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!

Regrets...

Broken Heart

To pinch the lines from the classic Frank Sinatra song... Regrets, I've had a few, but then again, too few to mention.

I am not finally divorced! A 2.5 years marriage leading to a 2 years divorce proceeding and I am now out on the other side. It went ugly. As an explanation for how ugly... I own a summer house together with family members in Sweden. Before I got married I demanded that a prenuptial agreement had to be made regarding this house to protect the rest of my family members. She signed it, it was sent in and registered at the tax office in Sweden. Her lawyer managed to twist it into that the document had not been created according to German regulation and was therefore not valid. And, funnily enough, according to German regulation he is correct in that statement. This means... if you get married in Europe with another European and you are potentially moving around in different European countries then you must make sure that you, with your agreement, have cowered the regulation according to each country. Just to be safe!

Another cold shower that I received from the German legal system was that not only are verbal agreements not viable but also written. Is that not sick?! If a notary has not been present then the agreement will always be void in the eyes of the law. This means that the family owned SMEs in Germany that operates according to a firm handshake and whatever they promised will be fulfilled (I love them for that! And they are making exceptionally great products) but that is according to German law a joke and void. Very fascinating!

Anyway... the divorce is now finalised. I have paid my dues to my ex-wife, I've paid my dues to the lawyer and I'm only waiting from the invoice from the court ~3k EUR but it has already been set aside. The overall costs from this 2.5 years marriage became ~46k EUR.

So now finally, finally, I will be able to start investing again!

During the cleansing operation I paid off all my debts so no more student loan, no more mortgage on my summerhouse (thinking about buying an apartment if I stay here in the UK so then I will get a mortgage again but it is not written in stone).

This means that my stock portfolio has been significantly reduced compared to what it was in 2018. It will take time to sort it all out so please bare with me a little and it will be a very sad moment when I make that first post regarding my stock portfolio.

If you feel like it then please guess how much of my stock portfolio is left?

Life is good!

Reflection on companies

The annual reports started with the British sugar, food and retail company Associated British Foods and ended with

the Russian car producer Avtovaz. This marks the end of the annual reports as well as the analysis of the individual companies that I currently hold in my portfolio.

What we can see is that the German banks are still not doing well six years down the line from the initial investment. We have seen that the German electricity companies are having a great year and on top of that are shaking up the entire market. We have seen that some retail companies have been highly successful and others have not. With the chemical companies we have to draw the same conclusion as for retail. The oil companies are doing well but not the oil service companies because they are still struggling as are the mining companies connected to agriculture. The american companies were hit by massive taxes but were besides from that doing very well which is a promising signal for 2018 especially since they will now pay less taxes.

I now hold 25% of my investment portfolio in ETFs and 35% if I include the company pension scheme that I am involved in. I am not yet up at 50% which I would have liked to be but I am moving towards it with giant leaps at the moment since I am saving over 60% of my salary each month. June will however become a month will a lower savings %-age since I big block of annual bills will arrive then.

I once again took a look at my biggest failed investment which was Asian Bamboo to remind myself concerning the size of that failure that I had so early in my portfolio build up period and how long that has had an impact. If only I had started with ETFs instead of making the inverse journey. I saw the signs in Asian Bamboo and yet I did not have the confidence to react on it. Is confidence the correct word? Did I remain due to curiosity? Due to my initial, very stupid, buy rule that I then had? In the final stages I remained due to that I considered that it was hardly even worth it to sell the shares before I finally did push the sell button. In general those initial investments have all performed extremely poorly for me and have lead to a long term drag on the portfolio that I still today have problems to catch up with. 

With each failure I have tried to tweak my investment approach. Is that wrong? Should the focus instead be to look upon the good investments and make up rules based on what I then saw before I made the investment? MüRe, Adidas, Enel and Deere were all great buys but should I have sold them? MüRe and Adidas I definitely should not have sold while I am still not certain when it comes to Enel and Deere. Kernel was a perfect sale but should I have bought it in the first place? One thing is for certain... it is not easy.

Open question on banks

Due to that I have two German banks that have not only share price-wise  but also earnings-wise have performed among the worst of the German and European banks I started thinking about their book value. Both DB and Commerzbank are now trading around 0.2 to 0.3 in book value.

Most other companies would have started a massive share buy-back program but the banks do not. 

Why do they not do that? Losing too much leverage? Do not care about the shareholders? 

New approach of summarizing Q-reports

To make my life a bit more easier I have decided to group my companies into these seven groups:

Retail

Automotive

Chemical

Energy

Financial

Agricultural

Technology

I will then wait until all of them have reported and then I will make one much briefer report regarding all of them within one group. In the beginning it might be a bit messy because some of them have broken years but when I go to their homepage I will then take what they offer and report on that.

