Heat of the moment

It was the heat of the moment, as the 80s rock group Asia used to sing. For me personally true on several levels as Im taking some vacation in very hot Italy while the Brits decided to turn up the heat in the financial markets – wow I did not forsee that at all. Especially when the last polls just before the vote counting started, came out with 52% for Bremain. I should have listened to my old boss, who is british, he called this a long time ago.

Initial responses were strong sell offs in European equities (for the markets that were open) and of course an equally sharp response in the currency markets with GBP being the big loser. Interesting was that SEK and NOK traded even weaker than the EUR. From a USD investor perspective, as this is the denomination currency of the blogs fund, I see attractive opportunities in Europe where both stock prices dived and currency weakened against the USD.

My portfolio is somewhat underweight European stocks which will help somewhat to keep ahead of the benchmark, although a few of my holdings have really suffered lately. I plan to deploy my cash buffer from the SAS Pref sale a few weeks ago. Interesting times indeed..

SAS – Im out

SAS came with a surprisingly weak quarterly report today, well below consensus estimates. On top off that the Swedish Pilots are threatening to strike again and are demanding 3.5% salary increases as well as stronger protection for newly hired pilots (bacisxally meaning they should be paid well too). Although all this is not catastrophy as a Preference share holder, I no longer see the same upside in the Pref. In this case I must say my analysis done 3 months ago, so far turned out wrong, but my bet on the Pref share anyway turned out above expectation. I sold the first half a week ago and Im happy to give away the rest of my Prefs at these levels.

Portfolio update +8% in less than 3 months

What a start

Incredible start to my fund +8% in less than three month – annualize that! This really shows what a skillful investor I am – just joking I have been lucky. This is way too short time-frame to evaluate an investment track-record, but it sure feels nice to have a bit of outperformance from the start.

A big contribution was of course the SAFT position which I now have sold, this gave almost 2% outperformance. I also managed to avoid heavier losses by taking action and cut my holding in Highpower International. The portfolio feels good, the weaker stocks in the portfolio as I feel right now are MQ and Yuexiu Transport. The Swedish retail market for clothes has come in much weaker than I would have thought and even if I believe in the new CEO for MQ (my reason for investing) that might not be enough. Yuexiu a owner of toll-roads in China, with very stable cashflows (high dividend) I’m worried of the weakening RMB having a big effect on results as well as government rulings on electric vehicles travelling for free through the tolls.

Portfolio stats

Although the portfolio is a mix and mash of very different styles, here is the Bloomberg harmonic weighted averages of some quick stats for the whole portfolio:

Dividend Yield: 1.81%

P/E: 15

P/CF: 6.54

P/B: 1.48

Debt/Equity: 191%

The trailing P/E is so high mainly because of Criteo, Ctrip and Coslight, the rest of the book is more Value oriented with a P/E between 5-15. But it is a conscious choice to blend the portfolio. The Debt levels are high from my Financials who carry much debt on the balance sheet.



Investment styles and lifelong learning

Thoughts on investing styles

Around the same time as I started this blog I also switched into a new area in my team at work. I’m once again faced with the struggle and joy of learning new things at work. As everyone interested in the field of finance, I read a tremendous amount of financial news stare at stock charts, etc. The deeper I delve into Finance there more I get the feeling how incredibly much there is left to learn. When I still was in University I was a more confident investor than I am today, when I today know probably 10 times as much.

We all know examples of extremely clever people, still making huge mistakes in investing, maybe the most famous one being Long Term Capital. You can be one of the world’s best at company valuations, knowing all the ins and outs of a balance sheet but still makes big mistakes. Investing requires you to be a master of so many fields, it’s more or less impossible for a single person to be all that. We can see how people try to handle this by narrowing the universe of what they are looking at, for example only one country or one sector across countries. Another way to slice it, is to become a master of an investing style. Many bloggers and investment professionals focus on one style, for example Small-caps, Value, others look at Growth, and some try to combine styles for example GARP (Growth At Reasonable Price), small cap Value etc. Other skip companies and invest more through Macro views, or given the low interest rates, Quality companies and High Dividend strategies has gained popularity. I have also seen a trend (hehe) more recently of Momentum investing gaining traction also outside of the CTA/Trend-following hedge fund space. All these styles requires tremendous effort to master fully – and I’m sure nobody is master of all.

