Presentation and structure of the portfolio on 25th September 2020

I would like to use my first post to introduce my portfolio. The start date is the 25th September 2020. I will update the performance and composition of the portfolio every quarter, starting the 31st December 2020. However, I will put any buy or sell movement in the Trading Diary section of the blog.

The portfolio currently has 22 companies, where the top 10 positions reach the 59% of the portfolio. The cash position is 6% and all the companies are based in Europe.

The following table and graph show the distribution of the portfolio in relation to the market capitalization of the companies:

81% of the portfolio is invested in companies with a market capitalization below 1.000 million Euros. As explained in the Investment Strategy section of the blog, small caps are my investment focus.

The next table shows the distribution of the portfolio in terms of the non-cyclicality and cyclicality of the businesses:

The stable (or non-cyclical) businesses are generally profitable regardless of economic trends because they produce or distribute goods and services we always need, including things like food and beverages, food and beverages packaging, tobacco, pharmaceuticals, power, water, and gas. These companies are also called defensive stocks because they can defend investors against the effects of economic downturn.

Cyclical companies follow the trends in the overall economy. Cyclical stocks represent companies that make or sell discretionary items and services that are in demand when the economy is doing well. These are goods and services that people cut first when times are tough. Examples of cyclical industries are travel, construction, furniture, car manufacturing or car manufacturing supplies.

The following graph shows the distribution of the portfolio in terms of the net financial debt that the companies have:

As the graph shows, there is only a 4% invested in companies with a net financial debt between 1,5x and 3x EBIT. In fact, it is just one company, Fromageries Bel, which is one of the top worldwide branded cheese manufacturer. This type of companies normally can handle these debt levels without any problem.

As you will see in the next table, almost all the companies, except one, are owned either by a family or by the founding CEO of the company, which is still in place. For me, as you can see in the Investment Strategy section of the blog, is one of the most important things to look at when you are analysing a company.

The next graph shows the currency exposure of the portfolio:

The following graph shows the country exposure of the portfolio, considering where the companies are based:

I would like to mention that the exposure to Greece is explained by these three companies:

As you can see, these are very defensive businesses and in two of the companies, the international sales are more than 50% of the business.

Finally, the next graph show the industry exposure of the companies in the portfolio:

Disclaimer: The purpose of this blog is not to provide financial advice or recommendations to buy or sell specific investments. Please, do your own research before making any investment decision. If you are unsure of any investment decision, you should seek a professional financial advisor. 

19 thoughts on “Presentation and structure of the portfolio on 25th September 2020

  1. Sutje

    Hi SCE,

    You mentioned in the trading diary that you bought Creightons shares.
    Imho in interesting company which would also fit into my portfolio.
    There is one item which I don’t like, the very high number of share options.
    High costs not to be seen in the p&l, at the end of the day a transfer of wealth from the (crowd of) shareholders to the management.
    This can be only accepted if the creation of wealth and the upside is significant higher than this issue.
    Would you share your thoughts on this item?

    Regards
    Sutje

    Like

    • SCE

      Hi Sutge,

      You are right, this high number of share options affects Creightons shareholders. However, I take into account all those share options (as it should be done) and I still think the stock offers a very nice upside potential at 0,50 GBP per share.

      The company said this would be the last big share option plan going forward. If they keep it that way I am ok with it. You have to consider that this management team has achieved tremendous growth for the last years just by selling toiletries and fragances. I actually recommend you going through the annual reports and Youtube presentations in the piworld Youtube. I know the company for 4 – 5 years and I have actually been a shareholder in the past and I can tell that is a company worth following.

      What I don’t like is that the two heads of the company, William McIlroy (Chairman and CEO) and Bernard Johnson (Managing Director), which already own 25% and 7,9% of the share capital, have received a huge amount of share options too. I would have liked to see a lower number for them, although I like them a lot. On the contrary, in the case of Philippa Clark (Global Marketing Director), which is terrific asset for the company, I am totally ok with doing “whatever it takes” to keep her motivated. She is a big part of the success of the company so far. The CEO and Managing Director acknowledge that and it is reflected in the number of share options she has.

      Kind Regards,
      SCE

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s