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.