Category Archives: Value Stocks

Coface SA (ISIN FR0010667147) : Ultimate death spiral or contrarian opportunity in an attractive industry ?

Executive summary:

Coface SA  is a relatively simple contrarian “mean reversion” case:

  • the company at the moment has some specific issues which in my opinion can be solved
  • the industry as such is attractive (within the generally problematic insurance space) with significant barriers to entry and little exposure to interest rates
  • Even in a bad case, the downside at current depressed levels is small. A conservative “mean reversion case” would indicate ~75% upside without assuming any growth
  • no hard “catalyst” and fundamentally it could get worse before it gets better
  • For exposure management reasons, NN Group will be sold and replaced by Coface
  • As always the reminder DO YOUR OWN RESEARCH. THIS IS NOT INVESTMENT ADVISE !!!!

The company:

Coface SA is a French “Trade Credit Insurance” company and one of the Big 3 players of this industry which together have 80% market share.

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Short cuts: Kuka, Swatch & Silver Chef

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”

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Waddell & Reed (WDR): “mean reversion” opportunity or potential Value Trap ?

The company:

Waddell & Reed is a Kansas based Asset Manager (mostly listed equity) & Financial Advisory firm. The company became somehow infamous during the 2010 “flash crash” when they were initially blamed that one of their order had caused the crash. Later, the SEC blamed a guy in London for it.

W&R looks like an interesting “High quality mean reversion” type of value stock.:

Market Cap: 1,4 bn
P/E (2015): 6,9
EV/EBIT: 4,5
Div. Yield: 10,3%
10 year avg. ROE: 33,4%
10 Year avg. NI margin: 14,1%

So we have a high ROE/ROCE, high margin business with significant net cash that trades at a ridiculously cheap level (based on 2015 earnings). There is a relatively recent SeekingAlpha “long” pitch with the following summary:

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

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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Performance review June 2016 – Comment: “Brexit, Excuses and Risk Premiums”

Performance Q2 2016:

In the second quarter, the portfolio gained +0,6% against -3,5% for the Benchmark (25% EUR Stoxx 50, 25% EUR Stoxx small, 30% DAX, 20% MDAX). YTD the score is -1,4% for the portfolio against -9,5% for the Benchmark. On a rolling 1 year basis, its +1,0% for the portfolio and -8,4% for the bench.

Just for fun, here is the YTD/1 Year performance of some small funds that I follow and where I know the managers (I will track them in future reviews just to see how I am doing against the “Pros”, data from Bloomberg):

Partners Fund TGV: +1,71% / +7,20%
Profitlich/Schmidlin: -3,86% / -4,35%
Squad European Convictions -1,19% / +7,85%

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AQ Group (ISIN SE0000772956) – a 15 year “42- bagger” without a Moat ?

Would you consider to invest into a company which at every occasion states the following:

AQ possesses no amazing patents or other security, we rely on having the best crew.

For a “Buffett/Munger” style value investor, this would be tough as there is clearly no moat or anything close and according to Buffett, the business economics always win in the long run, no matter how well a company is run.

Welcome to AQ Group, a Swedish “non moat” manufacturing company

 

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