After the great fun with the “All German Shares” series in 2019/2020, it is time to start the new “All Swiss Shares” series in 2021. According to the Swiss stock exchange, there are currently 220 listed companies based in Switzerland. So the series will be a little shorter. The reason for choosing Switzerland is that I already own two Switzerland-based companies (Richemont, Zur Rose) and that I think there is an interesting mix of companies in Switzerland, some of which I’ve seen over the past 10 years covered.
Again, mainly for my own entertainment, I will use a random approach to looking at the companies.
One difference to the German series is that I’ll try to better define what I’m looking for. Basically, my portfolio includes three different styles / buckets:
- “Long-term investments” – Stocks that I think have good long-term potential. For this group I need a high quality in terms of business model, leadership and balance sheet
- “Value Trades” – Stocks that I believe have significant undervaluation for certain reasons that will occur over a period of up to 3 years. This could be a “sum of the parts” situation, a split, activist involvement, or any other situation where I think I can identify the reason for the undervaluation and where I have a different view. Due to the shorter time horizon, the requirements for “quality” are somewhat lower.
- “Special situations” – By my definition, special situations are based on corporate actions (M&A, squeeze out, etc.) where the potential outcomes are clear and the main task is to evaluate probabilities and an expected value.
Now let’s jump into the first 10 stocks. Surprisingly, I have already found 4 stocks that are worth “watching” from the first batch.
- BVZ Holding AG
BVZ Holing is a company with a market capitalization of CHF 170 million, which is apparently active in local transport, real estate and tourist mountain cable cars, including the world-famous “Glacier Express” cable car and the “Gornergrat” cable car on the world-famous Matterhorn.
Covid-19 clearly had a huge impact. The net result in 2020 decreased from 20 million in 2019 to -7 million in 2020. The company has a significant real estate portfolio, but it also has some debt and appears to have ordered a lot of new equipment.
If we look at the stock price, we can see that the stock didn’t rebound as much at the start of the pandemic:
Perhaps this has to do with the fact that a significant part of Swiss tourism seems to be dependent on rich Asians who can and want to afford Swiss prices. I just checked and a return trip to the Gornergrat from Zermatt costs a hefty CHF 80 per person. This (German-language) analysis shows that the growth in the last few years up to 2019 was clearly driven by Chinese visitors.
I think for now it is open when mainly Chinese tourists will be back, maybe next year, but certainly not this year. On the positive side, the company clearly has unique assets.
BVZ could be interesting for investors who have more time to deal with the assets, for me it is a “consist” since I’m not really looking for asset games and it would take too much time.
2. Carlo Gavazzi AG
Gavazzi is a manufacturer of electrical and electronic components and sensors with a market capitalization of approximately CHF 150 million for a wide range of applications, including industrial automation and buildings. What is interesting at first glance is the fact that Gavazzi has a strong net cash position (~ CHF 45 million) and actually increased profits in the Covid-19 year with a stable return on sales.
On the other hand, the company has not seen any growth in the past 4 to 5 years, and its return on investment and margins are relatively low. That’s why I will “consist”.
3. Castle Private Equity AG
Castle is a listed investment company with a market capitalization of CHF 110 million that invests in private equity (not in Castles …). The underlying portfolio is a mix of buyout and venture capital with a very global distribution. The largest country exposure appears to be India. The most recently published net asset value is around CHF 15, which would mean that the share is currently trading at CHF 11 per share with a considerable discount on the net asset value.
A look at the share chart shows that Castle has not recovered from the “Corona crash”:
According to the annual report, Castle appears to be in “harvest mode”, meaning that they are not making any new investments but are paying out whatever is distributed from the underlying funds (via distributions / share buybacks). The company holds approximately $ 35 million in cash. The portfolio’s performance appears to have been quite disappointing, with low single-digit returns over the past few years that are well below the PE / VC benchmarks.
As I am not yet a specialist in liquidation situations, I will “consist”.
