We start to invest in Shopify Inc.

September 19th, 2019 Comments off

After selling all our shares of Colfax Corp. we were looking for a more promising investment and we found Shopify Inc. (NYSE:SHOP)

Shopify Inc. is based in Toronto, Canada and is an enabler of E Commerce. It started to produce software for small and medium sized enterprises to set up online shops. Then it offered payment solutions and now it starts to offer logistics in North America.

Shopify could become an independent alternative for third party sellers on the Amazon Platform. Shopify also is the No.1 ecommerce shop software solution for the new cannabis shops where selling cannabis is already legalized in the US and in Canada.

We will discuss Shopify in more detail in October!

But in these days the market offers us a good entry point to start a position in SHOP!

The stock already had a tremendous runup in the last years. But now following an investment in the logistics sector and a secondary offering of shares the stock price came back from an all time high of $ 407 to yesterday’s closing price of $ 325,85 . This is a very good entry point for long term investors. Start to build a position!

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Colfax released decent Q2 2019 results

August 10th, 2019 Comments off

Colfax Corp. (NYSE:CFX) our conglomerate in transition since it acquired the medical device sector released Q2 2019 results.

The medical device sector grew sales by 3%, fabrication technology grew sales by 6%.

Net loss in the quarter was $466.6 million or $3.45 per share, which includes a non-cash charge of $3.48 per share for the pending divestiture of its Air & Gas Handling business that is mostly attributable to the recognition of cumulative foreign currency translation effects from the long-term strengthening of the U.S. Dollar.

Excluding the divestiture impacts, strategic transaction costs, restructuring expenses and acquisition-related amortization costs, Colfax reported fully consolidated adjusted net income of $0.64 per share in the second quarter 2019 versus $0.61 in the second quarter of 2018.

Colfax continues to expect its businesses to achieve the previously announced 2019 adjusted EPS guidance of $1.90 to $2.00 from continuing operations.

Those numbers came in better than expected by the market and the stock jumped 15% on Wednesday.

But over the long term it is clearly visible that Colfax Corp. remains a slow grower and the development of the stock price reflects that.

Q2 numbers show that the divestiture of the Air & Gas Handling sector and the acquisition of the medical device unit did not improve growth rates. And most probably this will not change in the future!

One just has to watch Johnson & Johnson (NYSE:JNJ) with its growth problem in the medical device section. But they have a strong pharmaceutical section which drives the growth.

Therefore we recommend to sell Colfax shares now! There are more interesting investment opportunities in the stock market!

This blog follows Colfax Corp. since May 2009 when the share price of Colfax stood at $7.27

Readers who bought at that time can now realize a capital gain of 258% at a stock price of $26 – not so bad!

This blog will stop following Colfax and start to follow another more interesting stock soon!

So stay tuned!

Markel had an excellent 2nd quarter 2019!

August 2nd, 2019 Comments off

Markel (NYSE: MKL), the speciality insurer with a strong investment arm just released very good numbers for Q2 2019!

They reported operating revenues of $2.4 billion for the second quarter of 2019 compared to $2.0 billion for the second quarter of 2018.

Comprehensive income to shareholders came in at $623.3 million, up from $164.3 million in Q2 2018.

The all important book value/share climbed astounding 10.1% from $682.76 one year ago to $751.94 !

At the insurance segment the combined ratio was 95% for the second quarter of 2019 compared to 92% for the second quarter of 2018, a little higher but still very good.

At the investment segment total invested assets increased to $21.2 billion at the end of June, up from $20.1 billion at the end of Q2 2018 and equity securities were about 32% of that total.

At the Markel Ventures segment net income rose from $0.6 million a year ago to $49.8 million in Q2 2019 a meaningful contribution to the company’s results.

Obvious that management was very pleased with these results as all three operating segments made meaningful contributions.

Markel’s stock yesterday closed at $1’119.96 which means it is now valued at 1.5 book value/share.

This is fairly valued, not very cheap, but for long term investors this could be a good entry point to buy shares of a high quality insurer and investor!

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Colfax sells its Air and Gas handling business

May 16th, 2019 Comments off

So now it is official:

Colfax Corp. (NYSE: CFX) sells its Air and Gas handling business to KPS Capital Partners for $ 1.8 billion!

