Summary of May 2020

Summary of May 2020

The sunshine has continued during the month while my mood has gone a bit down from all the home office. The world has started to be active again and I'm sitting every day having telephone conferences with all corners of the globe. UK will now start to ease the lockdown and people are allowed to meet up as long as they keep the 2m distance.

I will be back in the office on Monday and more and more of my team will be brought back in during the coming weeks. I'm happy to be back at work even tough it will be awkward with the social distancing and all the precautions that we must take. I'm Swedish and we are a hugging population. Few things beat a proper hug for showing that you care about the person.

In the latest weeks I've spoken a lot with people in South America. They are still on proper lockdown and their economies that were struggling already before have now gone further downhill. Since it was on my mind about the supply companies I was asking them about it and what they said was that smaller supply chain companies either have or will go bust which will lead to delays in the economical kick-off not only for South America but for many other parts as well.

Share prices have continued up also this month and I can only once again state that I think the celebration is far too soon. Does this mean that I will not buy new shares from my salary? No, it does not. I know that I cannot time the market so if the company is reasonably priced then I buy it.

For the previous summary please visit Summary of April 2020 and here you can see my stock portfolio as it is.

The total invested value is now up at: 147,260 €. The monthly investment in the Mixed ETF has been made and I bought shares in Skanska.

The value of the portfolio is today: 170,199 € and I have 2095 € in cash on my broker account. I have realised gains of 3,103 € and unrealised of 22,940 € (13.5%) which is, as always, not good enough.

DAX is now up at 11,587 points which means that it has increased by 6.7% since the previous summary and my own portfolio has increased by 7.0%.

Conclusion: Third month in a row that my portfolio performed better than DAX. I do not expect it to last. I have cash again on my broker account and I've made a small investment in construction so I am still missing property and forest industry. Additionally, I'm interested in increasing my holdings in Skanska, ABF, DBAG or Tessenderlo. ABF has a part retail (Primark) and I am already have in retail so I'm reluctant with that one. DBAG pay out very nice dividends, they recently opened a new fund that was filled up with money so they have firepower for plenty of investments however I already have a bit of money in them. I was looking over the forest industry and I'm sorry to say that I am not pleased with their revenue growth rate and property I consider to be in a bubble due to the low interest rates and one need to dig to see if the company is aggressive with their property re-evaluations so currently I cannot be bothered to look into that industry. Hence it will either be more in Tessenderlo or more in Skanska.

Dividends during May 2020: Talanx

Many companies stopped their dividend payments so one must be happy with what little stream one do get.

During the month of May I received dividend from Talanx in the size of 120 EUR. From this was taken 31.65 EUR in taxes and 88.35 EUR was paid out as cash on my broker account.

To see a bit more in details please visit my Stock Dividends page.

Asian Bamboo looking back

My, without doubt, biggest financial mistake was made with a fairly young company, working in an old line of business and being based in China.

Asian Bamboo is now since 205/2016 bankrupt and for that reason I decided to go back to all the annual reports to read them again to see if I would today, hopefully knowing a bit more, have done something differently. Interestingly enough, Asian Bamboo was bankrupt, had no CEO, no board and yet it was still being traded on the stock exchange in 2016 as if it had a 1.5 million euro market capital (it has now been removed!). The company had many similarities to surströmming... besides from the taste that is.

Actually one should dig into all the Chinese companies that had their IPO in Germany since around 80% of them have gone "bankrupt", by now closer to 95%! Unfortunately I do not have the time for that but I did own Asian Bamboo so there my interest is large enough for me to spend time on it. This time I also had to spend to make sure to really rub some salt into the wounds.

