Author Topic: The case for Europe  (Read 2845 times)

Ulrich

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Re: The case for Europe
« Reply #10 on: October 19, 2018, 04:39:53 AM »
There is a big Gap in Oil Stocks between Europe and the US.

Take ENI S.p.a. . An Oil Major, that is more focused on E&P. Not so strong in Downstream like Exxon or Shell. But it trades for under 5 times EV/EVITDA and with higher Oilprices this year the valuation is very attractive.

It has low leverage , good growth in Production and i think over 7 million in proofed Barrels.

Cons: Reserves often in more unstable countries (Lybia for example), controlled by the Italian state. Dividendtax in Italy.

But ist not a state piggy bank. It has a long history paying dividends. And it created a lot of value since it s IPO in the 90s.

But really with that kind of reserves and in an financial strong position that would be worth much more on an US Exchange.


kab60

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Re: The case for Europe
« Reply #11 on: October 19, 2018, 05:32:12 AM »
I always feel I'm on the wrong side of those relative valuation studies... I think they're basically useless when you're a small guy or fund and do bottom up analysis. I'm from Europa, but I always struggle to find something worthwhile around here. My problem is usually around capital allocation. I'm probably evolving into a GARPy-kind investor and I'm very much attracted to companies and CEOs with large ownership stakes and a high understanding of how they can take advantage of their own balance sheet and equity when the market price doesn't reflect intrinsic value.

I have lots of ideas in the US atm (maybe I'm the bagholder, we'll see) but not so much in Europa. Recently sold Goodwin PLC, which was my only position in Europe. I like how Companies like Alliance Data Services, Spectrum Brands etc. are trying to unlock value by taking advantage of record amounts of dry powder at PE funds and discrepancies in valuations between public and private markets. The thing is, if these companies don't take advantage, it might persist (and thus undervalued for a reason). I have an investment in Hong Kong-based Lion Rock Group which has a really low valuation, extremely attractive ROIC and does M&A opportunistically, but it could create so much value in a heartbeat if it would buy backs its own stock in large amount as well.

It already has a pretty good TSR, pays a hefty dividend, so I think it'll compound alright, but that one insight of buying ones own shares, when they're dirt cheap, is so simple yet extremely valuable (just look at a Company like Autozone).

Some Canadian companies also look attractive but less so since buyback restrictions makes it really difficult to buyback aggressively. I think Turtle Creek wrote something about that not so long ago.

Also, regarding relative valuation, I think I saw someone point out that a big reason probably was the many American tech companies while a lot of European companies are more industrial (and thus sport a lower PE - probably with good reason). No idea about the data but sounds reasonable. The Danish equity market (I'm from Denmark) has always been frothy, but we also have a lot of highly valuable companies in attractive industries like pharma and medtech with secular tailwinds.
« Last Edit: October 19, 2018, 05:40:08 AM by kab60 »

TwoCitiesCapital

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Re: The case for Europe
« Reply #12 on: October 19, 2018, 01:10:23 PM »
Isen't it perhaps about some of your stock picks, TwoCitiesCapital?

Please don't get me wrong here - I like many of them, and I think perhaps some of it is temporary for you. Here, for my part it's about your Russian stock picks, where actually the political system in your own home country creates some fuzz and volatility. [I'm not trying to start a political discussion here.]

- - - o 0 o - - -

Ref. the starting post in this topic by Spekulatius, I took a dive into the website of S. W. Mitchell Capital some time ago after Spekulatius started the topic. Quite interesting stuff there to read for inspiration to European stock picks. The firm appears quite open about what they actually invest in, in their letters for both their funds and separate managed accounts. The investment style appear to be value combined with GARP/growth.

Not entirely. Sberbank is down 40-50% in dollar terms, but Lukoil and Gazprom are actually doing just fine this year and I turbo-charged those returns by adding to both on the weakness we saw back in April. Russian equities are a drag on my portfolio as a whole, but not really dramatically more so than other country exposures. Emerging markets as a whole have been rough.

Overall, across my entire portfolio, I'm down about 8% for the year, so the term "killing me" is a bit exaggerated. TBH, I'm outperforming the MSCI EAFE in $ terms despite the fact that the vast bulk of my portfolio is in international/EM companies that have individually under-performed that index. 

Some weakness was to be expected after two back-to-back 20+% years, but still expecting returns to pick back up and close some of the relative valuation gap between the U.S. and the rest of the world.

MarkS

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Re: The case for Europe
« Reply #13 on: October 22, 2018, 08:09:28 AM »
Is anyone looking at Bayer?  The trial court recently ruled in their favor granting them a new trial in the Roundup case brought in California.  I'm thinking this is a positive step in reducing or even eliminating the punitive damages award the jury handed the plaintiff who alleged that he contracted cancer from Roundup use. 

Spekulatius

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Re: The case for Europe
« Reply #14 on: October 24, 2018, 04:19:01 AM »
Is anyone looking at Bayer?  The trial court recently ruled in their favor granting them a new trial in the Roundup case brought in California.  I'm thinking this is a positive step in reducing or even eliminating the punitive damages award the jury handed the plaintiff who alleged that he contracted cancer from Roundup use.

The law suite is bogus (IMO), but the effects are real. Even without the lawsuits, Bayer vastly overpayed for Monsanto, IMO. German managers like to take over US companies, because US managers get paid much more, so thatís  a way to initiate a rise in compensation. I would rather own BASF which bought some AG assets that Bayer had to despose of because the merger. Those assets werenít thet cheap either,  it at least the price was fair (13x EBITDA ?).
To be a realist, one has to believe in miracles.

MarkS

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Re: The case for Europe
« Reply #15 on: October 24, 2018, 04:43:03 AM »
Thanks Speculatius,

As it turned out the trial court denied the motion for a new trial.  He did reduce the award but still Bayer might be dead money for a long time.  You make a good point about Bayer overpaying.  I have put BASF and UBS  on my watch list which included Lloyds, Siemens and Roche.