Nemetschek

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- UBS raises its price target for NVIDIA from USD 150 to USD 185. Buy. $NVDA (-3,63 %)

- METZLER raises the price target for MUNICH RE from EUR 535 to EUR 543. Buy. $MUV2 (-0,6 %)

- GOLDMAN lowers the target price for NOVO NORDISK from DKK 1040 to DKK 1025. Buy. $NOVO B (+5,32 %)

- GOLDMAN upgrades MTU from Neutral to Buy and raises target price from EUR 276 to EUR 400. $MTX (-3,41 %)

- GOLDMAN upgrades BASF from Neutral to Buy and raises target price from EUR 45 to EUR 53. $BAS (+1,69 %)

- DEUTSCHE BANK RESEARCH raises the price target for FRESENIUS SE from EUR 42 to EUR 44. Buy. $FRE (+0,18 %)

- DEUTSCHE BANK RESEARCH raises the price target for EMBRACER from SEK 24 to SEK 28. Hold. $TH9A

- DEUTSCHE BANK RESEARCH raises the price target for AMADEUS IT from EUR 62 to EUR 65. Hold. $AMS (-1,33 %)

- DEUTSCHE BANK RESEARCH raises the price target for NEMETSCHEK from EUR 85 to EUR 100. Hold. $NEM (-0,34 %)

- WARBURG RESEARCH raises the price target for DÜRR from EUR 32 to EUR 33. Buy. $DURYY (+0 %)

- HAUCK AUFHÄUSER IB upgrades CANCOM from Hold to Buy. Target price EUR 32. $COK (+0,4 %)

- ODDO BHF upgrades GENERALI to Neutral. Target price EUR 26.10. $G (-1,43 %)

- METZLER raises the price target for HEIDELBERG MATERIALS from EUR 131 to EUR 138. Buy. $HEI (+0,51 %)

- BERENBERG raises the price target for FLATEXDEGIRO from EUR 16 to EUR 18. Buy. $FTK (+1,48 %)

- BERENBERG raises the price target for FREENET from EUR 29 to EUR 32. Buy. $FNTN (+0,91 %)

- JPMORGAN raises the target price for HEIDELBERG MATERIALS from EUR 108 to EUR 149. Overweight. $HEI (+0,51 %)

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- UBS lowers the price target for MUNICH RE from EUR 560 to EUR 540. Buy. $MUV2 (-0,6 %)

- ODDO BHF downgrades MODERNA to Outperform. Target price USD 86. $MRNA (+6,04 %)

- UBS downgrades VALE from Buy to Neutral and lowers target price from USD 14 to USD 11.50. $VALE (-0,31 %)

- DZ BANK lowers target price for DEUTZ from EUR 6.80 to EUR 5.80. Buy. $DEZ (-0,91 %)

- DZ BANK lowers the price target for BECHTLE from EUR 51 to EUR 45. Buy. $BC8 (-0,42 %)

- BERENBERG lowers the target price for ESTEE LAUDER from USD 87 to USD 76. Hold. $EL (+1,18 %)

- RBC lowers the target price for ASOS from GBP 4.60 to GBP 4. Sector Perform. $ASC (-0,65 %)

- RBC lowers the price target for EVOTEC from EUR 12 to EUR 11.60. Outperform. $EVT (-0,94 %)

- RBC lowers the price target for VESTAS from DKK 222 to DKK 156. Outperform. $VWS (-1,47 %)

- BERENBERG lowers the price target for SUSS MICROTEC from EUR 80 to EUR 75. Buy. $SMHN (-1,71 %)

- JEFFERIES downgrades NEL from Hold to Underperform and lowers target price from NOK 5.50 to NOK 3. $NEL (-3,27 %)

- RBC lowers the price target for BMW from EUR 81 to EUR 80. Sector Perform. $BMW (-0,12 %)

- JEFFERIES lowers the price target for KNAUS TABBERT from EUR 26 to EUR 20. Hold. $KTA (-0,67 %)

Analsyst updates, 08.11.

