Both Belgian stocks in my Portfolio, EVS and Jensen published Q1 numbers in the past few days.
EVS Broadcast came out with a Q1 slightly below their own expectations and with EBIT guidance below 2024.
It is important to remember that EVS always guides cautiosly and last year had to revise their forecast upwards 3 times.
Italmobiliare
Italmobiliare published preliminary numbers already some days ago. The first reaction of the market was not so kind:
To be honest, I do not fully understand why the reaction was so negative. NAV development has been quite solid including the dividend as this chart shows:
EVS Broadcast
EVS Broadcast reported 2024 numbers this week. After raising their 2024 guidance 2 times during the year, they came out at the upper und of the projected range. The Highlight page speaks for itself:
Readers know that I am a very slow investor, nevertheless some noteworthy news from the porfolio for Q3 in no particular order;
EVS Broadcast
Just a few days ago, EVS held their investor day, the presentation can be found here. Business performance has been very good, they predict now that they will reach the upper end of the revised target. They also announced a (small) share buy back program. ZThe investor presentation contains a lot of interesting information, especially about the competitive landscape and how they want to gain market share. Overall I think they are executing extremely well and management eem to have a clear gorwth path ahead of them. As this is a European small cap, the stock of course did exactly nothing. According to TIKR analysts expect 3,03 EUR EPS for 2024 but only 2,56 for 2025. Yes, 2025 is not an event year but I think that analysts might be too negative. I have been buying and it is now very close to a full position.
For those who just came back from a 15 year space mission: Wirecard is a German company that according to its website is ” one of the world’s fastest-growing digital platforms for financial commerce”. It managed (briefly) to achieve a market cap of close to 25 bn EUR and is part of the German Blue Chip index DAX 30. The stock lost -62,71% today which is most likely a record for a DAX company for a single day.
Backstory / Personal history 2008
This is an article I wanted to write for a long time but I was actually afraid to do so for several reasons.
Wirecard is a company/stock that I have been following for a very long time. My first “encounter” with the company ended in a kind of “5 minutes of fame” situation with some very unpleasant side effects.
The story starts in May 2008 when a post appeared under the pseudonym memyselfandi007 on Wallstreet Online, the largest German stock community/forum. (fun fact: This Thread seems to have been read 17,8 million times, so a lot more than all my blog posts on V&O combined….).
Svenska Handelsbanken
I mentioned it in the comments, that I sold my Svenska Handelsbanken a few days ago. This was not an easy decision as I still like the company due to its unique culture. However I see the following short- mid- and long term issues:
Installux:
Installux is surprisingly one of my best performing stocks this year, including dividends the stock is more than 30% and is at an all time high.
I did not fully understand why until I read the 6 month report.
Sales are up ~7% yoy, 6M earnings per share are 17,16 EUR vs. 14,37 EUR, an increase of almost 20%. Profit improvements happened across most of their sectors, so it doesn’t look like single special effects or so. Despite the recent run-up, the stock remains exceptionally cheap.
Kuka & MDAX exit
For those who did follow my comments on the original Kuka post, they might have noticed that I sold the stocks 2 days ago and bought them back yesterday slightly cheaper.
The reason was that in the meantime, the tendered shares were kicked out of the MDAX, the popular German MID Cap index.
As I was not sure how the shares would react I decided to manage the risk by staying out.
At the end of the day not much happened:
Nevertheless I was able to cheapen my purchase price from ~107,5 to 106 EUR. As the deal now is more attractive, I invested a total of 4% of the portfolio.
Aixtron – another special situation (with a Chinese buyer)
Aixtron, a former TECDAX star has fallen on hard times. However a few weeks ago, a Chinese buyer showed up and finally made an offer for the company at 6 EUR per share.
With a share price at currently 5,53 EUR, the discount is similar to Kuka at around 8,5%.
The situation differs slightly from Kuka:
On the plus side, there is little risk that anyone complains about the deal as Aixtron was not doing well anyway and they are not deemed “strategically important”. The time horizon here should be shorter than for the Kuka deal.