Strange things that should have opened my eyes are mentioned below. Some of them I did react on when reading the reports but I kept pushing them away that the Norwegian oil fund held shares in the company gave me a false sense of security:

• Very high payments for leasing the bamboo forests 
• The forests kept going to maturity with increasing value even though they claimed to harvest the forest
• Largest parts of profit was from rewriting the value of the bamboo forest that they were leasing (not even owning it, which does not really matter because the value of course still increase but still...)
• I was in touch with their CFO asking who their competitors were and got the answer back that they did not have any. Yeah, right. This guy actually told me to get out with that answer and I failed.
• Kept flipping the costs between reports from being non cash flow influencing to being cash flow influencing. I still claim here that the auditing company that allowed this to happen should be sued by all the investors.
• Having a company in between Germany and China in Hong Kong that was a mailbox company with an oddly structured ownership that made no sense.

In the end my conclusion has been that I will simply not invest in a company that are not obliged to follow rules and regulations similar to what I am used to. This translates into only owning North American and European companies. Additional, I'm not allowed to allow myself some false sense of "security" based on other (famous) investors owning shares in the companies that I also own. It is irrelevant. The investment can often, in the grand scheme of things, mean nothing to them but it means a lot to me!

My first investment was made in 2012 and my final 11 months later in 2013. In 2015 I finally sold the shares with an overall loss of -5,783 €.

I currently have similar but unrealised losses in DB and Coba both companies were initially, just like Asian Bamboo, bought in 2012 when I started investing.

Well done me!

Dividends from January to April 2020

With this publication I am now finally on top of things again! All the dividends from the past has been sorted out (2018 and 2019) and now I have caught up with the dividends payments during 2020. I have also managed to make my simplistic analysis of all my current holdings and unfortunately all of them are not in the state that one would have liked to see. The three big ones there are my two German banks DB and Coba but also K+S has now joined the children choir of sorrow.

During these four months I have received:

Two dividend payments from Nike in total 17.63 €
Associated British Foods paid out 40.23 €
DBAG gave a nice payment of 232.50 €
Intel arrived with 39.88 €
TJX with measly 13.10 €
IBM with 35.48 €
and finally BP with 72.06 €

As tradition holds all dividends are re-invested with my monthly purchase.

This year will most likely not be very fruitful in terms of dividends due to two reasons:

1. Over 50% of my holdings are in non dividend paying ETFs
2. Many companies have decided to hold on to the cash from 2019.

I've also started to read other finance blogs and it is interesting to see how many of them have handed in the towel. I hope this is because they got tired of writing articles and that they privately are still enjoying the great fun of investing!

I hope all of you are busy reading up on companies and catching some good ones that are now more reasonably priced and you can be sure that I will, in the end of each month!

To see a bit more in details please visit my Stock Dividends page.

Analysis of Skanska 2020

Company: Skanska

Business: A Swedish world leading project development and construction group that is active within three segments: Construction, Residential Development and Commercial Property Development.

Active: Mainly in Europe and North America

P/E: 12.9

Here you can find the previous Analysis of Skanska made in 2013.

The P/E of Skanska is good with 12.9 but the P/B is a bit high with 2.4 which then gives a no go from Graham. The earnings to sales are pretty low with 3% and the ROE is good with 18% but there is some debt leverage. The book to debt ratio is low with 0.33. 

In the last five years they have shown a higher than inflation yearly revenue growth rate of 2.5% which then also gives us a motivated P/E of 10 to 13 which means that Skanska is today fairly valued by the market.

They pay a dividend in the size of 3.4% which corresponds to 43% of their earnings so it can be kept at this level.

Future: We will continue to build homes, build infrastructure and commercial properties - either new or restoration and renovation of older objects. There are claims saying the US part is undervalued today and after Carillion going bust I expect nice growth on the UK market also.

Conclusion: Graham says no but I say that this is a good opportunity to pick up a good company at a temporarily lower price which is why I also bought them last week.

Analysis of VW 2020

Company: Volkswagen 

ISIN DE0007664039 | WKN 766403 

Business: A German automobile manufacturer. The are still producing motorcycles, cars, trucks, large-bore diesel engines, turbochargers, turbo machinery, compressors and chemical reactors. They are however most famous for their cars and here are the Volkswagen brands. They have seven essential group values, that considering not that long ago, are simply a joke.

