Some links

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Very nice post: Investment lessons from 3 weeks of fatherhood

Should value investors look at money losing companies ?

Is Coporate Debt the weak link in a potential market downturn ?

Will the WeWork IPO maybe mark the peak of the current Unicorn mania ?  Despite the valuation, there are many red flags in the S-1 prospectus.

Harry Markopolos, main Madoff critic, issued a 170 page attack on GE. John Hempton has a different view (part 1, part 2)

Interested in knowing more about Venture Capital ? Then the free Venture Deals online course  the best opportunity

Must Read: Deep thoughts on the current Venture “Funding bubble” for loss making companies

Some links

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Litigation Finance company Burford Capital was “attacked” by Muddy Waters but tries to strike back

Italian based, AIm listed “bio plastic unicorn” Bio-on also was attacked by a short seller

Madison Square Garden Spin-off analysis

The Valuesque blog explains how companies can pump up Goodwill even after an acquisition

A detailed look into UK “quality stock” AG Barr

John Kingham (UK Value Investor) with an analysis of UK bus operator Stagecoach

Paul Singer /Elliott wants to split up Scout24. Their more detailed publication can be found here.

Quick update: Osram Special situation

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

Ouch, another day, another problem. Yesterday, one of my Special situation stocks Osram lost around -7%.

What happened: The largest shareholder  Allianz Global Investors (AGI) announced that they do not support the offer as they consider the price of 35 EUR per share as too low.

A few observations from my side:

  1. AGI had purchased more Osram shares in the past few months. Beginning in July they announced that they crossed the 10% threshold
  2. However in their press release they talk about >9% stake so they have sold shares in the past 4 weeks, clearly at a price of lower than 35 EUR. So while AGI is critisizing Osram managment for not believing in their company, AGI (or parts of them) also seems to have some problems in believing their own investment thesis.
  3. The press release reads like a marketing pitch for their “active management approach” with high fees which clearly is under threat from passive startegies
  4. They state that “at the moment they would not accept the offer” which in my opinion is not a super hard statement and we are relatively early in the acceptance period
  5. Although AGI states that that they are investors since the initial listing (which is natural if you had owned Siemens shares which they surely had), in various articles it has been mentioned that AGI’s average purchase price is much higher than the 35 EUR offered as they seemd to have increased their position significantly when the stock still went up.
  6. As the basis for their current opinion they use an “independent fairness opinion”. Why do they need that ?

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Quick updates: Vostok New Ventures, Majestic Wine and Cars.com

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Another headline for this post could have been “The good, the (not so) bad and the (very) ugly…

Let’s start with “the ugly” right away: Cars.com

Yesterday was a pretty bad day anyway but Cars.com decided that it is a good day to tell investors that a potential sale of the company will not materialize. The whole bidding process has been described in details by the company. In summary, 29 parties looked at the company but no “actionable” bid could be obtained. This alone might not have triggered the -36% share price reaction taht happened yesterday,

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Some links

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Great post from A16Z on “Hidden network” business models

Interesting analysis on the application and limits of Benford’s law in order to detect accounting fraud (example Steinhoff)

Q2 report from TGV Intrinsic, a new addition to the Langfrist family

Nice writup on the Juventus Turin turn-around by Greenwood

“Let my people go surfing” (Patagonia story) sounds like a must read book

“Activist” hedge funds are under increasing pressure themselves these days

The GlobalStockPicking blog has discovered an interesting Polish SaaS company called LiveChat

 

Idea generation: Q2 2019 Investment letters

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Background:

A few days ago, I posted the link to a Reddit collection of Q2 investment letters. Many of these letters plus some others in my opinion are good inspirations to lok for new ideas.  With less time available for me to create “original” ideas, I mentioned some time ago that I will use these letters much more to find interesting cases than in the past.

Inittially, I wanted to create my private “to do”list of companies that I want to look at. The criteria for selcting ideas is quite subjective.

However in order to leverage my readership, I  decided to create a post with my selected “stolen ideas” and hope for some constructive feedback from my readers. Here is the list what I found interesting and why.

Selected ideas from Q2 letters:

Choice Equities: Par Technology
Interesting case of a “sum-of parts” company with a SaaS business hidden behind other stuff

Tweedy: BASF
One of the better managed German companies. Cyclical but potentially good opportunityin a real economic downturn. Business is hard to disrupt

Alta Fox: Keyword Studios
Interesting business model (outsourcing of Video Game prodcution) and European based company. Expensive but potentially very interesting.

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Special situation Quickie: Acacia/Cisco & Grandvision/ EssilorLuxottica

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First of all thanks to the readers that mentioned these two potential M&A arbitrage situations.

Acacia/Cisco

Acacia, a US based received a take over offer from Tech Giant Cisco valuing the company at 2.6bn or 70 USD per share. The offer price included a 46% premium on the undisturbed price. The stock traded at the time of writing at 64,75 USD, indicating a 5,25 USD or a 8,1% premium.

The transaction is expected to close at the end of Cisco’s Q2 FY 2020 which if I have read it correctly translates into January 2020.

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