Analysis of Deere 2016

Company: Deere

ISIN US2441991054 | WKN 850866

Business: An American outdoor machine producer. They have eight different product categories: Residential (lawn mowers), Agriculture (tractors etc.), Construction (Trucks and Loaders), Landscaping & Grounds Care (commercial lawn mowers), Golf & Sports (fairway mowers etc.), Forestry (harvesters and dozers), Engines & Drivetrain (diesel engines and generators), Specialized (military and rental). Their largest is however Agriculture and most people in countries conducting modern agriculture will have have seen the beautiful Deere logo.

Active: 30 countries world wide. Focus on US, Canada, Europe, Brazil, Russia, India and China. I was surprised to see that they did not mentioned Africa but maybe the infrastructure need to improve much more before Deere can establish themselves stronger there.

P /E: 22.60

Here you can find the previous analysis of Deere 2015.

The P/E of Deere is too high for me with 22.6 and the P/B is also awful with 5.3 which giver a very clear no go from Graham. The earnings to sales looks good with 7% and the ROE is also excellent with 23% but the book to debt ratio is scary and looks like a bank. Yes, they do plenty of financing so I know where it comes from but it still looks scary.

In the last five years they have managed to have a yearly negative growth rate of -7% which gives us a motivated P/E of around 8 which means Deere is today highly overvalued by the market.

They spend a massive amount on R&D since it correspond to 91% of their earnings in this case that does however come from them not being able to push out their products as they should do.

They pay a poor dividend in the size of 2.2% which correspond to 50% of their earnings so I doubt they will increase it any further for the time being.

Conclusion: Graham says no to Deere and so do I at this moment. The P/E and P/B is awful and only the ROE is what looks ok but they are massively leveraged with debt on the other hand. My problem right now is that due to strong dollar and a no clue why share price increase as of late I have a fairly nice profit on Deere that I could claim. Berkshire and Mr. Buffett have even walked away. If Deere would have even been close to "normal" earnings and Mr. Market would value Deere at P/E 22 then I would have walked away. Earnings are at the moment pretty much half of what they had in 2012, 2013 and 2014 and for this reason I decide not to sell my shares and I will remain as a shareholder. I will however not buy any more shares at this moment.

Deere annual report 2016

To read the report in full on the Deere home page then please click here, to check out the previous publication then please visit Deere annual report 2015 and to find out more regarding Deere then please visit analysis of Deere 2015.

As can be seen in the financial statement below Deere have, if one includes 2016, had two really bad years. The sales keeps dropping and dropping and have gone from 35 billion USD in 2013 to this very poor of an excuse results of 23 billion USD. So sales down by over -30% in 4 years. The earnings are down to 1.5 billion USD and two years ago that value was more than doubled and it was better yet in 2013. No, Deere is not doing well. Even though they have kept buying back shares, which I certainly hope they have stopped doing now, they simply cannot buy back in quickly enough to cover for the strong earnings crash that took place.

Conclusion: Deere is having a tough time. Berkshire Hathaway have decided to step out of Deere which is understandable considering that there is negative correlation between result and share price and they most likely walked away with an annual of 20+% when they sold it. I will remain shareholder for the time being but I am annoyed that they do not destroy their shares but keep them in the books.

Analysis of DBAG 2017

Company: Deutsche Beteiligungs AG 

ISIN DE000A1TNUT7 | WKN A1TNUT 

Business: A German private equity company. Their focus lies with the management buy out of small and medium sized companies that have excellent products. To see their full company portfolio then please click here. Five new investments joined during 2015.

Active: Germany, and surroundings. Companies are sometimes more globally oriented. 

P/E: 10.2

Here you can find the previous analysis of DBAG 2016.

The P/E for DBAG is good today with its 10.2 and the P/B is also good with 1.4 which gives a very clear by signal from Graham. There is not need to bring up earnings to sales but the ROE is up at almost 14% which is so, so. The book to debt ratio is great with over 10.

Their revenue is going up and down and last year, 2016, was a good year but so was 2011 so the growth rate in these five years have not been impressive with its 2% and this then gives us a motivated P/E of 10 to 12 which means that DBAG is fairly valued on the market today.

They pay an acceptable dividend in the size of 3.5% which correspond to 36% of their earnings so hopefully something that they will be able to keep up.

