Monday 2 September 2013

Analysis of Industrivärden

A Swedish investment company

Company: Industrivärden

Business: A Swedish investment company that were created back in 1944 via Handelsbanken and the stocks they received due to the market crash in 1930. Their investment criteria's are:
  • Mid- and large cap listed Nordic companies
  • Companies with business models that can be applied in several markets
  • Companies with a good ability to generate growth in cash flow
  • Niche focus with leading positions in selected market segments
  • Ownership stakes that enable significant influence
  • Large potential for growth in value through active ownership
For the full list of their investments please take a look here. I must admit that they have very few (read none) fancy stocks but excellent companies that will continue to bring in money year after year after year.

Active: In the Nordic countries but invest in globally active companies and including those then they have combined sales of approximately SEK 1 trillion, of which 1/3 in emerging markets, operations in more than 180 countries and have approximately 400,000 employees worldwide.

P/E: 4.3

contrarian values of P/E, P/B, ROE as well as dividend

 The P/E of Industrivärden is excellent with 4.3 and the P/B is acceptable with 1 even though I like it to be well below 1. This gives a very clear buy according to Grahams formula. The earnings to sales are very nice with 95% and the ROE is excellent with 22.7%. The book to debt is also very good with a ratio of 2.4 however the yearly growth in the last four years has been -14% but I would still expect them to have a yearly growth around 8%. They have just like Investor large revenue fluctuations. The motivated P/E becomes around 20 to 22 which means that the stock is highly undervalued today. They pay a nice dividend of 4.1% which represents less than 18% of their earnings so no reason to decrease that!
Conclusion: This is a good contrarian stock with solid Swedish industrial companies and I would have no issues buying it today for the long run. The stock will therefore be added to the Stock of Interest list with the next update. I wonder a little over how come Berkshire have much less fluctuations in their earnings? Is it purely due to size reasons or is it due to that they also fully own several large companies?

If this analysis is outdated then you can request a new one.


Oliver said...

Du kommer med rena fantasisiffror i alla dina investmentsbolagsanalyser. Om INDV värderade till ett PE på 20-22 så hade aktiekursen varit ca 550, dvs 3-4 ggr högre än substansvärdet, vilket vore totalt idiotiskt att betala. Det största misstaget du gör är att bry dig om investmentbolagens vinst och P/E för året.

Fredrik von Oberhausen said...

As translation. Oliver is unhappy with my analysis of the investment companies since I do not consider the Net Asset Value and to pay according to P/E 22 which means around 550 SEK would be insanity. He also mention that the biggest mistake i make is that i consider the earnings and P/e from last year and i assume that he means that it is insanity in comparison to looking at Pe3 or even pe5 which would even out the fluctuations that investment oompanies have.

Oliver makes indeed a very good remark. It is possible and sometimes even useful to treat different kind of companies according to different sets of rules but that would then no longer be contrarian but adaptations and that can be found on many other blogs, financial sites etc.

To reach a pe of 20 there are two ways to go. Stock price increases or earnings drop or a oombination of both. Eitherway if it for whatever reason would beome pe 20 that would then also mean that i would start to consider selling the stock.

By using the same analysis on all the companies i hope to accomplish two things. Finding a type or branch of companies that are currently disliked by the market and then in that section find the best one and buy that one. I generally do consider european investment companies to be undervalued t the moment and from the ones i have analysed i would favour one.

I doubt that you disagree with my claim that investment companies are cheap today and maybe you would even find that the one according to the contrarian analysis is also the best one...
What this means is a signal to buy the company. This is to me the most important thing. Once i own it i decide when and why i sell it. It could be due to change of management, change of vision, maybe due to that it becomes expensive. How can we tell today how the market will value investment companies in 5-10 years from now. And honestly i do not care either. I want to buy a cheap company paying good dividends today and what comes tomorrow comes.

Sorry for the long reply and i just want to say again that Oliver is oorrect therevare different ways to look at it but i go fully contrarian for good and bad.

Fredrik von Oberhausen said...

Sorry but I forgot one thing yesterday when I replied.

If you make a different analysis of the investment companies Oliver then I will be happy to publish them here on the blog.

If you have your own blog and make the analysis there then I will be happy to link to those pages and those analysis because I think that as amateur investors we need to collect and look at as many different opinions as possible before we decide to make a buy.