Trading 2016-04-19

As I said in my previous post I will start with shorter updates (from my phone) with trades done. Trades will be announced on the same day and trades on close prices.

1. Sell half of my position in Highpower International.

Rational is the risk for a rights issue outweights the upside of the bid from the Chinese company, I still believe in the case, but taking down position size in the portfolio.

2. Use the cash from the sell to enter a position in Avanza Bank.

Rational is this is the most popular online broker in Sweden. The “old” four big banks in Sweden do not take up the race and they are losing out bigtime. When Avanza takes the step to become a more full service bank with mortgage loans and credit cards, they could put a serious dent in the customer base for the big 4 banks. Also the deposit base will be worth somehing when interest rates go above zero again.

Portfolio update 2016-04-15

Not a great start to my new blog, not making a single post for 4 weeks, I have been busy with work and a longer trip to Asia. I have realized I need some rules to how I announce trading in my portfolio. Starting now I will write a short post for every time I trade in one of my holdings. This has the upside that I can’t be blamed for back-trading my portfolio. Another added bonus is making the blog a little bit more lively with more frequent updates.

The portfolio will be calculated with a official NAV once per week, results will be presented on the blog with about monthly frequency. Latest results will always be available under the Portfolio page. So let’s review the performance of the portfolios first month live.

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My starting Portfolio

Without further ado, here is my starting portfolio which goes live with closing prices as of Friday March 18:

NameCurrencyCurrent WeightReturnTrailing P/EP/E EstYield
SAS PrefSEK12%0%9.4%
Highpower InternationalUSD8%0%7.6
Yuexiu TransportationHKD7%0%
Coslight TechnologyHKD6%0%38.7
Zhengtong AutoHKD6%0%

13 stocks and 8% cash position ready for adding 1-2 stocks from my Watchlist, which you will find also in the Portfolio page.

I will spend up-coming posts to introduce the stocks in my portfolio. Also from now on, I will start to update monthly the portfolio performance and changes to the portfolio. You can always find the latest Portfolio and my current Watchlist under the tab in the menu on the top.

SAFT Groupe – a battery specialist

Batteries are all around us. Many of the batteries are advanced, going into electronics like our smartphones and laptops, where we care about high performance. Others are cheaper batteries where performance is not as important due to easy access to charging/replacement, like toys, car batteries etc. What is emerging is the need for large sets of high performing batteries for our Tesla’s and other upcoming EVs. But there are also other more niche areas where high performance and/or safety and reliability is of utmost importance. In this space I have found one French listed company, SAFT Groupe. My investment thesis is based on the fact that battery technology reached a point where they can take over conventional petrol based products also in other areas than just cars and buses.
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Investments in EV value chain

Getting it right

If we buy the story that EVs are taking over (other theories are out there, like hydrogen powered cars), the question for us investors is, how do we play this to make money? If we focus on the electric cars for a moment. My reasoning so far has been that it will be very hard to know which car company comes out on top of this fight. Tesla seems to be in a good spot right now, but I wouldn’t count the German engineers at Audi and BMW beaten just yet, see for example what the Porsche team did with the 918 sports car. The Japanese have proven skillful as well. Another scary fact for the car companies is after-sale. I read somewhere that a regular petrol car contains about 30 000 parts, whereas a pure electric vehicle contains about 10 000 parts. And no liquids and fluids running around that need regular servicing. This probably means a lot less income for the car companies for service and repairs of the cars and that will be tough indeed.

So if we don’t know which car company will gain most market share, then perhaps we can dive deeper into the value chain and see if we can find other winners. Perhaps a battery maker that most of the car companies will use, or a Cathode supplier for batteries that is in a unique position, or a lithium mining producer in a great spot? My tactic will be to find that sweet spot or spots where the probability of success are highest, without knowing too much about the future, except that electric vehicles will gain in popularity.

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Investment Theme: Electric Vehicles

Investment themes are important, because they can be drivers of returns for many years to come. An investment theme is about seeing something that is coming long-term and understanding the dynamics in such a way that you are able to profit from it. This is appealing because most investors on wall street does not have the same long term view that you as a private investor can have. Therefore something that will happen 4-5-6 years down the road, might not be priced into stock prices yet. This is a first of many post on an important investment theme in my portfolio.

Even before the launch of the Tesla Model S I have been intrigued by how electric vehicles will be a major game changer. With the success of Tesla I have dug much deeper into what this will mean for the future, and how to play this to make money. If I allow myself to dream a little bit, my vision in a not too distant future is self-driving electric cars, powered by cheap electricity or rooftop solar-panels.  I was going to write a long post about how this will come about, relating to S-curves and such, but then I came across this excellent video by Bloomberg which sums it up nicely. Although they put a oil spin on the story, the basic message is the same, Electric Vehicles (EV), are coming to take over.

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Never invest in Airline stocks.. ..or?

“If you want to be a Millionaire, start with a billion dollars and launch a new airline..”

..Richard Branson supposedly said some years after having launched Virgin Airways.

After some mistakes in my early trading career, where I lost money on airline stocks. Combined with understanding more about the industry, how unprofitable airlines are held afloat by governments pride in having a national airline and how this created an unhealthy price competition and inefficiencies in the industry. I concluded that the business model is dead and I should never waste money on trying to buy airline stocks on the cheap. And yet, here I am, sitting at my desk contemplating how to best write a post about why I see great opportunities in some airline stocks, one in particular.

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Know your benchmark

My Benchmark

Perhaps not the most exciting first post for a blog, but let’s start from the beginning. Apart from talking stocks, investment ideas and probably other nonsense, I intend to run this site for a real money portfolio of stocks. This will be a concentrated portfolio of stocks from around the world.  Thus I need a yardstick to measure my performance/alpha. So let’s get that out of the way, so we later can move on to more fun topics. Since I intend to invest globally (mainly in the developed world), I have chosen MSCI World (Gross Return) as my benchmark, in this post we will get to know that index a bit better and by that understand the shortcomings of such a wide benchmark. Read More