Portfolio changes – Criteo In, Sony out

Adding Criteo 6% weight

For the second time I buy back into a stock I previously held. First time it was NetEase, this time it is Criteo (Criteo – Growth Case). To also revisit the reason I sold it was uncertainty on their revenue model and competitors crying wolf (Criteo – lawsuit scares me). Like all previous holdings of mine, I have kept this on my watch-list. With time I have understood their core model better. Although one has to mention that they keep innovating and coming up with new revenue sources that again are hard to understand.

But to summarize, the investment case is not very different from Catena Media, which is the affiliate for betting i have in my portfolio. Both companies are just trying to in the most clever way route customers to companies homepages and generate sales. The more I think about it this a very natural next step, we do not browse as much as we once did, we go to known pages through apps, but companies still want to reach us with their message. It’s a new and changing field and it might be that there is no room in the future for this players and Google/Apple takes it all. But that’s not my view, I think these players will mature and be a more accepted part of the business for anyone wanting to generate online sales. In the current circumstance for Criteo I feel the market has taken a way to negative view of the possibilities that Apple will limit their business model in the future. Meanwhile since I sold, the company has kept delivering very well and building up its cash-pile. I think the company is still misunderstood and negativity has again taken over and the stock is oversold. I find the stock attractively priced with a nice risk reward.

The biggest negative I can find is how they keep increasing the Equity awards compensation, although the stock price is not moving up. Clearly their metrics for Equity awards is not aligned with share holder returns.

Sell Sony – full holding

After a very decent run its time to part ways with Sony. I bought the stock believing the VR gear could become a big hit. It has done decently well but has not at all been any main reason why Sony has had solid results in general or good results in the games business. A bigger reason for the recent profit upgrade is the image sensor business, which goes into smartphones. An area I did not foresee at all would drive profits, sometimes you are just lucky too.

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A lot of work for nothing..

I noticed over the past months that a lot of my initial holdings, from when I started the blog has been performing extremely well. I always try to evaluate if what I have been doing make sense, or if I should change my investment strategy. So I decided to check, how well has my starting portfolio done in comparison to my real portfolio? In my real portfolio (as you know) holdings have been sold, trimmed and a lot of new holdings have come into the portfolio. Has all the work of throwing out old investment cases and adding new ones added significant amounts of alpha, or has it even been destructive?

My assumption is that I just hold the starting portfolio from March 18th, 2016. Since one of my holdings, SAFT was bought by Total, that holding is just placed in cash. Because of this cash levels will be high and on average at similar levels to my real portfolio.

Starting Portfolio


So how will this starting portfolio hold up against all my “clever” moves where I took profits in some holdings, cut my losses in others and found new good investment cases?


Somewhat crushing results, where I’m exactly neck and neck with my starting portfolio. Looking at risk adjusted returns I’m slightly slightly ahead. My real portfolio had a standard deviation of 12.4% versus the starting portfolios 13.6%.

How the result was achieved for the Starting Portfolio


What happened?

Basically the explanation is that I made the mistake of selling two holdings that did extremely well after I sold. Zhengtong Auto and Highpower International. I didn’t have the staying power and bought into other holdings that did well, but not nearly as well as these two. Other than that, I made the right decisions, exiting many of my other holdings like SAS Preference shares, Criteo, Ctrip and MQ holding, all four under-performing quite a lot.

But how ironic to end up in the same place after 1.5 year of struggling to beat the benchmark. Hopefully I at least learned a thing or three, that’s the main point of all the hard work..


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Dairy Farm logo

Portfolio changes – Dairy Farm & Ramirent

Ramirent out

I continue to rotate my portfolio away from cyclical companies to safer quality havens. Ramirent has been riding the cyclical construction boom in the Nordics. I believe we are seeing the very last legs of that. Especially in Sweden construction could very soon come to a halt with daily articles commenting on the property market. This is something I have analyzed closely myself and I have seen the signs for quite some time. So I’m a bit disappointed that I didn’t manage to exit Ramirent when the stock was trading at least one EUR higher, but here we are. I kept this holding since I started the blog, to avoid the risk of follow this cyclical company all the way down again, it’s time to sell. So as of today’s close I sell my full holding in Ramirent.