Conclusion: Graham says yes and I do not. The P/E and P/B is good and so is the dividend that the pay but they have started to get close to full valuation and for this reason I think there will be better moments to step in as a shareholder, such as after the dividend payment. This said I will still remain as a shareholder in DBAG.

DBAG annual report 2016

As always please make sure that you are viable to read the report that can be found in full here. To read the previous summary please go to DBAG annual report 2015 or why not visit the analysis of DBAG 2016.

As can be seen in the report below DBAG is doing well. Their investments are thriving and they are selling them off at good valuations when the opportunity appears. The net income is doubled compared to 2015 and the EPS was up at 3.65 €. They used to have a very low dividend payment that was each year increased according to their earnings but now they have stopped this and they will only pay out 1.2 € which is still pretty ok.

Conclusion: DBAG is doing very well selling off their holdings to for instance Tesla. This year appears to be an excellent year for DBAG with massive EPS increases even though they are handing out a lot of shares. I will remain as shareholder in DBAG.

Dividend from Deere: February 2017

Deere decided to pay out a dividend to me and for my 30 shares I received 16.62 € and I had to pay 2.49 € in taxes which left me with 14.13 €.

To find out more about Deere then please visit analysis of Deere 2015.

To see my yearly dividend earnings then please visit the Stock Dividends page that will shortly be updated.

Stocks bought February 2017: BP and ETF Portugal

I read an article the other day concerning the richest man in Belgium, an activist investor of the name Albert Frere, and how he has now stepped into Hugo Boss with a 3% stake and is planning to expand it. What I found very interesting was that he seemed to have stepped into Adidas at a similar moment of time as I did and he apparently decreased that holding a little lately, while I sold off all of it. I hope that he has a slightly better reason for why he bought Hugo Boss than I do but I am happy to now know that I will benefit from his knowledge and skills in pushing companies forward. Back to the topic at hand....

BP has been with be since the very start back in spring 2012. Since my very first investment I have made three additional increases when the share price have dropped or in this case because I see a shift in the wind. BP has a fairly large stake in Rosneft and since it was bought it has not contributed with much in terms of earnings which was due to the strong decrease in the oil price but also the entire Russian economy came to a halt.

The Russian economy is, by the look of it, picking up again and my Russian index fund is up nicely at the moment and Avtovaz also jumped up like crazy. I actually missed a sales moment there... sigh... Anyway... oil price is higher, Rosneft will do better and the share price has been punished now for too long for BP.

If I am wrong, as I have been for the five years I have held on to them, then I will at least collect a nice dividend and I have no issues with that.

I bought an additional 420 shares which set me back, including fees, for 2,238 €. I hold this stock in my British stock portfolio and I realise the annoyance of being forced to pay a stamp duty here in the UK.

The ETF Portugal has remained at a very low level for a long time now. I took a look at unemployment rate that is now down at around 10%! Their GDP is also increasing year after year after year. It is not possible that the Portuguese economy and population is doing so well today while the companies and the stock index is not. There will one day be a correlation and I think that is more likely to happen sooner than later.

I therefore decided to double my investment in the Portuguese PSI20 by doubling my holding. I bought an additional 370 parts at a total cost of 1997.65 € including fees. I have only had this investment since spring 2016 so it is not very old.

Any changes will be brought into the stock portfolio upon the next update in the very end of the month.

Stocks sold February 2017: Eniro, Gerry Weber and Kernel

I wanted to keep Eniro until the very bitter end. Not because I believe they can turn anything around but simply as a monthly reminder of how poor the decision was to invest in them. To buy into a company where the CEO has been arrested for not running things with the company properly is not a good idea. To take a current event example then that would be to buy into Samsung now. Every company everywhere will have a couple of crooks employed. Once the authorities start to seriously look into a company or person for that matter then you will always be able to find something. It does not please me to say so but I honestly believe that to be true.

Eniro had a crook CEO. The CEO that took after was, by the look of things, not better. The person running the show now I neither know or care what or who he is. Key employees will have left the company and what is left is a call center in Poland.

With Eniro I additionally learnt to take a look at the goodwill. If your goodwill is higher than your equity and your tangible assets are non existing all the while having a large debt... well... that will not end very well and it did not.

