VFB Investors’ Event : Day of the Tips

On the 30th of September,  Sven Sterckx, chairman of the Belgian League for Investors (VFB) opened the investors’ Day of the Tips. Fourteen banks. wealth asset management companies and investment advice companies signed up to present their top 3 investment ideas to the Belgian investor.

Below you can read our reflection of the day in three chapters : What did we learn today? , Our Own Opinion and Final Conclusion. The report only describes the presentations that we attended. There were many more presentations of companies explaining their business strategy and financial performance to investors.

What did we learn today ?

Welcome by Sven Sterckx

42 tips of the stocks will be given by the investment advisors top and intelligence of Belgium. Don’t follow them blindly. Do your own homework. VFB members invest more and more in stocks. The trend is also that more and more people are investing in stock market. This is because of low interest rates on savings accounts. It is not thanks to the Belgian government. The stock transaction tax has increased again. Incredible. Speculation tax and now the tax on having a stock portfolio tax above 500k. What bothers Sven most? This is on top of the current taxes already…we have too many taxes on capital.

Tax freedom day …60% goes to Belgian government. Would it not be fair that rich people contribute? Fair taxes is the slogan of politicians who wants a trophee. Investment pressure on capital and tax freedom day is 23 August.  We give 50 – 60% to government. Shocking !!

An Example : an entrepreneur with a small company who makes a financial plan. He saves for his pension in a portfolio. He needs 1 million euro to have the same pension as a government worker. Did you know that this person gives 372000 euro to the government? Capital is a large contributor. Get rid of this Michel tax!!

What does Belgian government do? It robbes all initiatives from the Belgian population. Entrepreneurship and being successful with investing in the stock market should be stimulated. Now the government is only focussed on taxing money from people who are able to save money for their pension.

The Power of Moats by Denise Molina (Morningstar)

Denise follows the industrial sector. 100 Analysts follow 1400 companies. What is important? Use 1 research methodology globally. Return on cost of capital is the key measure for the company valuation. It needs to be a longterm sustainable strategy of the company. Monringstar uses 3 economic ratings : Wide, Narrow or none.

Commodities can not profitable. Many companies have it..so they have no moat. Wide can be 20 years or longer sustainable strategy. An example of a WIDE company is Coca-Cola. A secret recipe with a successful brand.

There are 5 types of economic moats

• Intangible assets
• Switching costs
• Network effect
• Cost advantage
• Efficient scale

An example of Intangible asset is West-Vleteren beer. Unique beer with a worldwide known flavor and brand. Network effect examples are Netflix, Facebook,…Efficient scale examples are railway companies,…

Moats are not equally distributed across sectors. Highly commoditized or competitive industries will have fewer companies with moats. Different sectors have different moat levels. The other rating is trend. Morningstar looks for pricing power, competitive advantage,. A positive trend happened for the company Apple when they launched the iphone in 2005.

The stock price is not necessarily the value. Look at the cash flows. Moat isn’t always priced in. Quality and effectiveness of the ratings is very important for Morningstar.

Conclusions from recent research

Warehouse equipment suppliers have a long runway of growth. Ecommerce is driving faster delivery. Manual pickers rack up a lot of miles. Amazon has been snapping up logistics space at 30%. 40% Annual growth rate. The level of automation in warehouses is very low today..just people. There is lot of automation possible in the future…taking out expensive labor costs.

Kion group is the market leader and on our Best Ideas. Jungheinrich and Toyota Material handling are also on the stock market. Kion has customers in all sectors. The revenue stream is seasonal. We have to see what this company will do for the longterm.

Top 3 based on Excelco Software by Paul Hermans

Looking for the best company to invest in is key. Star companies with 5 stars – fast growth companies with solid balance sheet. The principle is simple. Invest in the best !

Paul Hermans explains how the rating works in the Excelco software. An example is Facebook who has a rating 5/5.

