Friday, July 24, 2015

Increased stakes in Fortum

I have more than doubled our position in Fortum lately because I think it is now very attractively valued.

My seven reasons for holding Fortum have not changed much in two years.

The reason #7 has now realized and hidden value has been unlocked. Fortum now has liquid funds worth 8,6 billion EUR after the divertments of Finnish and Swedish power distribution businesses.

At 15,50 EUR per share it has market cap of only 13,8 billion EUR.

According to fund manager Anders Oldenburg, the hydroelectric power plants that Fortum have are alone worth 15–17 billion EUR. 

Add that and the liquid funds together and you start to see the picture.

Market seems to value the company very much differently. There are short term headwinds with low price of electricity and market likely is hypersensitive with the business in Russia.

While it's entirely possible that the stock will continue to go south, one gets paid reasonably well for waiting for "better days". The "usual" dividend from Fortum has been 1,1 EUR (7,1% yield @15,50 EUR). On average analysts seem to expect 1,26 EUR next time.

Saturday, July 18, 2015

Sold Orion

Even though I like Orion as a company, the price climbed recently too high to make sense to me.
There are other companies in Finland of same quality, with higher dividend yield, better future prospects and more reasonable valuation.

It seems that many companies in pharmaceutical sector are valued high (P/E > 25) - just like Orion was when I sold it. It seems bit challenging given the headwinds most companies need to face with blockbuster drugs going out of patent protection.

Thursday, July 2, 2015

Portfolio update: Allocations and Top 5 positions

It has bee quite a ride in the markets past 6 months. First 4 months most of our stocks were performing really nicely. In the last two months aggregate gains have been almost wiped out.

Our portfolio is currently allocated as follows:

Stocks 98,0%
Gold 1,9%
Cash 0,1%

No bonds.
I simply substitute bonds with quality dividend payers in our portfolio.

Geographical Allocation (stocks):

Europe 54,5%
North America 33,6%
Emerging markets 11,9%

Actually, place of incorporation is pretty meaningless for most corporations we have invested in. Most operate and sell globally.

Sector Allocation (stocks):

Information Technology 44,6%
Other 21,8%
Health Care 8,8%
Oil & Gas Production 8,4%
Communication Service Providers 6,6%
Low Emission Power Generation 5,8%
Mining & Exploration 4,0%

Top 5 positions:

Company/ETF (place of incorporation -- sector) allocation%

Siili Solutions (Finland -- IT) 9,2%
Western Digital (USA -- IT) 6,8%
UPM (Finland -- Other) 6,4%
Micron (USA -- IT) 6,1%
Nokia (Finland -- IT) 5,9%

21,1% of all stock positions are done via ETFs.
None of those positions made it to top 5 though.

Wednesday, June 24, 2015

Added Micron to portfolio

I recently added Micron to our portfolio. General thesis behind that stock is the same as with Western Digital: amount of data in the world is growing exponentially and will keep on doing that for many years to come.

All that data will be stored on the fly to volatile memory and then for permanent storage to hard disk drive or non-volatile memory (solid state drive or non-volatile memory chips inside device). Micron makes both memory chips (of volatile and non-volatile kind) as well as solid state drives (which essentially come down to bunch of non-volatile memory chips).

The amount of memory chip manufacturers have come down over the years similarly to hard disk drive providers. This should make the overall playing field more healthy as there are less players going for crazy price points at expense of profitability.

It can be also foreseen that every major step in technical advance will increase the "moat" of dominant players i.e. create barrier of entry and makes sure only the very big ones can stay on the leading edge. As with all technology, most profits are made on that edge.

There are many things that have pointed to Micron as a potentially good position. Micron has popped up in my screens as value play. Intel and Micron are collaborating on 3D NAND Flash memory technology, which may get them market share boost in this space.

What also has caught my eye is that David Einhorn has a very big position in Micron (he is one of the value oriented money managers I follow).

Finally, Micron serves as hedge to our position in Western Digital. Transition to solid state drives has not been as fast as many predicted years ago, but it's there as a trend and threat to hard disk drive manufacturers.

We have positions in Micron, Western Digital and Intel.

Tuesday, June 2, 2015

Which stocks famous money managers hold?

Dataroma tracks famous value oriented money managers that they call "superinvestors". Among them are legendary investors like Warren Buffett.

I regularly take a look what they hold, what they have bought and what let go.

An interesting question with regards to these money managers is that given they park billions, how far they deviate from index investing?

Top 20 by ownership count was as follows:

I included two more stocks into the list since Google and Berkshire is there twice with different classes of shares.

Obviously they have to select big corporations because of the amount of money they need to put into a single position.

However, the companies are not in the order that you would expect in terms of market cap. The order will change a bit if you look at amount of aggregate money in these positions, but the conclusion does not. They are still not in the order of market cap.

There are three companies with market cap below 100 billion USD: Liberty Global Inc., AIG and American Express. Very many big names with much larger market cap are not in the list: Wal-Mart, Facebook, Pfizer, P&G, Verizon, Amazon, Chevron etc.

To me it seems that atleast these money managers as aggregate deviate what could be called "index investing".

Overall, the "superinvestors" seem to prefer technology and financial sectors. Also, they clearly prefer corporations based in USA rather than elsewhere in the world - even if those would be listed in the NYSE or NASDAQ.