- How does an analyst work to select stocks?
- Which stock tips does he favor?
- Is this something I would invest in?
Introduction: Who is Bart Goemaere?
Bart Goemaere, an analyst of the investors’ magazine Beurstips selects less known stocks of companies with upwards potential. He chooses for a selection of stocks where investors need to have the patience for possible capital gains.
Beurstips is an independent investors magazine with a contrarian vision for investments. Bart makes reviews about investment opportunities and recommendations to invest in specific good dividend paying companies, holdings, and strong undervalued stocks. Bart makes buy and sell recommendations for two portfolios. One portfolio has the name “Tresors at attic”. The other portfolio has the name “Risky Business”. Through the website beurstips.com, you can request an example of his investors’ magazine.
The Favorite Stocks
During 2,5 hours Bart Goemaere explained the reasoning behind his two buy and hold portfolios that he manages for his subscribers of his magazine and presented several favorite stocks from above two portfolios. Bart opens the evening with the quote: “Who knows the difference between gambling and investing. Gambling is investing in bitcoins and in the lottery. You won’t put all your money in those two items, right?”
The portfolio Tresors at Attic has a focus on undervalued stocks with fundaments. A catalyst within a sector where risk/spread is important. The portfolio has a balanced risk. So you invest a % of your portfolio in such a stock. The risk is how strong a company in his balance sheet is. Fundamentals are key for this portfolio! Within a crash, everything will go down. The strength of a portfolio is the speed on which your portfolio returns to its original value. You can’t predict a stock market crash and you can’t predict the direction of the market. So you need to balance your risk. Bart explains that each stock has a risk factor with 1 = low risk and 5 = high risk. The portfolio is composed of agriculture, real estate, energy, consumer goods,… Performance 24% of this portfolio since April 2016.
The portfolio Risky Business has a focus on speculative stocks. Here there is less focus on the fundamentals. Spread/risk is even more important in this portfolio. Beurstips contains several stories from companies that are in de-risking phase. The balance sheet of those companies is risk factor 3. In portfolio Risky Business there are several stocks with risk factor 5. The minority is risk factor 1. Majority is factor 3 and 4. Sometimes a move happens from the portfolio Risky business to Tresors at Attic when Bart sees more long-term potential.Bart explains the story of the company Resilux. This is a great turnaround story. A company with a good cash flow stream. 3,8% of the portfolio. It was original 15% of the portfolio. Q1 2017 was not so well for Resilux. Bart explains the business model, revenue streams and cash position of Resilux. EBITDA is the most important figure in fundamentals. Don’t look at the profit as this figure can be manipulated. EBITDA is the driving factor for selecting good stocks. Don’t look at P/E ratio. Bart highlights that an even more important fundamental metric of a company is EV/EBITDA. This is the value when you want acquire a company. This is the most important figure that Bart looks at. Bart explains the evolution of the Resilux stock chart.
6 Favorite stocks
Now let’s learn about 6 favorite companies that are currently in one of the above portfolios. Share prices are from 28 June 2017.
- Velcan Energy: the new Sapec ? (11,33 euro – Euronext Alternext/Ticker ALVEL)
Sapec chart….agriculture holding with strong balance sheet problems. Bart explains the story of Sapec. What is the key story ? There was a tresor within that company that was then sold to make the share price explode.
What about Velcan? Velcan is a listed Independent Power Producer with concessions in emerging markets. An example is the Hydrowater central in Brazil. When you look at total portfolio of Velcan, concessions are added slowly. The tresors of Velcan are the hydrowater central in Brazil. The sell value is low today. When the situation in Brazil improves, the value of this hydrowatercentral will improve. Only three hydrowatercentrals in India are built in Udar Pradesh. This will be interesting to follow. If Velcan would sell one of those new central concessions, then the stock price can increase substantially with 10 to 20 euro per share. The de-risking of the projects is happening but not certain. In the meantime, Velcan would possibly focus on a solar project within Bangladesh.
