The Shares Researcher

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...