Meetup in Stuttgart!

Shoutout an alle Value Investoren, die die es werden möchten und jeden anderen Interessierten im Raum Stuttgart! Um sich und die örtliche Valueszene ein wenig kennen zu lernen ist am Freitag, den 4. November 2016, ein Treffen in Stuttgart geplant. Wir wollen mit möglichst vielen Gleichgesinnten zusammen essen, trinken und uns über Value Investmentkonzepte bzw. Ideen oder auch alles andere unterhalten. Los geht es um 19:00 Uhr im Lumen. Unter folgendem Link findet Ihr die Adresse und weitere Details:

Wer dabei sein möchte bitte kurz im obigen Link zusagen. Wir freuen uns!

WEBCO Industries – One Last Puff Remains

WEBCO Industries is a classic Graham net net, or in Buffett´s words a cigar butt with one last puff remaining. Buying the equity provides investors with 63% upside to NNCAV and 120% upside to liquidation value. The business of WEBCO is unattractive yet good enough to earn meaningful profits over the cycle. WEBCO manufactures tubes for various end users in different industries such as upstream/downstream oil, agricultural and auto/trucking among others. In simple words raw materials are purchased and then processed into tubing solutions. Continue reading

Why Baidu Deserves a Spot in a Value Investor´s Portfolio

I have been interested in Baidu for quite a while and today decided to open a position in the company by buying 6 shares at a price of USD 163. I will increase the position when prices turn more favorable.
On SeekingAlpha I have outlined why shares are a buy at current levels in detail. You´ll find the pitch including my valuation model here:

For all the folks in a rush, here´s a fast track introduction as to why Baidu may be suitable for a value investor´s portfolio despite being an internet company and Chinese:

  • Sum of the parts valuation results in value of USD 255 per ADR
  • or 60% upside until end of FY2017
  • Baidu search is significantly undervalued trading at 11x FY2017 after tax profits while growing at a > 20% clip
  • Comparable businesses command multiples in excess of 20x profits
  • High search margins are buried under large investments into O2O and iQyi
  • Sale of online-to-offline businesses and Chinese Netflix pendant iQyi will reveal true earnings potential or provide upside optionality if turning profitable.

Here´s a brief update on what Chinese think of the company and its services. Headline here is that Baidu is unloved but there is no alternative for it, which will ensure growing profits for years to come.


I am currently long Baidu (BIDU)

Selling PM at a Wonderful Price

Yesterday I closed out my position in Philip Morris Inc (PM) with a net gain of 31% including dividends. I still believe the tobacco industry is an excellent place to be due to an addictive product resulting in a very inelastic demand curve helping big tobacco to grow revenues despite shrinking cigarette volumes. Further little CAPEX requirements pave way for robust cash flows in the industry.

Nevertheless, at some price even the best business becomes an attractive sell. As of yesterday PM traded at around 25x earnings and 20x FCF, which is considerably higher than multiples demanded by the company in the past. Average P/E ratio over the past 5 years Continue reading

More Color on RCI Hospitality

I felt I had to shed a little more light on a conviction buy of mine, RCI Hospitality (RICK). While I have briefly outlined the thesis for investing in RICK, I feel to better comprehend the rational behind taking a position in the company requires a little more detail.

I have decided against publishing the article on my own page in favor of SeekingAlpha. Due to the large audience on this platform authors are usually confronted with critical feedback on their argumentation, which I consider essential for the investment process. This is not a click and bait action of any kind. Compensation on this article will be minor since even on Seeking Alpha this stock is underfollowed and the write-up will generate only few views upon which compensation is based on.

Going forward I hope I can evoke similar feedback for my ideas on and am able refrain from publishing my ideas on 3rd party websites.

Finally, here´s the link to the article:

Here´s a brief update on recent released Q3 sales figures of RICK:

Buy, When There is Blood in the Streets

I have used the turmoil over Brexit to purchase 550 shares of Clydesdale Yorkshire Banking Group (CYBG). An undervalued mid-size British bank active in mortgage, credit card and small business lending.

The out-vote of the Brits caught markets off guard, which were clearly pricing in a remaining of the UK in the EU. In the following equity markets crashed because of a flight to safety, in particular into U.S. Dollar, Japanese Yen and Swiss Franc denominated assets. Naturally high rated gov. bonds were in demand sending yields down to record lows. Consequently risk assets all around the world, especially equities witnessed drops not seen since Lehmann Brothers in 2008. Among equities banking stocks have been battered down the hardest. Continue reading

Strategy Update

I felt the strategy section was overdue for an update to give it a little more structure and break it down to what really matters to value invest successfully. Hence this blogpost will be pinned here to give an overview on how I try to invest my funds.

For me as a value investor the most important imperative is to reduce uncertainty when valuing companies. However, widely used valuation techniques (while theoretically justified) such as the discounted-cash-flow method, usually involve a lot of guessing and forecasting into very distant points of time in the future. Continue reading