opportunities in portugal?

[PlanMaestro]

Can you think of any strong exporters in the periphery?

or large foreign operations.

[persistentone]

Sonae would look very interesting below €40¢.  They are more of a conglomerate business model with several different footprints.  The main attraction is Sonae MC and is the market leader in Portugal for food retail (groceries) with dominates locations.

http://www.sonae.pt/en/

My main problem with Sonae MC would be too much of earnings stream seems to come inside Portugal.   If you believe that Portugal will leave Euro, the resulting currency will be worth about 1/3rd of the Euro and aren't most of Sonae's new earning streams in that new devalued currency?

How much of the Sonae MR brand is being sold to North America, Asia, and Northern Europe?

[persistentone]

Can you think of any strong exporters in the periphery?

or large foreign operations.

Hey Plan.   Example of foreign operations might be Portugal Telecom's ownership of a Brazilian wireless vendor.    Not crazy about that particular subsidiary, but something along those lines.

This place looks better than Yahoo with all of its psychobabble.    My only complaint so far is the registration process makes a jail breakout from Alcatraz look easy by comparison.   But got past that nightmare...

[PlanMaestro]

This place looks better than Yahoo with all of its psychobabble.    My only complaint so far is the registration process makes a jail breakout from Alcatraz look easy by comparison.   But got past that nightmare...

Comes with the territory ... but we still have to suffer a few political trolls! Glad to see you around Persistentone.

[oddballstocks]

persistentone,

Funny you mention exporters... I've been working on putting together a blog post to detail some of this.  I have a similar thesis as you, in a country with a devaluation assets aren't worth much but a good export revenue stream is gold.

I'd recommend looking into Corticeira Amorim, almost all sales outside of Portugal.  Supply of raw materials is mostly local, so you get cheaper labor.  Other labor is worldwide so costs won't shrink as much but they were killed by associated.

I also was looking at FISIPE today, 99% export but supply is almost 100% external as well.  So they won't get killed purchasing abroad, where they really gain is that labor will suddenly be cheap.  Also they're highly indebted, they'll be able to use foreign cash to pay off local denominated debt.  They're slightly profitable, so this is really a devaluation play.  If they can float until debt becomes cheap and labor becomes cheap a possible win.

I have a position in COR, I'd buy them regardless of where they're located though, I like the company, Portugal is a nice little bonus. 

[AZ_Value]

Nate,

Just want to say that I really enjoyed your write-ups on COR on your blog a few months back:

http://www.oddballstocks.com/2011/07/looking-at-hidden-champion-corticeira.html

http://www.oddballstocks.com/2011/07/hidden-champion-corticeira-amorim-part.html

I don't have a position myself, mostly because at the time I think I was buying a few other names but one thing your blog posts did was make me buy that "Hidden Champions" book, and I think I really should have COR on my watch list. 
Another thing is your blog made me want to start my own blog, seems like it will force me to be more disciplined and write down my investment thesis on various stocks in a blog post format.

[persistentone]

persistentone,

Funny you mention exporters... I've been working on putting together a blog post to detail some of this.  I have a similar thesis as you, in a country with a devaluation assets aren't worth much but a good export revenue stream is gold.

I'd recommend looking into Corticeira Amorim, almost all sales outside of Portugal.  Supply of raw materials is mostly local, so you get cheaper labor.  Other labor is worldwide so costs won't shrink as much but they were killed by associated.

I also was looking at FISIPE today, 99% export but supply is almost 100% external as well.  So they won't get killed purchasing abroad, where they really gain is that labor will suddenly be cheap.  Also they're highly indebted, they'll be able to use foreign cash to pay off local denominated debt.  They're slightly profitable, so this is really a devaluation play.  If they can float until debt becomes cheap and labor becomes cheap a possible win.

I have a position in COR, I'd buy them regardless of where they're located though, I like the company, Portugal is a nice little bonus.

The Cork company is interesting and puts up decent numbers.   I added them to watchlists.     On a devaluation they would collapse and would be an interesting candidate to buy.

The textile company I don't like.   That'a a brutal business and hard to differentiate.   Their net income numbers are around 2%.     