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- GOLDMAN upgrades BIONTECH from Neutral to Buy and raises price target from USD 90 to USD 137. $BNTX (+3,14 %)

- BOFA raises target price for UNDER ARMOUR from USD 9 to USD 13. Neutral. $UAA (-0,73 %)

- DEUTSCHE BANK RESEARCH raises the price target for DELIVERY HERO from EUR 29 to EUR 35. Hold. $DHE

- DEUTSCHE BANK RESEARCH raises the price target for SIEMENS from EUR 197 to EUR 200. Buy. $SIE (-0,45 %)

- JEFFERIES raises the price target for HOCHTIEF from EUR 135 to EUR 138. Buy. $HOT (-0,13 %)

- DEUTSCHE BANK RESEARCH raises the price target for SIEMENS HEALTHINEERS from EUR 60 to EUR 62. Buy. $SHL (+0,45 %)

- DEUTSCHE BANK RESEARCH raises the price target for NORDEX from EUR 18 to EUR 19. Buy. $NDX1 (+0,87 %)

- DEUTSCHE BANK RESEARCH raises the price target for RATIONAL from 832 EUR to 841 EUR. Hold. $RAA (+1,23 %)

- DEUTSCHE BANK RESEARCH raises the target price for AXA from 37 EUR to 39 EUR. Buy. $CS (+0,45 %)

- WARBURG RESEARCH raises the price target for BASTEI LÜBBE from EUR 11.70 to EUR 12.20. Buy. $BST (-0,76 %)

- DEUTSCHE BANK RESEARCH raises the price target for ARCELORMITTAL from EUR 28 to EUR 29. Buy. $MT (-0,49 %)

- DZ BANK raises the price target for SWISS RE from CHF 130 to CHF 140. Buy. $SREN (-0,09 %)

- ODDO BHF raises the price target for HEIDELBERG MATERIALS from EUR 99 to EUR 110. Neutral. $HEI (+0,51 %)

- KEPLER CHEUVREUX raises the price target for DAIMLER TRUCK from EUR 35 to EUR 41. Hold. $DTG (-1,07 %)

- KEPLER CHEUVREUX upgrades REDCARE PHARMACY from Reduce to Hold. $RDC (-1,39 %)

- ODDO BHF raises the price target for HENKEL from EUR 67 to EUR 73. Neutral. $HEN (-0,41 %)

- ODDO BHF raises the price target for FREENET from EUR 27 to EUR 28. Neutral. $FNTN (+0,91 %)

- BARCLAYS raises the target price for ABOUT YOU from EUR 3.10 to EUR 3.40. Underweight. $YOU (+0,15 %)

- BARCLAYS raises the target price for NEMETSCHEK from EUR 108 to EUR 125. Overweight. $NEM (-0,34 %)

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- BOFA lowers the price target for PINTEREST from USD 45 to USD 39. Buy. $PINS

- WARBURG RESEARCH lowers the price target for DAIMLER TRUCK from EUR 56 to EUR 55. Buy. $DTG (-1,07 %)

- UBS lowers the price target for JCDECAUX from EUR 21.60 to EUR 18.50. Neutral. $DEC (+0,33 %)

- WARBURG RESEARCH lowers the price target for ADTRAN HOLDING from EUR 9.70 to EUR 9.30. Buy. $ADTN (-4,43 %)

- ODDO BHF lowers the price target for NORDEX from EUR 18 to EUR 17. Outperform. $NDX1 (+0,87 %)

- BARCLAYS lowers the target price for VESTAS from DKK 99 to DKK 80. Underweight. $VWS (-1,47 %)

- KEPLER CHEUVREUX lowers the price target for FRAPORT from EUR 62 to EUR 59. Buy. $FRA (+0,51 %)

- BARCLAYS lowers the target price for GSK from GBP 15.50 to GBP 14.50. Equal-Weight. $GSK

- BERENBERG lowers the price target for COMPUGROUP from EUR 23 to EUR 21. Buy. $COP (-0,63 %)

- BERENBERG lowers the price target for JUNGHEINRICH from EUR 41 to EUR 39. Buy. $JUN3 (-0,22 %)

- JEFFERIES lowers the target price for SUSS MICROTEC from EUR 87 to EUR 75. Buy. $SMHN (-1,71 %)

Summary Earnings, 07.11.

$MUV2 (-0,6 %)
| Munich Re Q3 24 Earnings

EPS EU7.02 (est EU6.67)

Sees FY Insurance Rev. About EU61B, Saw About EU59B

Sees FY Profit Above EU5B, Saw EU5B

$RHM (-1,89 %) | Rheinmetall AG Q3 24 Earnings

Sales EU2.45B (est EU2.42B)

Still Sees FY Sales About EU10B (est EU9.99B)

Sees FY Operating Margin At Upper End Of Guidance

Nissan Motor Q2 2024 Earnings $7201 (+7,76 %)

Q2 Operating Income 31.91B Yen (est 65.25B Yen)

Q2 Net Loss 9.34B Yen (est Profit 49.07B Yen)