The value (green line) is calculated multiple times by the software. This is true value calculation based on historical averages and cash per share. The Price Target (red line) is also calculated to see what is still the potential price increase of the stock. This is pure an indicator whether to invest or not.

The cashflow of Facebook has grown year over year.

When you look at the returns of 2013, we see phenomenal returns. In 2014, we see similar high returns. Fossil was a 86% drop due to competition of Apple.

Last year tips…gave still a 17% return. Invest only in the 3 to 5 star companies.

What are the tips today in Germany using the Smart screener with minimal 4 stars?

• Fuchs
• Nemetschek
• PNE Wind
• Rational

When we review the ratings of those companies, Fuchs is a favorite. Nemetschek has a high profit margin as it makes 3D software for architects and engineers. 45% of the revenue comes from licenses maintenance fees. Nr 2 behind Autodesk. Rational is another favorite with a market share of 54% globally.

All the 4 companies have solid fundamentals.

Qrf – by CEO Anneleen Desmyter

Qrf is a Real Estate Investment company searching for top locations for retailers. Investors looking for a return should know Qrf pays a 5,4% dividend return. 90% of portfolio in Belgium. 10% in Netherlands looking for top selections. Anneleen Desmyter, CEO shows a selection of the top locations in different cities with top brands such as Karl Lagerfeld, H&M, Kruidvat, Gerry Weber,…

Sometimes real estate is sold to ensure future sustainable profitability. Let’s show portfolio in Netherlands where Qrf has 5 top locations with top brands such as Kentucky Fried Chicken, America Today,..

Most important for the revenue is the rental customers in non-food and food sectors. 60% is in the non-food sector. Qrf specializes in retail real estate in top city centers. Hunkemuller, Mc Donalds and other customers are key partners to discuss future plans. This has resulted in a 96,4% occupation ratio.

What is the future evolution in retail sector? Qrf believes in shops within the city centers. All cities are growing by population growth but also by growing tourism. But the world is changing…

Companies that adjust quickly will be the survivors. What does the customer want? Retail sector is steered by changes of consumer behavior. Ecommerce did have an impact on retail. 65% of Belgian consumers shop in the cities. Retail and ecommerce are more and more complementary. People enter a shop to test the new iPhone, experience a new brand or product.

Ecommerce leads to more traffic on the roads. Each delivery and return of a product costs 8 Euro per trip. The shop will be the delivery point in the Omnichannel shopping experience. The consumer gets more involved with workshops. New retailers such as KIABI and KIKO are choosing the city centers. This results in new investments driving the market.

Qrf did a lot of acquisitions in the past years and has grown the portfolio over the past years. The debt is 151 million which equals 56%. The dividend payout can still grow in the future.

Stock selections by Investment magazines

Beurstips – Bart Goemaere (www.beurstips.com)

Tips of 2016 gave a return of 70 %.

Tip 1 : Socfinasia (Ticker : SCNFS)

Socfinasia is rubber production company which you can buy with a discount. From 2018 production in Cambodja will be started up. Why buy Socfinasia ? You have a dividend return of 5,1%. If prices of palm oil increases, the dividend can increase. If you want to buy this share, you need to call Binck.

Tip 2 : Enwave (Ticker : ENW)

Tip 3 : Exmar : RISKY TIP (Ticker : EXM)

In the press miscommunication…beaten up. A lot of incorrect information is spread. The company has a lot of debt…put a little piece of your portfolio in Exmar

You can read about Bart’s favorites in one of our blog posts.

The Favorite Stocks of Bart Goemaere

De Belegger – Gert Bakelants (https://belegger.tijd.be)

Only 1 name…investment idea !! As Gert does not like to give names..but he recommends to invest in Boskalis (Ticker : BOKA). He explains the order book and the impact of the oil sector on the results of Boskalis. We can see new investments in offshore. Reinvestment within the ships float and employee layoffs lower their cost structure. Margins need to be improved.

