tag:blogger.com,1999:blog-4521852431798057672024-02-07T14:38:47.128-08:00HNWIInvestment thoughts of a European HNWIAnonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-452185243179805767.post-32564485378587214772016-04-12T12:16:00.000-07:002016-04-12T12:16:02.283-07:00Addition in H&MFor the first time in many years I have recently added to my position in H&M, and therefore it was encouraging to read that Mr. Stefan Persson recently added B-shares for about 911 MSEK at an average price of about 278 kr (my own estimate).Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-77514619534988126622015-07-18T09:12:00.000-07:002015-07-18T09:13:25.482-07:002014 - a year of very poor performance Last year's investment decision have cost us (at least in the short term) minimum 0,5 MSEK. It turned out to probably be one of the worst years for me during the last twelve years. I sold a couple of quality companies (such as H&M, Industrivärden and AstraZeneca) as I deemed them overvalued, and instead bought three Norwegian oil-services related companies that I thought seemed undervalued. I have not been so wrong in a long time...<br />
<br />
The two main mistakes I made was to<br />
a) go outside my 'circle of competence' and<br />
b) not do my homework properly (at least in two out of the three companies)<br />
Both are really noob mistakes (to write in your language kids). The fall in oil price I just did not see coming... With hindsight, I would still not able to predict it when investing, but I should have been aware of the risk and therefor not have invested in those kind of companies. Now, I still hold on to all those three companies as I believe there should be an upswing in the prices within 5-10 years (and I have no better investment ideas). We'll have to wait and see if I continue to make the same mistake a third time.<br />
<br />
Fortunately, I made a few very good investments as well, but the still total performance was very poor. I am extremely disappointed with myself for making such bad investment decisions, bordering on the line of speculation.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-72379454507597301762015-07-17T07:54:00.001-07:002015-07-17T07:54:52.983-07:00Page 2 <span style="font-family: inherit;">One of the main reasons I dare to have a such large share of our net worth invested in one company is the following sentence on page 2 in the latest quarterly report (it has been a similar wording for quite many quarters now): "Betsson co-operates with a state-owned Chinese
company for the Internet-based lottery and sports
betting business. The expected regulation for
Internet-based lotteries in China has not yet been
introduced. Betsson has a continued positive
outlook on the market’s future potential."</span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">Why are not the analysts asking questions about this in any of the conf calls? It just eludes me. "Everybody" can calculate roughly the effect of the Europe-bet acquisition, but judging when (or if) China might materialise is much harder, even more so without any further information than the sentence above. The closest they came today was Brazil, interesting, but still not China and where Betsson clearly have done much more and for much longer.</span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">This is where one example where I just feel that the analysts are fairly short-sighted, whereas if you have the guts to have your own sound reasoning and hypothesis-making, then one can do quite well in a long-term perspective.</span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;"><br /></span>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
<span style="font-family: inherit;"> </span><br />
</div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-21441287424014116152015-07-13T08:13:00.001-07:002015-07-14T02:41:02.281-07:00Missed opportunityToday the portfolio increased significantly again, which I would have never guessed. On Friday I sold a small portion of my largest holding Betsson, that "cost" me a couple of thousand SEK as the stock rallied (again) today. Just to highlight that investing is hard.<br />
<br />
I will now account for a "theoretical" case, one which I actually could have made in practice. In December 2006 I made a large (600 kSEK) investment (I thought so at least...) in two companies that are no more listed. I was quite bold (or I would rather say today to myself 'stupid' as I did not know what I was investing in, even though I had done a proper valuation of the companies) as I basically put all of my financial assets into those two companies. I was lucky and was able to exit both positions at roughly +/- 0 about two years later amidst severe market havoc.<br />
<br />
Now, had I instead at the dates when the cash became available invested in a company called Betsson (it would have been possible, trading volumes on those dates well exceed the 600 kSEK I had at that time) and kept that investment intact until today, we would have had more than 35 MSEK (pretax), with about equal amounts in Betsson and Net Entertainment. That amount is without dividends reinvested... This year's dividends would have been over 750 000 SEK (pretax).<br />
<br />
All my other savings and dividends during the years until now would also have made a substantial sum, with dividends most likely amounting today to between 200 - 300 kSEK.<br />
<br />
Fortunately, I started to invest in Betsson about three to four years later, and have still got a very nice IRR on that investment with well over 30% annually at today's valuation.<br />
<br />
Now, the case above is "theoretical" for two reasons (at least when it comes to myself);<br />
A) I would not in 2006 nor today have dared to invest in a company with that short track record that Betsson had at that time<br />
B) I would not during all the years have kept the full position as I during many times over the last years have deemed the company overvalued AND that the position would have had a too (by extreme measures) large weight in my total portfolio. (I am actually still scaling down this position from time to time as it is such a large share of my current portfolio)<br />
<br />
I think the key lesson is that I would truly like to focus my investments for the future around "wonderful companies". But they are really hard to first understand and second to value properly and then thirdly to find at some kind of 'margin of safety' price or at least fair price. But in the long run, this is absolutely what you should try to learn.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-6965330725921224822015-07-12T07:56:00.002-07:002015-07-14T02:42:05.664-07:00"Investing" is hardSince the last post I have further increased the cash position to close to 25%. I am daily struggling with my own thinking on how to act in this market (that has now gone up since March 2009 or maybe even not fallen in any major way since late October 2008). I have had a really hard time to find anything to buy in the last 12 months, so instead I have started to be very careful. My two largest positions that I initiated in 2008 and 2010 respectively, I have taken "off the table", in the meaning that all the money in to those two investments I have got back in cash (either through dividend or through selling some of my shares). However, they are still my two largest holdings because of the significant value increases in the two respective stocks over the last five to seven years.<br />
<br />
The cash and short-term interest bearing funds now make up over 2 MSEK, or well over three years of savings (at the current savings ratio). Kids, I just want to write to you that despite having been through two severe market crashes and three bull markets, I am not sure how to act now. Hence I am trying to cover both scenarios, (crash or continued bull market), and I have landed in this asset allocation (25% cash, 75% stocks). Had the interest rates been "normal" (according to pre 2005 standards) I would have most likely left the market completely by now. But now, what is the alternative (besides keeping cash), I do not know.<br />
<br />
I still want to act according to the principle "investor-like" and I do not like to sell businesses that I fundamentally think will do well in a 10-15 year perspective. On the other hand, valuations are 'mind-boggling' and I cannot find anything to buy. New companies are put to the stock market every week (a clear sign of the end of a bull market).<br />
<br />
I'm nearly every day considering to sell everything in my ISK account (which I told myself was one of the absolutely most interesting benefits of the structure of the account, due to no tax incurred due to sell-off), but now I hesitate to act.<br />
<br />
"Investing" is hard...<br />
<br />
<br />Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-23753359929884641892015-05-24T07:24:00.002-07:002015-05-24T07:24:52.721-07:00Increasing cash positionTime flies and it has now gone nearly nine months since I wrote something. A new opportunity appeared during this time which has taken nearly all my focus for some time. Meanwhile, the stock market and the dollar have both rallied like crazy. The dollar rallied to the extent that I lost my HNWI status for many months (as I predicted would happen). Only now in the last few days/weeks has it again come to the point where I once again could qualify to be an HNWI.<br />
<br />