Dairy Farm

I actually started to research this investment thanks to a comment I got from on of you readers. The question was if I have looked at Jardine Matheson Group. My answer at the time is that its a very complex conglomerate to research, because it contains so many different types of exposure. One of the core holdings of the Jardine Group is called Dairy Farm and as many of Jardine’s holdings it is separately listed. It’s name might lead you to the wrong conclusions, it’s not a milk company of any kind, but a diversified company of Asian retail stores, mainly focused on food. It might come as a surprise for some people living in Asia that this company is the owner of so many famous retail stores for the Asian region. Dairy Farm operates supermarkets, hypermarkets, convenience stores, health and beauty stores and home furnishings stores under all these well-known brands:


I have been trying the last few weeks to enter this stock at a more attractive level, but failed to find/time any weakness. Therefore I took an initially smaller position of 4% in this company at today’s close, with the possibility to add in-case I see any short-term share weakness. This is not a cheap stock, but a quality company that I intend to hold for the very long term. It has good exposure to the growing middle-class in Asia. A full analysis will follow at a later date.

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Portfolio Review Q3

The third quarter of the year has passed and the bull market is still roaring pretty strong. My guess a few years ago would have been that we should have seen a larger setback by now. On this particular point I feel pretty humbled by being wrong for so long. Performance wise I do not feel as humble. I have done quite a number of things wrong during this year, mainly selling stocks too early. But in general I did more things right than wrong and that’s what counts. Let’s go through the performance and some high- and lowlights.



Year to date the Global Stock Picking portfolio is up +24.5%, that compares favorably to MSCI World (Total Return) which is up +17.4%, but lagging Hang Seng (Total Return) which is up an incredible +29.3%. Looking at risk adjusted returns, I’m not faring that well though. Although I have run a large cash position (which lowers volatility) the volatility YTD is at 10.5%, compared to MSCI World at 5.5% and Hang Seng at 11%. So risk adjusted I come out with the worst Sharpe ratio of 2.33 vs 2.66 for Hang Seng and 3.17 for MSCI World. I guess that also says something about the state of things in the markets when a Global Index portfolio is returning a Sharpe >3.

I probably sound like a broken record soon, but this to me is a very late stage bull market and one should plan accordingly. I did make an attempt to discuss the topic recently (Where to hide – a factor approach).

Compare with Hang Seng?

That I have added Hang Seng as a comparison might be somewhat misleading, since my intention is to run a Global portfolio. The reason why I added Hang Seng was due to my heavy China tilt when I started the blog. I would argue that is not a constant tilt that I will have over time. It was an allocation call I made at the time. It is a call I’m obviously happy about, since it has given me free Beta out-performance against MSCI World, which is my true benchmark.

Lately I worry about the Chinese economy and the valuations has got more stretched also for Chinese stocks. As you know from previous posts I actively rotated away from China. Currently my portfolio has 16.5% of its cash invested in companies with most of its earnings from China (Coslight, XTEP and NetEase). I will keep the Hang Seng comparison for sometime, but I might remove it at some point.


Buying Gilead became a very well timed investment. The market really liked the new product line their are buying themselves into through their acquisition of Kite Pharma. I honestly don’t have the knowledge to know if this will actually be so fruitful as the market seems to think. My impression is that (the market thinks) Gilead has a strong acquisition track record.

Nagacorp which we discussed extensively in the comments and I choose to double up on has come back to something closer to fair value. The company continues to execute well on attracting more VIP players and the Naga2 complex is about to open in full scale. Next Chinese New Year will be very very interesting, I’m optimistic about further share appreciation. As long as the majority holder does not decide to do something stupid (again).