Sees FY Oper Income 150.00B Yen, Saw 500.00B Yen

To Cut 9,000 Jobs Globally

To Reduce Global Production Capacity By 20%

To Sell Back Up To 10.02% Of Mitsubishi Motors Shares

Air France KLM Q3 24 Earnings $AF

EBITDA EU1.90B (est EU1.9B)

Rev EU8.98B (est EU8.88B)

Net Income EU780M (est EU874.3M)

Sees FY Capex EU3B, Saw Below EU3B

$TEF (+1,17 %) | Telefonica Q3 24 Earnings

REV. EU10.02B (est EU10B)

Adj. EBITDA EU3.26B (est EU3.26B)

Net Income EU10M (est EU357M)

To Book €314 Million Non-Cash Impairment For Peru

ArcelorMittal Q3 24 Earnings: $MT (-0,49 %)

- Sales $15.20B (est $15.23B)

- EBITDA $1.58B (est $1.47B)

- Still Sees FY CAPEX $4.5B To $5.0B

- Markets Conditions Are 'Unsustainable'

- Positive On Medium/Long Term Outlook

Daimler Truck Holdings Q3 24 Earnings: $DTG (-1,07 %)

- Rev EU13.14B (est EU12.98B)

- Adj EBIT EU1.19B (est EU1.13B)

- Still Sees FY Rev EU53B To EU55B (est EU53.45B)

Adyen disappoints with lower than expected sales growth and loses 13% on the stock market. $ADYEN (-0,84 %)

Lanxess-shares rise by 4.4% to 26.80 euros after a positive quarterly report, having previously fallen by 13%. The operating margin exceeds expectations, although prices weaken. $LXS (+0,14 %)

National Grid increased its adjusted operating profit by 14% to 2 billion pounds in the first half of the financial year and expects an increase of around 10% for the year as a whole. Higher fees in New York and higher revenues in the UK are supporting growth. $NG. (-0,43 %)

AMS-Osram increased its profitability in the third quarter despite a decline in sales, but expects business development to be subdued in the fourth quarter and early 2025. To ensure profitability, the company plans further cost reductions of 225 million euros by the end of 2026. $AMS

Suess Microtec is more optimistic after a strong third quarter and now expects to achieve its annual targets in the upper half of the forecast range. Sales are expected to reach 380 to 410 million euros, with an EBIT margin of 14 to 16 percent. $SMHN (-1,71 %)

The investment company Mutares slips into the red operationally in the third quarter with an adjusted EBITDA loss of EUR 16.5 million. However, sales increased by 14% to 3.9 billion euros. $MUX (+1,91 %)

Delivery Hero expects a free cash flow of EUR 50 to 100 million for 2024 and anticipates GMV growth at the upper end of the forecast of 7 to 9 percent. However, the Group expects adjusted EBITDA to be at the lower end of the range of EUR 725 to 775 million. $DHE

Deutz recorded an 80% drop in profits to EUR 7.2 million in the third quarter and slipped into the red with a bottom line of EUR 2 million. Turnover falls by 14.9% to 430.4 million euros due to a slump in demand. $DEZ (-0,91 %)

Compugroup Medical records a decline in EBITDA in the third quarter

EBITDA fell by 12% to 54.9 million euros in the third quarter, but slightly exceeded

analysts' expectations slightly. Turnover falls by 1% to 283.4 million euros

euros, and the company confirms its reduced forecast for 2024. $COP (-0,63 %)

Alzchem reports a jump in profits for the first nine months with

a 36% increase in EBITDA to EUR 76.8 million and increases the EBITDA margin to

EBITDA margin to 18.5 %. The Group is sticking to its profit target for 2024

but is aiming for the lower end of the sales forecast due to the discontinuation of low-margin

the lower end of the sales forecast. $ACT (-0,43 %)

Nordex is raising its forecast for the EBITDA margin for 2024 and

now expects it to be closer to the upper end of the range of three to four

percent. In the first nine months of the year, the company recorded

an increase in revenue of 14 percent to EUR 5.1 billion and an improved

improved EBITDA margin of 3.7 percent. $NDX1 (+0,87 %)

Nemetschek recorded an increase in revenue in the third quarter thanks to the

thanks to the GoCanvas acquisition, Nemetschek recorded a 15.1% increase in revenues to 253 million euros,

however, earnings remained slightly below expectations. The

The operating costs of the acquisition put pressure on profits, so that EBITDA

increases by 6.7 %. $NEM (-0,34 %)

Rational increases earnings before interest and taxes in the third quarter

taxes by 18% to just under 78 million euros, exceeding analysts'

analysts' expectations, while sales revenues grew by 8% to 294 million

euros. The company confirms its forecast for the year. $RAA (+1,23 %)