Due to tax reasons I decided to walk a separate road compared to Eniro and I sold all my 850 shares, that I had paid 1035 € to acquire, for 13.60 €. There were some fees but I think I got some slack because they only reached the value of 13.60 € which means that I received zero € out for that sale. Due to that I once sold share rights for 74.50 € this "investment" did not become a -100% loss but merely a -93% loss. Eniro became, in the end, a 31 months holding.

The reason for why Gerry Weber ended up in my visual field at all was due to insider trading. The new CEO, the son of one of the founders, was each month buying shares after shares after shares. He did that when the share price was up at over 30 € so when it dropped down to around 20 € I started to look upon it as being an interesting investment. The new CEO kept buying shares. Not that long afterwards the price dropped further down to around 15 € before it started to settle around 10 to 12 €. All of a sudden the CEO was not buying any more shares.

In the article that I wrote when I bought the shares I was already then annoyed with myself because I never ever saw any customers in the store. Never. It was therefore a kind of anti-Lynch company where the books looked ok however a company without any customers will only end up at one location in the end. The bin!

I have too many companies and far too many within retail that removing one while having a tax benefit from doing so felt pretty ok. Gerry Weber you are out! and for the future of the company I hope that Ralf Weber will pretty soon also be out!

I sold my 50 shares including the removal of fees for 509 € which gives me a loss of 530 €. I received a tiny dividend in the size of 20 € which gives me a loss of -49%. Gerry Weber stayed with me for 28 months more than what they should have stayed.

Kernel was a pure low P/E, P/B and looking into a war zone where very often share prices of companies drops like stones even though they are still able to continue their business. Sometimes they are even able to perform better during such situations so it was a classical contrarian company. When I look back at the reason for why I bought it then there was not that many. I had tried to buy another one but ended up with this one... was more or less the reason for the buy. In war zones everything drops so maybe no other reason is actually needed.

I ended up buying more shares in Kernel on four different occasions which came from that the share price kept dropping and back then I had my "auto" rule of buying more shares when the drop went passed certain borders.

After a couple of years the share price started to increase and I was sitting around with a Ukrainian agricultural company, in a war zone, having plenty of business with Russia in the size of 10% of my entire stock portfolio. I then decided to decrease the holding and I sold off a large part of my shares at a profit of 35%. I now decided to sell off the rest of this holding because there were several things in the latest report that I have not been so happy with.

They are playing around a lot with the valuation of the crops on the fields and not only in storage. The have hired a person for hedging. The dollar is very strong and all crops are traded in dollars so their profits are inflated due to this... all the while they are unable to increase their revenue flow since many, many years now. An insider, it must have been the founder and CEO, sold off larger portions of shares during the end January. For me that was enough and I decided it was time to leave.

I sold my remaining 170 shares for 2864 € with a 92% gain. Looking at the entire Kernel investment then I made a profit of 2518 € and I received almost 160 € in dividends giving me a profit of 56% during the 45 months that I remained as a shareholder in Kernel.

My average holding time of my departed shares are now up at 29 months.

Any changes will be brought into the stock portfolio upon the next update in the very end of the month.

Analysis of Kernel 2016

Company: Kernel

ISIN LU0327357389 | WKN A0M7QF

Business: An Ukrainian agricultural and logistics company with its headquarters in Luxembourg. They have six different business units: Sunflower Oil in Bulk (buy sunflower seeds and crush them to oil), Bottled Oil (sold under the brand names: Schedry Dar, Stozhar and Chumak Zolota), Farming (producing all kind of crops with the new thing being rapeseed), Grain (logistic handling of bought crops), Export Terminals (export of the grain and oil via harbours) and Silo Services (storage and drying of crops before export and sale).  

Active: Agricultural production in Ukraine and Russia. The products are exported and sold all over the world according to world market prices.

P/E: 7.9

Here you can find the previous analysis of Kernel 2015.

The P/E for Kernel is excellent with 6.7 and the P/B is good with 1.5 which gives a very clear buy signal from Graham. The earnings to sales are good at 11% and the ROE is excellent with over 22%. The book to debt ratio is looking great with 1.9.

In the last five years they have had a negative growth rate of -1.6% which is very bad and this then gives us a motivated P/E of around 8 to 10 which means that Kernel is pretty close to being fairly valued by the market.

They pay out a silly low dividend in the size of 1.4% which correspond to not even 10% of their earnings which is very low.

Conclusion: Graham says yes to Kernel but I do not. Yes, all the values are looking good but I find that the values are doped due to USD valuation and, in my opinion, different valuation of biological assets. I am still shareholder but I am very uncertain for how long.

