Monday 12 October 2015

Stock sold October 2015: Kernel

Kernel, a Ukrainian agriculture and logistics company

I no longer remember where and when I wrote about Kernel and my thoughts but it does not matter. Kernel grew to the size it was in my portfolio (around 10%) due to that I kept averaging down on my share price and now the price have started to go up. If I had not done that then I would not have had the size of the holding that I now have and I would also not have been able to sell it with a small gain but now I could do this. Averaging down worked well in this case and poorly in for instance the case of Asian Bamboo. Kernel, due to the war, could have become another Asian Bamboo (or Eniro for that matter) and I have had enough of those bad investments.

Kernel is by the look of it a good company I was just no longer prepared to have 10% of my stock portfolio in it and I therefore decided to sell off around 70% to invest in other companies.

I sold 380 shares at the price of 11.588 € per share which gave me a total (after a 11.01 € fee) of 4,392.43 € in cash on my broker account. this gave me a profit of 1,147.23 € during 28 months of holding. I still hold 170 shares in Kernel which I find to be a more reasonable amount.

Due to my recent activity many of you will probably shake your heads and that is good. Better still, write me a comment telling me how stupid I am when I do things you consider to be stupid.

The CEO and major owner of Kernel (around 39% of the shares) have during this last quarter been selling off shares. I do not like when owners sell off shares. I sat down and made a calculation for the yearly earnings for Kernel. I account for for instance that the wheat price have dropped with -20% compared to 2014 and I found that I would be surprised if Kernel is having a better result than 1.63 € per share for the full year. Which still gives a very good P/E of around 7 but on the other hand one must ask oneself what is a reasonable P/E for a Ukrainian agricultural and logistics company? Ukraine is in no way out of any trouble... the media focus is just gone for the moment and that is all. Will they be able to increase their earnings again in the future? Yes, I think so. Do they have an expanding business that can conquer the world like Coca-Cola did? No, they do not. So the investment was decreased in size.

I still want to keep some exposure towards agriculture (besides form the shares I kept) and when you have American Giants at around P/E 12, with massive share buyback programs and paying 3% dividends... well... the cash can quickly be put to work.

To take a look at my current Stock Portfolio then please click on that link. The portfolio will however not be fully updated until the end of the month.

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