Analyst updates, 29.10. 👇🏼

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• JEFFERIES raises the price target for SAP $SAP (-1,87 %) from EUR 230 to EUR 255. Buy.
• DEUTSCHE BANK RESEARCH raises the price target for DEUTSCHE TELEKOM $DTE (+0,67 %) from EUR 33 to EUR 39. Buy.
• ODDO BHF raises the target price for ALLIANZ
  SE
  $ALV (-0,14 %) from EUR 288 to EUR 324. Outperform.
• ODDO BHF raises the price target for DWS
  $DWS (+0,52 %) from EUR 38 to EUR 39. Neutral.
• METZLER raises the price target for LUFTHANSA $LHA (-0,44 %) from EUR 5.70 to EUR 6.40. Hold.
• METZLER raises the price target for NEMETSCHEK
  $NEM (-0,34 %) from EUR 89 to EUR 91. Hold.
• METZLER raises the price target for FRIEDRICH
  VORWERK $VH2 (-3 %) from EUR 29.20 to EUR 38. Buy.
• GOLDMAN raises the price target for SYMRISE $SY1 (+0,2 %) from EUR 127 to EUR 131. Neutral.

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• BOFA lowers the price target for MUNICH
  RE
  $MUV2 (-0,6 %) from EUR 550 to EUR 535. Buy.
• WARBURG RESEARCH lowers the price target for WACKER
  CHEMICALS $WCH (-0,13 %) from EUR 136 to EUR 133. Buy.
• WARBURG RESEARCH downgrades STEICO
  $ST5 (-2,12 %) from Buy to Hold and lowers target price from EUR 42 to EUR 29.
• METZLER lowers the price target for SALZGITTER $SZG (-3,59 %) from EUR 17 to EUR 15.50. Hold.
• DEUTSCHE BANK RESEARCH lowers the price target for SGL
  CARBON $SGL (+0,73 %) from EUR 10.80 to EUR 10.60. Buy.
• LBBW downgrades PHILIPS $PHIA (+2,11 %) from Buy to Hold and lowers target price from EUR 30 to EUR 26.
• GOLDMAN downgrades ABB
  $ABBNY (-0,56 %) from Buy to Neutral. Target price CHF 52.
• UBS lowers the price target for CARL ZEISS MEDITEC $AFX (-0,59 %) from EUR 71 to EUR 65. Neutral.
• JPMORGAN lowers the price target for STMICRO
  $STMPA (-1,92 %) from EUR 42 to EUR 35. Overweight.

German winning stocks of the past five years

+603% SUSS Microtec $SMHN (-1,71 %)

+411% Rheinmetall $RHM (-1,89 %)

+329% Redcare Pharmacy $RDC (-1,39 %)

+326% ATOSS Software $AOF (+0,87 %)

+262% PNE $PNE3 (-0,63 %)

+258% Mutares $MUX (+1,91 %)

+232% Energiekontor $EKT (+1,01 %)

+231% GFT Technologies $GFT (-0,48 %)

+230% Elmos Semiconductor $ELG (-1,39 %)

+229% Adtran Networks $ADV (+0,12 %)

+161% Commerzbank $CBK (-0,9 %)

+146% Krones $KRN (+0,97 %)

+131% Hella $HLE (+2,18 %)

+126% Munich Re $MUV2 (-0,6 %)

+125% Deutsche Bank $DBK (+0,12 %)

+111% VERBIO $VBK (-2,71 %)

+111% KSB (Vz) $KSB (+1,42 %)

+109% Infineon $IFX (-1,86 %)

+109% Siemens $SIE (-0,45 %)

+107% Talanx $TLX (-0,72 %)

+103% Encavis $ECV (-0,29 %)

+100% SFC Energy $SFC

+95% Nemetschek $NEM (-0,34 %)

+93% Aixtron $AIXA (-2,09 %)

+90% flatexDEGIRO $FTK (+1,48 %)

+84% SAP $SAP (-1,87 %)

Which ones do you have in your portfolio or on your watchlist?

I sold Infineon and Elmos too early.

+++ Earnings summary this morning, 31.07. +++

Adidas $ADS (-0,81 %) achieved sales of €5.8 billion in the second quarter (previous year: €5.3 billion), EBIT of €346 million (previous year: €176 million) and net profit from continuing operations of €211 million (previous year: €96 million).

-

KRONES $KRN (+0,97 %) achieves revenue of €1.31 billion in Q2 (previous year: +16.7%, analyst forecast: €1.295 billion); EBITDA of €130.8 million (previous year: +22.8%, forecast: €130 million) and net profit of €69.2 million (previous year: +19.5%). Outlook for 2024 confirmed.

