Wednesday, October 29, 2014

Fred Olsen Energy dives into the deep end of the pool

Fred Olsen Energy (Oslo: FOE), like the whole offshore drilling industry, has been hammered this year. In last couple of days FOE has been diving because of worse than expected quarterly report. To date it has clearly performed worse than most of it's peers listed in Oslo and New York.

In March this year, we tripled our position in this stock. Now it's our worst performing stock. Luckily, rest of the portfolio has performed better than the market, so despite of FOE moving to wrong direction, we might beat the market as much as 10%. However, it's still two months to go and anything can happen.

With regards to FOE, I'm not able to pinpoint any fundamental reason why FOE is performing worse than peers.

Any ideas from readers?

Thursday, October 2, 2014

Siili Solutions in - Valmet out

I have made two changes in our portfolio:
  • Siili Solutions was added
  • Valmet was removed
Valmet came to our portfolio for demerger of Valmet from Metso. As said then, then plan was to allow hidden value of the companies to unlock and then make decisions. The decision was between accumulate or sell and I chose latter.

Apart from some very risky positions that we have, I want rest of the positions to be meaningfully large to make a difference. Also, I want to keep the overall amount of companies at a level that I can manage to follow with some regularity.

Siili Solutions is a small Finnish IT company. They are listed at NASDAQ OMX First North Finland, which is an alternative market, operated by the different exchanges within NASDAQ OMX. It does not have the legal status as an EU-regulated market. Companies at First North are subject to the rules of First North and not the legal requirements for admission to trading on a regulated market. The risk in such an investment may be higher than on the main market.

The company has appeared regularly in my screens at the top, has good profitability and above all - potential to grow. Given most of the companies we hold are defensive and/or very large, it was time to inject a growing company into the portfolio even when it means also increasing risk for losses.

Inderes has made a thorough analysis of the company, but it's available only in Finnish (link). However, people from same company summarized their rationale when selecting the company to their expert porfolio in May 2014 - only a week after releasing the analysis linked above.

The company has been trading recently around 13,6 euros and is around all time highs. Lowest price within 1 year period is around 8 euros and before the above mentioned analysis and recommendations the company was trading at 11 euros. This should be taken into account when reading the above linked analysis.

Liquidity with the company is rather low even for individual non-professional investors like me. Thus, I had to aquire the shares we now hold over multiple days and even then I managed to increase price on several occations.

I believe the company is now fairly valued by market (and we bought with that valuation). We are in for the long run and hoping the company will deliver profitable growth, which is the key thesis to own the company.

The writer owns shares in Siili Solutions.