Active: World wide with sales in 153 countries. 

P/E: 4.8

Here you can find the previous Analysis of VW 2018. 

The P/E for VW is excellent with 4.8 as is the P/B with 0.5 which gives a clear buy signal from Graham. The earnings to sales are so, so with 5% and the ROE is not the best with only 11% while the book to debt ratio is at 0.3 which is also not superb but these days all these companies have leasing as part of their model for making the sales.

In the last five years they have had a yearly revenue growth rate of 3.4% which gives us a motivated P/E of 12 to 15 which means that VW is undervalued by the market.

The spend a large chunk of money on R&D since it corresponds to almost 100% of their earnings.

They pay a dividends in the size of 5% which happily corresponds to 25% of their earnings so there is room for improvement if so desired.

Future: Means of solo and multi-people transportation will be around for a long time. If that car is running on electricity, petrol, gas etc. is a different story. Few car companies are bound to use a specific source of "fuel" besides from Tesla. I do believe that VW will be able to change to what is required of them and if not then they can hopefully make a take-over of a company that already has what they need.

Conclusion: It is indeed a go for Graham and also for me even though I am still annoyed about the diesel-scandal and me buying the shares just before that took place. I am half interested in increasing my holding.

Analysis of TJX 2020

Company: TJX 

ISIN US8725401090 | WKN 854854 

Business: An American off-price apparel and home fashions retailer. They use several store names based on take overs and store concept and in the U.S. they have T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post and in Canada they have Winners, HomeSense, Marshalls and in Europe they got T.K. Maxx and HomeSense. 

Active: in the US, Canada, the Netherlands, Germany, the UK, Poland, Ireland, Austria and Australia.

P/E: 18.2

Here you can find the previous Analysis of TJX 2018. Since the previous analysis they have made a 1:2 share split.

The P/E of TJX is on the high side for me with 18.2 and the P/B is extremely high with 10 which gives a clear no go from Graham. The earnings to sales are ok with 8% and the ROE is excellent with 55% but due to debt leverage. The book to debt ratio is low with 0.3. Debt has significantly increased due to new lease standard which influences the balance sheet.

In the last five years they have shown an impressive yearly revenue growth rate of 6.2% which then also gives us a motivated P/E of 16 to 21 which means that TJX is today fairly valued by the market.

They pay a silly dividend in the size of 1.9% which corresponds to 34% of their earnings so it should be easy to maintain as well as increase in the future.

Future: Will people continue to want to buy fashion brands cheap even if it is a season later? I tend to think so. What did they fashion brands previously do with their out of season garments? Bin them? Now TJX is happy to take it and sell it cheap so sustainability is also good in my opinion.

Conclusion: Graham says no and I say yes. I like TJX. My latest garment shopping rounds have been to TK Maxx stores. I consider this to be a good moment to buy them at a fair price based on my overweight in retail if I would have had any money to invest with today then I would have bought Tessenderlo instead just to put it into perspective.

Analysis of Tessenderlo 2020

Company: Tessenderlo 

ISIN BE0003555639 | WKN 852064

Business: A Belgian chemical company. They currently have three operating segments : Agro, Bio-Valorization, Industrial Solutions and finally T-Power.

Active: 21 countries and 100 locations.

P/E: 11.4

To find out more concerning Tessenderlo then please go to analysis of Tessenderlo 2016.

The P/E of Tessenderlo good with 11.4 and the P/B is also good with 1.3 which gives a go from Graham. Earning to sales are so, so with 6% and the ROE is on the low side with almost 12% while the book to debt to book ratio is acceptable with 0.8.

In the last five years they have shown a yearly revenue increase of 1.9% which is not very good but still it is in the right direction and therefore gives us a motivated P/E of around 9 to 12 which means that Tessenderlo is today fairly valued by the market.

