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.

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