As the stock market has increased so much I have chosen to increase my share of cash and short-term bond funds to slightly above 20% of the total portfolio value. It actually feels quite nice as I know I can support our family with that kind of money for about four to five years and still receiving dividend covering some 9-10 months of living expenses. I figured this is a balanced strategy where I could buy stocks again if the market drops (and reach 12+ months of living expenses covered), and if not, I still get to take part of the valuation increase to a large extent.<br />
<br />
The savings ratio is about 87% currently. The 13% remaining cover expenses I have for working and the rent payments related to the loan on the house. All the savings are going into a separate investment account where I am building up a stock portfolio to match the remaining debt on our house. I figured this is the best long term solution to "pay off" the loan on the house. Instead of monthly instalments in these times of extremely low interest rates, I rather build a stock portfolio of the same size as the remaining loan. When that amount is reached, the stock portfolio should most likely cover interest expenses through dividends, while still increasing in value. Thereby, in the next 15-20 years (after having accumulated a stock portfolio of an equivalent value to the loan) I will be able to pay off all of the loan, while still keeping the stock portfolio.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-11275814507797630582014-08-30T14:01:00.001-07:002014-08-30T19:49:09.096-07:00Targeting 100%+ savings ratio in a couple of yearsBefore fully retiring, I plan to have a few years when I will be very close to a 100% savings ratio (as defined by total net cash amount invested in new stocks / net after-tax salary). After that I think I will have a few years (about two or so) of buying various stuff I would like to have in order to have a lot of fun when fully retired, and hence having a 0% savings ratio. Then it would be good to have one final 100%+ savings ratio year to get the really, really proper margin of safety for the rest of my and my kids' lives. 100%+ should be possible to reach by having my dividends pay for all living costs (incl. those incurred by having to work) and a slight margin (I.e. having some additional cash from dividends reinvested) while investing 100% of my salary. With this approach I hopefully never will come into a situation where I will become stressed due to a severe downturn in the stock market, as the dividends (in general) should keep rolling in, at least if I have selected good stocks for the long run.<br />
<br />
Within 6-12 months I expect to reach a savings ratio of about 80-85%.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-3578371202580345252014-08-12T15:58:00.001-07:002014-08-12T15:58:43.138-07:00How to measure portfolio returnAt the blog <a href="http://anothervalueinvestor.blogspot.se/2014/08/portfoljavkastning-del-2.html" target="_blank">AnotherValueInvestor</a> there is currently a miniseries on how to calculate your own portfolio return. I would therefore like to give my view on how to calculate the annual compounded return for your portfolio. This is fairly easy to do with a spreadsheet program like Excel, Numbers or Google Docs Spreadsheet. For my own tracking I have used Excel since late 2000.<br />
<br />
First start with identifying the exact dates and amounts for all your deposits and withdrawals from your stock accounts. Then do the following in your spreadsheet program:<br />
<br />
Create two input fields (orange fields at the top first column in the figure below):<br />
[A] today's date. If using Excel, use the TODAY() function<br />
[B] the estimated portfolio return (denoted as 'CAGR to reach current value of portfolio'). Start e.g. with 10% as a reasonable starting value<br />
<br />
Create at least four columns (six if you want to compare yourself with any index) with the following contents:<br />
[1] Date (enter the date for the deposit or withdrawal to your account)<br />
[2] Amount of deposit or withdrawal<br />
[3] Calculate the <u>number of years</u> since the deposit or withdrawal (there are several simple functions in e.g. Excel to calculate this) using the input [A] above and column [1]<br />
[4] Calculate the compounded <u>value</u> of your deposit or withdrawal [2] <u>today</u> given the estimated portfolio return [B] and time [3] since this deposit or withdrawal. The formula is = [2] * ( ( 1 + [B] ) ^ [3] ). <span style="font-family: Times, Times New Roman, serif;"><i>"</i><span style="background-color: white; color: #181818; line-height: 18px;"><i>Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it." </i>Albert Einstein</span></span><br />
<br />
Create also at least one output field (grey fields at the top first column in the figure below):<br />
[C] Current value of portfolio. In this field you summarize the whole [4] column. With everything now set, the output figure [C] should become equal to your current portfolio value (check in your stock account what it is on the [A] date) once you have the right [B] value input. Either test yourself (5-10 tries will normally make you come very close), or use a built in function like 'Goal Seek' in Excel.<br />
<br />
Kids, I would like you to remember that my primary target regarding portfolio return is to measure that the compounded return over time is at least 10%* (read this <a href="http://hnwiaaa.blogspot.se/2014/07/how-to-think-about-performance-vs-index.html" target="_blank">previous post</a> regarding having an absolute return target). However, it can still be relevant to compare to the most relevant <u>practical</u> alternative that I could entrust our capital to. That would most likely be an index fund that would try to closely follow the SIXRX index (such as Handelsbanken Sverigefond Index or SEB Sverige Indexfond).<br />
<br />
Hence, for comparison, I have added in the <a href="http://www.fondbolagen.se/sv/Statistik--index/Index/Marknadsindex/SIXRX---aktuell-graf/" target="_blank">SIXRX index</a>. Find the index value for each relevant date and add them into a fifth column [5]. Then calculate in the sixth column [6] the current value of the deposit or withdrawal by dividing today's closing SIXRX index [D] (see the top right orange input field) with [5] and multiply with the deposit or withdrawal value [2]. Sum up all values in column [6] to calculate the value of the portfolio if you had invested in SIXRX [E]. Then use the [B] input again to match the [C] output with [E] and you will find the annual compounded interest that the SIXRX would have given you.<br />
<br />
This model is simple to update every time you make a new deposit or withdrawal, just add a line and make sure the sums are correct in the 'grey output fields'. Using this model I can see that currently my portfolio have had an annual compounded return of 11,85% which is above my 10% absolute return target and 2,01%-points better than SIXRX.<br />
<br />
<i>Figure. Excerpt of simple model to calculate annual compounded return on your investment portfolio.</i><br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGLiSbjT4W091TowrnUkaPTkHIQ4xk_73qNB3j308PEzySkPWe6XneT58YK8NtKBBAJpKbTvfSHHC0b5jIrvNUUTWFCaSeT0ENGlhmeVMnZGySZO2HnGPKf5FWxMsrUlxyh7-ba4J_sNz3/s1600/Portfolioreturn_20140812.tiff" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGLiSbjT4W091TowrnUkaPTkHIQ4xk_73qNB3j308PEzySkPWe6XneT58YK8NtKBBAJpKbTvfSHHC0b5jIrvNUUTWFCaSeT0ENGlhmeVMnZGySZO2HnGPKf5FWxMsrUlxyh7-ba4J_sNz3/s1600/Portfolioreturn_20140812.tiff" height="400" width="392" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
Using this model it is also very easy to see how much a withdrawal a long time ago have cost me. For instance, the withdrawal in May 2001 of 146 kSEK would have been worth 646 kSEK today in nominal terms before tax (while inflation has been about 17% during the same period). These things are always good to reflect upon...<br />
<br />
Anyway kids, your portfolio is growing at a slightly higher pace (17,25%) mainly due to the fact that it is still more concentrated to fewer large (and so far successful) investments. So far it has also well outperformed SIXRX with about 5%-points.<br />
<br />
<span style="font-size: x-small;">* measured pre tax regarding capital gains tax in normal VP-account, after tax for ISK-account and after all transaction costs</span>Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-2673270818936081012014-08-08T10:09:00.001-07:002014-08-08T10:09:45.344-07:00Neurosearch - a different 'investment' case<span style="font-family: Times, Times New Roman, serif;">There is a company <a href="http://www.neurosearch.dk/" target="_blank">Neurosearch</a> listed on the Danish stock exchange that is now potentially very interesting to invest in. This is normally not the type of company that I invest in as this is clearly a 'cigar-butt' type of investment with the feature that this cigar either has no fire in it at all (and it will only cause me to feel ill for having picked it up) or that the last puff will be very rewarding.</span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="font-family: Times, Times New Roman, serif;">In summary, this company is in practice under 'liquidation' and have come very far in that process. The number of employees were two at end of 2013. The asset side is now (for all practical purposes) only compromised by cash and cash equivalent (of 87 MDKK) and the liabilities side (for all practical purposes) of equity only in the corresponding value. All other assets have been written down to a zero value. The company has 24,554 million shares.</span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="font-family: Times, Times New Roman, serif;">With a annual burn rate of 10 MDKK (as announced by management) during the ongoing 'liquidation' and litigation process, the share price at end of July should be about 3,30 DKK if just valuing the company by its cash assets.</span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="font-family: Times, Times New Roman, serif;">The key issue until now has been the trial regarding share manipulation in 2010. Today the verdict came and the ruling was that the company was found <span style="color: #333333; white-space: pre-wrap;">guilty of share price manipulation contrary to the rules of the </span><span style="color: #333333; white-space: pre-wrap;">Danish Securities Trading Act. The company was ordered to pay a fine of 5 MDKK</span><span style="color: #333333; white-space: pre-wrap;">. </span></span><br />