LG Chem which is my long long term holding for the EV-theme (being a leader in battery technology) has performed very well lately (although not as well as the pure-play Samsung SDI). Unfortunately the battery part of LG Chem is still fairly small. I expect it to grow substantially over the coming 5 years.


I made a bet that XTEP, the Chinese shoe company was lagging it’s competitors who have all had great runs in the stock market and would do some catch-up after it’s semi-annual was released. It turned out being the opposite and I doubled up before the stock collapsed. I feel a bit beaten up, picking the only Chinese shoe company that is down performance wise. Still haven’t given up though, although less about my position than before.

In my move to rotate away from China (Time to rotate away from China) I have sold a number of holdings lately. Two which I sold after very strong returns were YY and BYD. It has been a bit hard to see the shares continue to surge another 30-40% after I sold, but such is life. As I wrote at the time for YY, I got scared of the Chinese Gov clampdown on streaming services, but these things often go away and so it did. And the upside I saw very shortly after came true.

Catena Media which I just bought into also had a negative event right after I bought. The CEO was fired with immediate effect. This gives me some worry that something might surface in the Q3 report. I have considering to reduce my initially fairly ballsy position. The only positive keeping me from doing it is the interim CEO which I have very high hopes about.

I bought two bricks and mortar stocks, XXL and Tokmanni, I reversed my decision with a smaller loss for XXL and kept Tokmanni. So far I should have done the opposite, since XXL has rebounded nicely whereas Tokmanni is treading water.

Current Portfolio


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New holding Essity

As of yesterday’s close I entered a 6% position in Essity, the newly formed personal care and tissue products company. Essity was the Hygien part of SCA and was spun out of SCA earlier this year. That left SCA with forest ownership and pulp production in SCA.

I have kept SCA on the radar for a long time and it has always been the Hygien part of the company that I found attractive. After the spin-off the Essity share has traded down whereas the SCA part has continued up. I like Essity for the quality of their products and I believe there is room for Essity to increase margins to similar levels like competitors. I think they have especially strong products for growth in Asia, for example through their majority holding of Hong Kong listed Vinda. I have considered investing in Vinda instead, but I see more room for multiple expansion in Essity and also a more diversified holding (less concentrated on China).

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New holding – Catena Media

After listening to interviews with both the CEO and the largest owner of Casino and betting affiliate Catena Media, I started to understand this niche market a bit better. I decided to take a position in this gaming industry niche. Gaming affiliates has been a pretty murky business, with a high number of very small companies (more or less one guy sitting at home creating a homepage). But it has also been an insanely fast growing and lucrative business. Catena Media is organically and by acquisitions building up to be a large dominant player in this market. They recently took a step to invest in the Japanese market. It probably won’t be easy to break through in the Asian markets, but the Swedish gambling companies are very much at the forefront in general. So this can be a first step towards new growth for Catena.

This is a high risk position, but I feel I have space to take risk in my portfolio right now, cash-levels are very high and I lowered my Beta my taking less bets on China and buying more quality companies. So I initiate this at a 6% position, since I believe it is a good entry point, where the market has oversold this holding on scares of majority owners exiting the company. Which was in a pretty clear way denied, by the majority owner in a recent interview. Also the company looks cheap valuation-wise. A full analysis might come at a later date, but right now I’m focusing on finding more new investment cases.


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Sell BYD and EV mania

Sell full BYD holding

A quick post to state that as of today’s close I sold my full remaining position in BYD.

EV mania

When I started this blog 1.5 year ago the first EV mania wave had passed, Tesla had been treading water in the 200 USD range for a few years. But I was convinced that this rally still had more steam, the wide public had not yet caught this massive change that was upon us. Now I would say everyone is on the “EV-train”, in the sense that everyone now believes EVs will take over the world in the coming 5 years. I have no idea how far this EV-mania can go, perhaps are we still in early stages and valuations will double from these levels. But I feel the easy money has now been made. I was right, EVs are taking over, now the whole world agrees and anything touching EVs is rallying like no tomorrow. Look at the Global X Lithium & Battery Tech ETF share price and traded volumes.