Today’s stock market reacts favorably: Colfax share price is up 4.5% at the moment of this writing. This move will bring down debt and improve the balance sheet of Colfax Corp. !

Colfax Corp. continues the transformation process of the company

May 10th, 2019 Comments off

Colfax Corp. (NYSE: CFX) released Q1 2019 results.

After the acquisition of DJO Global completed in February 2019 Colfax is now a company which operates in 3 segments:

Orthopedics, Fabrication Technology and Air & Gas Handling

Adjusted earnings were $ 0.53 , 10.4% higher than in the year ago quarter.

The major contribution to the 14.4% revenue growth this quarter came from the acquired orthopedics business growing 19.2% in comparison to the 1.6% growth in existing businesses.

CEO Trerotola pointed out on the conference call that „DJO launched six new products in the first quarter that will contribute to an improving growth trajectory later this year and in 2020“.

But he also pointed out that Colfax „made significant improvements in the Air & Gas Handling business that are now leading through with consistent growth in orders and margins and the business is expected to return to top-line growth in the second half.“

As Colfax intends to sell this business this certainly helps to get a better price.

The balance sheet quality deteriorated. Long-term debt balance increased substantially to $4,037.1 million from $1,192.4 million in the previous quarter as Colfax already bought DJO Global but did not sell yet the Air&Gas Handling business.

But this can be expected within the next several months and the balance sheet will improve.

This means for investors that the transformation process of Colfax will most likely continue for a couple of quarters more.

Will management be able to transform DJO Global into a growth story?

Will fabrication technology continue to be a slow grower?

For 2019 Colfax anticipates adjusted earnings of $ 2.55-$2.65 .

At today’s price of $26.77 this translates into a p/e ratio of just 10 !

This looks cheap but Colfax still isn’t the growth story it once has been.

Even if this 1st quarter has been solid, investors should wait until more signs of improvement emerge. Until then Colfax remains a hold!

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Markel is off to a very good start in 2019

May 3rd, 2019 Comments off

Markel (NYSE:MKL) the speciality insurer released very good results for Q1 2019.

This is encouraging after the hefty swings of the share price from an all time high of $ 1’217.82 in August 2018 down to $ 957 in January 2019 and now up again to $ 1061,05

Since the beginning of 2018 incertainty came from the ongoing governmental inquiries into the loss reserves of the „CatCo business“ which today seem to be behind them.

Book value/share rose from $ 671.05 in the prior year quarter to $ 706.98 , an increase of 5.4% and the combined ratio was 95% compared to 90% in the 1st quarter 2018.

Operating revenue growth of 56.9% yoy from $1.575 billion to $ 2.472 billion is certainly an impressing number but can largely be explained by accounting rules:

Markel every quarter has to adjust the fair value of their equity securities to market prices. As the equity market recovered in Q1 2019 $611.5 million increase in operating revenue can be explained by this increase.

At Markel’s investment operations net investment income increased 5.7% year over year, to $114.2 million.

At Markel Ventures operating revenue grew 16.1% to $455 billion and operating income grew 25.8% to $29.9 million

Markel is cautiously optimistic about the remainder of this year!

At a price/book value per share ratio of 1.5 Markel’stock remains a buy!

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Colfax Corp., a company in transition!

February 18th, 2019 Comments off

Colfax Corp. (NYSE: CFX) released better than expected Q4 and FY 2018 results!

Q4 adjusted earnings in the fourth quarter were 69 cents per share.
Colfax’s net sales were $985.2 million, reflecting growth of 12.7% from the year-ago quarter.

Revenues from the Air and Gas Handling segment increased 9.7% to $410.3 million and Revenues from the Fabrication Technology segment totaled $574.9 million, an increase of 14.9% year over year.

Adjusted operating income in the quarter under review increased 34.1% year over year to $92.4 million and adjusted operating margin grew 150 bps to 9.4%

But Colfax is a company in transition!

They acquired DLO Global Inc. a global orthopedic solutions company and want to complete this transaction in the first quarter of 2019.

Furthermore they are looking for strategic options for its Air & Gas Handling platform which means they want to sell this segment.

So Colfax in one year will most probably look much different from today and today’s numbers will not be so meaningful.