<span style="font-family: Times, Times New Roman, serif;">The company now has two weeks to decide whether <span style="color: #333333; white-space: pre-wrap;">to appeal the District Court </span><span style="color: #333333; white-space: pre-wrap;">judgment to the Danish High Court. </span>Hence the current asset value of the company at the moment after this verdict should be (in my opinion) somewhere around 3,10 DKK / share (excluding 'option value' described below).</span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="font-family: Times, Times New Roman, serif;">The interesting thing is that there is a big upside in this company as all other assets have been written down to zero value in the books during the 'liquidation' process. Without going into details on the minor items (e.g. potential milestone payments of 55 MDKK r<span style="background-color: white;">elating to the development of Huntexil</span><sup style="background-color: white;">®</sup><span style="background-color: white;">), the large item remaining is the deferred tax asset that could potentially be sold (most likely through selling the whole company). Some of the details regarding the deferred tax assets are as follows:</span></span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="font-family: Times, Times New Roman, serif;">In the latest financial update (April 30th, 2014) the following is mentioned:</span><br />
<span style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;"><i>"In addition, NeuroSearch calculated the value as of 31 December 2013 of its unrecognised tax losses carried forward at approximately DKK 1.8 billion, and deductible temporary differences at approximately DKK 0.5 billion, or a total of DKK 2.3 billion. Under certain conditions, the unrecognised tax assets may be exploited in full or in part by a potential buyer of NeuroSearch."</i></span></span><br />
<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;">And in the Annual Report 2013 (p30):<i> "</i></span><i>As of 31 December 2013, the Group had tax loss es carried forward totalling approximately DKK 1,800 million which can be carried forward indefinitely. In addition, the Group had deductible temporary differences (net) of approximately DKK 473 million, totalling DKK 2,273 million. The carrying amount of unrecognised deferred tax assets was <b>approximately DKK 500 million</b> for the Group at a tax rate of 22%" </i></span><br />
<span style="font-family: Times, Times New Roman, serif;"><br />
To summarize; these 'hidden assets' have a <b>gross value of about 20 DKK per share</b>. I do not believe that in case of a transaction this full value would come to the benefit of the current shareholders, but rather a smaller <b>but still substantial </b>part of this.</span><br />
<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"><br /></span>
</span><br />
<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;">Based on this I see a downside (with very high likelihood) but limited to some 5-10% in the upcoming year. At the same time I see a potential upside (with much more limited likelihood) of 100%++ in the same timeframe. For me, this is the type of 'lottery ticket' I like to buy (intrinsic value is somewhere between 3-23 DKK per share). Therefore </span><span style="background-color: white;">I currently hold a smaller position in the stock. The stock closed at 3,25 DKK today.</span></span>Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com3tag:blogger.com,1999:blog-452185243179805767.post-48776593668741366662014-08-05T13:01:00.003-07:002014-08-05T13:01:50.878-07:00HNWI status - July 2014Below is a summary of my best understanding of the<b> investable assets</b> (in SEK) for some bloggers as of end of July 2014. For some of the bloggers the data is a few months old as there has been no update.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgg99hymp_b2ywwwsX2jzgTjH9YO14__yXvBAJ4RWbcCMWK_GKxaNmLq2VJv9Kh3M0PYiDFrRYftTwj-Xz2cWWgk_9yESr_I6f2FjvzqMTxUDxPLuFOq4tgiY78V8Io1fAJZMwOKsjDa8Ww/s1600/Portfoliosize140731.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgg99hymp_b2ywwwsX2jzgTjH9YO14__yXvBAJ4RWbcCMWK_GKxaNmLq2VJv9Kh3M0PYiDFrRYftTwj-Xz2cWWgk_9yESr_I6f2FjvzqMTxUDxPLuFOq4tgiY78V8Io1fAJZMwOKsjDa8Ww/s1600/Portfoliosize140731.png" height="395" width="400" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
NB: <span style="font-family: HelveticaNeueLTStd;">HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables and consumer durables.</span><br />
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
</div>
</div>
</div>
Exchange rate as of July 31st, 2014: 6,90 SEK/USD<br />
<br />
I was still able to make it above the 1 MUSD mark by having investable assets of over<br />
7 000 000 SEK as per end of July 2014.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-86650662656310640232014-07-30T08:19:00.000-07:002014-07-30T08:19:39.047-07:00How to generate income and what is an assetKids, one of the books that you should read very early on in preparing for investing is the 'Rich Dad Poor Dad'-series by Robert T. Kiyosaki. There are a number of books written by him and they are all fairly easy to read. As always, with anything you read or hear, you need to be critical and have your own thinking and opinions about the material. But you should always also open your mind to new and interesting ideas and not shut them out before thinking about them critically.<br />
<br />
For me there have been two key take-aways from reading these books; a) one about how to think about different structural options to generate income and b) one about what is an asset and what is not.<br />
<br />
A) Regarding the structural options to generate income, Kiyosaki introduces a concept of a 'CASHFLOW Quadrant', which basically lists four type of ways to generate income.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg81bR9jw6ABugX8M8swPINFwZczZSUvr4bEvFhm8iHvpt45_2VnYUWXYBikNL1ymBpAnQHvr57ecXAl0yJXH96NDV_LsV61YZ8KahOXpXZtlJWnaP4O03wKdvQtXofGeK6uoMCj-qZuJ_3/s1600/cashflow-quadrant.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg81bR9jw6ABugX8M8swPINFwZczZSUvr4bEvFhm8iHvpt45_2VnYUWXYBikNL1ymBpAnQHvr57ecXAl0yJXH96NDV_LsV61YZ8KahOXpXZtlJWnaP4O03wKdvQtXofGeK6uoMCj-qZuJ_3/s1600/cashflow-quadrant.jpg" height="400" width="386" /></a></div>
<br />
Most people in today's society live their lives mainly on the left-hand side of the quadrant, i.e. as employees or as self-employed (e.g. small-practice lawyer, doctor or similar). Even though it is possible to reach financial independence on the left-hand side, most people who have reached it have done it on the right-hand side (as business owner and/or as investor). Please however remember that there are also many failures on the right-hand side, not everyone who tries that side will succeed.<br />
<br />
I strongly believe that you should try to find your the passion in your life from which you can also generate a healthy income to live off and to invest. This can be in any of the four quadrants. However, I also strongly believe that you should as early on as possible develop your skills as Investor to have your excess money work for you. This will give you financial independence at some point in time and give you many additional degrees of freedom in your life. Even if you do not think investing is fun, you should at least try to acquire knowledge of the basic concepts within investing, so that you at least can challenge and potentially judge the advisors that you want to have to help you with the investor quadrant.<br />
<br />
Personally, I have spent most of my time after university in the E square, but for the last 15 years also allocated capital in the B quadrant. After reading 'Rich Dad Poor Dad' I have for the most of my career sought after job positions where I can combine E with B in order to get some of the financial upside of the B quadrant and also to get as much understanding of how successful people in the B quadrant think and operate and to learn things that I can also use in the I quadrant. I have, however, never been the majority shareholder and/or founder of a business, so in essence I have not really given that quadrant a proper go. In parallel, also for nearly 15 years, I have started to build my skills in the I quadrant. Most of the posts in this blog relate to the learnings and ideas I have about being an investor and those I want to pass onto you, no matter what you choose to do in life for a living.<br />
<br />
B) The other key take-away is regarding what is an asset and what is not. Until my early 30's I was so 'brain-washed' from school and university with the concept of assets being such things as the apartment or the house where we live or even the car we own, i.e. things that have a market value. It was not until I read 'Rich Dad Poor Dad' that it struck me that an asset is 'anything that produces a positive cash flow'. Our house will only produce a negative cash flow as long as we use it to live in and the same goes for our car. Hence they are not assets, they are only 'liabilities' and have a huge alternative cost... The most practical example of this is that we today could sell our existing house and move to a much cheaper house somewhere on the countryside or a smaller town, become debt-free and have all the cash-flow from real assets that we need to live a comfortable life without needing to work. But with the current 'assets' (mainly our house) I still need to work as it consumes cash (rent payments, running costs and maintenance costs) and hence is NOT a true asset (that generates a positive cash-flow). A share in a company is however most often generating <b>cash</b> to the owner through dividends or share redemption programs and this is in my world a true asset.<br />
