Results of a European Screen

I seem to be writing more drafts than actual posts so I thought I would do something pretty straightforward and just put up a list of stocks that I have been looking at or am going to look at. I have abandoned my usual price-to-book/return on equity screen and have adopted a simple EBIT/EV screen. The logic behind this is that I have found the latter screen tends to produce some slightly higher quality businesses whereas the former tends to produce businesses that require slightly more “skill” to invest in. As I have already made clear, I am not sure that skill is going to help much in the next 6 months or year so I think we need to be looking at some higher quality businesses (although as we will see these are influenced by cyclical factors too).

The list will differ even more than usual as these are mostly European stocks (I did look through AUS, CAN and HK but there wasn’t much interesting) with one AUS and one US stock. I have been looking through Europe for a while as I suspected I was more likely to find bargains in Europe and I don’t feel there are many truly extraordinary situations in the UK. The list of stocks here is a final list after looking through the financial statements as there were quite a few cyclical stocks (particularly, specialist chemicals) that came up but were obviously not a great idea after looking at the financials.

The data given is company name, ticker, price-to-earnings, price-to-book and LFY ROE. Anyone interested in any of the companies mentioned can e-mail me for data (financial statements, estimates, price data) as it can be hard to locate.

  1. Greek Organization of Football Prognostics,  OPAP, 4.71, 3.89, 82.66%
  2. Michelin SA, ML, 7.68, 0.99, 12.90%
  3. Tipp24 AG, TIM, 12.57, 2.64, 21.04%
  4. Duty Free Shops SA, FFGRP, 3.46, 0.55, 15.74%
  5. Flight Centre Limited, FLT, 13.31, 2.62, 19.68%
  6. Jensen-Group NV, JEN, 8.41, 1.24, 14.80%
  7. Kudelski SA, KUD, 5.51, 0.80, 14.57%
  8. Indesit Company SPA, IND, 6.08, 1.13, 18.58%
  9. Hornbach Holding AG, HBH3, 5.13, 0.49, 9.59%
  10. Whirlpool Corp, WHR, 7.02, 1.03, 14.65%
  11. Delhaize Group SA, DELB, 8.15, 0.92, 11.33%
  12. Hugli Holding AG, HUE, 8.12, 1.99, 24.49%
  13. Intralot SA, INLOT, 3.34, 0.43, 12.89%
  14. GR. Sarantis SA, SAR, 12.97, 0.83, 6.38%
  15. Robertet SA, RBT, 9.53, 1.24, 13.00%
  16. Renk AG, ZAR, 11.34, 1.97, 17.37%
  17. Semperit AG Holding, SEM, 13.46, 1.74, 12.93%
  18. Nice SPA, NICE, 10.93, 1.89, 17.26%

So briefly analysing this list there are a few things worth pointing out. First, we have Greek companies like OPAP, FFGRP, INLOT and SAR. Obviously, people aren’t too bullish on the Greek economy but I would these companies are very competitive. Particular mention should go to FFGRP which actually owns the Links of London chain of jewellers which is a tremendously successful brand.

Second, we have Swiss companies that are struggling because of the rapid appreciation of the CHF recently. I don’t know what to make of this at the moment and the SNB are really fighting this currency trend hard but looking more broadly at the companies that came up (even the ones not listed) it was clear most of them were quite exceptional. They operated in small niches and had very very long records of profitability. The data source I have goes back to 1984 and it is worth considering that I rarely see a company in the US or the UK go back that far but almost every single Swiss company did. There are a few reasons for this I am sure but I think it suggests there is something interesting going on there.

Finally, the rest of the companies are a mix of retail/consumer companies like DELB or IND. Again, what is extraordinary is the tremendous records some of these companies have like RBT or SEM which is something you don’t see elsewhere.

I am not sure which ones are going to work out but I think this is an area value investors should look into as, to me, it seems a fairly untapped source of value.

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