Thesis Tracker: Q4 2021

Still a work in progress. Companies mostly on track. Inflation sometimes an issue.

Portfolio in Q1. I include a quick view on the portfolio performance here, because it was so painful and might offer great learnings. As of March 31st, I was down 5% ytd, I believe. I forgot to write it down. April 1st shows c. -3.5%. Some portfolios might show a much worse ytd performance and some singel stocks might show the ‘-3.5%’ without the dot, but that observation offers little solace. I want to recap three developments:

1) Russian Roulette was a zero. At least, as of now, the ball lies rather firmly on the green zero. The wheel is still spinning a bit, and, depending on politics and brokers etc. my Russian shares may yet again show an executable price much higher than 1 euro cent (my chosen number). Read more in my tweet from March 3, also available via Threadreaderapp).

2) My three top positions performed strongly. PGR (11% ytd in $), CHKP (19% in $) and SES (19%) all delivered a good ytd performance contributions. All the more a pity, that it does not shine through in total portfolio performance, due to (1).

3) Other names profited from higher energy prices (Inpex, AOI). Krka was affected by a big Russia and Ukraine exposure.


The Thesis Tracker is still a work in progress but I believe it had a good start (launch was for Q3 2021) and it will improve my process going forward.

Mostly on track. Without spending too much time on discussing every shade of color of any one cell, the big picture is quite good I would say, and like said, definitions for colouring will evolve …

PGR is objectively — and that is the aim of the Thesis Tracker to take a step back and exclude emotions and biases — on track, but not better. Inflation hits profitability and defending profitability costs growth (so far). Two pictures below, say it all about the fundamental development. The performance was much better than (objective) fundamentals, which could be explained by (i) investors flocking once more to actually profitable higher quality businesses, and (ii) investors’ trust in future business performance of a company that leads its industry when it comes t orising rates, and that should profit from (permanently?) higher interest rate levels when (if?) inflation stops driving severity and LR will normalize again. LRs might even profit from people driving less to save fuel costs… (a bit). But, PGR looks rather expensive.

CHKP‘s reported sales growth finally accelerated in 2021, reporting 5% yoy growth in Q3 and 6% for Q4 for total 2021 growth of 5%. Growth is driven by subscriptions. Profitability remains high and cashflows are used for share buybacks (now at higher prices, unfortunately). The company arrived in the 21st century (or was it the 20th?) and focuses on higher growth, which might depress margins going forward.

SES is on track (i) vidoe decline curve flattens, (ii) Ebitda margins stays high at about 60% and (iii) execution is fully on shedule to reap FCC relocation profits, first payment’s first tranche is received. So far so good, that is all part of my thesis, and thus, it is only a light green for total of 2021. But, in the meantime, government data services became more important, and SES announced an acquisition in this area, and one of the additional one-offs materializes. Still a good play with a defensive business (aside from high debt, that is getting cheaper) and special catalysts.
>> I tend) to like SES more when share price rises, after it falls I planned to sell during the next rise… (@52w high now)

Oriental Watch was originally a bargain when I bought it. Might be at a cyclical high riding the short supply of expensive watches. On the one hand a Hong Kong reopening might push profits (ie from tourists) but on the other hand it might become time to leave before a cycle turns. Hong Kong’ers leave in droves. Past performance was very strong, but cyclicality is tricky. Most of its market capitalization is ‘covered’ by book value, mostly cash + inventory and high dividends are paid.

Flow Traders is a bit hard to track, since it is very much a probabilistic play. For 2021, margins were low (usual), market share gains in the US were missing but the ETP market is strongly growing. (ETP AUM +40% yoy). Q1 results will be interesting (MOVE and European vola measures: V1X, V2X).

Krka‘s growth in 2021 was a bit low, profitability still high, capital allocation OK. High exposure to Russia and Ukraine (27% of 2021 sales) creates uncertainty and will likely hit profitability.

Shinoken experienced a strong Q4 with 41% of FY sales and 50% of FY profits after depressed RE sales in prior three quarters. Growth of total units (served), ROE and dividend growth are good. Growth in higher-quality earnings was low (1%).

Qualitas experienced higher combined ratios in 2021, somewhat slower growth, and book value only increased a little. Domestic market position remains very strong. IR team reacts quickly!

Mo-BRUK had a great FY 2021 with total revenue +51% and strong margins. Q4’s incineration qoq development was weaker.

Tick TS performs strongly. Sales and normalized net profit increased 12% yoy. Besides a good one-off effect, underlying development is good and the company is positioned for growth. Guided fwd earnings yield is for c. 5-6%.

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