So for me this it the time to start being cautious, be thankful that the investment thesis worked and stop being so heavily tilted towards this theme. Outside of this “blog fund” I also been invested in this ETF, which I now also sold.

Portfolio wise I still have 2 holdings geared towards EV exposure, LG Chem and Coslight. For the long-term I keep LG Chem, will I believe will be one of the big battery providers to the western car makers. I also keep Coslight which as a small cap is still at a low valuation, and I think there is a potential for a multiple expansion if this mania continues. It has lately also sold parts of its battery factory for laptops, to gear itself more towards batteries for the Chinese EV market, which I don’t think the market really picked up on (yet).

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The Perfect Storm – Teva – Part 2

Recent development

This is the continuation of my post (Teva – Part 1) more than a month ago on Teva Pharmaceutical Industries. At the time the ADR was trading at about 18.5 USD per share. The share price would continue to deteriorate over the coming month down towards a low of 15 USD per share. But a week ago the stock made a huge jump upwards after the new CEO was announced. So before we dive into the valuation, let’s look at recent development.

The 3 billion CEO

As was mentioned Teva has been in a long (and desperate) search for a new CEO. When it finally was announced that Kåre Schultz, the danish drugmaker Lundbeck’s CEO has taken up the position, the Teva share rallied about 20% and increased Teva’s marked cap with about 3bn USD. At the same time Lundbeck saw it’s share drop with -13%, so the value of a CEO can apparently be very big. I suspected a pop the day the CEO was announced, but this was way out of proportion in my oppinion. Showing Teva’s desperate state is the size of Schultz sign on bonus, which all-in amounts to about 44 million USD, with 20m in cash. Nicely done for some who earned the equivalent of $6.1 million in salary and bonus last year!

Looking at what Schultz has accomplished. Schultz comes with a strong track record at Novo Nordisk and lately as Lundbeck CEO where he navigated the company through a difficult period that saw patents expiring for its biggest drugs. He cut about 17 percent of the workforce and oversaw a $480 million restructuring and brought a number of new medicines to the market. Lundbeck is now on track to report record sales and earnings this year and its stock price has almost tripled since Schultz’s appointment.

So this is obviously a big positive for Teva and it increases the probability for a successful execution of their very crucial strategy going forward.

Asset sell-offs

Teva needs to sell assets to meet debt covenants. I have been trying to build an model of future cash-flows over the last few weeks. One of my starting assumptions was around the anticipated asset sell-offs. I spent some time trying to estimate how much Teva would be able to get for it’s “non-core” units. This exercise became less meaningful now, since half of the asset sales already been announced.

Women’s health unit

What has been announced so far, in 2 tranches, is Paragard and the rest of the Global Women’s health portfolio, for a total sales value of 2.48bn USD. Here I have to say that Teva surprised on the upside. In my estimates I had a range for potential sales value of about 3-6x Sales, with me leaning closer to the 3x Sales valuation. But here they got paid close to the 6x range for the whole unit. It seems the Paragard unit which sold for 1.1bn USD with sales of only 168m USD, was worth a lot more than I anticipated. Well done Teva!

Future asset sales

I previously assumed that Teva would want to sell it’s Respiratory business to bring in enough cash, but it seems they got paid enough for the Women’s health unit, to be able to keep it. Which brightens my analysis of the future somewhat. The other unit up for sale is the European Oncology and Pain unit. Again it’s hard to guess on multiples, but sales 2016 was 285m USD and high estimates of valuations has been in the 1bn USD range. So I will assume 1bn and with that sell, in total shaving off a total of 3.5bn on a 35bn USD debt burden.

Valuation discussion

It has not been an easy task to come up with detailed estimate of Teva’s future cash flows. The Generics business is at an infliction point, where margins have been expanding for a number of years for all companies. As with most businesses, when margins gets more attractive, competition moves in. As we will see from my analysis, the million dollar question for Teva’s future is how will margins for Generics products develop over the coming years.