<br />
As a final remark, I think one should focus most of the attention on how one can generate the most income rather than spending as little as possible. The reason is that it (at least for me in relative terms) is so much easier to spend little money, whereas the effort to increase income (through getting a higher-paying job, starting and driving a business or learning how to invest successfully over time) is much, much tougher. Naturally one should keep costs low, but it is only a (smaller) part of the key to achieve financial independence.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com2tag:blogger.com,1999:blog-452185243179805767.post-7316310966983962682014-07-26T22:36:00.000-07:002014-07-26T22:36:23.480-07:00Kvaerner - additional investmentOn Friday I did a small add-on investment in Kvaerner of 5000 shares at 10,70 NOK. This company will most likely not be part of a long-term portfolio as I have very hard to judge its short-, medium- and long-term business prospects. The operating cash-flow recently has been wildly negative with 274 MNOK in the first half-year of 2014. The management claims that the cash flow is fluctating in this business and that is even illustrated separately on p13 in the latest <a href="http://www.kvaerner.com/Documents/Investors/Quarterly%20presentations/Q2_2014_Presentation_632898.pdf" target="_blank">Q2 2014 presentation</a>.<br />
<br />
However, at the current price it is yielding very close to 12,0%. This company I value mainly on the valuation metric of EV / EBIT of 3,24 (at the purchase price of 10,7 NOK). The company has a negative NIB (Net Interest-Bearing debt) of about 489 MNOK (cash of 972 MNOK and interest-bearing debt of 483 MNOK). TTM EBIT I have calculated to 738 MNOK. With the negative NIB, it gives me some comfort to invest in this company, more with the approach of a 'cigar-butt' investment that gives me some cash back short-term.<br />
<br />
Hence it gives me a decent return without having to risk too much money while building the dividend portfolio. The company itself states its dividend policy as follows: <span style="font-family: Times, Times New Roman, serif;"><i>"</i><span style="background-color: white; color: #333333; line-height: 25px;"><i>The ambition is to pay semi-annual dividends with increases, in order to give a stable and predictable dividend growth, balancing out the underlying volatility of earnings". </i>The next declared semi-annual dividend of 0,64 NOK will be paid out on October 24th. </span></span><br />
<br />
With this investment I expect some 270 kSEK in dividends (after tax) during 2015.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-59286579009093593142014-07-22T11:16:00.001-07:002014-07-22T11:16:25.283-07:00Betsson - my largest holdingMy largest holding (measured as current value) is currently Betsson. I have owned the company during the more than three years (measured as weighted average) and the first investment was done about 4,5 years ago. On a few occasions the last 1,5 years I have sold smaller parts of my investment, but also added positions. Net divestment during the last 1,5 years is 850 shares.<br />
<br />
During the time that I have now owned the company my CAGR (pretax, but incl. received dividends after-tax) is above 25%, which is far above my long-term investment return target of 10% p.a.<br />
<br />
In the chart below I have plotted the EPS TTM (last twelve months) for Betsson as red bars and then the closing price as the blue line and the corresponding P/E TTM in the green line. The flat red line is the average P/E TTM (14,0) during the period (since Oct 8th 2007). The black arrows indicate when I have bought (upward-pointing arrow) and when I have sold (downward-pointing arrow). The length of the arrow correspond to the size of the transaction in number of shares. In the chart it is a hard to see that the EPS TTM is now close to 14 (13,88 to be exact, based on the recently released Q2 report).<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmAYEW7r6ZXDoX80Wh2x5wNMXVpckeV-YryMsaRlBjYu0Hd97OrBwudOSDf08Qw_1EuGQ-dH887i37hUpLd6VxrVGEd8tZY0uxlHZW_MgxlLKVWytf0_0FeGmZ1yWxcHkaIFb6fV8PWDjx/s1600/Betsson20140721.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmAYEW7r6ZXDoX80Wh2x5wNMXVpckeV-YryMsaRlBjYu0Hd97OrBwudOSDf08Qw_1EuGQ-dH887i37hUpLd6VxrVGEd8tZY0uxlHZW_MgxlLKVWytf0_0FeGmZ1yWxcHkaIFb6fV8PWDjx/s1600/Betsson20140721.png" height="242" width="400" /></a></div>
<br />
As you can see from the chart above the first investment was made at a fairly high P/E (of about 15,5) in early 2010. One of the good things about following a company for a longer time, is that you start to get a better understanding for when it is cheap and when it is expensive. In mid 2011 I was even more confident that the company was attractively priced and added a fair position. Over the last 18 months I have started to take some money 'off the table' through a number of divestments. The main reason for this is that due to fairly high valuation at several points in time (P/E well above 14), I have judged it a good time to take some money 'off the table'.<br />
<br />
What I like about this company is<br />
- strong (although diminishing) ownership by physical persons<br />
- consistent management; Pontus Lindwall (former CEO) now holds the Chairman position in the Board and works actively with strategic tasks<br />
- fantastic ability to generate and distribute cash (through redemption of shares) to shareholders while growing the business<br />
- market leading position (no 1 or no 2) in key markets<br />
- seem to be able to acquire other smaller companies at interestingly low multiples to EBIT<br />
- seem to (here I would, however, still not draw too far-reaching conclusions) learn how to integrate those acquired companies into existing operations to extract synergies<br />
- seem to build in-house capabilities in many key areas (IT platform, payment solutions, data mining, proprietary games, marketing etc) to be successful in this business, while continuously pouring money into marketing<br />
- 'pricing power' in the sense that this business should always - all else equal (i.e. mainly given a stable competitive situation) - be able to offset impact from inflation<br />
- the option of successfully entering the Chinese market, which could potentially allow for massive growth over many years<br />
<br />
There are also a number of key issues with the business, the main being that I do not see any clear moat (competitors popping up left and right as limited capital is needed to start up a business). If I had seen a clear moat, I would probably have poured all my money into this single company as it otherwise have nearly all characteristics that I like for a company that I want to own.<br />
<br />
Today, I would most likely not add to the position unless P/E comes down to 14 or below before year-end this year. However, I do not believe I will sell either (at current price levels) as I think the company will be able to continue to grow its earnings in a pace that will give me some 8-9% total investment return over the next 10-20 years (given that they can hold an RoE at 32% or more and continue to reinvest the same share of their earnings into the business as they have done the last couple of years)Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com3tag:blogger.com,1999:blog-452185243179805767.post-23985947107152154092014-07-18T03:49:00.001-07:002014-07-18T03:49:17.032-07:00Ross Stores - additional investment madeYesterday I did a smaller add-on investment to one of my existing investments. I bought 165 Ross Stores shares (ROST).<br />
<br />
A short background to the investment is that I have owned HM since the market crash 2008 but due to the recent very high valuation of HM I have sold out part of the investment to buy some other companies. However, I like the simplicity and stability of HM and have therefore for some years been following another company that I think is somewhat similar to HM and that maybe could do the same trip as HM without necessarily competing too much with HM.<br />
<br />
Some 'soft' investment highlights that I like about ROST (you can read up briefly on the company for instance <a href="http://www.gurufocus.com/news/268279/ross-stores-is-down-23-from-its-high-and-is-now-a-bargain" target="_blank">here</a> or on their <a href="http://www.rossstores.com/" target="_blank">homepage</a>):<br />
- The company has proven itself over quite many years (about since mid 80's when it was IPOd), with a concept that now encompass over 1300 stores (Ross Dress for Less and dd's Discount) over large, but not all, parts of US. They seems to have a very well-defined concept that has been consistently expanding for more than 20 years<br />
