Tag Archives: Magic Sixes

A quick look at the Stockopedia Screening tool + Quantitative value investing & Data quality

It seems that I begin to harvest my successes as an investment blogger. After getting a free book, I now received already for the second time (temporary) free access to a stock screening tool. I wonder what comes next……maybe someone offering me 100 mn EUR to manage ?? 😉

A year and a half ago, I checked Tim Du Toit’s Eurosharelab screener which looked like a fair deal and a good tool

Now I checked the Stockopedia tool. I did only check the screening tool, they offer a lot of other stuff but I am not really interested in that.

From the beginning, I found their tool very easy to use. I don’t know the current status of Eurosharelab, but for me the biggest plus of the stockopedia screener is the fact that one can set up custom screens based on a large number of different variables. I was able to create my custom screens without reading any manuals etc. The navigation is very good, I liked especially the “Bloomberg” like selecting of fields for the queries.

The results are presented very well, it is very easy and convenient to drill down into the stocks or to check the fundamental data. This is even better than in Bloomberg and a big advantage of the fully web based technology. The speed of the queries was OK, could be a little bit faster.

I also liked the existing “Guru” screens, especially the “Screen of Screens” which kind of aggregates all existing screens. (Note: EGIS is the second best stock there after Dart. It looks like that my Boss model is not totally useless…..)-

The list of “in and outs” is interesting, too, where one can see which stocks newly qualified for the top positions and which stocks dropped out. The single stock monitor also looks very comprehensive, with a good data history. Up until now they offer only Europe but including many exotic countries like Bulgaria etc.

All in all it is a very good tool which is a lot of fun to work with. They told me that they would charge normally 499 GBP p.a. but if someone is interested, they would offer a “special rate” of 399 GBP. If I recollect correctly, Eurosharelab had also 3 month access which could be interesting for people who don’t need such a tool permanently.

For small investors, they should consider if the really need this. If you for example have a 50 K GBP portfolio, the 500 GBP full rate would eat up already a full 100 bps of annual returns or depending on what you expect at least 1/10th of your total return if you make on average 10% p.a.

Quantitative investing & Data issues. Example “Magic Sixes”

As I have written many times, I like using screeners as a basis, but I do not think that quantitative value investing, especially in the small cap sector, makes a lot of sense. The major issue is data quality.

In order to test the data quality of the Stockopedia screener, I did the following:

I set up a custom “Magic Sixes” screen (P/E lower than 6, P/B lower than 0.6, Div Yield higher than 6%, Europe) both, in Stockopedia and Bloomberg and compared the results. The results were quite surprising for me. Stockopedia returned 28 stocks, Bloomberg 19 stocks, but only 2 stocks showed up in both lists.

Here you find the results:

Stockopedia Magic Sixes   Bloomberg Magic Sixes  
 
    C21 21ST CENTURY TEC
AIRC Air China    
AURG Aurskog Sparebank    
    BTT BABCOCK-BSH AG
BQRE Banque de la Reunion SA    
BTG4 Bertelsmann SE Co KGaA    
ELMU Budapesti Elektromos Muvek Nyr
 ELMU ELMU NYRT
CAT31 Caisse Regionale de Credit Agr
    
CCN Caisse Regionale de Credit Agr
    
6C4 Chimimport AD Sofia    
CICG Cinkarna Celje dd    
CSFG CSF    
CTC Cyprus Trading    
DOM Domstein ASA    
    DIOD DIOD
    MLDYN DYNAFOND SA
    MLEDS EDITIONS SIGNE
ERME Ermes Department Stores    
EMASZ Eszak Magyarorszagi Aramszolga
    
    MLEVE EVERSET
RAM F Ramada Investimentos SGPS SA    
    BSG GERMANIA-EPE AG
HJH H.J. Heinz Co    
HF HF SA    
HGM Highland Gold Mining HGM HIGHLAND GOLD MI
HSPG Holand og Setskog Sparebank    
    INOX INOX
MELG Melhus Sparebank  
    KYTH K KYTHREOTIS HOL
    KDHR KMECKA DRUZBA
    OAB OAB OSNABRUECKER
    PVA PESCANOVA
PVL Plastiques du Val de Loire SA  
    1PL POWERLAND AG
5BU Real Estate Fund Bulgaria ADSI
    