The offer runs until October 7th. So far, the acceptance is low, as of today, only 1,64% of the shares have been tendered.
I think the risk is slightly higher than in the Kuka case as they might not reach their threshold, on the other hand there might be a chance for a better offer.
Although the situation is less clear for me as in the Kuka case, I start here with a 1% position at 5,53 EUR and will monitor it closely.
Kuka:
This is something that ran over the ticker today with regard to the Kuka case:
CFIUS Likely to Challenge Midea-Kuka Deal, Height Says
By Kasia Klimasinska(Bloomberg) — CFIUS will likely challenge this deal “because Kuka has a direct relationship as a primary robotics supplier to Northrop Grumman,” Height analyst Nils Tracy says.
- “At a minimum, we expect the transaction will face an extended CFIUS review timeline and a number of divestures”
Greenlight Re
Following the E.On discussion, I really asked myself if it was such a good idea to invest into Greenlight Re.
My argument was as follows:
After the E.On discussion however, I recognized the follwoing: Whenever I looked at a stock that Einhorn bought (Delta Lloyd, AerCap, SunEdison, Consol, E.on), I never understood why he did it or I thought it was not a good idea. Even if I look at his 20 bigest disclosed positions, I don’t find any stock that I would buy on my own:
APPLE INC AAPL US
GENERAL MOTORS CO GM US
ISS A/S ISS DC
CHICAGO BRIDGE & IRON CO NV CBI US
TIME WARNER INC TWX US
MICHAEL KORS HOLDINGS LTD KORS US
AERCAP HOLDINGS NV AER US
CONSOL ENERGY INC CNX US
ARKEMA AKE FP
AECOM ACM US
ON SEMICONDUCTOR CORP ON US
BANK OF NEW YORK MELLON COR BK US
TAKE-TWO INTERACTIVE SOFTWR TTWO US
GREEN BRICK PARTNERS INC GRBK US
MICRON TECHNOLOGY INC MU US
MARKET VECTORS GOLD MINERS GDX US
VOYA FINANCIAL INC VOYA US
LIBERTY GLOBAL PLC-SERIES C LBTYK US
DILLARDS INC-CL A DDS US
APPLIED MATERIALS INC AMAT US
That in effect lead me to the conclusion that I am most likely the wrong kind of shareholder for Greenlight Re. If things go really bad, I am not sure if I would have enough trust to keep the position or if I would get really nervous because I could not identify with the manager.
Secondly, I honestly don’t have much insight, how Einhorn generated his fantastic past track record.
Together with not liking his long position, I think it was a mistake to invest in Greenlight and I sold my stocks as mentioned in the comments at around 18,45 USD per share with a tiny profit of around +2,5%.
It could well be that Greenlight maybe has a spectacular 2016 but as I have mentioned above, one should not allocate money to someone where you don’t understand what that manager is doing. Conviction is important to withstand all kind of behavioural traps in investing.
Finally, I am not sure if there could be some isues on the Reinsurance side. AIG surpisingly disclosed a pretty massive reserve strengtening for Q4 and it looks like that this is mostly “long tail” exposure from long ago which is also the “bread and butter” business of Greenlight Re.
Handelsbanken
Following the market turmoil, I began to establish a first (2%) position in Handelsbanken. Purchase price was on average ~98 SEK per share. Valuation wise they are now at a level where I would expect to earn around 16-17% p.a. long term which looks atractive to me despite potential short term head winds.
I plan to increase this to a full position over the next months. I funded this position by selling some of the HT1 bonds, as I want to keep some cash (~10%) in order to be flexible if some of my watch list shares become really cheap.
Bill Ackman
Bill Ackman came out with his Q4 letter to investors just a few days ago. His results were similarily bad than Einhorn’s with -20,5% after fees for 2015.
There was already good coverage on his letter for instance from Matt Levine.
My 2 cents on this:
On a personal level, I do think there might be already TOO MANY activists. Many of them only care for short term payouts which, in many cases, might not be benefitial for long term share holders.
All in all, if I would have money invested with Ackman, I would really ask myself if I would trust a guy who only blames others for his misfortunes.