-

Auto1 Group $AG1 (+0,69 %) achieved sales of €1.52 billion in the second quarter (previous year: €1.34 billion, analyst forecast: €1.45 billion), sales of 166,292 vehicles (previous year: €141,682 vehicles); gross profit of €173.3 million (previous year: €127.8 million) and EBITDA (adjusted) of €20.7 million (previous year: -€14.8 million, forecast: €9.7 million).

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TEAMVIEWER $TMV (+1,21 %) achieved revenue of €164.1 million in the second quarter (previous year: €154.2 million, forecast: €163.3 million), EBITDA (adjusted) of €67.5 million (previous year: €63.8 million, forecast: €64.3 million) and net profit of €26.5 million (previous year: €34.0 million). Outlook for 2024 confirmed.

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Fresenius $FRE (+0,18 %) achieved adjusted sales of €5.41 billion (previous year: €5.1 billion, forecast: €5.27 billion), EBIT (adjusted) of €660 million (previous year: €571 million, forecast: €626 million) and adjusted net income after minority interests of €457 million (previous year: €393 million, forecast: €404 million) in the second quarter. Outlook confirmed.

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Siemens Healthineers $SHL (+0,45 %) achieved sales of €5.4 billion in the third quarter (previous year: €5.2 billion, forecast: €5.5 billion), EBIT (adjusted) of €825 million (previous year: €758 million, forecast: €856 million) and net profit of €472 million (previous year: €451 million). Outlook confirmed.

-

Nemetschek $NEM (-0,34 %) confirms key figures for Q2 with revenue of €227.7m, EBITDA of €61.4m and outlook for 2024.

-

Lufthansa $LHA (-0,44 %) achieves revenue of €10.01bn (previous year: €9.38bn), EBIT (adjusted) of €686m (previous year: €1.1bn) and net profit of €469m (previous year: €881m) in Q2. Outlook confirmed on July 12.

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KION $KGX (-0,36 %) achieved revenue of €2.9 billion in the second quarter (previous year: €2.8 billion, forecast: €2.9 billion), EBIT (adjusted) of €220.3 million (previous year: €192.3 million, forecast: €218 million) and a net profit of €70.7 million (previous year: €72.8 million).

The challenge: Name the three best German stocks you would buy right now.

The difficulty: You have to choose at least 1 DAX stock and 1 MDAX stock.

I'll start. Probably an unpopular opinion, but as a DAX stock I would actually pick the German Merck $MRK (-0,81 %) as a DAX stock. I like pharma and see this as a very solid stock at a good price. As an MDAX stock, I would pick Carl Zeiss Meditec $AFX (-0,59 %) as this is an important topic for the future. I would fill the third place with Nemetschek $NEM (-0,34 %) to include one of the few German technology stocks. How does it look for you?

Nemetschek Group Stock Analysis

Hello everybody,

Nemetschek has clearly won in my last survey on the desired company presentation, which is why I will give you a short overview of the Nemetschek Group ($NEM (-0,34 %)).

Have fun reading!

Note: This is my second slightly larger post, I would still appreciate feedback and thank you for the positive response to my last post.

Overview:

Company Presentation

Moat and company management

Quality - Scoring

Growth - Scoring

Valuation

1. company presentation Nemetschek Group

The Nemetschek Group is a German-based provider of software solutions for the construction industry and describes itself as a pioneer for digital transformation in the AEC/O industry and the media sector. Founded in 1963 by Prof. Georg Nemetschek, the Nemetschek Group today employs around 3,600 experts worldwide. 🇩🇪

The more than 7 million users (customers) of this software are architects, civil engineers, planners, landscape architects and many more. .

The intelligent software solutions cover the entire life cycle of construction and infrastructure projects and lead their customers into the future of digitalization. 🏗

Here, the solution is divided into 4 customer-oriented segments (Planning+Design, Build+Construct, Operate+Margin, Media+Entertainment) with 13 strong brands, with the Planning+Design segment comprising 7 brands. (s. Figure 1 in the appendix)

As an inconspicuous "small" German company, Nemetschek is a leading global player in an inconspicuous industry. With more than 80 locations and users in 142 countries, broad diversification is ensured (21% Germany, 30% Europe ex. DE, 39% America, 10% Asia/Pacific).🌍

Nemetschek is the market leader and offers software for the entire construction life cycle and has pursued this holistic approach from the very beginning. And they also have a wide range of products for creative minds.

(s. Appendix Figure 2&3).

