztransport and Kinder Morgan) went in and out in 2016.So 19 out of last years 27 are still in, a turn-around of 30% is acceptable and consistent with my strategy.

With 27 stocks, the portfolio is still maybe a little bit too diversified, my preference would be to have not more than 25 positions. However 2 positions (Kuka, Sapec) are special situations which will most likely be sold/terminated early in 2017. The cash level at the moment is quite low at around 4%.

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SAPEC SA (ISIN BE0003625366) Still an attractive Special Situation despite +350% YTD ?

Disclaimer: This is not investment advice. The stock mentioned is relatively illiquid and potentially risky. Please do your own research !!!!

Management Summary:

SAPEC SA, despite having gained already 350% YTD is in my opinion still a highly attractive special situation. The company is in the process of selling its main business which will result in around 230 EUR net cash per share compared to a share price of 135 EUR. Deal closing is very likely and management promised to distribute a “significant amount” of the proceeds. For me this is very attractive as I expect this to happen in the first half of 2017.

SAPEC is a somewhat strange company. Although the company is listed in Belgium, business activities are almost exclusively in the Iberian Peninsula (Portugal & Spain). This is how the company describes itself:

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