The acquisition of Gardline does not contribute today to the bottom line. It is a synergy investment. It is a cyclical grower. The stock price is not too expensive at this moment. The dividend was lowered to 1 Euro to use the cash for new investments.

When you look at the chart of CFE, we have seen major stock price increase. The stock chart of Boskalis has also potential together with the recovery of oil market. Boskalis has a dividend policy that distributes 40 to 50% of net profit.

Kroffinvest Investment Tips (www.kroffinvest.be)

You need at least 10 stocks. What is the impact of the interest increase? You need to invest defensive today.

Tip 1 : Ahold Delhaize (Ticker : AD)

Tip 2 : Credit Agricole  (Nord de France) (Ticker : CNF )

When interest rates go up, this is beneficial for the financial sector. This is a cheap bank with a stock price of 20 euro. Dividend 1 Euro

Tip 3 : First Pacific (Ticker : FPAFY)

Debt ratio 1,5 billion. 11,4 HK intrinsic value. Holding with a discount.

Test aankoop – Stefan Pintjes (https://www.test-aankoop.be)

Tip 1 : Atenor (Ticker : ATEB)

Real estate project developer in Eastern countries. More and more projects in the portfolio. Profit of 5-6 Euro per share. Dividend increase of 2%

Tip 2 : EVS (Ticker : EVS)

Tip 3 : AXA (Ticker : CS)

Inside Beleggen – Danny Reweghs (https://insidebeleggen.knack.be/beurs)

Tip 1 : Cameco (Ticker : CCO)

One of largest Uranium producer. A play anticipating recovery of uranium price. Target 13 USD

Tip 2 : Mithra Pharmaceuticals (Ticker : MITRA)

Possible game changer. Stock price 20% under IPO price. Target 15 Euro

Tip 3 : Goldcorp (Ticker : G)

A gold mine play. Canadian 4th biggest mine. Target18 USD

Mister Market Magazine – Pierre Huylenbroek (https://www.mistermarket.be)

Tips are risky. Most stocks have a negative return so Pierre believes he was lucky. 4% of the companies create value…96% of companies did not create value according to a US study

Tip 1 : Solvay (Ticker : SOLB)

Cytec acquisition. Much more US company today. Price target : 150 Euro. Take a look at Solvac as alternative !

Tip 2 : X -Fab (Ticker : XFAB)

Wants to grow to 750 million. Bought at 7,42 Euro. Target 10 Euro.

Tip 3 : Ablynx (Ticker : ABLX)

This stock will be 20% higher or lower. Target 20 Euro

MdxHealth by CFO Jean-Marc Roelandt

In the US own salesteam of 50 people. Two large contracts have enabled Mdxhealth to grow faster in the US. Diagnostic tests are the key focus in Europe.

Big investments are needed in research. It is key and important to prove analytical validity! Also the analytical utility needs to be proven. Then this needs to lead to a better result for the patient. At the end the cost needs to be cheaper for the health system.

ConfirmMDx has passed all the necessary research and tests. 60 payor contracts have signed up to pay back. 65000 people have been already by more than 3000 doctors.

SelectMdx is gaining traction worldwide. 13 payor contracts and 6 distribution companies have an agreement. Collaboration with research institutions needs to support the pipeline.

What are the advantages of the products ?

Prostate cancer is 2^nd most common cancer diagnosed in men globally. There are over 2M biopsies conducted in the US.

1,1 million are negative after research. So many unnecessary tests. Although 25% are false negative…There is clear need for detection of aggressive cancers. This is where ConfirmMdx and SelectMdx can help. In the US more than 20 million men above 50 are screened and 5 million are advised for an additional biopsy. CFO explains product portfolio.

With an urinal test, this cancer can be found. ConfirmMdx can exclude the men that have no prostate cancer. The correctness of ConfirmMdx is 96%.