- What I personally like very much from an outside perspective (without knowing the persons) is that the recent succession is an internal manager. New CEO Barbara Renter has been with the company for 28 years and her most recent position has been Chief Merchandising Officer. Also some other promotions are for internal managers, and notably former CEO Michael Balmuth has become Chairman of the Board. I like consistency in management, and internal promotions of management. For me that is one of the strongest signs in a 'simple business-idea' company that the concept works, that the management believe in it and that they will not change the winning concept. Kids, you can read about this in the book 'Built to last' by Jim Collins and Jerry I. Porras.<br />
- One weak point is that there is (to my understanding) not one single strong 'flesh-and-blood' owner. However, this is partly compensated with the fact that several key managers own about 10-30 MUSD of stock in the company, which I think is a large enough sum to really care about what you are doing as a manager. Please however also note that most managers seem to sell of a smaller sum consistently over time<br />
- 20 years of consecutive dividend increase (although at only about 1,3% yield yesterday, dividend ratio (to EPS) has been below 20% historically)<br />
- Number of outstanding shares is decreasing continuously. The management has driven a share buy-back strategy consistently over a long time period as a way to distribute the free cash flow back to shareholders.<br />
- My outside view of the key <u>issue and opportunity</u> for this company is that it will have to prove that its concept will work outside the US within about five years (as growth opportunities in the US is starting to diminish). As their largest peer (TJX) has done this (although with some problems if I understand) in both Canada and parts of Europe, I believe ROST can also do it.<br />
<br />
'Hard-facts' investment highlights:<br />
I have looked back at key figures of EPS, equity per share, RoE, dividend per share, share of earnings as dividend, year-end share price, P/E ratio, number of shares and interest-bearing debt. In the table below you can see the key figures, for most of the metrics since 1997. I have calculated the seven and 14 year CAGR averages in growth for EPS, equity per share and dividend using three-year averages (i.e. comparing the period 2011-2013 with 2004-2006). RoE, dividend share of earning and P/E averages are normal averages, whereas share price is normal CAGR for the latest seven and 14 years respectively. In the row above ('Assumptions going forward') you can see my key assumptions on RoE (38% this year and declining to 30% in 2020), dividend share of earnings (at 20% this year and increasing up to 75% in 2023) and 'normalized' P/E ratio of 15 (as compared to 15,3 for the last seven years and 17,0 for the last 14 years). The share price of 62,23 USD correspond to the price of my latest purchase.<br />
<br />
Interest-bearing debt is low at 150 MUSD and cash was 435 MUSD at year-end, giving a negative net interest-bearing debt, which is something I really prefer in my investments.<br />
<br />
I will go into more details about my thinking on how this 'hard-facts analysis' works in a separate post. However, with the above assumptions (which I deem fairly realistic on the side of conservative), I expect a investment CAGR (share price increase before tax and received dividends after-tax) of<br />
a) 13,8% in a 3-year perspective<br />
b) 11,9% in a 10-year perspective<br />
c) 10,4% in a 20-year perspective<br />
This is above my target return of 10% p.a.<br />
<br />
The CAGR figures are calculated using the expected share price and dividend that you can see for the upcoming years, given that the assumptions about RoE, dividend share and P/E ratio hold.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwXcTUDK3EbKtMW-oBYO7jT7PStxuRClinC-1IA9r4nMG_2xagx-G765kMVMgvowJm3Naj3YYk0XFURoNRRVZvdu_WsESc6ciPwRBlnrhEpMal7Plh9HLOvCMgQGNc3mw3JtDFoIIOnNl1/s1600/ROST_20140717.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwXcTUDK3EbKtMW-oBYO7jT7PStxuRClinC-1IA9r4nMG_2xagx-G765kMVMgvowJm3Naj3YYk0XFURoNRRVZvdu_WsESc6ciPwRBlnrhEpMal7Plh9HLOvCMgQGNc3mw3JtDFoIIOnNl1/s1600/ROST_20140717.png" height="609" width="640" /></a></div>
<br />
One strange thing about this company is the following note in the latest 10-K on p11:<br />
"There were 822 stockholders of record as of March 12, 2014 and the closing stock price on that date was $72.38 per share.".<br />
A company of this size only having about 800 stockholders, can that really be true? Is there any reader with good knowledge about US stocks out there that could clarify this to me; could this really be the case for such a large company as ROST (a little bit less than 1/4 of HM as measured by market cap)?Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-18445033364254638352014-07-10T23:22:00.001-07:002014-07-10T23:22:56.045-07:00How to think about performance vs. indexI know most investors (incl. Warren Buffett) compare themselves vs. index. This is of course fair and relevant in many ways, especially in deciding if you should spend time in allocating capital yourself or handing it over to someone else. However, I am more inclined to set an absolute long-term target for my total return, and preferably after adjusting for inflation. I believe e.g. Seth Klarman calls this an 'Absolute-Performance Orientation'. Kids, when you become old enough to have amassed some experience (i.e. having made a few mistakes on your own...) from investing (my guess would be somewhere in your early 30's) and can judge how interested you are to spend time on investing, then you should set your own <u>absolute long-term return target<strike>.</strike></u><br />
<br />
Right now I am operating with a <u>minimum</u> target level of 7% total return (in nominal terms, i.e. without taking inflation into account) over the long-term (20+ years). In real terms I expect that to be <b>about 5,5% total real return (i.e. after inflation)</b>, assuming inflation continues to be at the same low rates as last 21 years (about 1,4% CAGR measured as CPI (KPI) by SCB in Sweden). If the return I generate is less than that, I believe I should just hand over my money to the cheapest index fund there is and spend my time on something else.<br />
<br />
The reason for this is that absolute return on my capital is of much higher importance than beating an index. I will not be able to retire by beating an index. I will be able to retire because the businesses I own on average will increase my equity base by at least 7% p.a. I believe this way of thinking is more close to how an owner of a business thinks, and I like my investments to be closer to that thinking than to beating some index that I anyway do not understand.<br />
<br />
Now, 7% is not my <u>target</u> level. Currently it is rather 10% p.a. in nominal terms. So far, since end of 2000 which is as far back I can track my figures, I have had a CAGR return of some 12%+ in nominal terms. Now, as I still have a very large share of my financial assets invested in stocks, and I believe them to be somewhat overvalued currently, I would say that the 'true' intrinsic value CAGR is somewhere between 9-10%.<br />
<br />
Given that I would be able to spend 100% of my time allocating capital, I would probably raise the target level to 12%. The figures may not seem very impressive, but having these levels over long periods of time is much harder than one thinks when you are young. Mistakes (losing all or a large part of your money) also takes a very large bite out of your total return.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-11517289440671235492014-07-05T20:07:00.000-07:002014-07-07T23:21:57.191-07:00HNWI status - 2014 Q2Below is a summary of my best understanding of the<b> investable assets</b> (in SEK) for some bloggers as of end of Q2 2014. For bloggers marked in red, the data is a few months old. A few bloggers have been added since last update.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivfRgbfPVj-lqPzm_Eboho04oWWs6zasWEj0jwr9vQi1YidNLZyXemKhA_P2iH7z3yjRkVfFphiGcb5bHiUBzheOfhl3x-JhtvGTQOrwuufi9I1cDHPeaAil_3c9lBBNmkix5iCUyuLoEK/s1600/Portfoliosize140630.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivfRgbfPVj-lqPzm_Eboho04oWWs6zasWEj0jwr9vQi1YidNLZyXemKhA_P2iH7z3yjRkVfFphiGcb5bHiUBzheOfhl3x-JhtvGTQOrwuufi9I1cDHPeaAil_3c9lBBNmkix5iCUyuLoEK/s1600/Portfoliosize140630.png" height="363" width="400" /></a></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
NB: <span style="font-family: HelveticaNeueLTStd;">HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.</span><br />
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
</div>
</div>
</div>
Exchange rate as of June 30th, 2014: 6,74 SEK/USD<br />
<br />
I was still able to make it above the 1 MUSD mark by having investable assets of about 6 950 000 SEK as per end of Q2 2014.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com2tag:blogger.com,1999:blog-452185243179805767.post-83485836799736316992014-07-04T02:42:00.002-07:002014-07-04T02:42:47.059-07:00Quarterly update - some historical notes<span style="background-color: rgba(255, 255, 255, 0);">This post will contain a number of historical reflections on the post '<a href="http://hnwiaaa.blogspot.com.tr/2014/07/quarterly-update-2014-q2.html" target="_blank">Quarterly update 2014 Q2</a>'. Please refer to it to easier understand my comments.</span><br />