Latest developments

I hope that all of you are doing well and that you managed to profit from the stock market crash that came with Brexit.

I have still not noticed a change here in the UK but there are reports concerning a more unfriendly environment towards foreigners. It is interesting times that we are living in right now.

This first month at work I have focused on the organisation and the people. I have already made most of the changes for the people and their rolls but I will start to roll out the administrative changes today. I hope it will be ok for them and that I will manage to motivate them to keep pushing forward.

The second month I will spend on learning the technical part as well as the commercial and business models part for product sales. The technical part is not rocket science but I need to push myself especially in one field that I know very little about so that I can answer any question appearing in the future and I must become the person to go to for all those technical matters.

When it comes to buying stocks I am still not really into the game. I will however try in the coming week to get a stock ISA up and running so that I can start to make 1,000 GBP investments each month.

I have the possibility, each month, to push in extra money for my retirement and if I pay in a minimum amount then my company will pay 2% of my salary. I have decided to push in 10% of my salary there so each month I have a retirement fund being built up based on 12% of my salary. I push that into a Global fund 50%, European fund 30% and UK fund 20%. I will over time change the UK fund down to either 10% or maybe even zero and that will then go into the European fund instead. This is tax free and it will lead to me being able to get money back when I make the tax declaration.

This extra retirement money that I push in I will not consider as being part of my contrarian adventure and I will therefore not keep track of it here.

Alive and kicking!

After a, for me, long period of silence I am now briefly back! As expected there are plenty of things that I need to learn and figure out with my new job. My brain is working at full capacity in the background which means that I am not able to sleep well during the nights. It will change as soon as my brain has figured out all the parameters and I hope that will be soon.

My new team members are all of them very nice and it will be an interesting future challenge to make sure, as well as to see what I can grow them into. I have already received more people underneath me than what I had anticipated which is good.

In the company there are many people that seems to have a bit of a difficulty of what to think of me. The other people having a similar position to mine are between 55 to 63 years old and with my less than 40 years that seems to make a lot of people a bit edgy and my feeling is that they fear me simply because they can not figure me out.

All of this will hopefully settle down over time and if not then I will go after that extra piece of cake that this is giving me.

Previously when I ran my own company then I could not get fired. Now I am in the direct line of fire and if anything goes wrong then I will also directly be fired. Exciting!

Already in this first week I have ended up explaining how the technology works for people that have worked there for years. With a little bit of interest and quick understanding one can directly jump ahead of all those that simply do not care neither what they themselves nor what the company is doing.

I have still not set up a stock account here in the UK but it is my intention to get that all sorted out during next week.

Concerning BREXIT there is not that much to say. Personally I do not care very much about it since there are still years to go before things would even start to happen... if ever... In that case I am also 100% certain that my current company would move a large part of their operations to an EU country which will lead to new opportunities especially for someone that have no obligations and ties to the UK.

I will try to push out a couple of articles in the next days. I bought a new stock after the referendum (as always a bit too early) and I am pretty sure I have received some dividends also.

No internet say what?

I wrote this text while I was still in Germany the reason being that I will of course not have any internet in the beginning of my stay in the UK. If everything goes well and according to plan then I will get internet on the 22nd of June but until then I will be living my life in internet-shadow.

It is interesting to observe just how handicapped one feels without internet. Or better put... already now I am dreading that the period of no internet will come and I have worked hard evenings and nights to try to prepare myself for not having internet by storing a lot of car advertisements and the phone numbers and addresses to those car dealers so that we will still be able to look at cars etc.

When one thinks about it then I find it pathetic. I lived so many years without internet and things worked out just fine. So I need to re-calibrate my mind.

Auf Wiedersehen Germany - Hello UK

Germany and more specifically Berlin became the town where I spent the longest time in my life as an adult. In the end it became almost a decade. I must admit that I am sad to leave.

I did however never really fit in here and if it would not have been for me having my own company then I would probably have left earlier. It is not that Germany or Germans are bad it was simply not my cup of tea. My way of working fitted ok in the Netherlands and perfectly in France but less so here in Germany. It will be interesting to see how I will fit in the UK.

Usually in research and development today there is a lot of talk about optimization, quality control, quality management, GMP, Lean, Six Sigma etc. In my lab I established a concept that I called "Quick and Dirty" or short "Q&D". Sometimes the world seems to forget that new products only arrive by doing new things and part of that process is NOT optimization, quality control, Lean etc. All those things comes afterwards. Additionally, spending time in meetings talking about new products will also not generate new products but five minutes of Q&D in the lab will. These are the kind of things that makes me not really fit into the German scientific world.