- First Quantum Minerals (10,88 euro – Toronto Exchange / Ticker FM)
Copper is most shorted basic materials. Goldman Sachs was responsible for this. Now they went long. Drivers of copper demand is the electricity consumption per 1000 people. So developing countries will need to invest in infrastructure to cope with the electricity demand. Bolero released recently a report about copper.
Most important basic material for electrical engines will be copper, not lithium. Lithium is most hyped basic material. Today there is an export quota from specific countries. That is the main reason.
Copper is more and more expensive to get out of the mines. This results in higher prices and less investments in the mines. Take a look at the chart of Glencore. The copper mine project pipeline now is below pre-supercycle lows. Additional capacity going forward will be needed. Prices will go up.
First Quantum Minerals is a Tier 2 copper player which will increase it’s production capacity with projects in Panama and …
From 2018 – 2019 onwards the balance sheet will improve due to decreasing capital expenditures. When prices of copper will increase, the balance sheet will explode. The reason for current shaky stock price is the debt ratio of this company.
As an alternative you can invest in the ETF COPX for Copper mines.
- Socfinasia & Socfinaf (Socfinasia 21,76 euro – Luxembourg Exchange / Ticker SCFNS – Socfinaf 19.09 Ticker SOFAF)
The Socfin Group specializes in the development and management of oil palm plantations and rubber tree plantations. To date, the Socfin Group is present in 8 Central African countries and 2 countries in Southeast Asia, managing a total of 15 agro-industrial projects.
The Socfin Group’s strength is based on its expertise and the integrated nature of its activities, but also on its knowledge of the sector and its adaptability to current social issues.
These companies are an investment risk factor 2 and 3 in Beurstips portfolio.
Socfinaf has large debt ratio. Socfinasia pays a nice dividend. Socfinaf can’t afford it.
What is important ? Those palmoil and rubber plantages only run well around the Equator. There has a large growth. Production increases yoy. Growth will be biggest in Socfinaf. The dividend will follow one day.
3,5 Euro per share dividend. Socfinasia is high dividend and low debt.
Socfinaf is low dividend and high debt. New plantation is more than 12.000$ per ha. The expectation is that palm oil prices will increase to 1000 per ton over next 2 years. When supply drops, then prices will increase.
- Western Copper and Gold (1,34 euro – Toronto Exchange / Ticker WRN)
Risk value 5. Basic Materials sector. “the new Lumina Copper”?
It’s a Canadian copper and gold project. Bart explains the story of this project Casino in the Yukon Province in Canada. It is one of the largest gold projects. Biggest risk is the environment approval. The procedure will be start at the end of the year. The final goal is to sell this project.
This is an acquisition candidate. What is the potential value? On average price per NAV is 0,62x. Goal is 0,5 times NAV. Price WRN can double. Target 3-6 CAD.
- Enwave (1,05 euro – Toronto Exchange / Ticker ENW)
EnWave is an industrial technology company that offers commercial-scale microwave vacuum dehydration machinery for applications in the food and pharmaceutical industries. Risk factor 4. Sector Bart explains the market of this company.
The business model of Enwave is leasing and selling of food drying machines resulting in royalties. Three revenue streams with a royalty licensing focus. Enwave has several licensed partners such as Nestle, Bonduelle, Merck and development partners such as Kellogs. We can expect more royalties in the future as new partners are added to the revenue stream.
Stock price target 3,5 CAD. Possible customer is Ter Beke who could use the machines of Enwave. It was said by the CEO of Ter Beke.
- PureCircle (372 GB – London Exchange / Ticker PURE)
PureCircle Ltd is the leading producer of high-purity stevia ingredients to the global food and beverage industry. PureCircle has offices around the world with the global headquarters in Kuala Lumpur, Malaysia. Risk factor 4 in the portfolio.
All big soft drinks are starting to use Stevia in their drinks. New production in Malaysia will contribute in the future. EBITDA keeps on improving.
