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.

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.
 

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.