Kernel annual report 2016

There has been some major share price movements in Kernel lately since the Polish retirements funds and what have you seem to have discovered Kernel. These are the moments when you regret that you sold off parts of the company but even so I must keep my head on straight and realise the risk of owning companies that are pretty much operating in a war zone. 

The report in full can be found here and all material is taken from it. For the previous annual report please see Kernel annual report 2015 and to find out more concerning Kernel please visit analysis of Kernel 2015.

The revenue dropped dramatically, from my point of view, however the earnings are in the end very decent due to increased dollar valuation in which they sell many of their crops while many of their costs are in Ukraine Hryvnia.

There are some annoying question marks in the company... Compared to 2015 they significantly increased the valuation of their crops. To my knowledge the valuation of many crops have not increased significantly from July 2015 to July 2016 so why do they decide to push up the valuation of that? Yes, their costs to recover those assets will be less... I can agree on that but that should not influence the value of the biological asset.

They have have give them selves stock options in the size of 3.8% of the total shares. Is the CEO and founder planning to retake the company via stock options to himself?

They have now hired a BA guy that will most likely fool around with currency and crops hedging. I do not really see how that will end well.

Conclusion: Kernel is doing well on the paper which to a very large extent comes a very strong dollar and crops having world market prices in USD. The managers seems to want to create a cosy little environment for themselves and the amount of stock options are, in my opinion an outrage. This is a company that pretends to make money and it is not a little start-up that needs to tie extremely skilled people to them via the hand out of shares because the salaries are so bad. For this reason I am currently cautious. I will remain shareholder for now but it might change quickly.

Analysis of ABF 2017

Company: ABF

ISIN GB0006731235 | WKN 920876 

Business: A British conglomerate with agriculture, agricultural products as well as retail. Currently they have five business segments: Sugar, Agriculture, Retail, Grocery and Ingredients. To find out more about their grocery brands then please click here and to find out about their businesses in general then please click here.

Active: Europe, Africa, USA and Australia. Heaviest in the UK and Ireland.

P/E: 24.1

Here you can find the previous analysis of ABF 2015. 

Since the last analysis the share price have dropped by over -30% which means that the P/E is at a more reasonable level today with its 24.1 however this is still a high value. The P/B have also improved significantly and is now at 2.8 which still gives a very clear no go from Graham. And I realise while writing this how insane it was of me not to sell ABF when it was up at a P/E of over 50.

The earnings to sales have improved slightly and is now at 6% as has the ROE that is up at 11.6. It is still not good but it is ok. The book to debt ratio is great with 1.7.

The yearly revenue growth rate is at a low 1.8% so more or less inflation considering their global presence. From this we get a motivated P/E of 10 to 13 which means that ABF is overvalued on the market today.

The pay a silly dividend of 1.5% however it only corresponds to 36% of their earnings so they should be able to keep it up for a while.

Conclusion: Graham has always said no to this one. I, on the other hand, decided not that long ago to increase my position in ABF. The P/E is down as a more reasonable level, the P/B is ok, the ROE will hopefully keep improving and more importantly for me Primark keep increasing the store area and sales. I will continue as a shareholder in ABF.

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

ABF annual report 2016

When I saw the front page of the report I must admit that I got slightly disturbed. It directly brought back memories of Asian Bamboo and my massively failed investment that I ended up doing. 

There is one reason and one alone for why I own ABF and that is due to Primark. Living here in the UK now it is very clear that they have saturated the market here because the amount of visitors are more similar to in an H&M store than the insane amount of people that entered the Primark stores in Germany.

For the report in full please go here and for the previous report from ABF please visit ABF annual report 2015 and to find out more regarding ABF please click on analysis of ABF 2015.

Looking at the statement below we can see that ABF did indeed increase their sales slightly. They are a global company which means that they have profited massively from a decreased valuation of the GBP. They have claimed since a long time to be working on and decreasing their costs... I do not really see that here. The profits are up by over 50% and yet they only increase the dividend by 5% so they know that the year was good.

If one takes a look at the different segments of this odd conglomerate then one can really see all the issues with Sugar. It used to bring in the big bucks and these days they are hardly even worth mentioning with their 34 million in profits.