Target : 500 pence due to improving EBITDA, volumes and profit margins. PureCircle has more than 50% of Stevia production. A Chinese investor keeps on increasing his position within PureCircle. It’a vertical integrated company which is a competitive advantage.
Questions and Answers
Some attendees asked the analyst opinion about Global graphics, Balta and Roularta
- Global Graphics story. Value will go up as the technology is valued higher in the graphics industry. This is an acquisition candidate. The value is much higher than 4….
- Balta : the valuation is very high. Nice company.
- Roularta : we have it in portfolio in Tresors at Attic. Catalyst is repaying of debt in 2018. 6 million free cash extra. Risk is change of media landscape. Advertising market is unpredictable. Target 35 Euro
You can view the presentation at the following link Beurstips
Our opinion
Before reviewing the companies with their share prices presented by Bart G., we did some market research on the internet about other stocks in the two portfolios. We did find articles of 29 February and 28 November 2016 in the newspaper De Standaard with a list of favorite stocks . We can add the following stocks as favorites of Bart’s portfolios
- Resilux
- Accentis
- Nyrstar
- Tessenderlo
- Vasco Data Security
- Accsys Technologies
- SBM Offshore
If you visit beurstips.com, you can find out more stocks in the two portfolios. Here’s our review of the different stocks.
In the portfolio Tresors at Attic, you can find stocks such as Resilux, Velcan Energy, First Quantum Materials, Tessenderlo. Socfinasia, Socfinaf and Accentis. Tessenderlo and Accentis are two positions Bart entered long time ago. Tessenderlo is an upward trend. Accentis doubled in value. Velcan Energy, Socfinasia and Socfinaf I would consider as “patience plays” for big return on investment or (future) dividend. First Quantum Minerals is in a down trend channel and definitely not ready for a BUY. If it breaks out the trend above 11 and stays above 11$, it can move higher. I would prefer to see a consolidation between 10 ans 11$ first.
In the portfolio Risky Business, you can find stocks such as Global Graphics, SBM Offshore, Enwave, Accsys Tech., Western Copper and Gold, Vasco Data Security and Purecircle. Here SBMO and PURE are (potential) winners. Accsys just had a nice move up from 62 to 76. Will it hold those levels? Vasco (VDSI) is stuck in 12 to 16 trend. Enwave and Western Copper Corporation are in a downtrend channel and currently losers. We consider investing in those stocks more a “gamble”. But maybe we are wrong…in the longterm.
Final Conclusion
Beurstips is an investor magazine for two types of investors. First of all, the typical Belgian BUY and HOLD investor who subscribes to several magazines and executes his stocks picks based on analyst recommendations. Once and a while this investor will have a “homerun” winner such as Sapec and Resilux if he stepped in at the right time. What you need is patience and hope that things will play out as you (or the analyst thinks) want.
The second type of investor is the risky investor who likes to invest in Basic Materials, Technology, and other risky investments. Here you need to do your own solid investment analysis and make sure you cut your losses quickly. In the portfolio Risky Business are currently 7 losers out of 17. That is 45%. Hoping that a stock will rise again after a 30 to 50% loss is according to me not an investment strategy…just risky business 🙂
We can understand that many Belgian investors fit one of the above investor profile as our survey at the VFB conference learned us that 90% of the Belgian investors are BUY and HOLD investors.
Beurstips is amongst many other investors magazines such De Belegger, Mister Market for sure a valuable information source for the Belgian and Dutch investors.
Personally we don’t fit any of those above investors profiles. We are a dividend (growth) investor at heart crossing the 5000$ dividends in 6 months. That’s what we love about our strategy…money on the bank. Each month and each quarter. We also started to learn options investing. You can follow our journey on this blog going forward.
We end our blog post with a quote as always. Good luck with your investment strategy !
Sources : Beurstips , Standaard.be
2 Response Comments
Thx for sharing.
Looks like I have the 8+1 approach: accumulating ETFs, active ETF portfolio and options.
Also a great strategy !