Don’t choose your style to quick

In essence, the more knowledge you gain, the larger the chance is that you can skew the odds in your favor and generate alpha. It’s a never-ending learning journey where curious knowledge seeking people can express their knowledge into investment ideas – and potentially reap the rewards. I think that is the core of why I love working in and with Finance. I have still not reached the stage where I found my “style”. But I don’t want to rush it. I feel a lot of people for example read about Buffet and Munger’s success in investing and then they just decide – I want to be a value investor. They then gather up all great written books about Value investing with the mindset of, I want to learn to become a great Value investor. But they never really gave for example Growth investing the same chance to shine. They did not have a good picture of what the different investment styles had to offer, they already plunged in and decided Value investing is my thing. Well maybe it is, but for me personally I want to spend a few more years understanding both stock markets around the world, different sectors, as well as different investing styles. Because if it’s one thing I learnt from meeting all these great managers out there, with great track-records of alpha generation – there is not one style that is superior to others, all different styles of investing can work, if you do it right. And maybe as important, different investing styles will outperform during different times. We all know the story of how people laughed at Buffet around year 2000, and how his Value investing style came back with a vengeance when the bubble burst.

Weekend reading

In the spirit of learning more I have spent a larger part of the weekend reading up on different blogs, and also watched a fair amount of material on Youtube. Internet truly is a marvelous place for all us knowledge thirsty people. I wanted to share some good material I have come across.

I recently read a book by Guy Spier called The Education of A Value Investor. I read it after a recommendation from the blog Value and Opportunity.


In the book Guy talks about how he transformed his life in the pursuit of becoming a better investor. The book kind of grew on me, from being a bit skeptical in the first 3-4 chapters on what the “Value” for me was reading about Guy’s life, but it came around towards the middle of the book, delivering a lot of thoughtful insights. So I would also recommend a read, not so much for investing insights, but rather for personal change. One of Guy’s mentors is his friend Mohnish Pabrai, which he talks warmly about in the book as a great investor. Today I came across a blog that promoted a Video-lecture by Monish. I found the full material somewhat to long-winded, but I loved the short 5 min quick version of what Mohnish talked about, please check it out: Presentation on Stock Bubbles

I found the material resonated a lot with my own thinking, that the markets are currently a bit crazy, pricing FANG stocks (Facebook, Amazon, Netflix, Google) and others like Tesla at crazy multiples. We are in something of a new Nifty-Fifty scenario – and I don’t like it (since I don’t do shorts).

A hated guy who gives a lot

I read on another blog about someone called Martin Shkreli. I googled it and found out it’s that hated guy in the US that raised prices for a drug he bought the patent for. Well I guess I had too much time, but I spent like 2-3 hours watching videos of him and how he is building a fan-base through YT and other channels by actually responding to all the hate. He sits hour after hour and answers his phone from angry callers (you can watch it all through his YT live-stream) and explain things from his perspective, and his arguments are actually convincing. Anyhow, what I wanted to mention is that he also spends lots of time to educate the once interested in learning more about investing and valuation of companies. So if you would want to learn more about how to value companies do check out his videos, here is a link to his first lesson on Finance: Introduction to Investing


Portfolio changes and Value Investing

SAS Pref – Slicing position

So my biggest position in the portfolio is the SAS Preference shares, this is somewhat of a high yield bond position and therefore has a different kind of characteristics than the rest of the portfolio. For instance the position would lose in value if/when the Swedish Riksbank decided to hike interest rates. I think the position has performed tremendously well, +6% since investment and even more (+7.5%) since I recommended buying the SAS Pref in one of my first posts on the blog. Given the strong performance I decided to slice my position in half as of today and I will soon allocate my money elsewhere. Although I don’t mind keeping a bit in cash after a good run over the last couple of weeks.

