Selling some stocks, shorting bonds and investing in peer to peer loans

The stock markets are continuing to raise and the US is shooting for a new top.

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I took some profits today in order to reduce my risk for my trading positions and re-allocate some capital. An example is Atlassian (TEAM) where I removed the larger position which I established at the last dip during the end of February.

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During August 2016 I started to initiate a short position in bonds through the ETF with the symbol TLT since I am convinced that the interest levels will rise quite a bit. It turned out to be quite a good trade when the first wave down started for the bonds and since December I have been flat in TLT. A few days ago I initiated a short position again around 124 but I had not participated that the fall would come so fast since I wanted to establish a larger position so now the trade is relatively small.

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The capital that became available from the stock sales I have allocated towards peer to peer loans which I am a big proponent of and I use Kreditborsen (the credit exchange) for these investments. Through the service I get 10 – 15% returns per year which is hard to compete with when measuring the associated risks of other investments. I work with focused investments but I like to spread my bets a bit.

In general I work with one trading portfolio where I act more actively with stocks and ETF’s. I also have long term stock portfolio with a few long term holdings in a Warren Buffet manner! Outside of this I am involved with a few companies and a lot of investments in peer to peer loans to get long term cash flow which I think works better than dividend stocks.

Good luck and remember to book some profits.

/Stefan

Weekend analysis

Intrinsic Value is a tool that I am using to value my long term portfolio holdings in order to arrive at a value of the free cash flow that a company is generating.

For a while I have thought about establishing positions in ICA, Hufvudstaden and Hennes & Mauritz. With regards to H&M I wanted to wait for the report that was released during the past week before executing any purchases.

Hennes & Mauritz

The stock has fallen in price since the start of 2015 where the worry about lower margins and growing inventory has escalated.

Management does not seem to stand by and watch and they are taking steps to correct the problem. If I conduct a simple calculation and use 18.5 billion as the rolling 12-month earnings and 4% as the annual growth rate for the next 12 years and then 1% growth for the future together with a risk free interest of 3% I get a stock value of more than 700 SEK. The value of the free cash that H&M is generating should be valued a lot higher than the current share price of 229 SEK per share.

ICA Gruppen

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The price of the ICA stock has consolidated since the beginning of 2015. The last report shows an annual profit of 3.4 billion. If I use an annual growth factor of 1% per year I arrive at an intrinsic value per share of 817 SEK. The stock closed at 305.80 this Friday and offers a very high margin of safety. I have started to acquire ICA for my long term portfolio.

Hufvudstaden

Hufvudstaden is the company within properties that I like the most currently. I both like their long term operational growth and the low leverage that they have. For my intrinsic value calculation I am using the annual operational income of 1.226 billion with a growth rate of 5% per year for the next 10 years and 1% per year after that.

The value per share that I arrive at is therefore 410 SEK per share which offers a great margin of safety compared to the current share price of 130 SEK.

Summary

The holdings in my long term portfolio is not there to be sold but to be owned. I do not care about short term fluctuations and the general stock market in the same way as I do for my shorter term trading portfolio. I have started to accumulate shares of the three companies mentioned above.

/Stefan