2.moat and corporate governance

Nemetschek has been led (CEO) by Frenchman Yves Padrines since March 01, 2022. His strategic focus is on the further conversion to subscription and SaaS, the strengthening of the go-to-market approach, the introduction of innovations, the expansion of M&A and venture activities, and the optimization of operational processes within the group.

The following strengths can be identified:

• Attractive end markets
• Growth potential through structural growth drivers such as the low level of digitalization in the construction industry
• Structural megatrends (urbanization, infrastructure, sustainable construction, smart/green buildings)
• High barriers to market entry
• Unique market position
• Leading product portfolio, close proximity to customers, pioneer in Open BIM (in a data exchange strategy according toOpen BIM, data is exchanged using open information models)
• Attractive business model
• High percentage of recurring revenue, high profitability and return on investment (more later)
• Solid financial position
• Healthy balance sheet, high equity ratio, long-term oriented anchor shareholder
• Value-creating acquisitions
• Focus on long-term value creation, track record of value-enhancing acquisitions

Morningstar's economic moat rating (Wide) coincides with my impression that Nemetschek has a large and stable moat.

In the following scoring points, I will only briefly present the key figures and evaluation of these that are important to me personally.

3.Quality Scoring

ROIC 5Y AVG: 16.34% ✅

ROCE 5Y AVG: 26.6% ✅

FCF Margin: 30% ✅

Gross Margin: 54.21%🔰(I prefer >60%)

GuruFocus Profitability Rank: 10/10 ✅

Debt/EBITDA: 0.51 ✅

4.Growth Scoring

Nemetschek drives innovation, open standards and sustainability in the industry and continuously expands its portfolio by investing in start-ups. In addition, 24% of revenue is invested in research and development.

Revenue 10Y CAGR: 16.42%✅

FCF 5Y CAGR: 17.05%✅

EPS 5Y CAGR: 1.36%📛

5.rating

In the Morningstar Valuation Rating, Nemetschek is currently trading at a fairly valued price.

In my personal valuation scheme, Nemetschek is unfortunately not a buy for me at the moment.

The FCF Yield of 2.25% is below the 5Y Average of 2.93% and also far below the S&P 500 Earnings Yield and the US 10Y Treasury Yield.

The Market implied FCF Growth Rate for the next 5 years is 12.64% and thus below the past 5Y FCF CAGR of 17.05% --> positive!

I do not want to go further into the valuation here :-).

Thanks for your feedback. What are you missing in this (short) performance? What is your opinion about the Nemetschek Group?

Feel free to share the article if you like it!

Sources:

Key figures sources vary, ask if interested :-)

Nemetschek Group Annual Report

Nemetschek Group company presentation

https://ir.nemetschek.com/websites/nemetschek/German/100/equity-story.html

https://ir.nemetschek.com/websites/nemetschek/German/0/investor-relations.html

https://investor.morningstar.com/quotes/0P0001LSPH

-Tom

Investment philosophy, "diversification" and dividends

Hi all, as this is my first slightly larger post I would generally appreciate some constructive feedback.

First something About Me

I'll be 22 in a month and I've been active in the stock market for about 2 years now. After a lot of back and forth, I can almost say that I have tried every strategy - but I never really felt comfortable. One learns from mistakes, and I have made many of them.

But what I have also done is to spend countless hours, days and weeks with books, videos, shareholder letters and internet research. I was particularly fascinated by the investment approaches of Terry Smith and the way of Joseph Carlson on Youtube.

My goal quickly became clear, I don't want to have thousands of companies in my portfolio that I don't know, understand or fully support. So an ETF focus was off the table.

Thereupon I built my own investment philosophy, which I would like to present to you in the following.

If you want to know more about me and my goals, there might be another article with a portfolio presentation soon :-)

First I would like to explain to you why I do not believe in diversification hold:

A quote from Warren Buffet is well known: "Diversification is protection against ignorance. It makes little sense if you know what you are doing."

However, a quote from one of the world's best investors alone is unlikely to convince everyone. Studies also support Buffet's view. The advantages of diversification decrease very fast and the gap between market risk and total portfolio becomes minimal from a portfolio size of 20-25 companies - 25 companies give you all the advantages of diversification, more positions only worsen your performance and overview. (Figure 1)

Because concentration delivers better performance. Fund managers who concentrate their knowledge in a few companies deliver better results than more diversified managers. (Figure 2)

Investment philosophy

I want to outperform the market, so I look for the best companies. What makes good companies?