Greenlight Re:
One reader Emailed me that I had made a mistake in my initial post with regard to the book value and P/B ratio. This is what I wrote in December:
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2007 2008 2009 2010 2011 2012 2013 2014 2015 P/B Ratio 1,24 0,96 1,23 1,23 1,08 1,03 1,19 1,05 0,78 P/B Ratio adj. B Shares 1,48 1,15 1,46 1,47 1,29 1,23 1,42 1,25 0,93 For some reason, the official Bloomberg ratios do not include the class B shares held by David Einhorn, so I adjusted them accordingly.
Actually, the B shares are included in the stated Bloomberg Ratios despite showing the wrong number of shares, so the “true” P/B ratio is around ~0,79 which then of course makes the “mean reversion” story even more compelling.
Additionally, Greenlight already released the monthly investment return for December which was -0,1% against -1,6% for the S&P 500. So at least its going into the right direction.
Maybe one quick point on comparisons of Greenlight Re to Berkshire, Markel or Fairfax: Although it is true that the other companies have better track records, I do think that Greenlight has one big advantage: The company is transparent and relatively easy to value as the whole investment portfolio is marked-to-market. And as I pointed out, Greenlight for me is not a long-term compounding story but a mid-term special situation betting on a David Einhorn outperformance.
Hornbach
After Hornbach’s profit warning in December, a lot of people asked me: What are you going to do ? Are you selling now ? Why do you own Hornbach at all ?
First thing: I wil do nothing and watch. For me , the profit warning was very surprising as I thought that they are on a good track and have the right strategy, although the business they are in is very tough.
For me, Hornbach is a pretty low risk position. My expectation was that I can make around 10-12% p.a. with very little risk. Until Q3 2015, that was on track but now of course it looks like a clear underperformer.
One of the reasons for this is clearly the fact that in contrast to almost any other stock in Germany, Hornbach did not enjoy any multiple expansion over the last 5 years. For a capital intensive, real estate dominated business like Hornbach, book value is one of the relevant measures. If we look at this we can clearly see that Hornbach now is valued at the low end of the historical range of P/B which ranged from ~0,8 – 1,8 in the past 15 years:
| P/B | BV/Share | |
|---|---|---|
| 30.12.1999 | 1,86 | 8,335 |
| 29.12.2000 | 1,46 | 8,679 |
| 28.12.2001 | 1,07 | 11,654 |
| 30.12.2002 | 0,99 | 11,642 |
| 30.12.2003 | 1,09 | 12,103 |
| 30.12.2004 | 1,10 | 13,201 |
| 30.12.2005 | 1,17 | 13,661 |
| 29.12.2006 | 1,33 | 15,182 |
| 28.12.2007 | 1,31 | 16,441 |
| 30.12.2008 | 0,81 | 18,784 |
| 30.12.2009 | 0,89 | 20,584 |
| 30.12.2010 | 1,09 | 22,947 |
| 30.12.2011 | 0,93 | 24,900 |
| 28.12.2012 | 0,99 | 25,881 |
| 30.12.2013 | 1,03 | 27,101 |
| 30.12.2014 | 1,04 | 29,023 |
| Jan 16 | 0,84 | 31,230 |
Obviously, Hornbach does have some issues. Personally I think one needs to watch the E-Commerce issue most closely. So far I thought that DIY does not have big issues with Amazon & CO but this now needs to be tested.
TGS Nopec
Tgs Nopec released preliminary 2015 figures and a first outlook for 2016. Naturally, the outlook is rather subdued. Combined with the drop in oil prices, the stock got hammered. For shareholders, the only positive aspect is that TGS still is doing a lot better than its capital-intensive competitors, for instance PGS or CGG:
For the moment I will not do anything. Clearly the oil price went lower than I ever thought but TGS has net cash and will manage the cycle conservatively. So I don’t think one has to panic now.
Overall I think the best advice in such a situation is: Either you panic early or you don’t panic at all. For the early panic it is already too late for oil related stocks in my opinion, so the only alternative is to sit it out.
value and opportunity 