<span style="background-color: rgba(255, 255, 255, 0);"><br /></span>The current level of debt vs. property value is the lowest that we have ever had since starting to pour cash into our living premises, but in absolute terms it is still higher than at most times, however it is down from the top levels two to six years ago. We have switched property several times and the first two quarters in the summary show the actual price appreciation between a purchase (which was a couple of years before Q2 2004) and sale in Q3 2004. At that time we did something very uncommon in the market in the city we lived in, we sold our property BEFORE we bought a new one (this practice became much more common after the crisis in 2008). We were also very diligent when looking for new property and probably looked at about 100 different properties before we finally were able to acquire one where I actually thought there was an inaccurate price (in relation to value) in the market; we were at that time in a strongly rising market able to buy the property at a seven percent lower price than the seller had paid several years before (the broker clearly told me a couple of days before closing that he did not think the seller would accept our offer). Three years later we were able to sell the property at a price well above 40% more than we had paid. In the summary I have spread out the appreciation equally per quarter over the holding period. Furthermore, the last few years we have chosen to drive down debt in two larger one-off 'amortisations'. I did this in order to take down the risk to a level that I am more comfortable with, and to counter the effect from increasing interest rates (boy have I been wrong there so far...). At a debt level below well below 50% and interest rate at all-time low we are currently not doing any regular monthly amortisation.<br />
<br />
So while fairly diligent on the property side already early on, I today with hindsight would really like to give you kids some advice on cars. Today we own a really basic car, bought used while still not being too old or having too much mileage to (hopefully) incur too much issues (and costs) with repairs. More than ten years ago I went 'all-in' buying a brand new car (in cash). Don't do that when you are young (unless you already have made all the money you will ever need)! The alternative cost for that cash has proven to be fairly high, so I would today have been able to drive a used Porsche Panamera instead ;-) or better, already laid the first part of the equity fund to pay off the remaining debt.<br />
<br />
Kids, it is also always very important to remember that these assets (property and cars) are cash-consuming, so I do not view them as keys to building wealth, rather the opposite. They just cost you. You can (or if you run into trouble have to...), however, dispose of them to improve your debt situation. The less of these type of assets (cash-consuming) you acquire (especially early on in your lives) the more you can invest in the cash-generating assets.<br />
<br />
So, now to the really funny part, the financial assets. They GENERATE cash. Every year we get a CASH amount as dividend or interest (on cash). This year alone, the cash amount generated by the financial assets will be higher than total financial savings were ten years ago. It is quite amazing when I think about that now.<br />
<br />
In general I have put nearly all surplus cash (except the two larger amortizations mentioned above) into financial assets over the last twelve to thirteen years plus reinvested dividends. The CAGR value growth since late 2000 is currently somewhere above 12%, probably close to 13%. This will probably fall down to 9-10% when the next major correction will come. Still, this is a number I am OK with, even though my ambition would be to increase it somewhat when retiring fully and being able to spend more time following potential investments.<br />
<br />
As you see from the asset figures, (easiest seen in figure 2), I was lucky to hold a fair share of my financial assets in cash by end of Q32008, and then going 'all-in' in the beginning of Q42008 when the world was in turmoil. Since then it has basically been a soon six-year very positive development in the stock markets. As you can also see I have nearly all the time since more than three years operated with a fairly high amount of cash, having the 'gun' ready for shooting. As you can also see, the last quarters I have shifted over even more of the financial assets to cash, basically just loading the gun with more bullets as I cannot find any big elephants to shoot. My cash amount is today higher than my total financial assets were less than six years ago, so there is now some firepower if/when needed.<br />
<br />Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-20416937798682253312014-07-03T00:37:00.000-07:002014-07-03T00:37:00.167-07:00Quarterly update - additional comments and reflectionsThis post will contain a number of comments and reflections on the previous post '<a href="http://hnwiaaa.blogspot.com.tr/2014/07/quarterly-update-2014-q2.html" target="_blank">Quarterly update 2014 Q2</a>'. Please refer to it to easier understand my comments.<br />
<br />
First I would like to go through some important events and give some additional key information on how certain asset values are estimated. Starting with the asset side, ease of valuation is inversely proportional to the the liquidity of the asset. For instance, the property we hold is traded very infrequently (e.g. once every ten years or so) and there is no exact copy of it. Valuation of it is therefore quite tricky. I will revert to it in a moment. The car we have is easier to value, as there are fairly many cars with similar specification and mileage as ours sold (it is one of the ten most common models in our country) and price intervals are stated in various public sources. An estimate with a ca. +/-10% margin is reasonable to make at all times. Shares (which make up the absolute majority of our financial assets) traded on stock exchanges are again very much easier to get a 'price quote' on (normally during some eight hours every working day), and during that time the 'price quote' often changes many times during a minute. The value of the share I do not however think changes that rapidly and as volatile as the 'price quote' mechanism ("Mr. Market") seem to imply. Hence, valuation of the shares is also not so easy... However, in the quarterly summary update I use the 'price quotes' given by the market for 'valuing' the shares that I have acquired in a number of businesses. Cash on a bank account is 'traded' extremely frequently in the financial system, so it is easy to value in the short term. What you have to consider if you plan to hold cash for some longer time is the effect of inflation (which normally diminishes the value of your cash unless you get an interest on your cash of at least the inflation rate).<br />
<br />
The value that I use for the current property we hold is based on two independent valuations made late last year. I have taken the lower end of each respective valuation and taken the average of that.<br />
From that amount I have deducted the broker fee that we would have to pay when selling the property and after that I have deducted the capital gains tax. I believe that that is a conservative estimate of the price that we would be able to get today. As a note I can also mention that I would be very reluctant today to sell the property at the price used in the summary (but I want to have a margin of safety).<br />
<br />
For the liabilities side there is a loan where the security is the property we hold. Without going into details, the debt is well below 50% of the latest valuation accepted by the lender. Deferred tax liabilities are related to unrealised gains on shares that have appreciated in value since purchase.<br />
<br />
Some key ratios that are important in judging the risk we are exposed to:<br />
Net debt (loans less cash and short-term interest bearing bond funds): About 1,4 MSEK (my definition of net debt can be discussed if correct, but I find it to be the practical one)<br />
Equity ratio (equity as share of total liabilities): About 74%<br />
Interest coverage should also be measured, but for various reasons I do not want to disclose it. However, dividends and interest on cash alone today give an interest coverage ratio well over 600%.<br />
<br />
In general I think the debt situation in relative terms is very manageable (we can e.g. pay off our debt about two and a half times only with our financial assets). I sleep well at night. However, I would still like to improve the situation further. In case of an extremely severe crisis, we are still 'swimming with our pants down' and that is always making our manoeuvre room in such situation more or very limited. Currently, my overall thinking to mitigate that risk is that from early next year starting to build a specific equity portfolio with the purpose to<br />
a) specifically generate dividend to pay interest on the loans we have (interest rates today are extremely low, so having debt is extremely cheap. E.g. I today risk-free have a positive spread of 0,46%-points between the interest I get on my cash deposits and the loans we have on our property)<br />
b) build the size of the portfolio (in value terms) to match the loans, thereby creating a 'virtual' zero net debt position<br />
c) over the long-term use additional capital appreciation of the equity portfolio over the current loan amount to pay down the loan<br />
<br />
So, in total kids, I deem it necessary to further improve the balance sheet with the ultimate goal to become debt-free. Then no one (in our current legal and political system) can take our assets and it is much easier to remain cool-headed in times of severe crisis.<br />
<br />
I also realise that there needs to be at least one more follow-up post on the quarterly update to cover some history.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-51118355241429551522014-07-02T02:44:00.000-07:002014-07-02T06:02:26.477-07:00Quarterly update - 2014 Q2As investor, I think it is very important to understand your own (or your family's if/when applicable) personal balance sheet, thereby laying the ground to understand your risk exposure and consequently how that might affect your investment strategy. I therefore regularly track our balance sheet position (in the more traditional 'accounting' style of setting up a balance sheet).<br />
