Wednesday, October 21, 2015

Thoughts on Western Digital's acquisition of Sandisk

Consolidation in memory/storage space continues with Western Digital (WDC) acquiring Sandisk (SNDK).

It's not surprising to me that Western Digital is making the move instead of Seagate.

One of the reasons I originally selected Western Digital (instead of Seagate) was the fact that they used far less leverage (debt). This kind of deal would have more difficult for Seagate.

Flipping through the the presentation on this deal, the following stands out:
  • Very little dilution to Western Digital stockholders (almost entirely cash deal financed via taking more debt)
  • Complementary portfolios: Western Digital+Sandisk will have widest ranging storage portfolio out of all other companies.
  • Combined company will have significant patent portfolio and R&D units
  • Addressable market doubles
Our IT technology portfolio is heavily tilted to storage/memory/processor theme as these are the basic building blocks that are needed to fuel the huge growth of data that is ahead of us (data being stored, processed and transferred between locations).

As there has been consolidation in all these spaces, the remaining companies have good position to extract profits from growth of data as barrier of entry to these markets is high.

Sunday, October 11, 2015

Update on portfolio allocations

Due to recent changes in portfolio I decided to post an update about our allocations.
Our portfolio is currently allocated as follows:

Stocks 96,2%
Gold 1,9%
Cash 1,9%

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

Geographical Allocation (stocks):

Europe 61,4%
North America 28,7%
Emerging markets 10,0%

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

Sector Allocation (stocks):

Information Technology 36,2%
Oil & Gas Production 11,9%
Low Emission Power Generation 10,3%
Forest Industry 6,3% (from now on separated from "Other" category)
Communication Service Providers 6,2%
Health Care 5,7%
Mining & Exploration 5,7%
Metal Industry 5,5% (from now on separated from "Other" category)
Other 12,2%

Top 5 positions:

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

Siili Solutions (Finland -- IT) 10,7%
Fortum (Finland -- Power Generation) 9,9%
Western Digital (USA -- IT) 7,2%
UPM (Finland -- Forest Industry) 6,1%
Nokia (Finland -- IT) 5,9%

23,3% of all stock positions are done via ETFs.
None of those positions made it to top 5 though.

Monday, September 28, 2015

Changes to portfolio

Crazy times in market...

That can be viewed also as an opportunity to make changes.
- And change we did.

I have made a few changes recently to our portfolio that are significant enough to be mentioned:

  • Cisco Systems (USA)
  • Microsoft (USA)
New positions:
  • Volkswagen (Germany)
  • Market Vectors Oil Services ETF (NYSE: OIH)
  • Vanguard Health Care ETF (NYSE: VHT)
Added to following positions:
  • Chevron (USA)
  • Statoil (Norway)
  • iShares MSCI Global Select Metals & Mining Producers (NYSE: PICK)

Which one stands out?

That's right... Volkswagen. Well, that's purely opportunistic position in a stock that I have once considered, but didn't buy at the time. I don't think we would be in there without the huge 40% drop following the emission scandal. Only time will tell how good or bad time this was to enter.

Otherwise this change is about shifting money from IT to other focus segments of ours: Oil & Gas, Health Care and Mining sectors.

Sunday, September 6, 2015

Two positions above 10% of portfolio

Due to recent wild swings in the market and our portfolio allocation changes, we have now two companies that have above 10% share in portfolio.

These are Fortum (Finland) and Siili Solutions (Finland).
My most recent posts about these companies here (Fortum) and here (Siili Solutions).

Overall, this year has potential to turn out as our worst year vs. benchmark, but we have still roughtly 4 months to go, so let's see.

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.