Outside of work life in Germany is fine. Food tastes good and you get plenty of it. They have a heavy bureaucracy which sometimes you hate and sometimes you love based on how your current interaction is progressing. German people are kind and hard working savers that unfortunately have yet to discover stocks and the stock market. 

I was on my way to write that Berlin is special but I decided to change it into that Berlin was special. The reason for this is that today there is much less that is special about Berlin than what is "normal" in Berlin. Give it another couple of years and Berlin will be a large München or Frankfurt. I missed the golden era of Berlin which was from the fall of the wall to the millennium and I was here during the intermezzo where some parts where still different and special and other parts had already become completely gentrified. Try to find a place in Berlin today that is not gentrified...

Due to my personality I did not profit from Berlin as I could have. In the middle of the process I also discovered and was forced to start investing which then also caused me to profit less from Berlin because especially in the beginning when you start living very frugal it is hard to find a balance and one very often goes frugally too extreme. I did for many years and only recently have I started to change a little concerning this matter which most likely comes from me tossing out around 15k € for starting our new life in the UK. Much of it will come back but psychologically once you start to toss out those quantities of money it seems to be "easy" to just keep pushing out more money. I will need to step on the break once we are in the UK to regain control of the situation.

I was once told by a french person that I should never say "Adieu" because that meant to never meet again and therefore to Germany and Berlin I will say "Auf Wiedersehen" and at the same time I say "Hello" to the UK!

In England to find a home

Me and my wife are now in England for a week to try to find a new home. This is the first time I am making a serious move with a life partner and I had for this reason not the experience regarding it... It is hard. Things that I do not see, would not see, would not care about she does. She also have a clear opinion about what must be present in this house / apartment.... So... what would personally have taken me maximum three apartments visits before deciding now takes much, much longer time.

It should be repeated here that the plan is to stay for maximum one year in the rented apartment before buying a house. For living somewhere during one year time I really do not care what it look like but she does and for this reason it is also important that we find something that she will like even if it takes a bit longer time.

There are so many nice little villages in the UK and the distances are nothing if traffic runs smoothly. For this reason we are trying to find a nice place in one of those little villages.

Today we will go and see a very promising town house! It is a bit on the expensive side (600 GBP) but it is only 18 km to work and with good traffic it will take 20 minutes to get there with a car. A car is a must here and we will be forced to buy two of them directly in the beginning. I am already worrying about all the costs that we will have to carry during this first month.... the move will be around 5k € to that can be added that we need to start two cash ISA and pay in 2.4k GBP... since we do not have a credit record here in the UK we might even end up being forced to pay the first half year in rent even before entering the apartment... to that comes fees in the size of 300 GBP... and of course the two cars... flights... hotels... etc. etc. It really feels like a never ending story. Besides from the cars and the fees the money will not be lost but they will still need to be brought out on the table during this first month.

Do I have the money? Yes, I do but it is in stocks and I have no intention of selling stocks to pay for my move. Anyway... we will manage since I planned a little a head and started to build up cash.

So... Greetings from the UK - the future home for My Contrarian Adventure.

New job -> new life -> new country?

I have since July last year been looking for a new job. The reasons are many and I find it better not to list them all but let us just leave it at that every now and then we need change in our lives and I have lived and worked in Berlin now for ten years. It is enough. I have seen a lot and I have learnt a lot but it is time to move on.

Avtovaz: incompetence sitting at the steering wheel

No, I am not talking about the CEO Bo Inge Andersson because he has a proven track record but instead I would like to point at the complications of having majority shareholders that are controlled by incompetent individuals.

A lot of bad things can probably be said about Russia, Mr. Putin and Mr. Medvedev. One thing is however very clear. Russia is a great nation with extreme quantities of natural resources. No one has ever managed to fully conquer Russia and yet countries have tried. Mr. Putin and Mr. Medvedev... well... one do not have to like their politics or how they gained and remained in power but one thing is very, very clear. They are extremely intelligent people.

Analysed requests from 2015

In 2015 I received a fair amount of requests on the Analysis Requests page. To check out my previous summary then please visit analysed requests from 2014 and by following that one step further back you will find how the colour coding works.

What we can see is that Graham got four green ones and four red ones so 50% accuracy in the selection and for me I got three green ones and three red ones so also I got 50% accuracy in the selection. So far so good!

Analysed requests from 2014

This time we take a closer look at the requests that arrived in 2014 on the Analytical Requests page. The principle of how I looked at it was exactly the same as in the previous article Analysed requests from 2013 so there is no reason to go over that again.

From this year Graham has four green ones and only one red meaning that he had an 80% pick accuracy for the "extra ordinary" stocks in either direction. I on the other hand had only two green ones and one red so 67% accuracy but on the other hand I would not have picked a single company to invest in. That is always bad news.

