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?