Category Archives: Value Stocks

Majestic Wine (GB00B021F836) – Nothing to see or potential UK “Outsider” company ?


As always: this is not investment advise. Please DO YOUR OWN RESEARCH. Never trust any “stock tips” from anyone.

A few weeks ago I already mentioned that I had invested into a UK small cap company. Because of a lack of time I had to delay finishing the write-up but now I happily reveal the “UK mystery stock”:


Majesic Wine Plc is the dominant wine retailer in the UK for “medium to higher priced” wines, from 5 GBP/bottle upwards. They run a retail chain plus a commercial service for restaurants and a “fine wine” subsidiary. They recently purchased online only wine trader “Naked Wine” but we come to that later.

Charly Munger’s mantra is “Invert, always invert”. So let’s start this one with a couple of reasons why you shouldn’t buy Majestic Wine at the moment:

  • BREXIT: This has potentially multiple negative impacts on Majestic. With a lower Pound, imports get more expensive plus a general potentially weak consumer climate could make things really difficult and squeeze margins and/or reduce volumes. On top of that, many of the bankers who might need to leave the City might be target customers
  • The overall wine market in the UK hasn’t been growing in the last years so any growth needs to come from competitors. If Wine importers need to raise prices there is also the potential of a “substitution effect” towards other, cheaper alcoholic beverages like for instance craft beer which can be made locally.
  • Current numbers do not look that good, even if one adjusts for one-offs etc. the stock is not “cheap”. The company cancelled the dividend for the current year.
  • Even before the Brexit discussion, the business had weakened. The earnings peek has been the business year 2013/2014
  • As everywhere in retail, online is definitely an issue for the wine trade.

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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

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


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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