Teva has two main business units

The two main business units are: Generics and Specialty Pharma (meaning mostly pharma under patents). The two units are further split into the following and also a “other” unit:

  • Generics (Sales 11,990m)
    • US (4,556m)
    • Europe (3,563)
    • Rest of the World (3,871)
  • Specialty Pharma (Sales 8,674m)
    • Copaxone (4,223m)
    • Other CNS (1,060m)
    • Respiratory (1,274m)
    • Oncology and Pain (1,139m)
    • Women’s Health (458m, now sold)
    • Other Specialty (520m)
  • Other Revenues (1,239m)

Although Generics Sales is higher, the total Operating Income is slightly higher for Specialty Pharma, given its a higher margin business. In my analysis I try to forecast at least partly on this sub-level.

Assumptions – Future Generics market is the key

I quite quickly realized that valuing Teva is about understanding how the Generics market will look like in the future. Up until now Teva has managed to substantially increase its margins on Generics, so has also other companies, like Actavis that Teva bought. With margins now decreasing, both due to pricing power of major buyers (See link) in the US, as well as increased competition from Indian and Chinese players, the investment case might look very different. One the other hand, the sales volumes of generics seems to have a continuously bright future. Generics sales have exploded over the last decade, but with more big drugs falling out of the patent cliff as well as countries pushing for usage of generic alternatives to lower costs, it seems plausible that growth continue at an above market rate.

The more I read about Generics, it looks like any other maturing market with limited barriers to entry. Volumes go up, margins come down and left are the largest most skillful players who can use its scale to out-compete smaller players. So what is left to find out is if Teva is one of those players, has the market in its panic priced Teva way too low, even if what is left is a lower margin business but with good volume growth over the coming 10 years.

Assumption Details

Given that Teva is such a huge company, it’s very hard to accurately model each units future cash-flows but hitting the right assumptions for revenue and margin. I have focused on the broad picture and spent most of the time trying to get the figures right for Generics and Copaxone. It would be too lengthy to go into all the assumptions on margin deterioration and sales.

  • For both business units when calculating margins, R&D, Selling & Marketing and General & Admin expenses has been added into the cost structure. For a bull case, more synergy effects from the merger have been assumed than in the bear case.
  • Discount rate in Bear Case 10%, Base Case 9% and Bull Case 8%. 1% change in discount rate, changes valuation by about 2-3 USD per share.
  • 31.5bn USD debt assumed

Copaxone and other Specialty Pharma

Copaxone is a case about it’s patent expiring on it’s 40 mg drug. It’s not so much a question if the patent will expire, but just how soon, and how quickly generics will take over the market. Here are my assumptions on Specialty Pharma:



Generics Markets

Teva does not specify how much of the recent margin deterioration in Generics is affecting the different regions. But since Teva still produces Actavis Sales numbers separately, together with total sales numbers, one can back out, at least an approximate Sales deterioration per region. The Sales deterioration is not due to less sold drugs in volume, but due to margins shrinking so quick that top line decreases. What is not really mentioned by Teva is that “Rest of the World” margins and revenue is suffering even worse than the US market, while Europe is seeing more of a mild margin deterioration. I therefore make different revenue decrease assumptions for the different regions. Unfortunately Teva does not produce Generics margins for the regions, so only Sales numbers are modeled with such detail. I have used what I can find in terms of short term and long term forecasts for the generics market.





The Total becomes mainly a combined effect of Copaxone income falling off a cliff and the future for the Generics market:


Other costs

Teva is very good to hide costs and show PowerPoint presentations with very hyped up figures, showing figures excluding for example Legal settlement costs, which is more or less a re-occurring item every year. So on top of the business units Operating Income above I have afterwards deducted legal and settlement fees of 500m USD per year.

