Portfolio update and Rottneros out

It’s always something with this one..

So once again Rottneros delivered a solid top-line, but magically did not transfer fully to the bottom line. This time the company just refers to “non-planned costs”. Next quarter (as has already been guided) will also be bad due to a problem at the Vallvik plant, and the quarter after that is the seasonally weak quarter, due to the planned stop of production. I start to feel like this is a broken record with the same tune, there is always some reason why this quarter is not being as profitable as it should be. With the risk of me becoming a type of investor I don’t want to be (thinking too short term) I anyway decided to sell today. I decided that if EPS for the quarter came in under 0.3 SEK for some reason, I would sell, and I stand by that, although it might be somewhat short sighted. I can’t fully trust this company since they don’t seem to deliver like they did 3-4 years ago, so out it goes.

One should mention that pulp prices are extremely favorable at the moment and SEK still very weak vs USD and EUR. They have a golden opportunity in this market and I think with the top-line production increase, the market traded this stock back to flat for the day. Also there is a dividend that is received as of tomorrow. And that makes me happy, since I then managed to get out with a decent profit (+8%) for this trade, although in my view it was a shitty bottom-line given the nice pulp pricing currently.


Quick Portfolio update

Unfortunately my plan of lower portfolio turnover is not working out that well, and my cash levels (after Rottneros sell) are now very high again (~18%). Still struggling to find good investment cases, might use the cash to add in some of my names that have been trading very weak lately, another update will follow.

Looking at my portfolio, after suffering massively from the weak performance of my previously largest holding Coslight Technology (I will revisit this stock as well), my portfolio has now kind of recovered on the rising market tide. As you again can see, my portfolio still has the higher correlation with Hang Seng and follow upwards as soon as the index does well.

A couple of stocks have lately particularly helped performance

  1. Skandiabanken – solid results lately with good lending growth. The market is also starting to reprice Norwegian banks in general, but slightly also increasing Skandiabankens P/E multiple more in line with the large banks, in my view with a higher growth rate, it should rather be on a P/E premium. Let’s see how that goes.
  2. Ramirent – A stock that I believe is this perfect late cycle holding, which with it’s leveraged business model, will start a similar exponantial stock performance as 2006 to 2008. The latest quarterly figures were a strong beat and the stock traded up significantly.
  3. YY – It would have been better investing in the competitor MOMO, but this has also been a good investment. Results that came out were pretty decent, market having a bit of a hard time valuing the company, its now a story of two parts. A solid user base of highly profitable user listening to girls singing and playing, only one problem, it has stopped growing. And another leg of extremely strong growth in the online gaming broadcasting, again only one problem, it’s currently not profitable (slight loss). My thesis still stands and that is why I like the stock, the singing girls is a value play and generates wonderful cash-flow to the company, in my mind you get the tremendous online gaming business for free and currently almost only paying for the cash-flows generated by the first part. Although I’m sure Mr Market has valued this company on the margin as a much more complex mix than that

A couple of stocks have lately been real dogs

  1. Coslight Technology – I also expressed this in my hangover post below, but the stock continues to underwhelm. I think the market is scared of the potential price pressure on batteries, lead by Tesla/Panasonic and their Nevada factory ramping up, in combination with the short term oversupply in the battery market, which I mentioned before. The facts are still that this company at least in the past has held a cash-cow position in a smaller pc and mobile game company (which as a separate company should trade at high multiples). On top of this we are looking at a huge ramp up in demand of batteries over the coming 5 years mainly from EVs, but also Power companies building reserve power solutions, electric motorbikes and our continued usage of phones/laptops/tables/drones etc. Maybe maybe the pricing pressure will kill this company, but it might as well be the car companies that get squeezed in the fight for survival and the battery companies will be in a solid position to deliver the most important component to the car, in the same way as the engine used to be that component.
  2. Xtep – Here I can’t see any major news, the stock is very tired, trading down without any news. Citic securites initiated coverage with a buy rating a few days ago but the market just responded by trading it down a few percent more. Either this is a fraud, or a bargain, in China you never know. What I can say is that in other cases, like Zhengtong Auto I have also been shrugging my head for a long time and then the stock suddenly do pop, unfortunately as you know in that case I sold before the pop. But momentum in this stock looks awful at the moment.


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