4. Schweiter Technologies AG
Schweiter is a company with a market capitalization of CHF 2.2 billion that manufactures a wide range of composite panels. According to their IR presentation, M&A is part of the growth strategy that has adopted 18 companies over the past 20 years. The long-term share chart looks “constructive” and offers clear long-term value creation:
The company appears to have had little impact on Covid-19, with sales stable in 2020 and margins rising. The EBITDA margins in 2020 were 15%, the EBIT margins still over 10%. The company is financed conservatively (net cash).
One of the areas they are active in is supplying material for windmill blades, which sounds interesting. Based on 2020 profit, Schweiter trades at 20 times trailing profit. The largest shareholders appear to be the Frey family, who were also large shareholders in Zur Rose, but sold out much too early.
Based on this very first assessment, Schweiter Technologies is a candidate for “Observe” as a potential long-term game.
5. Starrag Group AG
Starrag is a manufacturer of steel processing machines with a market capitalization of CHF 144 million. The company was hit hard by Covid-19 with a significant drop in sales (-30%) and orders (-50%). The company previously appears to have struggled with a low single-digit ROE and declining sales and earnings. The stock has moved sideways for the past 15 years.
There is nothing for me to see here “consist”.
6. Romande Energie Group SA
Romande is a regional utility company with a volume of CHF 1.4 billion. Interestingly, 2020 was a very good year for her and almost doubled her profit to over CHF 80 million. According to the investor presentation, they are very active in the renewable energy sector and are expanding into France.
Romande also owns ~ 10% on a see-through basis in Alpiq, another Swiss utility company that appears to have benefited from a deep loss in 2019.
Tech-wise, the stock looks cheap with a book value above current market value. On the other hand, the stock has been trading sideways for 10 years.
As an electricity supplier that owns both generation and grids, the future could be interesting as the degree of electrification increases. That’s why I wear Romande “Observe” as a potential “trade in value”.
7. Swiss Prime Site AG
Swiss Prime Site is a 6.8 billion real estate fund traded. According to the 2020 earnings presentation, the share will trade near net asset value. You seem to have a diversified Swiss real estate portfolio, but since I’m not a huge fan of publicly traded properties in general, I will “consist” without deep research.
8. U-Blox AG
U-Blox is a CHF 435 million semiconductor company that does not manufacture chips itself, only designs them. They specialize in developing chips for global positioning and seem to have a strong focus on IoT and Industry 4.0. 2020 was not a good year for them, however management seems optimistic for 2021. According to their forecasts (sales increase of 5 to 15%, EBIT margin of 9 to 15%), the share would trade at around 10xEV / EBIT for 2021
On the negative side, sales peaked in 2017 and have been declining since 2017, which explains the share performance in recent years:
While I’m not an expert on semiconductors, I think the stock is worth it “Observe” as a potential “trade in value”.
9. Energiedienst AG
Energiedienst is a 1.13 billion market cap hydropower plant that I’ve owned and covered several times over the past 10 years. I bought it at 29.5 CHF in 2014 and sold it at 30.50 CHF in 2015. A look at the share chart shows that Energiedienst only recently returned to the level when I sold it in 2015:
This could have something to do with rising electricity prices, since hydropower is mostly a “pure bet” on electricity prices and the energy service, which is largely located on the German border, is directly influenced by German electricity prices:
As for Romande, 2020 was a pretty good year for Energiedienst. Since I like “green” power generators and grids, I will bring them back to market “Clock” List as potential “securities trading”.
10. Berner Kantonalbank AG
The Berner Kantonalbank is a regional bank with a market capitalization of CHF 2 billion, the majority of which is owned by the District of Bern. The bank appears to be a very conservatively run bank with little observable volatility and a decent dividend yield of ~ 4%, which is very high especially in Switzerland.
The ROE is around 5%, and the share has been moving sideways for a long time. Since I’m not that big of a fan of bank stocks and dividends aren’t really relevant to me, I’ll do it “consist”.