Insurance vs. Inflation & Interest rates (Admiral, Sabre, DirectLine) – Part 1

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Spoiler: Readers only looking for “actionable investment advice” might skip this post as this is about the basics. The short summary is: Inflation is not good for P&C insurers.

Background: Inflation is back

Last week, especially UK insurance stocks were rattled by news from Sabre Insurance that inflation was hurting them both, through rising claims but also rising reinsurance costs.

Sabre lost -40% that day Admiral and DirectLine were down double digits. On Monday, DirectLine, another UK direct insurer issued a very cautious Trading Update which again led to further losses. The whole disaster can be seen in this chart:

admiral comps

Inflation and Insurance

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Some links

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The Rational Walk blog on why researching companies that are too expensive might actually make a lot of sense

The “Uber leaks” picture a horrible company

SPACs were never a good idea for anyone except the promoters and even Bill Ackman is sending money back to investors

Interesting post on AMETEK, a company that compounded nicely over several decades

Companies with difficult to pronounce names might be systematically undervalued

Chrysalis and other “listed VCs” seem to be far behind the curve in valuation of their holdings

Some interesting details on “Twitter vs. Musk”

 

 

 

 

 

Performance review 6M 2022 – Comment “The Siren’s Song of Fallen Angels and (very) low P/E stocks”

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In the first 6 months of 2022, the Value & Opportunity portfolio lost  -14,4% (including dividends, no taxes) against a loss of -20,2% for the Benchmark (Eurostoxx50 (25%), EuroStoxx small 200 (25%), DAX (30%), MDAX (20%), all TR indices).

Links to previous Performance reviews can be found on the Performance Page of the blog. Some other funds that I follow have performed as follows in the first 6M 2022:

Partners Fund TGV: -33,5%
Profitlich/Schmidlin: -18,1 %
Squad European Convictions -13,1%
Ennismore European Smaller Cos -2,5% (in EUR)
Frankfurter Aktienfonds für Stiftungen -14,1%
Greiff Special Situation -2,5%
Squad Aguja Special Situation -12,7%
Paladin One -17,0%

Performance review:

Overall, the portfolio was more or less in the middle of my peer group. Looking at the monthly returns, it is clear that June was one of the worst months in the 11 1/2 years of the blog in absolute terms:

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All Danish Shares part 9 – Nr. 81-90

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And on we go, another 10 randomly selected Danish stocks. In the current batch, there are some very interesting and unique business models, however only one made it onto the “watch list”. We are now at ~50% coverage of the universe. Once again a quick reminder: Thank you for any requests to look at a specific company, but the random generator determines in what order I look at companies.

81. Scandinavian Medical Solution A/S

Scandinavian Medical is a 17 mn EUR market cap company that seems to be active in trading second-hand medical equipment that was IPOed in late 2021. Not my area of expertise. “pass”.

82. ChemoMetec A/S

ChemoMetec is a 1,9 bn EUR market cap MedTech company that offers Equipment to count cells which, among others is used for  Advanced Cell Analysis, Counting of Mammalian Cells, Yeast Cells, and Sperm Cells.

The stock has performed very well over the last 5 years:

Chmeometec

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Naked Wines ($WINE) update – The Good, The Bad and the Ugly

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Disclaimer: this s not investment advice. PLEASE DO YOUR OWN RESEARCH !!!

Naked Wines released their full earnings last week and the result was a full disaster with the share price down a whopping -43% despite the fact that the headline numbers were already known. It is a good reminder that even being down more than -60% from its top, a stock can still fall another -40% on one day. Although the stock was only a 2,9% position prior to that drop, it still warrants a deeper dive than usual.

The signs were already obvious

Before moving to the actual numbers and the report, I have to criticize myself for not acting on the stock despite the following issues that I had identified already some time ago:

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Some links

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Another interesting background article on Tiger Global 

Elad Gil on the current state and future of Venture Capital (Twitter Thread)

A good reminder that Wealth doesn’t flow anywhere when stock prices go down

Ray Dalio thinks that Stagflation is coming

Excellent write-up on Fuchs Petrolub from Augustusville

And a great Sony Deep Dive from Asia Century stocks

Why the “long tail” promise  in streaming never happened

 

Some links

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Brad Feld thinks startups should prefer “clean” down rounds to crazy structures

A deep dive into the factors why Nuclear Power is so expensive

Despite some popular home runs, Biotech Stocks as a group have underperformed over the long term

The Value Shares blog likes Vopak (German)

Searching4Value likes Croatian Pharma stock Krka

Bill Gates has released his “5 books for the summer” reading list

TikTok seems to have become essential for Music labels

 

 

Inflation vs. Pricing Power for Chemical companies & Nabaltec follow up (ADD)

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Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!!

Inflation & Pricing power

One of the obvious strategies for for investors in an inflationary environment is to pick companies that have “Pricing power”. Pricing power means that companies should be able to raise prices at least as quickly as costs rise.

Now one could try to do some deep thinking if and how different business models react to inflation. As I am a more “hands on” guy, my solution is to look at actual numbers and then try to draw my conclusion.

For any company that is producing material goods, the best indicator for pricing power in my opinion is Gross profit, i.e. the difference between selling price of a product minus the direct costs to produce them.

A company with pricing power should keep the gross margin or ideally even improve gross margins in an inflationary environment.

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All Danish Share part 8 – Nr. 71-80

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And another 10 randomly selected Danish shares. This time, only one stock made it onto the watch list. With 80 out of 179´stocks, we have covered almost half of the Danish universe by now..

 

71. Scandinavian Brake Systems (SBS) A/S

SBS is 4 mn EUR market company that seems to be a failed automobile supplier. “Pass”.

72. Relesys A/S

Relesys is a 34 mn EUR market cap SAAS software company that was IPOed in early 2021 and has lost -50% since then. The company has around 5 mn EUR in revenues in 2021 and is growing at around 30-40% p.a.

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