Another observation, SAS ordinary is trading at P/E of about 6.5 and Lufthansa P/E is below 5. Either profits are going to come down or valuations up in a not too distant future. If I look at ticket pricing the last 12 months, I’m guessing we as customers are getting a lot of the oil-price decrease. So another reason to stay a bit cautious on the SAS Prefs.

Poor Value investors

An Article has been hitting headlines the last few days talking about Growth vs Value investing:

“Using a formula created by Ned Davis Research that tracks changes in the relative performance between the two styles, growth has been in an uptrend versus value since July 2006, a stretch of dominance that outlasts virtually every other feature in the American stock market. At present, growth’s edge has gone on about three times what it normally has since 1932 and is the longest in history.

In other words, it’s been pretty shitty being a Value investor over the last 10 years. But the bigger point is, maybe now it is time to shine? I for one believe that is the case, and I should try to shift my portfolio more towards Value than it currently is, a deeper dive into this is definitely needed as soon as I can find time.


NetEase – Chinese Gaming

I’m sitting 11 000 meters in the air, over the Siberian tundra writing this post, if someone told me ten years ago that I would be able to do that, I would probably have laughed. Technological advance often goes quicker than we can imagine and it also opens up opportunities for substantial new revenue streams. One such area is how mainstream gaming has become. About 20 years ago when I was a kid growing up, playing NES, early PC-games like Prince of Persia etc, gaming was definitely not mainstream – it was something mostly nerds did. And it kind of stayed nerdy when internet and multiplayer gaming started. We nerds played games like Warcraft, Starcraft, Quake and Counter-Strike. Then around the time when Playstation 2 had gained some traction, something in our society started to change – gaming started to be cool and the gaming industry grew enormously. With the entrance of smartphones the world was ready for the next level of gaming – suddenly even our mom’s became gamers, playing Candy Crush in the subway on their way to work. I think we all can agree that games in our daily lives through PC, Consoles and Phones are here to stay and most of us are willing to spend a few dollars now and then for this entertainment.

Throughout the years I have always been impressed with Blizzards game making, in the same way as Nintendo they built a whole world of characters that they re-use in all kind of games. It has become so big that they are just launching a Warcraft movie (I’m watching it tomorrow). In my opinion they also deliver products with immense quality. Blizzard was bought by Activision and one way to gain exposure to their games would be to just invest in Activision Blizzard, but I think I have found a perhaps riskier but better way to play the investment and that is through NetEase. Let’s see what type of company this is.

Read More

Portfolio Update & Trading

The portfolio has been running neck-and-neck with the benchmark MSCI World Gross Return, but with the help of the bid on SAFT and strong performance from Criteo and a few other holdings we have managed to de-couple somewhat over the last two weeks. An unexpected bid is always a lucky shot, but I believe this shows big things is going on in the battery sector, we have both the whole electric car side as well as electricity storage from the grid. This is probably not the last battery buyout we will see over the coming years. I’m staying cautious still though, the industry is still driven by subsidies and China will most likely favor the Chinese makers.  It is still many years until we see big profits from the Korean companies like Samsung SDI and LG Chem, I’m waiting for a good entry-point in Samsung SDI as the best pure-play in the sector.

Performance graph



I have also decided to take one new position and add further to an existing holding.


I have been looking for a good entry in Microsoft, it never gets cheap but with a little bit of weakness here I use 4% of my cash to make a first entry in the stock. The short rational is how Microsoft is pushing hard for cloud computing and I believe they will succeed taking a huge part of the corporate market. Corporations are already heavy Microsoft Office / SQL Server etc users and are so ensnared that they automatically go for Microsoft Azure cloud. This will be a huge deal over the coming 10 years.


This is already a holding at 6.6% and I decided to make it a high conviction position at 9% by allocating 2.4% cash. Within a few days a bigger piece on the company will be out explaining the rationale, so stay tuned.