The issue with leverage

Naturally with leverage the company becomes more risky, how much more risky is really shown in a DCF of the above cash-flows. I value the company including it’s assumed remaining debt of 31.5bn USD, meaning NPV of Cashflows has to be larger than the debt, to give a positive value to equity. This is of-course does not become a realistic case close to zero equity value. Since an option value kicks in, the option that the companies future cash flows will improve.

But this leverage also makes it more easy to understand why some analyst has a buy recommendation with a target price 100% above current market price and others come to the conclusion it’s still a sell. The difference in assumptions is actually not that large.

Valuation results

Bear Case

The bear case gives a negative equity value of about -2 USD per share, accounting for option value and dilution, the value per share is set 3 USD.

The meaning of this result would be there is only option value left (as described above). It also gives an indication of how hard it will be for Teva to service it’s debt, especially if funding costs goes up for the company (which it will, when cash flow deteriorates). If funding cost reaches 10% as the WACC in my DCF, then the company really can’t service it’s debt anymore on the cash flow it generates. There is really a non negligible probability for the company defaulting, then one can argue that the Israeli state would never allow that, and that it probably true. The bear case anyhow, indicates a share price with possible future share dilution in the low single digits.

I would give this cash-flow scenario a probability of about 20%

Base Case

The Base case gives a share price of 14 USD per share.

I have done my best to try to estimate a realistic base case scenario for Teva, short-term and long-term. Against the Base case Teva currently is slightly over-valued and before the CEO announcement was fairly valued. The panic pricing I had anticipated before my analysis rather came out as being in-line with my base case.

I would give this cash-flow scenario a probability of about 60%

Bull Case

The bull case gives a share price of 43 USD per share.

Here the company manages to execute on all it promises and also very optimistically margins of its Generics business improves again in 2018 and onwards. On a gross margin level, they will still slightly decrease from the best levels seen, but thanks to synergy effects, the operating margins come out very good. Also Copaxone generics versions will be delayed by a couple of years. I have found only one example of a generics company that lately managed to keep its margins fairly stable and that is Perrigo, but they still state they expect weakening going forward (Perrigo surprises). So the expectation of a quick turn-around in margins is very optimistic and rather a blue sky scenario in that sense, rather than a very realistic bull case

I would give this cash-flow scenario a probability of about 20%. I think the CEO hire has taken this probability from 10% to 20%.


Weighted valuation: 20% * 3 USD + 60% * 14 USD + 20% * 43 USD = 17.6 USD, which is 10 cents from where it is trading at this moment.

To be able to buy the stock, either the stock price needs to go lower, or the probability for the bull case needs to go higher. As soon as the market sees that generic margins are not turning as bad as expected, the stock has as we can see great potential. This explosive share price potential is of course due to Teva’s very heavy leverage. But this kind of leveraged bet on the generics market is not anything I’m willing to do without a serious margin of safety. I would not be comfortable to buy the Teva stock before we see almost a single digit stock price. Therefor my recommendation right now is wait and see. Most likely they will deliver another larger good-will write-down during next year, since the cash-flow the Actavis division is generating is nowhere near what they paid for it (they need to shave off probably another 8-10bn USD). Since Teva is such a large and complex company, this analysis has taken a lot of time from researching other interesting stocks, so somewhat frustrating to come to the this conclusion, which was somewhat surprising to me.

As always, any comments are highly appreciated.


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Another Portfolio change

Defensive is my new offensive

So I continue my quest of reducing China exposure and finding good defensive plays. My portfolio changes are the following as of market closings today (Tuesday):

  • Buy 6% of my NAV into Gilead Sciences
  • Add 50% to my current holding in Xtep International
  • Sell 40% of my current holding in BYD
  • Sell my full holding in CRRC

All in all this slightly reduces my very large cash position. Some quick comments on the changes:

