The Shares Researcher

For many investors, the current investment climate is bizarre and new lockdown rules are not well received for investments as well as consumption. For this reason, ‘online’ companies are still in high favour (although stagnated a bit recently) and many other firms, for instance, that need factories to actually manufacture a physical product, are out of favour. Since the dawn of this blog, focus has always been on value; speculation or lofty promises have been tried to be avoided. So far, the results have been mediocre at best and at the beginning of this year, it was rather difficult to find attractively valued shares – a situation that has changed completely with lots of long-term opportunities available now. Some of the investments discussed on this blog have performed rather well, while others have gotten much cheaper and most of them show a better risk/reward situation than at initiation. It is imperative to think about current macrotrends; however not to get too much drifted a...

Intro Fresenius is a global healthcare group offering products and services for dialysis, hospitals and outpatient treatment. Fresenius is split into four different segments: 1) Fresenius Medical Care is the world leader in treating people with chronic kidney failure; 2) Fresenius Helios is the largest private hospital operator in Europe; 3) Fresenius Kabi is a supplier of essential drugs, clinical nutrition products and medical devices; and 4) Fresenius Vamed plans, develops and manages healthcare facilities. A lot of segments, but it is crucial for the reader to understand at least to a certain their business. Since its beginning in 1912, Fresenius has grown in each of its business units to a leader and generated revenues of more than €35 billion in more than 100 countries. The largest shareholder is the Else Kröner Foundation with 26.6% of the shares and guarantees a long-term, sustainable vision.   Valuation Fresenius was able to steadily increase its EPS from €2.64...

Intro Walgreens is a global leader in retail and wholesale pharmacy with a history going back to 1849. The company is present in more than 25 countries delivering to more than 250,000 pharmacies, doctors, health centers and hospitals. Besides an impairment for its assets in the UK by approx. $2 billion, the firm has ‘survived’ COVID-19 rather well with 2% higher sales for the full year ending in August and growth of 2.3% in the last quarter compared to last year. While it might be that the retail segment will decline over time due to online sales, Walgreens has partnered with Microsoft and Adobe on the digital front and its e-commerce business has shown strong sales growth, especially this year.   Valuation Mainly as a result of the UK impairment, EPS for the last 12 months has been under pressure albeit still being decently positive. Adjusted for these negative events, the company’s adjusted EPS would have been $4.74. However, a real figure might be more in the area of...

Intro Today, I’ll write about a special situation, which is not aimed for all investors – a good old net-net stock as defined by Benjamin Graham. Hunting plc is a British supplier to the oil and gas industry and hence has a highly cyclical business: Revenues more than doubled from 2016 to 2019 while EPS grew to almost £0.44 in 2019. After the sharp decline of the oil price at the beginning of 2020, revenue declined significantly and the stock price is down from more than £9 in May 2018 to approx. £1.4 at the moment. Although the outlook is not rosy for the industry, it might still be worth to have a look at this company from a contrarian perspective, especially taking into consideration its solid balance sheet and its ability to weather also wild storms.   Valuation A net-net stock is a company whose cash plus accounts receivable plus inventories minus all liabilities is higher than its market capitalisation. So let’s look at the H1 2020 figures (all numbers in £ million)...

Roughly three weeks ago, the chairman and CEO, Massimo Zanetti, who indirectly holds ~68% of the company made a voluntary offer to acquire all outstanding shares for a price of €5.00 per share. While this lifted the share price from below €4 to now €5, this still doesn’t come close to the fair value we assigned to the shares. However, since the offering party already owns the majority of the shares, it seems rather unlikely that either the deal falls through or that there will be an adjustment in the offering price. When the first blog entry was made this January, it was expected that the opposite will happen: a further sell down of the majority stake to third party investors to turn this into a ‘real’, stock market listed company. Now they will become a fully private entity again. On the bright side, there are still many great value plays in Europe where the sale proceeds can be allocated to. New stock ideas will follow in due course.   Current Price €5.00 per share

Intro Probably most people have used a product of this company, which produces ballpoint pens, lighters and razors. In 2019, BIC sold 31 million products every day and is either number one (for lighters) or number two (for shavers and stationery) in terms of market share. Total revenue was hovering around €2 billion p.a. with a free cash flow generation of approx. €200 million per year – as can be expected from a mature, solid firm with a long history. The founder’s family still holds 45% of the shares (voting rights 61%) which guarantees a long-term vision and strategy. Valuation BIC has withdrawn its guidance for 2020, as many other companies as well, where it was initially guiding for a flat year. Historically, BIC earned around €5 per share and we may expect similar numbers after the current crisis will be over, which would result in a P/E of approx. 10x. Besides the attractive dividend (was set at €3.45 per share in the last years and reduced to €2.45 due to COVID-19), the c...

Intro Cigarettes? Who and why would anybody invest in cigarettes nowadays since everybody is aware of its possible health issues it can cause and hence the declining client base? Well, the tobacco industry has done an excellent job to more than compensate the declining customer base with price increases or substitutes. Altria, probably best known for its Marlboro cigarettes, has a very long history and is seeking to invest its high cash flows from the tobacco portfolio into other related trends such as the stakes in IQOS or JUUL. Besides, the company owns shares in ABInbev, the drink and brewing company, as well as a wine producer and cannabis firm. Valuation Altria’s share price dropped around 50% from almost $80 just three years ago. Does this make the company a bargain? Of course not, but let’s look at the earnings and balance sheet: The company has been generating consistent revenues of around $25 billion in the last years and, what’s more impressive, has been able to raise its ope...

Intro Having written about a few smaller companies recently, this blog entry talks about a major firm – a Swiss blue chip. Swatch is the number one producer of watches in the world and produces nearly all of the components for its 18 watch brands in house. The brands include names in different price segments such as Harry Winston, Swatch, Breguet, Omega, Longines and Rado. Some uncertainty in Hong Kong (political turmoil, protests), the spreading of a new virus (COVID-19), provisional measures adopted by the Competition Commission and possible risk of smartwatches have weighted heavily on the stock price, which trades on the lowest levels since 2009 – albeit the operational performance has been very acceptable. Valuation In the last four years, Swatch was able to increase its sales from CHF 7.5 billion to more than CHF 8.2 billion; operating profit (margins between 10.7-13.6%) and net income have seen even bigger boosts. For 2019, net income is around CHF 750 milli...

Intro This entry constitutes a novelty – so far, all entries have been about a specific stock, while this post is about an attractively priced bond with an excellent risk reward situation (and why not profit from it?). The Canadian company that issued this bond is Alaris Royalty, a highly diversified royalty firm with the majority of its assets in the US. Alaris’ business model is to advance money to companies and in return receives a percentage of the investees revenues – in other words, Alaris sits in the capital structure between the equity holders and banks, a form of hybrid capital. Hence, companies requiring money usually have one of the following needs: growth capital, partial liquidity, recapitalisation or for a management buyout (MBO). Alaris has been public since 2008 and currently holds royalty interests in 16 partners.   Valuation Alaris is only as strong as the weakest link in the chain, its royalty partners – if they are able to make their royalty pay...