    ALRIC RICHEL SERRES DE
SALB Salling Bank A/S    
    SHFT SHAFT SINKERS HO
SPOG Sparebanken Ost    
PLUG Sparebanken Pluss    
SVEG Sparebanken Vest    
SHL Stademos Hotels    
    SZI1 STOLBERGER TEL
TOTA Totalbanken A/S    
    59X UNIPHARM AD-SOFI

Only Highland Gold Mining and Budapesti Elektromos showed up in both tools. When I digged into the detailed data, I was even more surprised. In total, I had 43 “diverging” entries. From those, 7 stocks were stocks where there were large bid/ask spreads and depending on the price the stock would either have 0.59 as P/B or 0.61 for instance, so this is a pure technical issue.

On the other hand, 20 diverging stocks were clearly mistakes in the data of Stockopedia (either wrong, outdated or missing data) and still 16 stocks were clear data mistakes by Bloomberg.

I emailed a little bit back and forth and it seems that they get their data from Reuters and are working hard on improving data quality. But nevertheless it is for me highly revealing that based on two different data sources, you get 2 almost completely different set of stocks with a few relatively basic filters.

Clearly, the Magic Sixes filter at the moment only throws out micro cap deep value stocks, where data is always an issue, but still, I wouldn’t have expected such a result. Also rankings might help to a certain extent. Nevertheless that mae me highly suspicious of any “automated” Value trading strategies no matter how good they look in backtests.

Summary:

I really liked the Stockopedia tool. If I would not have access to Bloomberg, I would seriously consider their tool . Although I would always use it as a screener only, not as a basis for a trading strategy,

Maybe it is not representative, but my Magic Sixes example clearly shows that data sources alone can have a huge impact how portfolios look like even if you use the exactly same criteria.

If one really digs deep into data like I had to for my boss model, one would detect even more disturbing data issues, but that is a topic for another post.

DISCLOSURE: I got free access to the tool but I do NOT get any referal fees etc.

Magic Sixes – “new entries” quick check (BAM, ENEL, Mr. Bricolage, Europac)

After the recent stock market declines I had a look into the “Magic Sixes” screen (P/E < 6, P/B 6%), if some interesting companies show up as potential candidates for “contrarian” Plays.

Currently, using Bloomberg, the following “new” companies seem to be interesting:

BAM Groep

P/E 5.9, P/B 0.49, Div. Yield 6,42%

Dutch constrcution group. However highly leveraged, lots of goodwill and negative free cash flow, chart looks like a falling knife on the way to zero —> NOPE

ENEL SpA

P/E 5.4, P/P 0.57, Div. Yield 10.7 %

Large Italian utility.. Political risk, high debt load and negative tangible book. Howver significant free cash flow genration –> WATCHLIST

Mr. Bricolage

P/E 5,3, P/B 0.4, Div. Yield 6.34%

French DIY chain. Relatively low tangible book, relatively high debt but improving. Stable results over past year —> WATCHLIST

Europac

P/E 4.6, P/B 0.6, Div. Yield 7.7%

Spanish paper and cardboard producer. Good tangible book, however relatively high debt load. Volatile Free Cashflow generation, although very profitable in 2011 —> WATCHLIST

Summary: It is interesting to see that some “normal” companies enter into the “Magic Sixes territory”. So the choice for contrarian invetsments is getting better.

Magic Sixes: Follow up Iren SpA

In November, I had a quick look at Iren SpA, an Italian company which would have qualified as a “Magic Sixes” company.

My summary was the following:

For me, the combination of a large debt pile, negative free cashflows and a significant portion of non-tangible book value makes Iren SpA more or less uninvestible. Based on the pure financials without any further analysis there doens’t seem to exist any Margin of Safety despite qualifying as “Magic Sixes” stock. For the time being, Iren will not be analyzed further as there seem to be more attractive “targets”.

Yesterday, Iren SpA announced that due to “one off effects”, they will actually show a loss for 2011 and the dividend is cut down to 1 cent per share.

