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%.
Disclaimer: This is not investment advice. The stock mentioned is relatively illiquid and potentially risky. Please do your own research !!!!
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:
Yesterday, I sold my complete Kinder Morgan position at ~21 USD per share with a total gain of around 25% (in EUR, including dividends). Why ?
When I bought the stock in April I argued like this:
For me, the “expected case” would be something like a 8% discount rate and 1% growth resulting in a fair value of around 25,60 USD per share. Also, under my assumptions, the downside is relatively limited. Based on 18 USD per share (at the time of writing), that would imply an upside of around +42% which for me would be an acceptable return over my typical 3-5 year investing period (plus any dividends).
So why did I sell out now and didn’t wait for higher prices ? Well, something has changed: Interest rates went up. Since April, the 10 year USD Swap rate went up by +0,90% and the 20 year rate by around +0,70% p.a. If we look at my valuation grid from back then we can see that the value reacts significantly to change in interest rates:
Some of my readers might remember that I looked at Delta Lloyd a long time ago as it was one of David Einhorn’s top pick back then, but we didn’t like it back then.
A quick look at the chart shows, that the problems I had identified were indeed there and the stock never really recovered:
One of the highest profile merger cases at the moment is the Bayer / Monsanto case.
A quick recap:
In may 2016, Bayer made a proposal to buy Monsanto. The first offer was 122 USD per share which was rejected. Bayer increased the offer 2 times, first to 125 USD and currently to 127,5 USD.
The big question is: Why is Monsanto only trading at 107 USD (at the time of writing)? Compared for instance to the initial ChemChina/Syngenta deal spread, the Bayer case looks a lot more solid:
Monday, Sep 12th will be the first trading day for Uniper, the E.On spin-off. E.On shareholders will get one Uniper share for each 10 E.On shares they are holding.
Just to recap: Uniper will contain all the (unwanted) power generation assets of E.on, so all the “fossil fuel” power plants, the Russian assets and the Swedish nuclear plants plus some other stuff. The German Nuclear assets (and the corresponding liabilities) will remain at E.on due to the reasons I mentioned in the last post.
Uniper is clearly an ugly Duck, maybe the “most ugliest spin-off” I have seen since I started the blog. If we look into the most recent investor presentation, it is clear that you have a problem when the 3 listed growth projects are a German Hard Coal Power plant, q Russian power plant closed due to an accident which will reopen in 2018 and some strange dealings around the North Stream gas pipeline (page 9.). It doesn’t help either that Uniper had to take a 3,8 bn EUR pre tax write down in the first 6 months of 2016.That makes the duck still uglier.