In the last two months I have been evaluating my current stock picks (Santander Group; Statoil; Salzgitter AG and Corning Inc.) since I am writing a book with the compilation of my stock selections and investment philosophy. At the same time I have also been making some prospective stock research.
This has led me to some interesting conclusions, which I will be posting in this blog in the following weeks.
First and most important:
Salzgitter AG did post a profit warning on the 05 of August. Obviously this was a major fact and I concentrated my analysis on this company for a while. What conclusions did I reach? Well the profit warning on itself has nothing too much worrying. The steel industry as a whole is passing through rough times and Salzgitter is no exception. The company took the opportunity to take some extra charges on its books, which will allow some slack for next year’s financial statement (no net real impact).
However, there are some new facts that I didn’t know a couple months ago when I first wrote my book about the Steel industry. My new appraisal is that Salzgitter is not so well positioned in terms of marketing and is not so well positioned in industrial process efficiency as I previously thought. Therefore, since my prospective search for other stocks has yielded some good results, my opinion is that the best course of action is to sell the Salzgitter stocks and get ready to buy some better companies. That said, I do not think that there is an immediate danger for this stock and that is why I say important and not urgent. The company is beaten down, the current financial community appraisal is tremendously negative, while I do believe that there is room for improvement. However, I now think that there are better companies. If you do not agree I welcome you to state your reasons.
– Is it urgent to sell Salzgitter stock?
No. However since there might be some opportunities arising in a 6 months to 12 months horizon I think that it is the best option to sell sooner than later.
– Was it a bad call to buy SZAG stock?
Yes and no. If you look to the performance of the Dax 30 and compare it with Salzgitter (SZAG) you will notice that SZAG under-performed the DAX by 4.69%, still obtaining a positive return of 4.99% while the Dax 30 yielded 9.68%, this since the 29th of April. Let us not forget that the profit warning came during this period and still we were able to get a positive return, mainly due to the fact that at the time I recommended this stock, the bad news were more than incorporated into the stock price.
– Practical consequences
I will be retiring European Jewels – Steel Industry from sale. Anyone interested in buying the book for studying purposes is welcome to do it until the 30th of September. I am no longer recommending any Steel company. This will be posted in the book page in our retailers.
I consider this a failed investment, but as I have stated in my books, when you are diligent enough with the study of your investments, even when they turn out to be bad decisions, this does not has to translate into losses, like in this case.