The stock now is down almost 50% from when I wrote the post:

Interestingly, by just looking at “momentum” one would have come to the same conclusion. Both in absolute terms and relative terms, the stock started underperforming from October.

Or maybe “momentum” for low P/B Stocks (and magic sixes) maybe is a shortcut to detect weak balance sheets ? I don’t know but something to keep in mind.

Nevertheless, I will keep Iren SpA on my radar screen in order to learn more about the Italian market. In theory Iren would be a prime take over target.

Magic Sixes Portuguese companies : Conduril (ISIN PTCDU0AE0003) – Too good to be true ???

Although my last “Magic Sixes” (P/B < 0,6, P/E 6%) Investment, Autostrada was not a runaway success, I still use the screener from time to time to see what companies are “really” cheap.

It might not be a big surprise that some Portuguese companies are among those “cheapies” now. As of today, the following Portuguese Companies are “magic Sixes”:

P/B P/E Div Yield
Ramada Invest 0.380 2.68 10.45%
Orey Antunes 0.440 5.11 15.48%
Grupo Soares 0.400 3.30 7.48%

Ramada is a steel company, Orey a shipping company and Soares a construction company.

As discussed before I also run a “Magic Sixes light” screener with slightly relaxed rules (P/B < 0.7, P/E 5%).

Here we get an additional 5 companies:

P/B P/E Div Yield
Corticeria Amorim 0.67 6.78 7.09%
Sonae 0.66 0.66 7.39%
Sonaecom 0.67 0.43 5.71%
Conduril 0.66 1.50 6.82%
Espirito Santo 0.47 3.44 5.28%

One has to keep in mind that only around 65 Portuguese companies are actually listed, so 8 “dirt cheap” out of a total 65 is quite significant.

A relatively well known problem of most Portuguese companies is their relatively high debt load. With Portuguese banks in trouble (not to speak of the Government), it is intersting to look at debt levels. I usually look at nebt debt / market cap in combination with EV/EBITDA:

Net debt per share Share price Net debt/Marcet cap EV/EBITDA
Ramada Invest 3.03 0.67 452% 6.52
Orey Antunes 0.55 1.15 48% n.a.
Grupo Soares 4.87 0.29 1679%  
Corticeria Amorim 1.01 1.41 72% 4.35
Sonae 0.62 0.45 138% 4.33
Sonaecom 0.76 1.23 62% 3.38
Conduril -33.8 22 -154% 0.55
Espirito Santo 313 5.3 5906% n.a.

Ratios above 100% are very critical in my opinion, because then a capital increase to “save” the company needs to be above current market cap which is highly unlikely.

Based on this list, Conduril looks like a ” bad data” input.

A P/E of 1.5, EV/EBITDA of 0.55 and Net cash above current market cap must surely be a mistake or ?

However a quick look into Conduril’s 2010 annual report shows an amazingly profitable company.

In 2009 and 2010, the company earned net margins 13-14% and ROEs of 30-40%. .

So how comes ? The answer seems to be relatively easy: Conduril is very active in the “hot” African markets Angola, Mozambique and Botswana. I only have 2009 figurtes, but of the 250 mn EUR sales in 2009, 167 mn were in Angola and only 45 mn or less than 20% in Portugal.

Of course doing business in those countries will be quite risky, but nevertheless it is a very intersting case.

Trading seems to be relatively strange. As far as I can see, 1000 shares are traded most of the days at 22 EUR per share, the chart doesn’t really look like a stock chart:

However it is definitely a stock I want to research deeper.

It might also make sense to look at the other less indebted comapanies at some point in time. If one wants to bet on a Portuguese Non-default, those stocks might be more interesting than Portuguese Govies.

Magic Sixes quick check: Creston plc

Regular reader know that I run a “Magix Sixes” screening for investment idea generation.

This idea is from Peter Cundill’s book and is a very simple screen: Stocks which trade below 0.6 book, below 6 PE and have a dividend yield of > 6%.

As one could imagine, the result of this search are not really “wide moat” beauties…

However, one new entry, Creston PLC doesn’t look too bad.
Read more

Esso S.A.F. – less attractive at a second glance

After having quickly analysed “Magix Six” stock Esso S.A.F a few days ago with some encouraging results, I dived a little bit into the company.

