Euro Share Lab

What would happen should Greece exit the Euro?

tdutoit@eurosharelab.com (Tim du Toit) — Tue, 22 May 2012 06:39:47 +0000

I'm sure you have also spent a great deal of time thinking about what would happen if Greece finally called it a day and leaves the Eurozone.

I am sure you have also come up with banking collapse, pension collapse, hyperinflation and even more hardship for the Greek population but it's really difficult to think of every conceivable impact.

That's why you may want to have a look at this list of articles the Financial Times put together under the heading If Greece Goes…

Spend 10 min reading through a few of the articles, it'll definitely you a better insight as to what could happen.

You may also want to check back often as new articles are added all the time.

Useful websites and tools - not just for investing

tdutoit@eurosharelab.com (Tim du Toit) — Mon, 16 Apr 2012 12:47:56 +0000

Here is something you will find useful.

Last week one of my favourite bloggers Barry Ritholtz wrote a blog post called 5 most useful website and tools

I knew most of the things he mentioned but in the comments the readers of this blog came up with a lot of really outstanding tools and website I'm sure you can use to increase your productivity and even your investment returns.

The article is definitely worth five minutes of your time.

But be warned if you start looking at these tools you may be busy for hours.

Up 52.7% and still undervalued

tdutoit@eurosharelab.com (Tim du Toit) — Thu, 12 Apr 2012 16:07:24 +0000

Since I recommended Linedata to my newsletter subscribers in August 2010 its share price is up 52.7% (58.1% including dividends).

Remarkable is that the company is still very undervalued.

At the current share price of €14.4 the company is valued as follows:

9.9 times 2011 earnings
8.5 times 2011 free cash flow
6 times enterprise value to 2011 EBIT

The share price jumped just more than 20% recently when the company announced a tender offer to buy back 25.7% of its share capital at a price of €16 per share.

Interesting is that the founder and CEO Anvaraly Jiva is not planning on tendering any his shares and will own just over 38% of the company once the tendered shares have been cancelled.

You can find out more about the company here:
Linedata investor relations
Linedata December 2011 year end results

As always, please do your own research and remember past performance is no guarantee of future results. Like you I also don't know what could happen in future.

What really makes a great fund manager – it’s not what you think

tdutoit@eurosharelab.com (Tim du Toit) — Mon, 19 Sep 2011 16:03:42 +0000

I recently came across an excellent blog post called The Handicap of Experienced Investors by JJ Abodeely in his excellent blog called the Value Restoration Project.

The article looks at successful fund managers identified by Fortune magazine in 1989. And with 22 years of real investment performance evaluates the success of the fund managers to find out what made them successful or not.

JJ's findings are quite surprising, for example, the larger firm becomes the less flexible they are and thus the lower the investment returns. JJ adds that when firms become successful and large, it becomes increasingly difficult for them to focus on the investment returns for their clients.

Even more surprising is the finding that work experience and the longer a manager has been with a fund does not help performance. They found that less experienced managers had better performance.

How can that be you may ask?

JJ quotes research that determined that less experienced managers have stronger incentives and are more willing to take risks, with this often leading to superior performance.

He also makes the point that experience may count against most fund managers saying:

Relying heavily on experience tends to mean looking to the past and considering the probability of future outcomes based on how things played out historically. Exposure, on the other hand, considers the likelihood — and potential risk — of an event that recent history may not reveal.

These two insightful points just scratch the surface of the blog post.

The whole thing is really worth reading.

Here is that link again: The Handicap of Experienced Investors

If you liked the article I would encourage you to add the Value Restoration Project blog to your RSS feed.

Do you know that we will be 7 billion soon?

tdutoit@eurosharelab.com (Tim du Toit) — Mon, 12 Sep 2011 14:06:43 +0000

Nothing to do with investing but something interesting on demographics, something I follow with a keen interest.

According to the current world birth-rate the United Nations has estimated that the 7th billion person on the planet will be born at the end of October 2011.

That is 7 000 000 000 people....

Allianz, the German insurer, has put together an interesting interactive website that has interesting information about world demographics and the country there the 7 billionth person may live.

Here's the link to the interactive website:
We will soon be seven billion

More of my articles on demographics can be found here:

World demographic changes – Why you should care

Living knowing your retirement fund is bankrupt

Slow motion train wreck – German demographics

Watch Japan implode

Tweedy Browne Q2 2011 portfolio changes, interesting additions

tdutoit@eurosharelab.com (Tim du Toit) — Tue, 23 Aug 2011 13:26:25 +0000

Mainly trimming and adding but also a few new positions is the best way to describe the past quarter’s activities.

And all four funds beat their respective indices.

Top contributors for the quarter – Consumer Staples, Healthcare, Industrial Holdings

Coca Cola Femsa
Diageo
British American Tobacco
Roche
Johnson & Johnson
Kone
Krones

Top decliners for the quarter – Media, Financial, Oil and Gas

Zurich Financial
Munich Re
Berkshire Hathaway
Axel Springer
Mediaset Espana
ConocoPhillips
Devon Energy
Total

Portfolio changes

Tweedy, Browne Global Value Fund

Added to – Zurich Financial Services
Sold – Imtech, Milbon Co, TKH Group, Zehnder Hldgs Bearer
Trimmed – BBA Aviation, CIE Financiere Richemont, Coca Cola Femsa, Daetwyler Bearer, Fraser & Neave, Jardine Strategic, Kone Oyj, Krones, Linde, Nestle, Philip Morris Intl, Sika AG
Merged – Embotelladoras Arca, Grupo Continental