<br />
Below in three figures is a summary per quarter during the last ten years of the assets and liabilities in our household (the currency is SEK in all figures). It is showing the overall picture of our balance sheet position, and it is the one I use to regularly track our position and judge our risk exposure. The summary is not 100% accurate as it does not include all assets and deferred tax liabilities in our household. For several reasons (mainly simplicity, confidentiality and difficulty of valuing correctly) I have not included them. The net equity effect today, however, is in my most conservative estimate 0 SEK, i.e. these assets and deferred tax liabilities have a zero or positive effect on our equity. Assets not included are e.g. 6-month 'cash emergency fund', all other inventory (such as computers, TV-sets, gaming consoles, furniture etc which is popular to sell in the TV-show 'Lyxfällan'), shares in non-listed companies and savings designated to our children.<br />
<br />
I am starting by showing the asset side of the balance sheet. It is compromised by four main elements, starting with the most illiquid asset type first<br />
A) property<br />
B) inventory<br />
C) financial assets<br />
D) cash and short-term interest bearing funds<br />
<br />
Figure 1. Shows asset side with most illiquid assets below and most liquid assets on top.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCtGemY0RW5hMKGFO306taOOJhOLut9TVYgjMcsdU7AEH1Gf1BMkdZ-5LnkHimmnk6aIh4Q65Dt1e0e4u1EMbDYUs7qAyGGJEzoRNGYB3MVjwGDjzKUbs6psopV07R8ZU5fZhSv6UARhWl/s1600/Assets_2014Q2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCtGemY0RW5hMKGFO306taOOJhOLut9TVYgjMcsdU7AEH1Gf1BMkdZ-5LnkHimmnk6aIh4Q65Dt1e0e4u1EMbDYUs7qAyGGJEzoRNGYB3MVjwGDjzKUbs6psopV07R8ZU5fZhSv6UARhWl/s1600/Assets_2014Q2.png" height="243" width="400" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
Figure 2. Shows asset side again, now with most liquid assets at the bottom. I only include the cash and financial assets when calculating HNWI status.</div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDNFX_2P2NOBqzotj7Ug9LQBgT_ffk-vmlvzVvp1WxvAqN9RX-aMB0pBin_H1jWZe5KxGEkYec-yBzMR4ZOfwv1yixpCS8_bYWemhh54D8fNl_sZY7je2pxQzf12IhCCdYFtZNudqFYfQy/s1600/Assets_2014Q2_v2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDNFX_2P2NOBqzotj7Ug9LQBgT_ffk-vmlvzVvp1WxvAqN9RX-aMB0pBin_H1jWZe5KxGEkYec-yBzMR4ZOfwv1yixpCS8_bYWemhh54D8fNl_sZY7je2pxQzf12IhCCdYFtZNudqFYfQy/s1600/Assets_2014Q2_v2.png" height="242" width="400" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
Figure 3. Shows liabilities side, with debt at the bottom, deferred tax in the middle and equity at the top. The line shows the equity ratio.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFulMGeg2hEy8ruTBspPbZ0UmdFKQq6N83Y_BDhdvuLkGL9ouU7MmC5mfSZUTIhyphenhyphenDZJhTQk2iwMJ7w1cXQU52EyJ4itvjnvfLm3ZAaP5td1fHKTqhJY_rfGsmsT0JDKBhkCEnkYOjW_tyS/s1600/Liabilities_2014Q2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFulMGeg2hEy8ruTBspPbZ0UmdFKQq6N83Y_BDhdvuLkGL9ouU7MmC5mfSZUTIhyphenhyphenDZJhTQk2iwMJ7w1cXQU52EyJ4itvjnvfLm3ZAaP5td1fHKTqhJY_rfGsmsT0JDKBhkCEnkYOjW_tyS/s1600/Liabilities_2014Q2.png" height="242" width="400" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
I will add comments and reflections in the next post.</div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-87406944502193856872014-06-30T00:12:00.000-07:002014-07-02T06:03:06.653-07:00Theoretical dividend - some examplesThe post from <a href="http://agamintid.blogspot.se/" target="_blank">Ägamintid</a> about his theoretical dividend inspired me to write this regarding my own situation at the moment. I could today probably shift all my investable assets into one stock only. At my disposable I would have about 6,5 MSEK (after paying off deferred tax). So then I could for instance go for the following extreme allocations of capital (many more examples exist):<br />
<br />
Alternative A:<br />
100% in Awilco Drilling. I would be able to buy about 42000 shares, and expecting about 28-30 SEK/share in dividend during the upcoming 12 months, totalling some 1,175 - 1,26 MSEK in annual dividend (and then one should deduct about 41 kSEK for tax assuming the new investment has been done in an ISK account). That would more than well cover our expected total living costs. ;-)<br />
But there is a problem; I can with a high probability expect that the dividend will be lowered or even suspended for some time due to various reasons (e.g. one of the rigs run into unexpected problems or more likely there will be periods of maintenance which will drive the dividend down or hopefully the company finds productive ways to use their cash in order to expand their operations), which would pose a cash problem if this would happen in the short-term.<br />
<br />
Alternative B:<br />
100% in Telia. I would be able to buy some 132 000 shares. I should be able to expect some 3 SEK / share in dividend totalling some 355 kSEK per year after tax. This is unfortunately somewhat too little to comfortably (with a decent margin of safety) cover all our long term living expenses. This paired with - in my view - somewhat unclear long term development for Telia (although most likely much more stable than Awilco in the upcoming 5-10 year period) does not make this alternative too interesting. However, if I could buy Telia shares at say 42 SEK/share, then this could be a really interesting option.<br />
<br />
Alternative C:<br />
100% in HM. I would be able to buy some 22 300 shares and expect some 10 SEK / share in dividend next year, totalling some 182 kSEK after tax. This would be nowhere close to cover our living expenses, but I would feel fairly safe with the level of dividend for a long time going forward.<br />
<br />
Alternative D:<br />
100% in ROST. I would be able to buy some 14 600 shares and expect (at 0,8 USD / share) some 55 kSEK in dividend in upcoming 12 months (keeping the stock in a normal VP-account). Well, this wouldn't work for too long... But I could be close too 100% sure that this amount would increase substantially (10-20%) every year for a long time.<br />
<br />
So, what to do? If I had some more guts, I should probably go for alternative A (had I done it when I found out about the company I would have already had about 2 years of living expenses covered AND a much higher value of my total portfolio). But in that case there is a clear risk of a complete or near-complete wipe-out of all my capital, so it is not an option for me. Rather, I am pursuing a portfolio where I mix all of these alternatives to balance the risk of capital and/or dividend loss, with the opportunity for continuing growth of capital and dividend. I am also having a substantial sum of money on the sideline to be able to capture opportunities, such as if Telia would fall to 40-42 SEK and I would still judge the dividend to be maintained.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-32677581652523730432014-06-28T03:57:00.001-07:002014-06-28T04:01:48.840-07:00A lot of stocks move 50% in one yearOne of the more interesting observations that I have made and read about is that a large proportion of all stocks can move in price about 50% (from lowest point) in one year.<br />
<br />
Some examples as per yesterday (first figure is lowest price paid over the last 12 months, all %-figures correspond to the highest price paid compared to the lowest)<br />
Apple 55,58 USD, up 70,9%<br />
Atlas Copco 140,4 SEK, up 32,7%<br />
Betsson 167 SEK, up 49,7%<br />
Clas Ohlson 87,25 SEK, up 74,8%<br />
H&M 220,3 SEK, up 36,5%<br />
Oriflame 145,3 SEK, up 51,8%<br />
<br />
Kids, in my experience there are few cases where a company's real value ('intrinsic value') move that much in one year. Rather I would say that a well-run company in rough terms increase somewhere between 10 and 20% in value during a year. The key take-away is that even in the short-term (<one year) the price of a stock-listed company will be wildly different during times. The conclusion should, however, not be that you should try to make 30-50% a year on each respective investment. As a corollary to my observation above, there is a fair risk of the stock going down by 33% in one year's time from today. So, rather the conclusion is that with even a fairly modest amount of patience (waiting one year or less), one can find reasonable buying opportunities in specific stocks across the market in many (but not all) instances.<br />
<br />
One 'practical' example of how one can use the above described 'fact';<br />
The other day I bought a smaller amount of ROST when it was close to a one-year low. Unfortunately it is still some 5-10% too expensive for me to be fully comfortable with the investment from a risk perspective in a 3-5 year perspective; on the other hand it has not been this cheap for some time.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com2tag:blogger.com,1999:blog-452185243179805767.post-91544189142816285712014-06-26T00:36:00.000-07:002014-06-26T00:36:13.409-07:00Awilco Drilling and BonheurOne of latest investments that I've made is in Awilco Drilling. I cannot recall how I found out about the company, but I am fairly certain that my thought process started with <a href="http://lundaluppen.blogspot.se/" target="_blank">Lundaluppen's</a> series on Bonheur. To be honest I did not understand much of it, more than that LL had done his homework. Based on a RoE of 6% the company seems fairly valued; if they can increase this a couple of %-points each year going forward, it will be a very good investment. I think my key conclusion from LL's analysis was that you buy FOE and get some other businesses for free. That seems reasonably interesting as long as the rest is not cash-draining. However, I felt that Bonheur was out of my 'circle of competence' and a very complicated structure of companies I just had a hard time to understand. As I started to do some digging on my own I found out about Awilco Drilling. Doing a comparison between Awilco Drilling, FOE, Seadrill, Transocean and Diamond Offshore on multiples I found that Awilco was much cheaper than the rest with FOE as a distant number two on most parameters.<br />