[oddballstocks]

Ok, finally put some thoughts together on this: http://www.oddballstocks.com/2012/02/investment-strategies-for-devaluation.html

AZ_Value - Thanks for the compliment.  COR is good, but you'll probably do much better for yourself from having purchased the Hidden Champions book.  I just wish a lot more of those companies were public!  If I remember only 9% are listed.  I've gone through about 8-10 more that are listed in Austria and Germany the last few months.  Universally they're all fairly valued or even overvalued.

On blogging, this has been the biggest help to my investments this past year.  Having to sit down and record my thoughts helps me think things out better.  Often I'll do some research and think one thing, then as I try to type it up my mind changes because I'm able to flush out some detail or perspective I hadn't initially considered.

Let me know if you do start writing online, I'd love to read it.

Persistentone - I agree FISIPE is a crappy business, but the idea I had was that a devaluation would be a catalyst.  Debt could be reduced because it's in native currency with their export earnings stream.  Also their margins would grow as labor costs are lowered.

Of course the company has to survive until then, and not lose any customers in the process which could be difficult.  I think this is why some sort of moat/competitive advantage needs to exist.

I really like COR, earnings have been increasing.  I should really do a follow up post.  I've read up on a few French companies in a similar space, there might be some opportunity there as well.  Unfortunately I read French so slow and Google Translate is imperfect.  I will invest in a foreign company that I have to translate if it's a net-net and I have a nice margin of safety.  If it's a decent business I really want to understand what's going on, and Google Translate just doesn't cut it.

[persistentone]

Ok, finally put some thoughts together on this: http://www.oddballstocks.com/2012/02/investment-strategies-for-devaluation.html

AZ_Value - Thanks for the compliment.  COR is good, but you'll probably do much better for yourself from having purchased the Hidden Champions book.  I just wish a lot more of those companies were public!  If I remember only 9% are listed.  I've gone through about 8-10 more that are listed in Austria and Germany the last few months.  Universally they're all fairly valued or even overvalued.

On blogging, this has been the biggest help to my investments this past year.  Having to sit down and record my thoughts helps me think things out better.  Often I'll do some research and think one thing, then as I try to type it up my mind changes because I'm able to flush out some detail or perspective I hadn't initially considered.

Let me know if you do start writing online, I'd love to read it.

Persistentone - I agree FISIPE is a crappy business, but the idea I had was that a devaluation would be a catalyst.  Debt could be reduced because it's in native currency with their export earnings stream.  Also their margins would grow as labor costs are lowered.

Of course the company has to survive until then, and not lose any customers in the process which could be difficult.  I think this is why some sort of moat/competitive advantage needs to exist.

I really like COR, earnings have been increasing.  I should really do a follow up post.  I've read up on a few French companies in a similar space, there might be some opportunity there as well.  Unfortunately I read French so slow and Google Translate is imperfect.  I will invest in a foreign company that I have to translate if it's a net-net and I have a nice margin of safety.  If it's a decent business I really want to understand what's going on, and Google Translate just doesn't cut it.

Don't you feel some risk holding COR before a devaluation takes place?

I read your blog post and I think we are on the same page.   But I would go further and say you should LOVE heavily indebted companies if the debt is Euro denominated and you believe that the government will somehow succeed in mandating a conversion into a new and less valuable currency.   Somehow Argentina pulled that one off with its companies.    This is an area I don't understand well and maybe someone can illuminate it.   If a company located in Portugal finances with a bond denominated in Euros, what are the circumstances in which a country like Portugal would have an ability to Force Majeure convert those bonds into a different base currency?    The country would certainly do that with its own sovereign debt, and with the cash balances in bank accounts.    I am less clear on how Argentina managed to pull this off with corporate debt.   In the case of corporate debt you would think this involves a cross border transaction with a European bank, and in theory the law that controls the debt and its trust would be laws outside of the defaulting country.

Can you send me an email to persistentone AT spamarrest.com?

[oddballstocks]

I'm not sure about corporate debt, I believe companies would still be on the hook for that debt in Euros which would absolutely kill a lot of companies.

I mention local debt because it would be easier to pay off.  Most Portuguese companies I've seen use bank lending not bonds so the debt is with local banks who would presumably be using local currency going forward.

I sent you an email as well.