September 2012

September 2012-09-27

OMV AG and Einhell AG were added to our Portfolio in September. Both Companies come with sound fundamentals and have stable operating  businesses.

OMV Ag was spotted in several Stock Screeners, it kept our attention since it is trading at a Book/Market ratio of 1,18 as well as a high dividend yield of 4,65% . The facts of being the biggest company in Austria and standing out as one of the finest corporations in this country contributes to our findings. Furthermore one has to add that Central Banks are flooding the markets with cheap currency, leading to a growth prospect in energy prices which is the core operating business of OMV. A major contributor leading to the discount of OMV can be seen in the low liquidity of the Austrian stock market. Still a company that has such strong business operations also operating in a lot of East European countries is sufficiently undervalued at a P/E of 6,89.For us the liquidity issues does not acount for a game changer as we will be invested for a year. All in all this leads to our conclusion that OMV is trading at a sufficient discount to Intrinsic Value.

Einhell AG has not as many triggering catalysators as OMV Ag, this pick is a classical Stock Screener pick according to our strategy. A decent company with sound financial fundamentals as well as a stable business environment trading at a low multiple. Furthermoe we could achieve high margins of safety in both stock picks in having high Book/Market ratios (OMV AG 1,18 & Einhell 1,29).

This was our fifth set of stock picks, time for some review. Our actively managed portfolios have been around for four months now. The portfolios are still underperforming the market, but in absolute terms gaining some returns +0,5% and +0,4% respectively today. This is fully in line with our expectaions as our investing horizont is one year for the Stockscreener portfolio and even more long term for the Hidden Champions portfolio, we are not expecting outperformance from the beginning. Our target stock picks are undervalued in absolute turns, sometimes misunderstood by current market agents thus it takes time for them to come back to more reasonable valuations. To quote Benjamin Graham: “The stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine!”

From now on we will pursue more detailed informations about our stock investing to overcome asymetric information for our portfolio. We are planning on setting up a website to support our two Portfolio investing strategies here on Wikifolio. After having seen the project Wikifolio develop for a couple of months, we are very excited about the project and its future perspectives.

Sincerely,

Aeneas Investment Team