I’m now fully invested with only a small cash residual and I’m truly live, putting my neck out there to see if I have any alpha/skill. 3 months has passed since the first pen-strokes on the blog and 2 months of live performance and I feel I passed the trial period of the blog. Now let’s do this great!




Take-over bid and market thoughts

Better SAFT than sorry

Good news for the portfolio today, the oil major Total has made an offer for all shares of SAFT, the battery producer I previously wrote a post about. Under the terms of the deal, Total said it would pay €36.50 a share for Saft, representing a premium of 38.3 percent to its closing price on Friday. Total has earlier bought a Solar-Panel company and seem to be planning the full infrastructure for renewable energy. So instead of having the pleasure of holding this company over the years, we cash out early and can deploy our money elsewhere. The stock is trading close to the bid and there is little reason to think any other player would step in and outbid Total, so the position will be sold tomorrow.

The portfolio currently looks like this:


Market thoughts

Even though S&P500 has recovered significantly from February lows and is almost back at all time highs, stocks globally still feel weak. Most of the stocks on my radar is far from all-time-highs, how come is that? Well first of all Europe is NOT back to all time highs, we need to go up +23% to break the April high of last year and Hang Seng needs to rally +40% to get back to the highs (although those highs were amplified by the China madness rally). Some of this dispersion between Europe and US lately is probably driven by the weakening of the USD against EUR.

The other reason why it feels like “my” stocks are even more depressed is that the biggest recovery has been in sectors like Oil & Gas and Basic Resources (Mining etc). Which are sectors I disregarded from now for quite some time. Maybe it’s time to revisit both Mining companies as well as agriculture related investments. I for example still believe in the Uranium story, that I invested in about 10 years ago. Long-term, if the worlds want to get rid of coal, we can only go nuclear.

Here is an interesting graph of 12-months forward estimates of P/E for three markets: Hang Seng (HSI), S&P500 (SPX) and Stoxx 600 Europe (SXXP):


So looking at this metric, the conclusion is there is not much upside in US-stocks, Europe is somewhere in between and Hong Kong looks cheap. There is always more than meets the eye to these kind of figures though. The HSI P/E is so low partly because the Mainland Chinese banks are big in the index and they have very low P/E:s. Anyhow I find more Value in Hong Kong and this discount in the Hong Kong stock market is one of the reasons why I keep allocating an overweight there. Although my bet on battery-related companies might be somewhat too high. My next investment will probably be in a Asian Insurance company.

Criteo – Growth Case

It’s time to present another of my Portfolio holdings – Criteo.

Criteo was founded just over 10 years ago and has in that time grown into a billion Euro revenue company. Back in 2005-2006 Criteo developed a sophisticated machine learning platform that analyzed user behavior. The company applied this to movie reviews as well as e-commerce purchases. The problem was that they could not figure out how to make money on them.

So the founders started to look at other markets and saw that the adtech industry looked like a great fit. But then again, there was no shortage of adtech operators gunning for the opportunity. In other words, Criteo needed to find something compelling to set itself apart. Keep in mind that – at the time – the adtech market focused on charging for ads based on fuzzy metrics like ad views. But for the founders of Criteo, this seemed really odd. Why not build a system that only billed customers when there was actual performance that drives sales?

This was a big idea and disruptive.

Big growth

The inner works of how Criteo creates its ad technology is not easy to comprehend. But looking at their growth figures it is obvious that they do seem to have an edge in this field.  They employ a large number of PhD’s to build their systems. The more clever people they hire, the more their system seem to scale. I try to disregard from the complexity of how they build their systems and look at the facts. My investment thesis is fairly simple. This is an extremely high growth company with a long proven track-record of growth. Right now all their revenue is plowed back into the business, to grow it further. When the company reaches a more mature stage and the growth slows down, they will have the ability to increase margins significantly, and a lot of that juicy revenue will fall down to the bottom line.

Read More