Great insights how the event ticket market works (hint: You’re screwed)
Armstrong Flooring could be an interesting small cap Spin-off (h/t AR, market folly)
Is there a mattress store bubble ? Plus Jeff Mathews on Mattress Firm (MFRM)
Interesting letter from Gator Capital, a HF focused on financial services companies with an analysis of post-reorg Ambac
Jim Chanos sees big issues in online and auto lending in the US
Shipping Parties in Greece are not as much fun anymore
Reading the press and comments of market pundits lately, one might get the impression that the end is near if the British referendum next week will result in a vote for leaving the EU.
Following my Old Mutual “sum of parts” valuation I saw the following Ira Sohn presentation of Exor Spa, the Agnelli family holding (FiatChysler, CNH etc.) as a potential “Sum of part” value investment.
To summarize the presentation in my own words:
The study sees a potential upside of several times the current share price. They forecast a 150 EUR NAV per share (vs. ~50 EUR now and 30 EUR share prices), driven by a quadrupling in value of the FCA and the CNH stakes.
From time to time I check on previous investments how they performed and if they might be interesting again. I find this a very efficient way to create potential (re)investment ideas as only relatively little effort is needed to get up to speed.
EMAK SpA
EMAK SpA was an Italian “special situation” investment I made in 2011 following an “italian style” capital increase in 2011 and then sold end of 2013 and early 2014 for a decent profit. Looking at the chart we can see that the timing of the sale was not that bad, as after a peak of around 1 EUR in early 2014, the stock is now trading ~30% below that price:
Optically, EMAK looks very cheap now:
P/E 12,8
P/B 0,7
EV/EBITDA 7,0
In the blog I looked in the past at a couple of “sum of parts” situations (Alstom, Viel, CIR SpA but I never invested in one. Why ? Because if nothing happens, a perceived discount can remain for a long time. So for a sum-of-part investment, a “catalyst” has to be on the horizon.
Old Mutual
As many other Emerging Market exposed financial companies, Old Mutual did not create a lot of shareholder value over the last couple of years as the chart clearly shows, although they performed better than the overall index:
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“Who says Elephant’s can dance” is the book from the former CEO of IBM who took over in 1993 when IBM was struggling hard and then turned around the company until he left in 2002.
Interestingly he wrote the book himself without the help of a professional writer, which is very rare for such kind of memoirs, but makes the book very interesting.
Gerstner came to IBM from RJR Nabisco but he did spend most of his previous career ar Amex and was shocked how bureaucratic the company was. The book then describes in detail how he managed to focus the company on the then little known internet and “e-business” segment away from the focus on the traditional mainframe computers.
The most interesting chapters come towards the end of the book where he reflects on company culture and strategy.
A few of my take aways from Louis Gerstner’s insight:
At the end of the book he even gives some advice to stock analysts and proposes 5 questions to ask (and answer) when considering an investment:
Coming from a manager and not an investment guru, I think this 5 points pretty much capture everything.
Overall, I found the book one of the best “Business books” I have ever read and I can only recommend it highly.
Hornbach Baumarkt is one of my few remaining initial position after almost 5 and a half years.
Looking at the stock chart we can see that compared to the German small cap index, Hornbach looks pretty lame:
At the time of writing, within my portfolio Hornbach clearly was a drag on performance with a total performance of 13,7% since 01.01.2011 vs. 109,5% for the portfolio and 73% for the SDAX.
Within my “Watch series” last year (Swatch part 1, Swatch part 2, Hengdeli, Fossil part 1, Fossil part 2, Movado) I left out one company which also is one of the major players in the Watch space: Richemont.
Some might ask: Why didn’t you already buy Swatch ? I argued that 300 CHF would be a good entry point and the stock is now at 292. Well, at the time of writing the Swatch post, I implicitly assumed that 2015 would be the low point. As we can see now, this is most likely not the case. Sentiment at Swatch is clearly more negative than for Richemont but still not rock bottom.
Additionally, I think one should not overestimate the moat of expensive Watch brands. One example is a (German) article 2 weeks ago in Handelsblatt about luxury watch brand Richard Mille. Founded in the early 2000’s they went from zero to almost 600 mn EUR in sales of super luxury watches with a new brand. So the market entry seems to be possible, at least at the very top.
Background/Business
Originally founded in South Africa by Anton Rupert, Richemont has a quite colorful history.The Group among other activities was into Tobacco, Pay TV and jewelery. Then, in the early 2000s, they focused on luxury and increased their exposure to watches.
Installux
Installux released 2015 results a couple of days ago. EPS went down slightly from 28,12 to 26,63. With 31,7 mn EUR or 104 EUR per share, at the current share price of 271 Installux trades at an adjusted P/E of 6,3x.
The decrease in profit seems to be attributable to a reserve for a legal dispute in the Roche Habitat subsidiary. Roche Habitat is still the “problem child” and the only subsidiary making losses. The annual report states however that the restructuring is well on track and that sales at the division increased by 13% in 2015. If that division turns around, this could easily add 1-2 EUR per shar in profits in 2016.
Installux is maybe not a great company but a solid and very resilient company and at the current valuation still a very good “hold” in my opinion. Interestingly enough, Installux trades near its all time high:
G. Perrier
G. Perrier released its annual report 2015 some days ago.
2015 EPS was 2,65 EUR per share vs. 2,50 EUR. Cashflow generation was exceptionally good so that they now have 38,8 mn EUR or ~10 EUR per share in Cash. At a current share price of 35 EUR per share, this means that adjusted for cash the P/E is below 10.
The first quarter looks pretty Ok as well. Overall, this quality (boring) company is still very reasonable priced and will remain a core position of my portfolio.
Thermador
Thermador released 2015 numbers and the 2015 annual report already some weeks ago. Stated EPS were 4,55 EUR vs. 4,47 in 2014. This includes two companies (Mecafer and Nuair France) that Thermador acquired in 2015. Without the acquisitions, EPS would have gone down by a low single digit percentage.
As Thermador is highly geared towardsFrench construction activity, the performance itself is quite good, the business seems to be very resilient.
Adjusting for around 4,50 EUR cash per share, the trailing P/E is now around 15,5 which clearly is not that cheap anymore. The current share price clearly implies EPS growth in the next few years (Bloomberg estimates are ~10% EPS growth for 2016 and 2017). This is something one will need to watch. 2015 earnings were still below the 2007/2008 level despite higher sales. If they actually grow earnings like estimated, the price is pretty OK, if not, the stock would be more or less fully priced in my opinion.
Tom Ward (Chesapeake and Sandrigde) has no good words for the oil E&P business.
Bill Gates recommends 5 books to read this summer.
Interesting chart how bank profits and interest rates are correlated (or not..)
Thanks to a comment I discovered a relatively new but promising blog: Valuetradeblog
Nils has two updates, one on Hargreaves Services, the other on Vitec
There is a new biography out about the founder of Iscar (bought by Berkshire some years ago)
Frank has a good post on our pilgrimage to Mecca ahhh Omaha this year
value and opportunity 