What are you buying today?

[michaelj]

What attracted you guys to this business? Just curious, I don't know anything about it.

It's beer  ;D

 

Essentially branded consumer discretionary purchases. They have decent brands (Molson, Coors) and an established distribution network. It's pretty cheap and was 10% off today.

 

While the business may go thru ups-and-downs, especially in terms of management's execution (as we are seeing with other CPG's like Kraft-Heinz), I think product demand will remain relatively more steady (compared to say, Tide detergent).

 

So it's basically, multiple is low, they have scale, brands should have staying power.

 

Was just curious if there was more than met the eye to the thesis.

 

In the alcoholic beverage segment, beer is losing market share to spirits and wine. Within the beer segment, TAP’s mass market brands are losing share share to craft beers. I think TAP represents a slow bleeding consumer franchise, somewhere in between a consumer staple and cigarettes, imo.

 

The bleed is probably slow enough that an investment in equity makes sense at this point, especially since pricing holds up.

 

That seems to be the consensus, although I've seen conflicting data regarding beer's overall market share. The first chart in the following link indicates that beer popularity has been surprisingly steady over the last 5 years. https://news.gallup.com/poll/238100/americans-favor-beer-alcoholic-beverages.aspx

[Guest MarkS]

I've been contemplating picking up share of TAP. Does the fact that TAP is going to restate earnings bother you guys?

[rb]

I've been contemplating picking up share of TAP. Does the fact that TAP is going to restate earnings bother you guys?

That wouldn't bother me too much. AFAIK the restatement had to do with calculation errors on income tax. So not really anything to do with the economics or the integrity of the business.

 

What would bother me is the 5% volume decline for the US.

[LC]

The shift away from beer doesn't really bother me. Wine, liquor, beer. All have been around for centuries, I'm sure the pendulum has swung back and forth multiple times.

 

Wine and liquor don't create the tavern/pub atmosphere like beer does - there will always be a place for it.

 

I generally like the Coors brand. I think it has a unique value compared to say, Budweiser. This could be my Colorado bias, however.  ;D

 

Molson I think it the worst of the Canadian beers but it's like Budweiser - it's the mass market brand. I was at a Habs game and spent my $11 on a Molson or two, when I was last up there. There is something to be said about reliable, consistent, mediocrity :)

 

So it's basically as Liberty said:

So it's basically, multiple is low, they have scale, brands should have staying power.

 

Even if it's a bit of a melting ice cube, I think it's different from say, consumer technology brands. Something like Blackberry phones were essentially completely replaced - the ice cube totally melted. Here I think, the brands may have competition, but will not really be replaced. The worse-case scenario is that it takes longer to earn my money back. Lower risk of a permanent loss of capital, perhaps higher risk of a lower return on capital.

[york]

Pieridae Energy Ltd

TO.V: PEA

[sleepydragon]

WFC is cheap, probably caused by negative press coverage about the outage. I added some on Friday. FWIW, I could still access my accounts, but it was slow.

 

On WFC page, before people were complaining about not being able to access their money and overdraft fees, now they are complaining they no longer can get the “$50 customer appreciation credit” that was issued to some customers who called during the outage. Bunch of angry people hard to satisfy. Lol

 

[bizaro86]

What's the thesis on PEA? Just that Goldsboro will get built? I had a big short position there during the Ikkuma deal as there was a huge spread. Seems binary to me, but maybe still a good risk-reward.

[sarganaga]

Hutchinson Port Holdings Trust (NS8U in US dollars or P7VU in Singapore dollars)

[John Hjorth]

MF.PA - Wendel SE. [Website]. Started small/tracker position.

[LC]

IRM

[alwaysdrawing]

Puts. Cash.

 

Mr. Market not paying attention.

