value and opportunity

Electrica is the only remaining “Emerging Market” stock in my portfolio. I bought the stock in December 2014 and now after 3 year and some months it maybe time to assess how the situation looks against my initial expectations.

Including dividends, the stock is up ~18% in total since then, in my portfolio however the stock is flat because I bought more of Electrica at higher prices. Compared to a +53% performance of the portfolio in the same period, the stock is clearly a underperformer and the question is clearly if I should keep the stock.

My initial thesis relied on the following assumptions:

• the stock was cheap for a grid company with guaranteed returns on invested capital
• Romania was supposed to grow significantly and Electrica as well
• As a former Government owned company, I expected significant cost savings potential
• I had expected After Tax / After minority Earnings of around 442 mn RON in 2017

What happened ?

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During my Silver Chef “Post mortem” some days ago, I decided to look at the 10 biggest losses I made since I started the blog in order to check if I have actually learned from mistakes.

These were the (by absolute performance) 10 worst investments in the 7+ years of Value and Opportunity:

10. Medtronic -18,93% (2011)

Medtronic was one of the initial portfolio investments. I kicked them out in August 2011 as I was not very comfortable owning US large caps and I never deeply looked into the company myself. Medtronic since then outperformed the S&P 5000 IN USD terms (~17,1% p.a. vs. 15.3%) or ~ 233% in EUR terms. This is slightly better than my portfolio which made around 215% in the same period.

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A few days ago, Silver Chef came out with their half-year update. There is the glossy half-year 2018 Investor Presentation and the 2018 half-year report.

Looking at the stock price, the market clearly didn’t like the news very much:

So what happened ?

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