Free stock picks - value stocks
Value stocks – Free stock picks
There are hundreds, nay thousands of places to go to get stock picks. All that is required is to give them your money and they will tell you what to buy.
I think this model is good for those firms that use it but completely sucks for the rest of us. Therefore, I am putting my writing where my money is. I will update my blog about once a month and I will tell you what stock I like. I will either be holding or looking to hold the stock.
In addition, I will do follow up and tell you how the recommendations are doing over time and how I am doing in general. Feel free to ignore my picks and make you own.
Feel free to use my picks yourself, that is why they are being made. Feel free to contact me if you have made money off my picks and tell me about it. (just use the contact link on the left of the page). At the moment I am concentrating on German stocks. These can be acquired from almost any service for minimal fees.
Pick 1 – Fielmann AG (I am currently holding this stock)
FIE:GR ISIN # DE0005772206
This stock is a rock. Since 2008 the stock has delivered solid year end returns for its’ investors. Caution: This pick falls well outside my normal zone so first let me present the negatives:
1) Expensive – as I write this the stock is trading at 74€. This is a bit steep for my tastes as it reduces the potential upside.
2) Smallish, youngish – Est. in 1972 the company has strong sales and assets (assuming good bookkeeping of course) but is several orders of magnitude smaller than the real blue chips.
3) Older founder - could create problems with succession upon retirement.
4) Retail related – retail firms are notoriously unreliable and I avoid them like the plague. Fielmann is partially retail. They make their own glass but sell many brands of eyeglass frames. Thus, some worrisome volatility still exists.
5) Insane P/E ratio – the stock’s P/E is way more than its contemporaries.
Positives:
1) The company is retail but also controls their own fabrication and distribution networks. They make their own stuff, distro their stuff and their stores sell their own stuff. Due to their size the firm has achieved economies of scale.
2) Regional penetration in Central Europe. While primarily German, the firm has good market share in several others countries making it more resilient to single country shocks.
3) Tight Share control. Only 43% of the stock is free floating. In times of valuation decline the family and / or foundation ownership can always enact buybacks to increase the share price and protect investors.
4) Good secure value. The 5 year retrospect shows that the stock has be surprisingly resilient and steadily improving despite some truly challenging conditions in the European economy.
Expectations: Barring a messy dispute in the event of the founder’s retirement or death (Günther Feilmann is 72) the stock should be a steady performer over the next 2 to 3 years.
Barring a crisis or some scandal, I expect steady returns leading to a solid topline of 105€ at which point I would advise selling the stock and booking the profits. As Fielmann is a brick and mortar, traditionally built German firm, it will not achieve real rock star values and I think a doubling of share value is unrealistic. However a 30% gain is achievable (over the next 2 to 3 years) once the market stabilizes and a few quarters of solid central european consumption reports bolster the stock.
Recommendations: Buy at any price under 80€, (hold) - sell at 95 - 105€ booking 15 – 30% returns.
November 3rd, 2011 at 5:19 pm
Update: What happened to Feilmann?
Since the initial write-up 3 weeks ago Fielmann steadily gained value at a normalized steady rate just as predicted, peaking at 76.60€ per share for a total return of 2% in 2 weeks. Not eye-popping but a solid return for such a short window.
However, on November 1st the stock plunged ending the day at 74.65 a 3% loss on the day. This coincided with a 300 pt drop in the DAX on aggregate for Nov 1st and far larger losses on individual issues. As of this writing most stocks have returned to positive territory but Fielmann has been very slow on the uptake, experiencing small gains and declines even while other more volatile issues have recovered some of their recent losses.
Why? In the absence of any company specific news releases I had considered insider dumping in advance of bad news. However, as the majority of shares are family controlled anyway, this makes little sense. Notably, Fielmann will report Q3 earnings on Nov 11 so dumping would be inside the 2week window which is sure to flag regulators. (If the Q3 report is sharply negative I will be among the first petitioning an investigation of dumping.)
Because of these reasons I discarded this hypothesis. Only today has another more plausible idea come to mind and in response to of all things, Treasuries. November 1st was a panic no doubt but the subsequent trading days are informative.
When the panic struck there was huge flight out of equities and into Government paper (US Treasuries, German Bunds and French Oats). In the following days, the riskier stocks (financials) have fluctuated but there has now been a large European selling of US Treasuries (http://www.faz.net/aktuell/wirtschaft/unternehmen/vorstandschef-blessing-commerzbank-verkauft-staatsanleihen-11508328.html). This selling of ‘safe haven’ funding during an epic crisis is counter-intuitive. Turns out, the reason, as cited by the Commerzbank CEO, is to raise funding.
This coincides with my new perspective on Fielmann. The stock is reliable…those holding the issue over the past year would have enjoyed a 7% return. This return is comparable to Government issue returns over the same period.
The stock has been slow to recover as there is a tug-of-war between prospective buyers looking to pick up a reliable value stock at lower levels and sellers looking to cash out a reliable equity to cover other riskier losses.
An examination of volumes underscores this hypothesis. The largest volumes were always large ‘buy’ signals while the majority of consistent volumes reflected ‘sell’ orders. This indicates that preset ‘buy’ signals are being activated as other holders gradually unload the stock to cover.
I maintain my buy and hold rating on Fielmann, However, I am rather curious to see their Q3 results. I expect it to be down, reflecting a general slowdown of the German economy. However a massive drop may indicate real problems.