Tweedy, Browne Global Value Fund, Currency Unhedged

New positions – Heineken, Metcash Ltd,
Added to – Axel Springer, BAE Systems PLC, CNP Assurances, Diageo PLC, Johnson & Johnson, Mediaset Espana, Mediaset SpA, Munich Re, Nestle, Novartis, Roche Holding, Royal Dutch Shell PLC, Schindler Holdings, SK Telecom, Teleperformance, Total, Unilever, Zurich Financial Services

Tweedy, Browne Value Fund

Added to – Wells Fargo & Company
Trimmed – Diageo PLC ADR, Emerson Electric, Henry Schein Inc, Linde, Nestle ADR, Philip Morris International

Tweedy, Browne Worldwide High Dividend Yield Value Fund

Added to – BAE Systems PLC, Exelon Inc, G4S PLC, Kimberly Clark Corp, Mediaset SpA, Metcash LTD, Munich Re, Novartis, Roche Holding, Sysco Corp, Total, Unilever, Zurich Financial Services

Should Greece default? – why I would have

tdutoit@eurosharelab.com (Tim du Toit) — Thu, 21 Jul 2011 08:32:34 +0000

If I was Greece I would default the reason is probably best explained in the excellent blog post by Harris Kupperman in his blog Adventures in Capitalism blog called What Should Greece Do?

The post contains an article by Peter Gianulis, manager of Carrelton Asset Management with themost important part being this:

“By defaulting (or the credible threat of defaulting), Greece actually improves their negotiating position not worsen it. I would immediately default on all government obligations, raise the retirement age, cut social programs, simplify the tax system and create new business tax incentive programs to create a “safe tax haven” for new European businesses willing to operate in a European country without the shackles of the Euro. Also, the fact that you cannot borrow more money in the international markets would be the best news; you are now forced to live within your means.

Greece (representing less than 5% of European GDP) is not large enough to even register a “blip on the screen” in terms of world economies or markets; so why all the fuss? It is our belief that a Greek default would legitimize the concept of government defaults from European or “Developed” Countries and most likely lead to a series of defaults (far larger than Greece) that would roil the financial markets and world economies for years. The European Central Bank (as well as the FED) is acutely aware of this draconian scenario.”

Read the whole article it’s really worthwhile. Here is the link again What Should Greece Do?

So the other European countries are really not bailing out Greece but their own banking systems that have loaded up on debt of Greece and the other over-borrowed European countries.

The banks can most likely survive a Greece default but not a default by Portugal and Ireland. And definitely not Spain.

Barry Ritholtz in his Big Picture blog is of the same opinion.

In his post titled Not the Greeks, But Their Creditors Get Bailed Out he mentions:

"Whenever you hear a Bailout being discussed, look to see who it is that is actually being bailed out. It is not the Greek people or even the Greek government — rather, it is the creditors of Greece. These are the banks mostly in Europe, primarily in Germany and France, but also includes Japan, China and the US."

Also next time I hear a bank CEO or analyst saying that Europe cannot allow Greece or anyone to default I am going to throw up. Because it is not an independent opinion backed up by in depth independent analysis. It is someone talking his book, plain and simple.

China bubble in charts

tdutoit@eurosharelab.com (Tim du Toit) — Thu, 07 Jul 2011 14:06:01 +0000

Take a look at these really interesting charts from SocGen on the extent of infrastructure spending in China.

I am firmly in the camp of people that thing China is going to pick up problems. The only thing is I just don’t know when.

The charts are also interesting as they clearly show the extent of the property bubble in Spain and the collapse of US construction spending.

In the US the underinvestment in infrastructure also has something to do with it.

Bubblelicious Chinese Construction Charts

A profitable major car company with a negative value?

tdutoit@eurosharelab.com (Tim du Toit) — Thu, 02 Jun 2011 05:58:24 +0000

On May 31 the Financial Times published an interesting article on Renault called Renault: carmaker is running on empty (free registration may be required)

The article describes how the share price of Renault has underperformed the auto sector by 66% over the last 10 years.

Quite a performance.

But this has made the company’s shares very cheap.

According to Morningstar the company is valued as follows:

Price to Earnings ratio: 3,1
Expected Price to Earnings ratio:   4,6
Price to Book ratio:   0,5
Price to Cash flow:   5,3

I think you will agree it looks cheap. But it has been like that for a long time.

What really caught my eye in the Financial Times article thought was this calculation:

If you subtract the market value of Renault’s investments in Nissan, Avtovaz of Russia, Daimler and Volvo, the remaining value for Renault (the French carmaker) is minus €15 a share.

Unbelievable.

This means if Renault sells all its investments in other car companies, just these are worth €15 per share more than what the Renault share price is at the moment.

Not a bad idea for a patient investor.

Tweedy Browne Q1 2011 report, likes technology trims luxury

tdutoit@eurosharelab.com (Tim du Toit) — Fri, 06 May 2011 13:22:32 +0000

Tweedy Browne’s quarterly reports are always a worthwhile read.

In spite of the funds being so big that they mainly invest in large and mega cap shares they always give good ideas and valuable investment insights.

The funds top contributors were financials, energy, consumer and industrial holdings. Negative contributors are pharmaceuticals, office electronics, communications equipment and food holdings.

The best performing stocks were

Leucadia
Conoco Philips
Devon Energy
Philip Morris International
Total
CNP Assurances
Henry Schein

Worse performers (possible investment ideas)

Novartis
Canon
Axel Springer
Cisco
Transatlantic Holdings

Notable new buys were

G4S Plc – UK based worldwide security group
British American Tobacco – UK based tobacco and cigarette company
Royal Dutch Shell – Major oil company
Cisco

Even though Cisco underperformed during the quarter, they invested because the company was trading on a one third discount compared to their conservative intrinsic value estimate.

This fits with Jeremy Grantham’s comment that high quality companies in the US offers great opportunities.

The report is available in the Research and Reports section of their website.
Tweedy, Browne Quarterly Commentary