 

People looking at the world like this:

https://www.bloomberg.com/opinion/articles/2019-02-14/retail-sales-were-puzzingly-ugly-but-don-t-panic

https://www.bloomberg.com/amp/news/articles/2019-02-14/subprime-auto-bond-market-unmoved-by-record-late-loan-payments

 

When they should be looking like this:

https://www.alhambrapartners.com/2019/02/14/retail-sales-landmine/

 

Christmas 2018 was worse than Christmas 2007.  December 2018 wasn't a blip--it's the opening salvo.  The smart money betting billions that rates will fall in the short term--the short term!.  Equity markets looking for any way to explain away the data, but I expect that we will see more volatility, more negative price action, and in all likelihood, a recession within the next 12 months. 

 

The world does not look strong:  China and emerging markets are slowing (if you even believe the data, especially coming out of China), Europe is slowing and Italian banks and Deutsche Bank looking increasingly vulnerable, Canada and Australia are seeing their property bubbles burst, asset prices are very high and priced for continued growth, corporate and consumer debt levels are very high, and central banks have lessened capacity for handling a crisis with huge balance sheets and still very low interest rates. Market participants seem to both be A) Over-estimating the likelihood of a trade deal, and B) over-estimating the positive impact that a trade deal will have. 

 

 

 

 

[Spekulatius]

MF.PA - Wendel SE. [Website]. Started small/tracker position.

 

I haven’t seen this stock being mentioned for a long time. They go whacked very badly during the financial crisis (down more than 80% if I remember correctly) being in cyclical names back then and due to holding company leverage , but seem to have made it back. Discount to NAV north of 20%. I will take a further look, but I think I like EXor and some others better.

[John Hjorth]

Spekulatius,

 

It's just a part of my eternal hunt for interesting stuff to study, where I'm searching for stuff on this side of the Atlantic Ocean. I think I know the European investment holding companies that I already own well enough now, after having owned them for quite some years now, to take on to expand the sphere of companies that I know about. Trackers keep my interest up, if I catch just some degree of interest. It's an eternal educational journey, and I like to do it, even if the price of the stock may not be right to me right now [here, it is so-so], because perhaps some day, it may.

 

I looked at Indus AG not so long ago, and passed [no tracker]. I think next will be Lifco AB and Kinnevik AB, trying to learn something new and challenging the way I do things so I don't fall totally asleep and freeze without any kind of personal movement, perhaps even progress.

 

It's great to have a reading/study backlog on companies.

[DooDiligence]

Spekulatius,

 

It's just a part of my eternal hunt for interesting stuff to study, where I'm searching for stuff on this side of the Atlantic Ocean. I think I know the European investment holding companies that I already own well enough now, after having owned them for quite some years now, to take on to expand the sphere of companies that I know about. Trackers keep my interest up, if I catch just some degree of interest. It's an eternal educational journey, and I like to do it, even if the price of the stock may not be right to me right now [here, it is so-so], because perhaps some day, it may.

 

I looked at Indus AG not so long ago, and passed [no tracker]. I think next will be Lifco AB and Kinnevik AB, trying to learn something new and challenging the way I do things so I don't fall totally asleep and freeze without any kind of personal movement, perhaps even progress.

 

It's great to have a reading/study backlog on companies.

 

If our brains continually use the same neural pathways, they stagnate.

 

You're doing pushups with your brain  :)

 

A true muscle head!

[Spekulatius]

Spekulatius,

 

It's just a part of my eternal hunt for interesting stuff to study, where I'm searching for stuff on this side of the Atlantic Ocean. I think I know the European investment holding companies that I already own well enough now, after having owned them for quite some years now, to take on to expand the sphere of companies that I know about. Trackers keep my interest up, if I catch just some degree of interest. It's an eternal educational journey, and I like to do it, even if the price of the stock may not be right to me right now [here, it is so-so], because perhaps some day, it may.

 

I looked at Indus AG not so long ago, and passed [no tracker]. I think next will be Lifco AB and Kinnevik AB, trying to learn something new and challenging the way I do things so I don't fall totally asleep and freeze without any kind of personal movement, perhaps even progress.

 

It's great to have a reading/study backlog on companies.