Despite beeing a subsidiary of ExxonMobil, the homepage is “french only”.

Luckily, I managed to understand at least the two investor presentations they have on their website.

Both, the 2011 and the 2010 show a quite depressing picture.

Read more

Autostrada / SIAS Teil 4: Extra Assets und Aufnahme ins Depot

Im besprochenen Buch “There is always something to do” wird erwĂ€hnt, dass Peter Cundill immer auf der Suche nach “Extra Assets” war, also Vermögenswerte in einer Bilanz die nicht offensichtlich sind und evtl. nicht vom Markt bewertet werden.

Bei der Bewertung in Teil 3 bin ich ja einfach vom konsolidierten Gewinn nach Minderheiten ausgegangen und mit Autobahn Assets in Höhe von 3,1 Mrd. gerechnet sowie einer Nettoverschuldung von 1,7 Mrd.

Dabei habe ich aber einiges in der Bilanz unterschlagen, vollstÀndig sieht die SIAS Bilanz wie folgt aus:

Aktiv:

3,1 Mrd. “Konzessions Assets”
0,6 Mrd. andere Finanzanlagen
0,5 Mrd. Umlaufvermögen
0,5 Mrd. Cash
macht 4,7 Mrd. gesamt

Passiv:

1,4 Mrd. EK
0,2 Mrd. Minderheiten
2,2 Mrd. Finanzverbindlichkeiten
1,0 Mrd. andere Verbindlichkeiten

Bei der Bewertung in Teil 3 war die implizite Annahme, dass sowohl die restlichen Aktiva und Passiva jeweils Ihren “Buchwert” wert sind und sich dann aufheben.

Bei Italienischen Unternehmen sind ja insbesondere die Finanzanlagen immer einen Blick wert. Praktischerweise werden die ebenfalls Italien typisch bis in die letzte Einzelheit “aufgedröselt”.

Bevor wir uns im Detail anschauen mĂŒssen ob da irgendwo eine Perle versteckt ist, gibt uns SIAS in der Juni InvestorenprĂ€sentation einen freundlichen Hinweis und zwar auf Seite 29.

Man ist mit 45% an einem Chilenischen Unternehmen beteiligt (zusammen mit dem Konkurrenten Atlantia und Mediobanka), dass dort ĂŒber 100 KM Autobahn betreibt bzw. baut.

In der Bilanz wird die Beteiligung at Equity bewertet mit ca. 180 Mio EUR (grĂ¶ĂŸte Position der Finanzanlagen), Gewinn wurde lt. GB im Jahr 2010 nicht gezeigt. D.h. auch bei der in Teil 3 ermittelten Bewertung ist diese Beteiligung mit 180 Mio EUR implizit angesetzt.

Das Interessante ist, dass anscheinend ein IPO dieser Beteiligung in Vorbereitung ist. Laut Juni PrÀsentation schÀtzt SIAS den Marktwert Ihres Anteils auf > 640 Mio EUR.

Ob das zum jetzigen Zeitpunkt noch realistisch ist kann ich nicht beurteilen, es zeigt aber die GrĂ¶ĂŸenordnung der “stillen Reserven” an. Nimmt man mal die SchĂ€tzung aus der PrĂ€sentation wĂ€ren das 460 Mio stille Resereven oder bei 227 Mio Aktien 2 EUR pro Aktie (bzw. ein Drittel des aktuellen Kurses), dass ich auf den Wert der SIAS und der Autostrada noch oben drauf packen muss.

Kommt der IPO noch wie angekĂŒndigt per Ende des Jahres, dann könnte das vielleicht sogar fĂŒr einen kleinen KurshĂŒpfer sorgen. Wenn nicht, dann macht das auch wenig.

Fazit: Mit der Beteiligung an dem Chilenischen Unternehmen hat man hier die von Peter Cundill so geschĂ€tzten “Extra Assets”. Der bevorstehende IPO dieser Beteiligung könnte sogar so eine Art kleiner kurzfristiger Katalysator sein.

Alles in allem rechtfertigt das eine volle Position (5%) im Portfolio fĂŒr Autostrada Torino Milano.

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