They pay out no dividends.

Future: Agriculture and let us call it upcycling, water treatment and energy. All if it has long term future as long as they can keep up with competitors.

Conclusion: Graham is ok with it and personally I think it is a good moment to pick up some more shares in Tessenderlo.

Analysis of Talanx 2020

Company: Talanx 

ISIN DE000TLX1005 | WKN TLX100 

Business: A German mutual holding insurance company. It is divided into five divisions: Industrial Lines (covering all the insurance needs of industrial companies), Retail Germany (retail and commercial customers covering property/casualty), Retail International (outside of Germany), Reinsurance (non-life reinsurance via especially Hannover Rückversicherung that Talanx own to 50.2%) and finally Financial Services (an internal reinsurance part for the entire group). 

Active: In over 150 countries.

P/E: 9.1

Here you can find the previous Analysis of Talanx 2018. 

The P/E of Talanx is looking good with 9.1 and the P/B is also good with 0.8 which gives us a go from Graham. The earnings to sales are very low with only 2% and the ROE could be better since it is only at 9.1%. The book to debt ratio is ok with 0.7.

In the last five year they have had a yearly "revenue" growth rate of 4.4% which corresponds to a motivated P/E of 13 to 16 which means that Talanx is today undervalued by the market.

They pay an acceptable dividend of 4.5% which correspond to 41% of their earnings which is fully acceptable.

Future: Insurances will exist for a long time in the future. Based on how aggressive the companies are in their sales approach and creativity in what they insure they do however have a chance to bubble and burst. Talanx is owned to 79% of a German industrial non-profit affiliation. I never did manage to get a response on what they did with the dividends they received but my conclusion was that being a non-profit organisation they will hopefully make sure we do not see any bubbles and bursts.

Conclusion: Graham gives an ok and I am happy with the shares that I currently hold but I will not increase my holding any further.

Analysis of RWE 2020

Company: RWE 

ISIN DE0007037129 | WKN 703712 

Business: A German electricity and gas company. RWE currently have four pillars to stand on: Renewable (planning to invest ~1.5 bn € per year), Generation (gas, coal, hydro which I would have expected to be in renewables), Power (lignite ~ coal, nuclear) and finally Supply & Trading (of all products)

Active: Europe mainly.

P/E: 1.9

Here you can find the previous Analysis of RWE 2018. 

The P/E is looking good with 1.9 as does the P/B with 1.0 which means that Graham gives the green light on this one. The earnings to sales are too impressive with 64% as is the ROE with 50% but I would claim that comes from the high debt leveraging and significant earnings from discontinued activities. The book to debt ratio is looking a bit better but still bad with 0.36.

In the last two years (only look back to E.On. deal) they have seen a yearly decrease in revenue growth in the size of -0.9% which bad and this then gives us a motivated P/E of around 6 which means they are undervalued by the market today.

They invest a miniscule amount of money into R&D in the size of 0.3% which I find to be very low so pretty much everything is outsourced and they will buy off the shelf products.

They paid out a dividend of 3% which is ok and this only corresponded to less than 6% of their earnings so that is good however, 9816 million € in earnings came from discontinued businesses. Without that they would have made a loss.

Future: Nuclear, coal, gas, oil and a bit of renewables. Just like E.On they will be struggling with the oil giants on the renewable market and therefore I am uncertain about their future. Personally I am not against nuclear but many people are which must be respected and there has been strong protests in Germany against nuclear power and the transport of nuclear waste. I did not intend to be in RWE for the long run and if I would have been more observant then I would probably have stepped away from RWE when the share price was above 30 back in 2019.

Conclusion: Graham gives a go based on the simplistic PE/PB valuation but I am uncertain of RWEs future and excluding the discontinued then 2019 was not a great year. I will remain an observant shareholder - ready to sell.