 

FWIW, I agree on Indus AG, it’s nothing special. They do add a layer of holding company debt on top of the operating company debt, so they seem to be more leveraged than I’d like. I have owned some in the 90’s last time. At times, the stock is cheap, but it’s not particularly well managed. I do like the concept of rolling up Mittelstand companies, but haven’t seen a vehicle that does this consistently well. There are some that do seem to do it Ok with a concept of owning several independently operated companies in the same industrial sector. Dürr AG and ISRA AG come to my mind. I particularly like Dürr, but I don‘t think we are at the right time of the cycle to buy this yet.

 

France and Scandinavia the richest hunting ground for holding companies.

[John Hjorth]

Thank you, Spekulatius,

 

Yes, I got scared away from INDUS Holding AG because it had "strategic considerations" about getting rid of a whole "leg" / "cluster" of subs / business unit consisting basically of vendors to the German automakers, in some way. I was surprised to read that, I did not know things were so bad right now in Germany, despite reading about Germany being recession near for the last few months. [Denmark will with certainty be hit by this in the near future, btw, because of the close German-Danish trade relations, important from a Danish perspective.]

 

I will take a look at Dürr AG and ISRA AG at some point in time in the near future, too. -Thank you for sharing, and a privilege to have access to such information from you because of your German background.

[EricSchleien]

Bought more BAM, FCAU, and TRUP.

[Spekulatius]

Thank you, Spekulatius,

 

Yes, I got scared away from INDUS Holding AG because it had "strategic considerations" about getting rid of a whole "leg" / "cluster" of subs / business unit consisting basically of vendors to the German automakers, in some way. I was surprised to read that, I did not know things were so bad right now in Germany, despite reading about Germany being recession near for the last few months. [Denmark will with certainty be hit by this in the near future, btw, because of the close German-Danish trade relations, important from a Danish perspective.]

 

I will take a look at Dürr AG and ISRA AG at some point in time in the near future, too. -Thank you for sharing, and a privilege to have access to such information from you because of your German background.

 

I didn’t feel that INDUS situation is dire, it‘s just that the stock was too expensive at 20x earnings and now is around fair value, but still not cheap. A shallow revision in Germany is possible. It might bring better buy opportunities. A lot of stocks in Germany were quite overvalued and have now come down to fair value and might become good values going forward. There are a lot mid cap companies in Germany that are world leaders in their niches and could be great investments in a recovery.

 

[rolling]

Sold BRK and bought KHC

[Spekulatius]

Bought a little bit of GNRC. I might get this one cheaper , but I like the sector and the brand equity. I also believe this sector has secular growth, even though near term results can vary, based on weather patterns.

[Spekulatius]

Added to Metro Bank (MTRO.L) - UK exchange

Hi. I've been looking a bit into that. Seems very interesting. Have you seen a decent writeup anywhere or mind to share a couple of points?

 

What's obvious is the deposit growth, which is incredible. The culture is based on the Commerce Bank model, that Vernon Hill "invented" in America.

The culture is real - I can tell you that. Both customers and employees love this company. You have 56 "stores" going to 100-130, roughly in 5-6 years.

The "store model" is totally repeatable - and UK will eventually support, perhaps, 200 stores.

 

There are structural reasons for the growth - by that I mean - the UK banking sector is being forced to shrink (I mean the legacy banks) as the

UK regulators and the public's interests have not been served. (RBS is still 65% owned by gov).  So some assets are being dispersed, the market is opening up, and

legacy branches have closed at a fast rate due to cost cutting and poor locations. So there are significant industry tailwinds for the

growth of "challenger" banks. Metro is the best of them all. It's the fastest growing bank I have ever seen in my life.