Conclusion: Due to the decreased valuation of the pound sterling ABF profited immensely and will continue to do so as long as it remains pushed down. I still wait for the day when they will break Primark loose from the rest of the conglomerate. I will remain as a shareholder in ABF.

Summary of January 2017

January was an interesting month since it contained salary increase, bonus, stock options and back payment due to salary "error" for a six months period. I have since a long time been against bonuses but I must say that receiving share options was very enjoyable.

During January I also ended up travelling to the far east on business and stayed for a week rolling my thumbs. The trip was however highly important and with a successful outcome my team will be kept busy for months to come. I strongly dislike when I need to travel somewhere for support and to bring in some well selected words and sentences at the correct moment but I do not think that there is a way around it. I was hit very hard with jet-lag and slept maximum three hours per night. Very exhausting.

In the next couple of weeks I might even end up travelling back home to Sweden on business. I hope that I will be able to combine it with some holiday but we shall see if that can be done... I doubt it...

I have not yet managed to take up sports but I have decided to go, every now and then, for walks during my lunch break also here in the UK as I did every day in Germany. It is a start.

I managed to finish the Business Administration course of Organisation and Leadership. It was interesting but afterwards I must admit that I do not remember much of what I read. However me and my course mate managed to get the highest grade on the essay which was probably only possible because the third member of our group decided to leave us. Amazing how useless and annoying some people can be when you need to anonymously work with them online.

For the previous summary please visit Summary of December 2016 and here you can see my stock portfolio as it is.

The total invested value is now up at: 86,715 € (the decrease comes from me selling Adidas and not investing the full amount yet) including a realised loss of -356 €. I bought Hugo Boss as well as Nike.

The value of the portfolio is today: 89,469 € and spread out I now have around 7,700 € in cash on the account. The combined unrealised and realised loss is now at: 2,754 € (3%) which is not as good as one would have liked.

DAX have more or less been standing still during January 2017 and went down to 11,543 points which means a decrease of -0.5% which is worse than the +1.0% that my portfolio managed to accomplish.

Conclusion: DAX did bad and I did better. I sold Adidas at an ok moment. The two stocks that I bought instead can be discussed.... My assumptions are a 30% gain for Nike and a 30-50% gain for Hugo Boss in share price during the coming 2-3 years. The fact that I make such a specific gain increase within a specific time frame added to it makes warning bells go off all over the place. Horrible! I hope that my statements will become utterly wrong to prove the point that such statements should never be given because they should never come true.

Stocks bought January 2017: Nike and Hugo Boss

Nike is one of those American giants that are present and making sales pretty much world wide. Today Adidas is being valued at a P/E of 33-35 while Nike is valued at a P/E of 21-23. I do not consider Nike to be cheap today but neither is it very expensive. Back in December 2015 the board gave the management the right to buy back shares to a value of around 12 billion USD during the next four years. We are now in Q1 2017 so two years later and the managers of Nike have still around 9 billion USD to buy back shares for during the next two years. I do not expect to own Nike more than two to three years.

I bought 40 shares of Nike to the total cost, including fees, of 2,018.30 €.

To find out more about Nike please see this very old analysis of Nike.

The share price for Hugo Boss have taken a serious nose dive since Q1 2015. Not that long ago the managers went out with the statement of decreasing the price for their garments with around 30%. From my personal point of view the quality of Hugo Boss is poor. Back in the days when I was not keeping as good track of my finances as today I bought a Hugo Boss suit for around 450 €. I have never worn suits daily and for this reason I was slow to discover it but within wearing it for maybe ten times the garment has already started to fall apart. For me this meant never ever buying another suit from Hugo Boss even though I find their design very beautiful. 45 € per wear is simply too much for me. I additionally do not like to pay for a name and here I ended up paying far too much for the name Hugo Boss on the garment. With the new strategy of the managers the price for the Hugo Boss garments are getting closer to their level of quality. Like I said... they make beautiful things and with a 30% reduction in price I make the assumption that more people will buy their garments as well as people spending more money in the store. I look upon this as being a temporary effect especially if they have not done any changes to their quality / quality control. I therefore do not expect to own Hugo Boss for more than two to three years.

I bought 35 shares of Hugo Boss to the total cost of 2,136.44 € (including fees).

To find out more concerning Hugo Boss please see this old analysis of Hugo Boss.

I will try to remember to update the Stock Portfolio with the next monthly report that is actually already due.