As always there will be a separate performance portfolio review in the beginning of January. After a short break, I had to do a new “Panic Series” post due to the result of the US election.
With the rather “mixed” performance of my portfolio this year and the many headwinds, the motivation to write clearly has suffered a little bit, but having seen these situations before, of course I will continue to blog with the clear goal to become the longest running financial blog on the planet. In the subcategory of non-paywal financial blogs with a transparent investment portfolio, I would guess there are not many challengers.
Energiekontor has been one of my worst performing stocks in 2024, the performance was much worse than the borader renewable peer group. To be honest, I am not sure why the stock performed so bad. On part of the explanation is clearly that the overall political shift to the righ (Trump, Germany etc.) might be bad for renewables, which explains the overall bad performance to some extent. It didn’t help either that they announced a 2024 profit warning some days ago.
However, they didn’t adjust the mid term guidance (2028) and it seems that the profit warning was clearly just a short term timing issue with a required approval of a purchaser for a large UK wind farm. So next year could look very nice especially for the developer segment.
Despite the political uncertainty, I still think that Energiekontor is one of the best bets in the sector. Here is a table I did some weeks ago showing that Energiekontor, among a European peer group, is both the cheapest and the least leveraged player:
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.
Last week has not only brought a clear win for Donald Trump but in parallel also the (final) downfall of the German “Traffic Light” coalition.
US Markets celebrated the clear outcome, further increasing the outperformance of anything US based. Everyone now tries to figure out what a Trump administration will actually do, but the “market” seems to agree that it will be “pro business” and therefore great for US stocks (and Crypto and of course Elon).
Lower corporate taxes, more oil & gas drilling and tariffs on every import with a focus on China seem to be something the US stock market really likes.
One way to play this as an investor would be to join the various “Trump/Musk/Thiel Trades” like Bitcoin, US Bank, Palantir Tesla or the likes or just switch (even more) into ever winning US stocks. My inner contrarian however is screaming “red alert” as in my opinion a lot of this or even too much is already baked into US asset prices in general. But maybe it’s just my envy that US assets are performing so much better than what I own ? Who knows.
DISCLAIMER: This is not investment advice. The Author is known for making lots of mistakes in his write-ups and will frontrun you whenever possible. DO YOUR OWN RESEARCH !!!!
As always in my longer write-up, this post only contains selected sections of the write-up- A full pdf is embedded below.
Management Summary
Sixt AG, a family-owned and -run Car rental company from Munich, has been compounding profits and shareholder returns at a double digit CAGR for the last 20 years. Following Covid, they accelerated their organic growth in the US which now represents ⅓ of their business and is growing rapidly at 20% plus p.a..
As most of their competitors (Hertz, AVIS, Europcar) are overleveraged, they will continue to take market share from them in the coming years. The recent (temporary) issues with residual (EV) car values depressed valuation multiples so that Sixt trades at a very low P/E for 2025 (~8 times for the Prefs, 11x for the common) for what I consider a high quality company resulting in an attractive risk return profile.
Background
Sixt is a company I owned several times in my investment career, unfortunately never long enough. During the initial Covid panic, I bought a “half” position as a part of a wider Covid basket” without any deep fundamental research at that time. Initially, this turned out to be a brilliant investment and almost tripled until the end of 2021, however since then, the stock struggled.
Following that Tweet, I thought it’s a good time to dive a little bit more into the rental car industry and see if I should “re-underwrite” Sixt or not.
3. Sixt History & some KPIs
3.1. Company history
Sixt was founded in 1912 and so technically is the oldest of the large car rental companies. However, only with Erich Sixt, who became CEO in 1969, Sixt started to expand significantly. Sixt went public in 1986 and opened the first US Branch in 2011. In 2021, Erich Sixt after 42 years finally passed to lead over to his two sons who now run Sixt as Co-CEOs in the 4th generation.
3.2. Some KPIs
We can see that over 10 and 20 years (based on 2023), Sixt has been a great compounder. Only over the last 5 years (EPS 2018 adjusted for DriveNow one off gain), EPS growth slowed. But one has to remember that this time period includes a beginning recession (2019), Covid, interest rate increases etc.
It’s also worth mentioning that all that growth was achieved organically. To my knowledge, Sixt never acquired another company.
As always, when a stock is cheap, the question is: Are there any perfectly good reasons for the stock being so cheap ?
Despite the general weakness in European small and midcaps, these factors might play a role:
A common theme I hear is that the rental car business is a shitty one. I think this is mainly due to the fact that the problems of AVIS, Hertz and Europcar are very public, but the success of Enterprise is not. On a P/E basis, both Hertz and Avis have traded at similar multiples (but with a lot more debt). As Enterprise is not publicly traded, some analysts might look at Sixt and decide that it is even “expensive” compared to Hertz and Avis.
Falling residual values for cars have impacted Sixt in 2024. Initially, an EBT of 400-520 mn had been forecasted. After Q1, where they had to book a loss because of unexpected depreciation, they had to cut the guidance again with the Q2 results in May to 350-450 mn EUR. In Q2 once again they again reduced the outlook to 340-390 mn EUR. So investors might be afraid that Q3 might contain more negative surprises.
Investors might still not fully trust the two sons to continue what Erich has achieved over more than 40 years. I have to admit that I am also not 100% convinced. Only time will tell.
Sixt is clearly also exposed to the overall economic situation. A deepening recession in Europe might soften the demand, both for vacation rentals and business customers. Or customers might trade down from Sixt’s premium offer to a cheaper competitor.
11. Summary & conclusion
The initial question that I asked myself before writing this post was: Should I re-underwrite Sixt despite the quite disappointing performance over the past months ?
Thea answer after this exercise for me is clearly YES.
Sixt is a stock that offers an interesting growth story, a strong track record for a very low valuation which in my opinion creates a very attractive risk-return profile on a mid-term time horizon.
There are clearly some risks, as mentioned my main concern is how the sons will perform once Erich is not around anymore.
In any case, I decided not only to “re-underwrite” the stock but to increase my exposure by buying an additional 1% of the portfolio of Common shares.
I might add further, both to the Prefs and the Commons in the future if no negative surprises happen. The date for the release of Q3 earnings is November 11th.
value and opportunity 