Market potential for prostate detection products is a market of 5 Billion. This is only start of the use of diagnostic tests for neurologists. 600$ per patient can be saved by using the MDxHealth products.

AssureMdx is a bladder cancer diagnosis opportunity. 0,5Billion market potential.

Financials. Revenue growth of 10%. Level of revenue by SelectMdx is still low as it is in the launch phase. The number or payer contracts is still low and needs to increase.

Cash burn of 13,4 million in first half. Cash flows will come in early 2018. Cash position 30 million $

Conclusion

More payer contracts are needed to pay tests back. Growing sales force to enable growth – high expectations in Q4 2017 with an ambitious forecast of revenue growth. Young market with high growth potential. Working to a break-even point !

 

Stock Selections of Private Bankers

Leleux Associated Brokers by Dirk Peeters

Tip 1 : Intervest Offices & Warehouses (Ticker : INTO)

REIT with an 1,4 Euro dividend gross. Focus on logistics ! High dividend 6,3%

Tip 2 : Nokia (Ticker : NOKIA)

Worldleader in technologies for connected world. Turnaround story. Dividend of 3,8%

Tip 3 : BIC Group (Ticker : BB)

Family holding with world leadership in defensive sectors. Positive free cash flows.

Dierickx Leys – Private Bank by Werner Wuyts

Criteria for Werner’s selection are companies with strong history, acceptable forecast of the profits and high cash flow generation.

When valuation is underestimated, you can buy CHEAP

Tip 1 : Intrum Justitia (Ticker : IJ)

Credit management company in the Nordics.

Tip 2 : BMW (Ticker : BMW )

Slow growth in China. Margins are improved. Family owned company.  Buy the preferent shares. BMW Vorzugsaction

Tip 3 : X-Fab (Ticker : XFAB)

X-Fab wants to improve EBITDA from 17% to 30%. Ambitious goals. This is a cheap stock.

Van Lanschot Private Banking

Tip 1 : General Electric (Ticker : GNE)

General Electric share price is now at an important multiple level support line. This company has upwards potential.

Tip 2 : Allergan (Ticker : AGN)

Botox remains most important profit engine. Good pipeline of future products.

Tip 3 : X-Fab (Ticker : XFAB)

This is partly a belief in the management team. Operational margin of 20%

Underresearched…by analysts

Weghsteen by Hans Heytens

Tip 1 : Credit Suisse (Ticker : CS)

Turnaround play with aggressive cost cutting plan with focus on growth in Asia.

Tip 2 : Mdx Health (Ticker : MDXH )

Tip 3 : Guggenheim Global Shipping Stocks – (Ticker : SEA)

Stock Selections by Banks 

Candriam – Ken Van Weyenberg (Head of Asset Management)

Tip 1 : Carl-Zeiss Meditec (Ticker : AFX)

Carl-Zeiss is a player in eyes technologies. It’s a market leader in diagnostics and microscopes.

Tip 2 : Swedbank (Ticker : SWED)

Swedish bank. Dividend higher than sector average

Tip 3 : ASML (Ticker : ASML)

World leader of machine. 80% market share.

BVFA-ABAF by Luc Van der Elst

Tip 1 : Agfa (Ticker : AGFB)

Tip 2 : Bois Sauvage (Ticker : COMB)

A holding you can buy at a discount

Tip 3 : Barrick Gold (Ticker : ABX)

Gold mine play

BNP Paribas Fortis by Rudy De Groodt

Tip 1 : DSM (Ticker : DSM)

Transformation to pure Life Science player. Undervalued company with strong balance sheet. Target 80 Euro.

