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Value Investing Seminar: Robert Vinall Highlights German Value Opportunities

Robert Vinall, founder and managing director of RV Capital, presented at the Value Investing Seminar in Molfetta, Italy today. His presentation was (ambitiously) entitled, How to Come Out of the Financial Crisis as a Winner with Certainty. Our notes from his speech follow:

Rob's Investment Checklist

  1. Is the business within my circle of competence?
  2. Does the business have a sustainable competitive advantage? Can come from cost leadership, network effects, brand, switching costs, licenses/permits/patents, ecosystem effect, culture
  3. Is the company run by honest and talented management? Rob is big believer in being able to tell good managers from bad by using references, track record, ways of communication, a CEO's role models, own behaviour 
  4. Does the company have engaged and responsible owners? integral part of research process, skeptical of open share registers where management does not have anyone to answer and owner/manager interests not aligned 
  5. Is the valuation attractive? central valuation methodology is "owner earnings yield" defined by dividend yield plus growth; considers 15%+ as attractive

"Invert, Always Invert"

Invoking Charlie Munger, Rob cross-checks above by asking what kind of investment will make you come out as a loser:

  • buying business you do not understand
  • buying business that won't be around in 10 years
  • partnering with people who promise miracles
  • leveraging yourself up to the hilt
  • using short term capital to buy long duration assets such as equities
  • throwing common sense out of the window
  • trusting your emotions 

What to Buy in Germany Now

Rob highlights three investment opportunities:

  1. GrenkeLeasing (XETRA: GLJ):
    • leading provider of small ticket IT-leasing equipment (<€10k equipment value)
    • multiple moats: cost leadership, customer switching costs
    • owner-run: Mr. Grenke is founder, CEO and largest shareholder (40%)
    • attractive valuation: owner earnings yield of 15%+ (3% dividend yield plus 12%+ growth); downside protected by stock trading at close to liquidation value
    • winner from current crisis: strong double digit growth as competitors retrench
  2.  Takkt (XETRA: TTK):
    • leading B2B mail order company for small business equipment (160k products ranging from sack barrows to designer lamps; ticket size <€1k)
    • multiple moats: cost leadership from scale, customer switching costs
    • high management quality
    • Haniel family (owns 70%) are engaged and responsible owners
    • attractive valuation: owner earnings yield of 15%+
  3.  Beiersdorf (XETRA: BEI):
    • manufacturer of branded consumer cosmetics
    • multiple moats: cost leadership from scale, Nivea brand
    • high management quality
    • Herz family are engaged and responsible owners
    • attractive valuation: owner earnings yield of 15%+ driven by growth into new markets and categories
    • Rob thinks current undervaluation due to market's disappointment with 1Q09 results as Beiersdorf was perceived as a safe haven

About Robert Vinall

Mr. Vinall is the Founder and Managing Director of RV Capital. He is based in Zurich, Switzerland where he lives with his wife and two children. Rob is from the UK and was born in May 1973. He graduated with an honours degree from Cambridge University in 1996 and was awarded the CFA designation in 2000. He began his career in April 1997 at Goldman Sachs Asset Management where he participated in the graduate trainee program. In October 1998, he joined DG Bank which later became DZ Bank where he was a sell side analyst covering the telecoms sector. In October 2004, he moved to Switzerland to join CDL Principal Investors, a boutique consultancy where he sourced investment opportunities in public equity markets which required active ownership.

Disclosure: No positions.