Dutch Stock Picker

My portfolio, going strong

2005-12-10T14:31:00.000+01:00

Over the past few weeks, my portfolio has picked up its positive performance again. In particular the navigation companies (TeleAtlas & TomTom) have done reasonably well. In the biotech corner, DeVGen is on the move whereas Crucell's latest acquisition attempt has not been wel received by the market. I've ditched my IT consultancy holdings since there is more and more market information that the European IT markets are moving sideways whereas the valuation of the sector (forward PE's of 15x and more) do not imply this.

European telco landscape

2005-11-24T10:43:00.000+01:00

The European telco landscape is up to a new set of mergers and acquisitions. Recently, Telefonica indicated to make a bid for Brittish mobile operator O2. On top of that TDC (the telco of Danmark) is bound to be taken private again, either by a group of private equity firms or even by competitor Swisscom (the national operator of Switserland).

In the meanwhile, Dutch KPN is also a frequently mentioned subject as a take-over candidate. In my opinion, KPN has been moving slowly the past few years. Of course, the company went through a very difficult time with buying German mobile operator E-Plus just after the bubble in 2000. The stock market closed and KPN could not issue the required equity to finance the acquisition. Banks forced KPN to heavily restructure and sell of many assets. The tide has tunred since KPN bought Telfort this year (another Dutch mobile operator). To my surprise the Dutch competition authorities allowed KPN to do this. I my view this acquisition ius a defense one. Telfort was basically the only operator in the Netherlands offering their network to Mobile Virtual Network Operations (MVNO's) and by excuting this acquisition KPN limits the competion.

Still, I believe that KPN should have acquired O2 a year ago, when the actually did make an offer. The combination would have had a very strong foothold in the German mobile market (being the number three) and on top of that the combination would have dominated the UK-Netherlands-Germany axe throughout Europe. KPN didn't want to pay too much but now the see the target being acquired (at a much higher price) by Telefonica.

KPN has turned itself into a take-over target. I believe that the company will get acquired, the question is when..

I do not own any KPN stock

Endemol

2005-11-22T12:26:00.000+01:00

Endemol, the Netherlands based, international producer of (television) entertainment shows will today be relisted after being bought in 2000 bij Telefonica. The company generated 851m in revenues last year on generated an EBITDA of 132.4m.

I've build a financial model for Endemol and my conclusion is that the company trades around 14 times 2006 earnings which is in the middle of the international peer group.

I bought some stock at the opening

Garmin & TomTom

2005-11-22T12:24:00.000+01:00

I found this interesting comparison article on TomTom and Garmin on the MotleyFool... watch the marketing spend!

$100bn fund

2005-11-19T15:29:00.000+01:00

I ran into this post on Mr. Simmons who has run a hedge fund with an average return of 33% over the past 14 years... let me know if you know any similar ones!

TeleAtlas additional listing

2005-11-19T12:29:00.000+01:00

TeleAtlas, the creator of roadmaps for companies such as TomTom has acquired an additional listing on the Euronext Amsterdam exchange. The company was already listed at the exchange in Frankfurt (they are now reconsidering this listing btw) but felt in would get more exposure if it would get a listing in Amsterdam, similar to TomTom.

TeleAtlas is still loss making but most analysts predict the company to be profitable as of next year. Although you could argue that providing the maps to equipment providers such as TomTom is much more of a commodity service and more likely to suffer of price pressure, on the other hand it is more or less a fixed cost play and hence strong revenue growth may instantly lead to higher levels of profitability.

Since the listing in Amsterdam was accompagnied by raising an additional 7.7m new shares (at 18,50 euros) and placing 18m shares of venture capitalists the company now has ample means to build up a stronger Asian presence. As management has indicated I expect some acquisitions in the Far East in the next couple of months.

The listing has resulted in heavy short selling and a good rebound the first day of trading. I own the shares since I've added some shares to my model portfolio yesterday.

Tom Tom navigating the world

2005-11-19T11:52:00.000+01:00

One of my favourite stocks since its IPO has been TomTom. The company has become a leader in the European navigation space in only a few years. According to my financial model of the company, it trades at 19x 2006 earnings. Underlying compound annual growth is in excess of 100% which makes this a cheap high growth company.

Having said that, the stock dropped 30% after announcing tremendous Q3 results, far in excess of any analyst predication and on top of that, the company significantly upped its full year outlook. The reason for the drop? One, the company estimated that a significant part of the growth came from pre-christmas stocking by (new) retailers (TomTom is rapidly expanding its retail distribution reach). In my view, the average (Dutch) analyst does not comprehend how indirect distribution works and soon the whole market was screaming about channel stuffing.

Next, TomTom also announced that it will introduce more cheaper devices in order to capture more market share in this Tornado-like growth market. TomTom also said it believed that due to these cheap devices that the Average Selling Prive (ASP) would come down in Q4. Again, the analyst community turned into panic... margins will implode an estimates for the next years need to be shaved down..

I believe that in the PxQ equation, Quantity will dominate Price. On top of that, I think that TomTom has tremendous buying power that will compensate a large part of the pricing. In the meanwhile, discounting on the TomTom products remains very limited which is a good sign for demand.

We'll see, but I strongly believe that the market is wrong. I own the shares and stick to them.

My model portfolio

2005-11-19T11:48:00.000+01:00

Although this is my first post in this English blog, I already run a Dutch blog for a while. Part of that Blog is a model portfolio that I actually manage. Below you'll find the holdings and performance of this portfolio year to date. So far, I've had a pretty good year with year with a performance of almost 39%. The dip earlier this month was due to the sudden drop in my largest holding TomTom.