Tip 2: Akzo Nobel (Ticker : AKZA)

World player in paint and related products. Target of 87 Euro

Tip 3 : KBC Ancora (Ticker : KBCA)

Current intrinsic value NAV of 65 Euro means a discount of 26%. Target of 57,20 Euro

KBC Group by Tom Simonts

Stock markets are expensive, volatility is low…this will change

Tip 1 :  Alibaba (Ticker : BABA)

Alibaba is a leader in growing ecommerce with an explosive growth. It grows faster than China. Many people short Alibaba, It has a strong position

2019 is important. Growing cashflows. Not cheap at 24 EV/EBITDA

Tip 2 : Biocartis (Ticker : BCART)

Tip 3 : Recticel (Ticker : REC)

Final words by Sven Sterckx

The day is concluded by Sven Sterckx thanking each presenter and wishing each investor lot of success with the investment tips.

Our Own Opinion

A lot of stock investment tips…isn’t it? One tip has more value than another. Each investor has to do his home work. Which stocks tips did I like for a potential investment ?

I split the stock tips in following themes :

1. Buying Holdings at a discount

The holdings KBC Ancora, Bois Sauvage and First Pacific. Holdings are a MUST in every investor portfolio and when you can buy them at a discount against Net Asset Value (NAV), that is an opportunity. From the three suggestions, we like KBC Ancora the most. Take a look at the graph and you see the upwards potential against All Time Highs.

2. Real Estate Investment Companies with a nice dividend

Here we walked away with three names : Qrf, Atenor and Intervest Offices & Warehouses. Investing in a REIT is reviewing their sustainablility of the dividend payouts. . Here we prefer Intervest Offices & Warehouses as preferred stock to invest in. It pays a nice 6,3% dividend.

3. Investing in Qualitative Value Companies

Several tips of analysts are qualitative companies with a strong balance sheet and future cash flows. Examples are BMW, BIC Group, Carl Zeiss Meditec, DSM and others… Here I don’t have any preference as it all depends on the upwards potential of each sector and the strategy of the company. Inform yourself before doing an investment.

4. Commodities Recovery

We heard three commodity tips anticipating a potential recovery in gold and uranium prices. The three tips were Cameco, Goldcorp and Barrick Gold. Personally we think it is too early to invest as the dollar gets stronger. When the dollar gets stronger, the gold price will go down. We keep an eye on this sector though.

5. Financials

Another clear theme was investing in financials. Swedbank, Credit Suisse, Credit Agricole de Nord, and even financial services provider Intrum Justitia were favorites listed by analysts. Personally we like Credit Suisse and Credit Agricole de Nord the most as potential investments. Credit Suisse is a turnaround play and the stock is about to break out above 15 USD.

6. Opportunities

Opportunities….those tips are investment tips in biotech, turn around plays, new technology, agriculture, you name it. X-Fab was the preferred tip here based on belief of the management (Melexis growth) and the potential growth of this sector. Review the list above and see if each opportunity play is worth a money investment in your portfolio. Personally we like the tracker Guggenheim Global Shipping Stocks – (Ticker : SEA) here

Final Conclusion

So how would we invest 10.000 Euro based on the above tips. Here’s how we would build our portfolio :

• 2000 Euro KBC Ancora (Stock price at 7/10/2017 : 51,37 EUR)
• 2500 Euro Intervest Offices & Warehouses (Stock price at 7/10/2017 : 22,36 EUR)
• 1500 Euro Credit Suisse (Stock price at 7/10/2017 : 15,83 USD)
• 1500 Euro X-FAB (Stock price at 7/10/2017 : 8,07 EUR)
• 1500 Euro Guggenheim Global Shipping Stocks (Stock price at 7/10/2017 : 11,75 USD)
• 1000 Euro Goldcorp (Stock price at 7/10/2017 : 13,26 USD)

Let’s see how our portfolio performs one year later… Let us know which stocks you would invest in. Do you agree with our selection? We also walked away with a book that contains 100 investments lessons. Once we finish the book, we will write a book review blog post.

If you want to have an impression of the event Day of the Tips, take a look at this video. I look forward to next year’s event.

Thanks for following us on Twitter and Facebook and reading this blog post. We end with a quote as always.