Therefore Colfax should remain a Hold for investors until the picture becomes clearer:

Will they be able to successful integrate DJO Global?
Will they sell the Air and Gas Handling business at a good price?
Will management be able to lead a complete different business as medical solutions are?

Perhaps there will already be first hints at the end of the first quarter of 2019!

Markel reported a difficult Q4 and FY 2018

February 9th, 2019 Comments off

Markel Corporation (NYSE: MKL) reported Q4 and FY 2018 results.

Operating revenues came in at $6.8 billion for the year ended December 31, 2018 compared to $6.1 billion in 2017.

Comprehensive loss to shareholders was $375.8 million for the year ended December 31, 2018 compared to comprehensive income to shareholders of $1.2 billion in 2017.

Diluted net loss per share was $9.55 for the year ended December 31, 2018 compared to diluted net income per share of $25.81 in 2017

The combined ratio was 98% in 2018 compared to 105% in 2017.

Book value per common share outstanding the single most important ratio in the insurance industry declined 4% to $653.85 at December 31, 2018, down from $683.55 at December 31, 2017.

This was certainly a difficult quarter and fiscal year for Markel.

One problem was the steep decline of the stock market at the end of 2018. Therefore Markel had to recognize a comprohensive loss.

In addition the results were also impacted by a goodwill and intangible asset impairment of Markel CatCo operations.

The investment results weren’t so bad.

Net investment income surged 12.8% year over year to $114.5 million, driven by higher short-term interest rates, dividend income from equities, and higher interest income on the fixed-maturity investments.

The investment portfolio of Markel will always be more volatile than the one of other insurers as they maintain a rather high equity portion of 30% of total invested assets.

In Markel Ventures total revenue climbed 18% year over year, to $472 million.

Despite the above mentioned setbacks Markel looks optimisticly into the future:

The underwriting results for the year 2018 were positive, despite significant catastrophe losses.

In Q4 they completed the acquisition of Nephila of Bermuda, the industry’s preeminent insurance-linked securities investment manager. So Markel remains committed to there strategy in this market segment.

For investors the big picture and the long term perspective hasn’t changed at all.

Markel’s stock is valued at a price/book value per share ratio of only 1,6

At this price Markel remains a buy!

Colfax Corp. announces a surprise move!

November 26th, 2018 Comments off

Colfax Corp. (NYSW:CFX) the industrial gas and fluid handling company made a surprise move:

They announced the acquisition of the orthopedic devices, software and services company DJO Global!

.. oops… a total different activity and the price to pay in cash to the seller Blackstone is $ 3.15billion! In order to finance this acquisition Colfax intents to sell its entire Air and Gas Handling Division which at the end means a complete change of their business model.

Investors are nervous and the stock fell 16% after the announcement last week.

Will this all work and create shareholder value over time?

For the moment impossible to tell and therefore the stock remains a „hold“ but this change of activity is not just a „crazy idea“: the Rales brothers who founded Colfax modelled the company after Danaher Corp. (NYSE:DHR) which works in the orthopedic sector for years with success. Also Colfax CEO Trerotola came to Colfax from Danaher.

So perhaps with their experience in the medical device sector it could work over time!

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Markel released good Q3 2018 results!

November 2nd, 2018 Comments off

Markel Corp. our speciality insurer reported good Q3 2018 results!

Book value per share was $704.70 ,3% higher than the $683.55 reported december 31, 2017

The combined ratio was 99% for the third quarter of 2018 compared to 134% for the third quarter of 2017 and included $75.7 million, or six points of underwriting losses from Hurricane Florence and Typhoon Jebi.

Comprehensive income made a big jump from a comprehensive loss of $19.9 million in Q3 2017 to $315.1 million this quarter.

This was largely due to the strong performance of the equity portfolio while the fixed income portfolio was unfavorably impacted by rising interest rates.

Markel Ventures also released good numbers: Operating income more than tripled, to $23.6 million and in october they acquired 90% of fashion-handbag specialist Brahmin Leather Works for $173.3 million.

Another acquisition has already been announced in August: Nephila Holdings Limited, a Bermuda-based investment manager with $12 billion in assets under management, for $975 million in cash

These were once again solid numbers and Markel continues to grow by acquisitions.

The book value/share ratio stands at 1.5 which is not too expensive for a high quality company like Markel.

This stock remains a „buy“!

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