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Mystery investment by GW investor


sampr01
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I have been following Steven Wood (GW investors) from early days of FAITY research (he is the one indicated $RACE spin off long before everyone). In his blog he recently invested in an European company with same potential as Fiat. Hints are: 100 million FCF, he has Board seat, and New management.. I am curious... any way find out with clues for fun...

 

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Our largest position in Europe, where we have a board seat and are working with a new management team to transform the company, is most likely going to become a holding company. Around 30% of the revenue of this company is generated in a “shitty” industry that has no chance of becoming a growth business. But it is a local monopoly with substantial barriers to entry.

 

Furthermore, it provides the platform upon which we can build its other businesses and launch a significant number of new growth initiatives. Excluding two assets which generate none of the cash flow today, we have obtained a €100 million cashflow stream for free. Free is a good price to pay, particularly when there is no bankruptcy risk nor debt.

 

This setup is eerily similar to our purchase of Fiat whereby we got Ferrari at a deep value price of €4.5 billion, and got the rest of the business for free. Eventually, shareholders of both companies have and will end up owning multiple pieces of paper.

 

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Thanks 🙏. How did you do that. I googled but unable to come up with any hits

Thanks

 

I've been following Steven as well since FIAT. Clever guy and great at pitching stuff.

 

If he is on the board of a listed company, then there must be some sort of publication. That publication is likely to include "steven woods" "greenwood" and "board of directors" or "board member". Et voilà.

 

What confused me is his claim that they have "obtained a €100 million cash flow stream for free". Hard to see that from the latest annual report...

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The 100m Euro cash flow is from the cash flow statement (150m euro) less cap-ex for the business (28m euro).  The cash/securities hoard on the balance sheet is almost 850m euro vs. a mkt cap of 316m Euro.  This looks like a bricks & mortar version of customer aggregation (from postal customers) from which to sell other products & services.

 

Packer

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Hi Packer

 

What are your thoughts on this company. Are you following this company before

Thanks

The 100m Euro cash flow is from the cash flow statement (150m euro) less cap-ex for the business (28m euro).  The cash/securities hoard on the balance sheet is almost 850m euro vs. a mkt cap of 316m Euro.  This looks like a bricks & mortar version of customer aggregation (from postal customers) from which to sell other products & services.

 

Packer

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Maybe I'm reading this wrong or maybe it's because I'm Icelandic and a little bit scared, but I don't think one should include the banking operations if we are going to use free cash flow as a metric.

 

Also, isn't a comparison between the cash hoard and market cap omitting a bunch of liabilities, such as €800 million of deposits?

 

A pretty interesting situation nonetheless...

 

https://relatoriointegrado.ctt.pt/media/f4sjdnka/07-consolidated-and-individual-financial-statements.pdf

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Depending on how you define cash flow (if it is EBITDA) & you annualize Q1 2019 Mail EBITDA you get 100m Euro.  The net cash outside the bank is 72m Euro (so a smaller cash hoard).  These are from the Q1 2019 segment results.

 

Packer

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  • 10 months later...

In the same letter - he also did a mea culpa on underperformance against indexes over extended period. I have never really followed him closely but I would have thought he should have done better given some good calls FIAT etc..

Also not so sure about his call on Pelaton?

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  • 3 months later...

https://www.gwinvestors.com/wp-content/uploads/2020.08.18-Q2-2020-Letter.pdf

 

Great work yet again from Steven. Who knew this field that is so focused on quantitative results cares so much about how people sound?

 

I've seen his work on Rolls-Royce first-hand and he undoubtedly digs very deep, but does it matter if you end up with poor returns?

 

His published returns are wildly inflated by 155% returns during 2009 when he wasn't running very much money and probably had a different strategy.

 

5.5% CAGR if you start in 2010 vs. 8.5% for the MSCI ACWI, and well over 10% for the S&P500.

 

 

 

 

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