Gilead Sciences

As I have mentioned in several posts, I have been circling the Pharma sector for quite some time now. Since it is, at best, a murky area to try to estimate the value of a big companies research pipeline, I have struggled to come to an investment decision. It’s easier with companies where current cash-flow motives more of the value. I tend to end up a bit too much on Seeking alpha, trying to find people who do understand the intricate details of this industry and especially the pipeline. Someone that I do trust though on the topic is Martin Shkreli, who freely shares on his thoughts in his Youtube streams. He is a fan of Gilead lately (when the valuation has come down). That gave me some comfort to keep looking at the stock. After seeing this (WertArt Capital on Gilead) very in-depth review of Gilead, I realized I might be a bit late to the party. But nevertheless, I want exposure to the sector which I feel have come down valuation wise and is defensive. Giliead is the best I have been able to come up with after a long search. I feel confident enough to take a position at what I believe is still a decent entry point, with some confirmation that the down-trend is broken.

XTEP International

The case is simple, if this company is not a fraud, it is undervalued. All other Chinese shoe companies have continued to perform fairly well and outperformed XTEP. This might be the ugly duckling, but I don’t believe it is THAT ugly. We will also get a very quick answer on my bet, since the earning report is released tomorrow, I’m hoping for a +10% pop upwards in the stock-price.


The countries outside of China keep disappointing me in how much they dare to commit to electric buses, it’s already proven to work fine in China. This is where BYD is very strong and have a top product. On top of that I still don’t see BYD releasing a car anything near to Tesla Model 3 or Chevy Bolt, so my thesis from over a year ago, that I’m unsure of BYD’s success in the car market, stays the same. I haven’t given up on BYD, but I could see this one visit the high 30’s again and choose to reduce my position.


This was my Belt and Road play, perhaps somewhat sloppily implemented. I decided to not invest in the theme before I understand it much better than I do right now. It has a holding I don’t have a strong view on and selling it reduces my China exposure, so out it goes.

My next post..

..will be about Teva. I have been very occupied lately and I still need some time to dive into the details. So stay tuned for Part 2 and let’s see if it becomes a new investment or not.

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Portfolio changes

I made a mistake..

when I bought XXL 1.5 month ago. The Norwegian sporting goods retailer is expensive without continued growth that I knew. But how solid is the ground in their home markets? After both visiting one of their stores and not having the same positive feeling as before (maybe too much Peter Lynch here) and reading an article from one of their competitors about the very tough environment I started to turn more skeptical.A podcast that I followed woke me up to the fact that I have probably overpaid. I realized today I have probably underestimated the risks in the company. Luckily I’m in USD terms able to come out at a very slight loss. So I reversed my decision today and selling the full position as of today’s close.

Something that I did right..

was buying Skandiabanken when I started this blog. Not my fastest, but a very steady and my largest gain (+120%). During this time the stock has gone from trading at a slight discount to the large banks, to today trading at a good premium. Just as it should be in my opinion, with it’s superior growth rate. But this bank is almost entirely reliant on the Norwegian housing market, which has been in a slide for some time now. Nothing major, and probably it is fine but for the first time I see some clouds on the horizon. Judging from how hot the Swedish property market is and I know the Norwegian one is in a similar state, there is some worry. Any kind of further outside shock which creates higher unemployment could trigger something very nasty. Now it’s up to the company to keep executing and stealing market share from the big boys. I think they can do it, but any failure will set the stock price back now. So I will reduce this holding just before their earnings release, take some handsome profit and keep a smaller position as a long term case. I sell 60% of my holding as of today’s close.

A new defensive..

..in my portfolio. Already as a kid studying finance, I found out that I could increase my Sharp ratio by adding Swedish Match to my portfolio. It didn’t have the highest returns, but it had this wonderful characteristic of being negatively correlated to the rest of the market. That did wonders in terms of risk adjusted returns. Swedish Match does not anymore have a negtive Beta, but it is very defensive and very well run company. There is some huge political risk if for example the European Union would manage to ban snus in Sweden, but I see it as highly unlikely. I start with a small position of 4% and I intend to look at more tobacco companies going forward. I would also be very interested to hear your thoughts on the E-cigarette/Vaping industry, if you believe in that, what would be the best way to gain an exposure?

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