 

Looks like Metro Bank is blowing up. Risk weighting for mortgages off - they had  RWA for commercial mortgages at 50% rather than 100%. Did they forgot to read the manual for bank accounting in the UK? Looks doomed to me, or at least has to raise capital. On then surface, it still looks adequately capitalized, but I stay away from financials that can’t get their accounting right - a lot of them become doughnuts.

https://finance.yahoo.com/news/british-lender-metro-banks-2018-072746266.html

 

Dumpster fire continues - cash call:

https://finance.yahoo.com/news/metro-bank-slumps-shareholder-cash-081129938.html

[scorpioncapital]

Sold BRK and bought KHC

 

I just did the opposite  ;D

[rolling]

Sold BRK and bought KHC

 

I just did the opposite  ;D

:( realized my mistake. Costly mistake. Sold out khc and I’m considering going back to BRK or opting for my small caps, most heavy in cash, but so is BRK

[cubsfan]

Added to Metro Bank (MTRO.L) - UK exchange

Hi. I've been looking a bit into that. Seems very interesting. Have you seen a decent writeup anywhere or mind to share a couple of points?

 

 

What's obvious is the deposit growth, which is incredible. The culture is based on the Commerce Bank model, that Vernon Hill "invented" in America.

The culture is real - I can tell you that. Both customers and employees love this company. You have 56 "stores" going to 100-130, roughly in 5-6 years.

The "store model" is totally repeatable - and UK will eventually support, perhaps, 200 stores.

 

There are structural reasons for the growth - by that I mean - the UK banking sector is being forced to shrink (I mean the legacy banks) as the

UK regulators and the public's interests have not been served. (RBS is still 65% owned by gov).  So some assets are being dispersed, the market is opening up, and

legacy branches have closed at a fast rate due to cost cutting and poor locations. So there are significant industry tailwinds for the

growth of "challenger" banks. Metro is the best of them all. It's the fastest growing bank I have ever seen in my life.

 

Looks like Metro Bank is blowing up. Risk weighting for mortgages off - they had  RWA for commercial mortgages at 50% rather than 100%. Did they forgot to read the manual for bank accounting in the UK? Looks doomed to me, or at least has to raise capital. On then surface, it still looks adequately capitalized, but I stay away from financials that can’t get their accounting right - a lot of them become doughnuts.

https://finance.yahoo.com/news/british-lender-metro-banks-2018-072746266.html

 

Dumpster fire continues - cash call:

https://finance.yahoo.com/news/metro-bank-slumps-shareholder-cash-081129938.html

 

My worst investment of last year. What a lesson for me.

 

Buffett says you want management that is smart, energetic and honest.

And the most dangerous management is smart, energetic and lacks integrity.

 

Unfortunately, that is Metro Bank management. I bought it hook, line and sinker.

I hope none of you followed me in to Metro. You can not believe anything they tell you.

[Read the Footnotes]

Metro Bank (MTRO.L) - UK exchange

 

 

My worst investment of last year. What a lesson for me.

 

Buffett says you want management that is smart, energetic and honest.

And the most dangerous management is smart, energetic and lacks integrity.

 

Unfortunately, that is Metro Bank management. I bought it hook, line and sinker.

I hope none of you followed me in to Metro. You can not believe anything they tell you.

 

Cubsfan,

 

I haven't followed Metro Bank, so I don't know the details of the story, but I'm sorry to hear of your bad outcome on Metro Bank. Hope it hasn't been too painful.

 

I wanted to congratulate you on your reaction. The fact that you are here discussing this bodes well for you. I hope you can make the most of whatever lessons that might be available to you from a post mortem.

 

You say "You can not believe anything they tell you" and "I bought it hook, line and sinker". Everyone is at risk of being taken in by psychopaths and charlatans, some more than others.

 

I don't know what mistakes you'll feel you made, but here are some thoughts I hope will help even if you already know all of these points. Many great investors choose not to speak to management because they don't want to be influenced. I can also think of one investor I have tremendous respect for who says that he knows his unique personality makes him vulnerable to influence and that he doesn't have a good compass in this area. With that knowledge, he takes steps to minimize influence. Doing well in the markets has to do with refining a process that fits your personality. The risk of being taken in by management is probably something that isn't discussed enough and differences in susceptibility are probably discussed even less.

 

Best of luck making the most of it.

RtF