Shoutout an alle Value Investoren, die die es werden möchten und jeden anderen Interessierten im Raum Stuttgart! Um sich und die örtliche Valueszene ein wenig kennen zu lernen ist am Freitag, den 4. November 2016, ein Treffen in Stuttgart geplant. Wir wollen mit möglichst vielen Gleichgesinnten zusammen essen, trinken und uns über Value Investmentkonzepte bzw. Ideen oder auch alles andere unterhalten. Los geht es um 19:00 Uhr im Lumen. Unter folgendem Link findet Ihr die Adresse und weitere Details:
Wer dabei sein möchte bitte kurz im obigen Link zusagen. Wir freuen uns!
WEBCO Industries is a classic Graham net net, or in Buffett´s words a cigar butt with one last puff remaining. Buying the equity provides investors with 63% upside to NNCAV and 120% upside to liquidation value. The business of WEBCO is unattractive yet good enough to earn meaningful profits over the cycle. WEBCO manufactures tubes for various end users in different industries such as upstream/downstream oil, agricultural and auto/trucking among others. In simple words raw materials are purchased and then processed into tubing solutions. Continue reading
I have been interested in Baidu for quite a while and today decided to open a position in the company by buying 6 shares at a price of USD 163. I will increase the position when prices turn more favorable.
On SeekingAlpha I have outlined why shares are a buy at current levels in detail. You´ll find the pitch including my valuation model here:
For all the folks in a rush, here´s a fast track introduction as to why Baidu may be suitable for a value investor´s portfolio despite being an internet company and Chinese:
- Sum of the parts valuation results in value of USD 255 per ADR
- or 60% upside until end of FY2017
- Baidu search is significantly undervalued trading at 11x FY2017 after tax profits while growing at a > 20% clip
- Comparable businesses command multiples in excess of 20x profits
- High search margins are buried under large investments into O2O and iQyi
- Sale of online-to-offline businesses and Chinese Netflix pendant iQyi will reveal true earnings potential or provide upside optionality if turning profitable.
Here´s a brief update on what Chinese think of the company and its services. Headline here is that Baidu is unloved but there is no alternative for it, which will ensure growing profits for years to come.
I am currently long Baidu (BIDU)
Yesterday I closed out my position in Philip Morris Inc (PM) with a net gain of 31% including dividends. I still believe the tobacco industry is an excellent place to be due to an addictive product resulting in a very inelastic demand curve helping big tobacco to grow revenues despite shrinking cigarette volumes. Further little CAPEX requirements pave way for robust cash flows in the industry.
Nevertheless, at some price even the best business becomes an attractive sell. As of yesterday PM traded at around 25x earnings and 20x FCF, which is considerably higher than multiples demanded by the company in the past. Average P/E ratio over the past 5 years Continue reading
I felt I had to shed a little more light on a conviction buy of mine, RCI Hospitality (RICK). While I have briefly outlined the thesis for investing in RICK, I feel to better comprehend the rational behind taking a position in the company requires a little more detail.
I have decided against publishing the article on my own page in favor of SeekingAlpha. Due to the large audience on this platform authors are usually confronted with critical feedback on their argumentation, which I consider essential for the investment process. This is not a click and bait action of any kind. Compensation on this article will be minor since even on Seeking Alpha this stock is underfollowed and the write-up will generate only few views upon which compensation is based on.
Going forward I hope I can evoke similar feedback for my ideas on Investing0711.com and am able refrain from publishing my ideas on 3rd party websites.
Finally, here´s the link to the article: http://seekingalpha.com/article/3985498-rci-hospitality-holdings-sin-stock-50-percent-upside-assuming-zero-growth
Here´s a brief update on recent released Q3 sales figures of RICK: http://seekingalpha.com/article/3987995-rci-hospitality-holdings-reports-solid-sales-disappoints-capital-allocation.
I have used the turmoil over Brexit to purchase 550 shares of Clydesdale Yorkshire Banking Group (CYBG). An undervalued mid-size British bank active in mortgage, credit card and small business lending.
The out-vote of the Brits caught markets off guard, which were clearly pricing in a remaining of the UK in the EU. In the following equity markets crashed because of a flight to safety, in particular into U.S. Dollar, Japanese Yen and Swiss Franc denominated assets. Naturally high rated gov. bonds were in demand sending yields down to record lows. Consequently risk assets all around the world, especially equities witnessed drops not seen since Lehmann Brothers in 2008. Among equities banking stocks have been battered down the hardest. Continue reading
I felt the strategy section was overdue for an update to give it a little more structure and break it down to what really matters to value invest successfully. Hence this blogpost will be pinned here to give an overview on how I try to invest my funds.
For me as a value investor the most important imperative is to reduce uncertainty when valuing companies. However, widely used valuation techniques (while theoretically justified) such as the discounted-cash-flow method, usually involve a lot of guessing and forecasting into very distant points of time in the future. Continue reading
How is Risk Traditionally Measured?
Are we equipped with a flawed understanding of risk? In Business Schools all over the world students are drilled to think of risk as volatility measured by standard deviation σ, when investing in financial securities. As inputs to calculate the standard deviation (Stdev) we are taught to rely on observable asset prices. Such data is easy to gather e.g. historical equity prices are downloadable at yahoo-finance over time frames sometimes as long as 50 years. We then use this data to calculate the Stdev of e.g. our portfolios or single equity positions. A low standard deviation indicates that returns of the stock are usually very close to their mean. From this we infer that at a given day in the future there is only little chance for highly negative or highly positive returns. Continue reading
RICK (long): 154 shares, 8.42€/Share
Much has happened to RCI Hospitality (RICK) after having pitched why I bought into the firm. Since last week the price dropped below 8 USD, which translates into a FCF-yield just short of 20%, I decided to up my position by 70 shares. Due to a shortage of cash I sold my CB&I holdings to finance the purchase. This shifting out of CB&I into RICK has two reasons. First, I believe RICK is valued much more attractively and its real-estate portfolio, takes a lot of risk out of the equation. Second the recent developments at CB&I (impairment and selling of their nuclear segment) haven´t exactly bolstered confidence in the current management to create shareholder value. Continue reading
RICK (long): 94 shares, 9.58€/Share
I recently purchased 94 shares of RCI Hospitality (RICK) and briefly want to update you why I did so. After having talked about the Greenwald Valuation for companies in my last article (before my creative time-out) I have been busy finding companies that are undervalued according to exactly these standards. At the end of this search was RCI Hospitality, a value investment gem. The company, as the title of this blogpost might hint, is active in the adult entertainment business and runs several what they call “cabarets” aka. strip clubs across America. Their business model results in the holding of a large real estate portfolio. The firm is a small cap with a market capitalization of about 80 million as of last week. Due to its size it is largely ignored by analysts. The combination of a lack of analyst-attention and what some people would call dubious industry might have created this very attractive opportunity. Currently RICK trades at a P/B of just 0.7 and a P/E of 9.0 and a free-cash-flow yield north of 15%. Continue reading