Hello readers, another timely update of my picks and performance. Unfortunately, my article frequency is rather low at present, mainly due to covering stocks that most of you across the Atlantic wouldn't care about, still I have been giving a lot more information on Twitter and so most of my picks for this period can be attributable to my ramblings there.
Of course, I will write when I think I can add something to a debate but my workload just gets heavier and heavier so don't count on seeing a barrage of posts from me any time soon.
Before going into my picks I suppose its worth taking the time to talk about my amazement with the bulls of GoPro and the dangers of reliance on a story and ignoring the data. My thoughts on GoPro are pretty rational and I am only short due to the technicalities of the IPO, otherwise I'd be a 'wait and see'.
There are plenty of great products around of which GoPro is one but the main problem of story based investing is that it is not grounded in anything realistic. In my opinion, if GPRO IPOed at $10bn market cap, many of the bulls would be equally bullish and be painting the same story.
At the end of the day, investing is never an absolute science and I am quite amazed by the amount of people who are SO adamant they are right that they lower themselves to petty insults.
One particularly funny Tweet read -
"Redrut my noob friend, over 45 your nuts will squeeze we headed for 60-70 u dont understand #momo $GPRO #stocks"
There are good companies and bad companies, there are overvalued companies and undervalued companies and the best you can do as an investor is make a reasonable range of assumptions and then figure out the price target that your valuation implies. 95% of the time you will be changing your model within 3 months as you realise that forecasting is a rather difficult exercise and the volatility of the markets make it that much more difficult.
If GPRO rallies 30% I will no doubt get tweets calling me a 'noob' a 'weiner' etc etc. If GPRO drops 30%, I won't be sending the same tweets the other way. It's all about a balance of risk/reward as in the long run, no-one really knows anything!
Moving forward to my picks....
Heidelberger Druck (HDD GY In Price EUR2.62 -currently 2.50)
If you followed my advice you would currently be down 4.5%, however I was buying this stock at as low as EUR2.20 so I chalk this as a losing trade despite the subjectivity.
This position was carried over from my previous update and I continue to hold as the management are doing a fantastic job of restructuring the company in the face of a declining marketplace and significant debt.
The company makes offset printing machines and has a near 50% global market share. They have suffered over the past 6-7 years as the 4 remaining competitors attempted the razor/razor blade model to pricing which lead to losses endemic to the market place. The new CEO came from outside the company and has begun shedding unprofitable segments, cutting the useless R&D budget and rejecting non-profitable orders. As a result the revenues have dropped markedly but margins have grown. This year, the company will embark upon further portfolio streamlining and I will hold this company until 3.50 or so based on an EV/EBIT valuation at a 10% discount to capital goods peers.
GoPro (GPRO) - Shorted at 46.50
My call came from a Stocktalk followed by a more detailed article. Fundamentally I dislike the company's long term prospects but do admit their could well be further growth over the next few quarters. My call is based purely on the structural undersupply of shares in the IPO which lead to a squeeze as fans jumped over each other to bag a few shares of their own
Followed my advice and you would be up 16%
I first mentioned this company on April 9th and have liked it since they managed to sell some business units back to Thyssenkrupp in exchange for the nullification of a +1bn EUR loan note.
This deal allowed the company to deleverage the balance sheet overnight once again making them investable.
Couple to this the upcoming US stainless plant, the strategic access to ferro-chrome, the Indonesian nickel ban, the Russian Turbulence, the EU anti-trust suit against China, the cyclical recovery and the decreasing supply of stainless, you have a long term winner.
Followed my advice and you would be up 56%
Suedzucker OTCPK:SUEZF Shorted at EUR18.30
This short I gave on the profit warning which saw this stock smashed to pieces, ne'er to recover. With the EU sugar quota system due to expire in 2017, it is likely the European Sugar prices will converge to world prices. This means lower top line for the company and drastically lower EBIT through negative leverage.
This is still a structural short
Followed my advice and you would be up 25%
Serco OTCPK:SECCF Bought at £4.24
I was blindsided by Mr.Soames kitchen sinking when I recommended a buy on this stock as another profit warning in a long line over the past 12 months had led to a weak balance sheet for which the group needed to issue a rights issue. This is a long term own but don't expect to see too much to soon.
Followed my advice you would be down 12%
I wrote an article after the first bids for the power segment came in suggesting the target price to be between EUR29 and 34 per share. Unfortunately, since the French state stepped into the frame, investors lost confidence in investing in a company attached to a socialist government. I haven't had enough time to follow this so in the face of uncertainy, I would close the investment and take a loss. The stock is trading 14% below my mean price target. I recommended accumulating below 28.50 meaning
Followed my advice you would be down 7%
I also made a long investment in both Xeros and REC Silicon, the latter of which is flat and the former is down 25% but I will stress that Xeros is a £60m company and is subject to wild swings. I am a long term holder here but see no point on expanding on the stock since I doubt many of you would be interested. If you were, give me a message and I'd be happy to share my views
Previous picks covered in earlier posts (brackets indicate, should you have held after I closed the trade)
...RM2, you lost 14% (NO!!)
...Herbalife, you made 15% (NO!!)
...Pandora (PNDORA DC), you made 22% and still open
...Blackberry, you made 41% (Well there was a LOT of volatility but ultimately YES!)
...Potash corp, you made 16.2% (YES!)
...Nokia, you made 37% (YES!!!)
...K+S you made 23% (YES!!!)
...Dialog you made 30.5% (YES!!!)
...Infineon, you made 17% (YES!!!)
...Tesla, you made 3.5% (NO!!!)
...Potash Corp, you lost 0.5% (HELD ANYWAY)