Companies with competitive advantages (moats) outperform the market (Figure 3), and they do so because they have high returns on capital. My first metric for evaluating quality of a company and with a high value in my company analysis is ROIC (Return on Capital Invested). I look for companies with at least 10% ROIC. (Figure 4) Furthermore I want high ROCE (Return on capital employed) and high ROA (Return on Assets) figures.

This directly eliminates some companies and also whole sectors, namely exactly those in which it is not worth to invest anyway. Why is this so?

There are sectors that historically outperform the market (Software, Consumer, Healthcare) - on which my focus is -, and sectors that consistently underperform and are not considered in my investment approach (Banking, Energy, Insurance, Mining, Utilities, Airlines) - just compare the sectors with the main index ;-)

Consumer goods, healthcare and software companies perform better because they generate sustained profits, so they remain profitable even during economic downturns. This allows for consistently high returns on capital.

Next, a look at the margin here I would like to see high Gross Margins >60%, which are also a good indicator of a competitive advantage, and a high Profit Margin, which is an indicator of the efficiency of a company's value creation. However, the most important margin for assessing profitability is the FCF margin.

A company's focus should be maximally on Free Cash Flow, we should invest in companies that are as profitable as possible. In the long run, the share price follows the Fcf/Share.

Beyond that I don't want any debt, any company with Debt/EBITDA > 3 flies right out, preferably anything less than 2.

In terms of growth, I look for stable and good EPS and revenue growth, but FCF growth has the highest priority.

The higher the better, the more important the key performance indicators are.

My minimum benchmarks for the most important metrics:

• ROIC > 15%, ROCE > 15-0%
• Gross Margin > 60%
• Profit Margin > 20%
• FCF Margin > 20%
• Debt / EBITDA < 3, preferably < 1
• FCF 5Y CAGR > 10-15%

(Not all of my companies always meet every metric, but I have built my own score where a minimum score must be met and by score I set the "Conviction" to a company).

Buy & Hold and long-term investing outperforms

As long as a company continues to reinvest its capital at high returns there is no reason to sell. (Figure 5)

What about dividends?

Some of my companies pay a dividend, others don't - I don't put much emphasis on dividends, and will definitely not put bad companies in my portfolio just to get a payout in a given month ;) Dividends should be minimized if capital can be reinvested at high rates of return. At my young age and with a long term investment horizon the focus should be on yield, in old age I will also shift to dividends ;)

The most important thing to conclude: Invest in profitable companies that you UNDERSTAND

A few final tips:

• Don't chase trends, they fade away
• Do not be blinded by dividends
• Don't care about macroeconomics, invest in companies - not cycles
• Market timing is impossible
• Look for established companies, not one-hit wonders
• BUY GOOD COMPANIES - DON'T OVERPAY - DO NOTHING (Terry Smith)

My current investable universe:

$ADBE (-2,14 %)
$NVO (+5,14 %)
$CUV (-1,16 %)
$CDNS (-4,03 %)
$ASML (-0,72 %)
$VRTX (+0,82 %)
$V (-0,16 %)
$MA (-0,3 %)
$MSFT (-1,57 %)
$QLYS (-1,9 %)
$MKTX (+2,6 %)
$KLAC (-2,61 %)
$GOOGL (-2,28 %)
$REG1V (-2,01 %)
$TNE (+1,05 %)
$ENX (-1,25 %)
$EW (-0,51 %)
$VRSN (-0,43 %)
$FICO (-1,51 %)
$FTNT (-3,08 %)
$NEM (-0,34 %)
$MONC (+1,66 %)
$CSU (-0,46 %)
$6861 (+0,2 %)
$ENGH (-0,28 %)
$MC (+0,4 %)
$AAPL (+0,26 %)
$6857 (-0,87 %)
$7741 (-2,75 %)
$PAYX (-0,77 %)
$MTD (-0,87 %)
$TXN (-0,26 %)
$OR (+1,22 %)
$ZTS (+2,45 %) (Companies I watch, in my portfolio I have only 8 of them).

That's it from me for now. Please leave me some feedback and share the post if you like it :-)

What would you like to hear from me next? More about free cash flow? Portfolio presentation? Company presentation? My slightly different valuation approach, far away from P/E?

Some of the illustrations are from a slightly smaller fund ("Long Equity Investing" on Twitter - can only recommend you) or from Terry Smith's Shareholder Letter.

No investment advice

Quarterly figures on Valentine's Day (14.02.23)

From Coca-Cola to SFC Energy and AirBNB ⤵️

Today there were again some quarterly figures that are very interesting for us investors. The numbers are one thing but how are the outlooks. On the outlooks we can otherwise like to go into the comments times, from the companies that are interesting.

The consumer figures from the U.S., were not quite so convincing today.