Analysed requests from 2013

I decided to take a look at the requests that I have received over the years and how the development, in terms of share price, have been of those companies. First out will be the requests that I received during 2013 on the Analysis Requests page as it can be seen above. I have received many more requests over email and on twitter but I will stick to that what posted on that page.

This reflection is not only to take a look at the suggestions arriving but, maybe more importantly, I also look at and judge the buy or not buy comment based on Grahams formula as well as my own personal feeling concerning the specific company.

Should it stay or should it go?

This is an attempt of a survey to find out what you guys thoughts are concerning my current holdings. I start to have many of them and I have on numerous occasions already realised that I am not able to follow them all as well as I would have liked. By this I mean that I would love if all the companies would only arrive with annual reports for me to read and not a report each quarter but now that they do arrive with them then I should also read them. Sometimes months can pass before I realise that one of my companies arrived with a new quarter report. Good, bad? I cannot tell but I do not like that I am obviously not able to keep track of them all.

So the four questions are:

• Which three companies in my stock portfolio should I increase my holdings in?
• Which three companies should be kicked out from my stock portfolio?
• One company that should enter my stock portfolio?
• Why? and that goes for all the three above questions

I will not make a promise and say that I will run out and sell the companies, increase or add a new holding but I can promise you that I will keep it in mind for the future. Oh, and for February I have already decided what to buy so it will not influence the very near term decisions.

Hmmm... first I was thinking that I should start and give my own thoughts to it but that would be bad and could give an influence so I just leave it as it is.

The middle manager conundrum

Since around half a year or so I have been writing that I am looking for a, to put it nicely, new challenge in my life. To be more frank I am bored out of my mind and I need a new job to kick start my brain cells again.

I have by now been running my own company for over seven years and I have had between three to seven employees during these years. For a small company that makes you the CEO but for a large one that makes you a middle manager. Times have sometimes been tough with decreased employees and decreased salary but that is how things can be.

Due to my studies in Business Administration and the essay that we had to write in the end I have come to realise what a fatal mistake I have made in my career. The essay lifted my eyes over the plate but I had already before started to suspect that something was not correct.

Repeat or not?

I have desperately been searching my own blog for an article or comment that I wrote concerning that I have started to be more and more unhappy with the low P/E and P/B strategy since I find that it does not live up to what it promises. I did unfortunately not manage to find it and for this reason I now write this reflection concerning the matter. So if you remember what I then wrote then please excuse an old man for ranting on and on about same things.

The reason why I, at least in my mind if not in text, claimed that I was unhappy was because the strategy by David Dreman included not only that low P/E and P/B companies would over time outperform the others BUT ALSO that when the market drops and when there are bad news then the low P/E and low P/B companies will not fall as much as the market because they ARE already so low.

Merry Christmas 2015

Since I found last years tree so cute it became also the picture this year! Why waste a good picture?

This year my wife and I have gone back to Sweden to celebrate with my family. Next year we will celebrate with her family to start getting the ball rolling of those celebration visits.

Since my brother came home from Australia with his entire family this year my parents house is pretty stuffed and to make ours as well as everyone else life a little bit easier we decided to stay in the summer house and drive the one hour back and forth when the traditions demands it.

Since we will celebrate with my family the food costs will be a little bit better off this Christmas, but the travelling (back and forth to Sweden + within Sweden) + the ski trip will drain the account. Most likely the smaller investment will be made for the first couple of months.

In my last Christmas greeting the Merry Christmas 2014 I wrote that I would try to give myself an increased salary which should hopefully make it possible for me to increase my investment pace slightly. I hoped to be able to invest 20k €. I was not that far off. In the end I invested a bit more than 22k € which I am happy to have managed to push out onto the stock market. The companies picked still needs to be improved though in the future. Oh, the salary increase will remain for now but I do not know for how long it can remain as such. The clouds are growing dark, which I am preparing for by increasing my buffer system and by increasing my cash to cover around eight months of living expenses. I will feed money into that cash buffer for the next couple of months which will also influence how much I can push into the broker account.

Anyway... Christmas is here. I am in my summer house with my beautiful wife. The wind is blowing, the rain is falling but inside the fire place is burning.

Merry Christmas to all of you!

The investment check list

As I wrote in a comment somewhere I have become more and more interested in making an investment check list. I heard about it from Mr Mohnish Pabrai and I find it to be a very correct thing to use.

Thinking back on my own investments and starting to considering this investment check list I must admit that I get a big embarrassed because I have bought cheap companies that I have found but I have very rarely taken a look at their competitors. So in situations where the entire sector crashed I have only bought more or less randomly the company that I looked at that then appeared to be cheap. This is not ok. There were for sure many other companies / competitors in the sector that were equally cheap but maybe with a significant advantage that I have completely missed to analyse.