USA: Consumer prices in January +6.4%. Expected +6.2% after +6.5% in the previous month (y/y).

USA: Consumer prices (core rate) in January +0.4%. Expectations were +0.4% after +0.3% in the previous month (m/m).

Perhaps the figures will make us a bit more positive again:

$ABNB (-5,19 %)
Airbnb:

Beat analyst estimates of $0.25 in fourth-quarter earnings per share of $0.48. Revenue of $1.9 billion beat expectations of $1.86 billion.

$KO (+2,3 %)
The Coca-Cola Co:

Hits analyst estimates with fourth-quarter earnings per share of $0.45. Revenue of $10.1 billion above expectations of $10.01 billion. In the outlook for 2023, Coca-Cola expects organic revenue growth of 7% to 8% (analyst forecast: 7.15%).

$SZU (+0,81 %)
Südzucker:

Expects fiscal 2022/2023 group sales of 9.5 billion euros (ate forecast 9.7-10.1 billion), group Ebitda of 1-1.04 billion (old 0.89-0.99 billion), and group operating profit of 640-680 million (old 530-630 million).

$JEN (-0,81 %)
Jenoptik:

Expects sales of 1.05-1.1 billion euros and an Ebitda margin of 19-19.5 percent for fiscal year 2023. The forecast is based on preliminary sales in fiscal 2022 of around 980 million euros (last forecast 945-960 million).

$MAR (-1,49 %)
Marriott International Inc:

Surpassed analyst estimates of $1.83 in fourth-quarter earnings per share of $1.96. Revenue of $5.92 billion exceeded expectations of $5.39 billion.

$RBD (+0 %)
Restaurant Brands Intl Inc:

Missed analyst estimates of $0.74 in the fourth quarter with earnings per share of $0.72. Revenue of $1.69 billion exceeded expectations of $1.67 billion.

$MTUAY (-6,13 %)
MTU Aero Engines:

Achieves 2022 revenues of €5.33 billion (PY: €4.188 billion, analyst forecast: €5.405 billion), Ebit (adjusted) of €655 million (PY: €468 million, €633 million), Ebit margin of 12.3% (PY: 11.2%, forecast: 11.7%) and net profit (adjusted) of €476 million (PY: €342 million, forecast: €455 million). Proposed dividend 2022 at €3.20 (PY: €2.10, forecast: €2.90). In the outlook for 2023, MTU Aero Engines now expects a higher revenue growth of 10 % and for 2025 still an Ebit (adjusted) of approximately €1 billion (forecast: €1.00 billion).

CFO: Expect 2023 Ebit (adjusted) of €775 to €750 million. Dividend payout ratio for 2023 to increase to 40%. Will have to deal with share buyback issue from 2024.

$KTA (-0,67 %)
Knaus Tabbert:

Achieves 2022 consolidated group sales of €1.050 billion (PY: €863 million) according to preliminary figures (driven by strong growth spurt in Q4).

$F3C (-0,89 %)
SFC Energy:

2022 sales of €85.2 million (PY: €64.3 million), Ebitda (adjusted) of €8.2 million (PY: €6.2 million) and Ebit (adjusted) of €3.2 million (PY: €1.9 million). For 2023, the company expects revenues of €103 bid €111 million and Ebitda (adjusted) of €8.9 to €14.1 million.

$NEM (-0,34 %)
Nemetschek:

Achieves fiscal 2022 revenue and profitability targets, 2022 revenue growth of +17.7% (+12.1% at constant currency) to €801.8 million, 2022 Ebitda growth of +15.8% to €257.0 million, 2022 Ebitda margin at 32.0% (PY: 32.6%), detailed 2022 figures and 2023 outlook on March 23.

$CEC (-2,01 %)
CECONOMY:

Reports 1st quarter sales of €7.1 billion (PY: €6.85 billion, analyst forecast: €7.1 billion), Ebit (adjusted) of €224 million (PY: €274 million) and net income of €127 million (PY: €122 million). Forecast 2022/2023 confirmed. CECONOMY sells majority stake in Mediamarkt Sweden to Power International; in return CECONOMY receives 20% stake in Swedish subsidiary Power Sweden from Power International.

$TKA (+0,54 %)
ThyssenKrupp:

Reports 1st quarter order intake of €9.2 billion (PY: €10.4 billion), sales of €9 billion (PY: €9 billion, analysts' forecast: €9.1 billion), EBIT (adjusted) of €254 million (PY: €378 million, forecast: €174.6 million) and net income of €75 million (PY: €106 million). Outlook for 2022/2023 confirmed.

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