<br />
The really interesting part with Awilco is that they are really showing me the money as a stockholder. My first investments have already returned 11,5% cash back in less than five months. However, there is at least one major issue from a risk perspective in the short term; they only have two rigs. Bad things can happen. Therefore I have taken two precautions; firstly I have only invested a smaller part of my portfolio into the stock (<5%), secondly, as I would further like to mitigate the impact of something happening to one of the rigs (while still surpassing the 5% level) I created a 'hedge' by expanding the number of rigs by buying also Bonheur (which owns the more expensive FOE, but also hold some other businesses). So I partially view Awilco (~67% of combined purchase value) and Bonheur (~33%) as 'one' investment at the time being, in the sense that the combined businesses in the short term should be able to generate a cash flow of at least >2% of initial investment even if one of the companies run into severe trouble.<br />
<br />
The key point with this post kids, is that you should really think about the risk in each investment. If there is a significant risk, make sure the stake you take is a small part (I would say <5%) of your total asset portfolio. Never risk your well-being for the long run by doing something risky in the short-term. It really kills your long-term investment performance.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-26615100101411479192014-06-24T08:25:00.001-07:002014-06-24T08:26:16.424-07:0040percent2years - Possible or not?Investing for stable stock dividends now and in the future is my main way of creating the positive cash flow that we are going to live off. The blogger 40percent20years is setting a very good and clear long-term goal for his investments (40% dividend yield 20 years after your investment).<br />
<br />
So could there be cases where you could be 10 times faster reaching a 40% dividend yield, i.e. to reach it in two years time? Yes, matter of a fact I found out about one case fairly recently!<br />
<br />
In the period between March 21st and August 20th 2012 (i.e. during 5 full months) it was possible to buy Awilco Drilling for 53,5 NOK or lower (however most of the time between 46-51 NOK). Total value of stock transactions during this period was over 190 MNOK, however most of this I do not think traded between normal small investors. My understanding is however that at least 23 MNOK did, so it would have been possible to take a significant stake in this company. At this time the company did not pay dividends, but clearly stated the following in its full year 2011 report: <i>"<span style="font-family: Arial; font-size: 10pt;">During the course of 2012 Awilco Drilling is scheduled to repay debt to Transocean amounting to
approx. USD 46 million. The scheduled debt repayment in 2013 is USD 11 million. This significant
decrease in debt repayment will enable a return to investors of a major part of the company’s free
cash flow generated in 2013 and beyond. The level of dividend will reflect the underlying financial
position of the company, while taking account of opportunities for further value creation through
profitable investments. The dividend will normally be distributed on a quarterly basis with
expected commencement sometime during the first half of 2013."</span></i><br />
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
</div>
</div>
</div>
The first quarterly dividend was paid on June 20th 2013 and after that quarterly. The first four dividends amounted to 24,9144 NOK, corresponding to a yield of 46,5% on a price of 53,5 NOK. Buying the stock at 49,5 NOK would have yielded 50%... So new target should be 50%2years. ;-). The company also just paid out its fifth dividend, which was the highest so far at 6,8909 NOK.<br />
<br />
NB: Closing stock price today June 24th is 145,5 NOK. I have a position in the stock (started much later unfortunately)Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-24523702432517281362014-06-22T23:13:00.000-07:002014-06-22T23:13:34.315-07:00Setting goals - and one recommended book to readI believe that one important part regarding investing is to set a clear goal for yourself. I did so somewhat more than ten years ago. Then I was in my early 30's, and though fairly successful in my career there was still no way that I would be able to have financial independence in the near future. Still, I made some bold career moves and even more importantly, I set a very clear goal regarding my financial status in the future.<br />
<br />
I did this after quite many months of thinking of how to formulate the goal, and inspired by the classical book '<b>Think and grow rich' by Napoleon Hill</b>. Kids, read it when you get old enough. The rich part is not really important for me, I translate it to free (free in time to do what you want with your most precious and limited resource: time). Today I do not remember much of the book's content, but one thing that it inspired me to do was to think about my goal EVERY day during that time period I set my goal for.<br />
What I did was that I calculated roughly what I would need in assets to live a good (but not fancy according to my own standards) life and not have to work for the rest of my life (i.e. freeing up time for myself). I came (then) to the conclusion and goal that I wanted to have 2 MUSD in assets (in the more traditional accounting-style definition) and being completely debt-free. The assets should be distributed as 2/3 for investable assets (cash-generating assets) and 1/3 for housing (cash-consuming 'asset'). The starting point was around 0,1 MUSD in assets. I set a very clear time-limit on that goal: to reach this by June 30th 2013.<b> I failed</b>.<br />
<br />
However, I came a long way. Today (one year late) I have reached more than 2/3 of my goal in terms of assets, and as inflation has been much lower than I anticipated back then, I am in a very favourable position regarding my time. I will write more about this in upcoming posts.<br />
<br />
I am now considering a new major goal in my life, but I am not sure yet what it will be. I am starting to lean towards becoming a 'mid-tier millionaire' 20 years from now (i.e. having investable assets of 5 MUSD or more by June 30th 2034) and to be completely debt-free. This is fairly ambitious, so I am still considering how realistic it is, and what it would take for me to be able to achieve it in such a time period. The key thing I am considering is how the plan should look where I balance/optimize between additional definite positive cash-flow (i.e. having a job or similar), spend my time on improving expected return on my investments and having more free time, all while having a financial independence with a fair margin of safety.Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com0tag:blogger.com,1999:blog-452185243179805767.post-8448021090921170552014-06-20T07:47:00.002-07:002014-06-21T00:05:12.544-07:00Current HNWI status<div class="separator" style="clear: both; text-align: center;">
</div>
Our base is currently in northern Europe and that's where you've experienced your first years of your life. Having seen a few places around our globe, mainly in Europe but also in large parts of Asia and some in Africa and the US, I genuinely treasure the ease with which one can get access to the nature in the Nordic countries. I hope you will also treasure that; it is a fantastic combination of a region with high living standard, a society with a fair degree of trust among people (even though I unfortunately believe it is slowly eroding) and a fairly clean and very accessible nature.<br />
<br />
A short while ago I surpassed a major milestone in my investing life, I am now able to call myself a HNWI (according to the definition used by Cap Gemini, <a href="https://www.worldwealthreport.com/" target="_blank">World Wealth Report</a>). This will most likely change a few times over the next two to three years (i.e., I will fall out of the category), but hopefully after that I will be a stable HNWI.<br />
<br />
NB: <span style="font-family: HelveticaNeueLTStd;">HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.</span><br />
<div class="page" title="Page 3">
<div class="layoutArea">
<div class="column">
</div>
</div>
</div>
Exchange rate as of May 31st, 2014: 6,66 SEK/USD<br />
<br />
Below is a summary of my best understanding of the<b> investable assets</b> (in SEK) for some bloggers. The list is not complete and unfortunately lack some bloggers in Scandinavia (such as 40%20år, Riskminimeraren, Fundamentalanalysbloggen, Spartacus, Defensiven, AnotherValueinvestor to mention some of the most interesting) where it would be interesting to know what investable assets they have. For bloggers marked in red, the data is a few months old.<br />
<br />
Anyway, a key take-away:<br />
I think investable assets is a good guidance/proxy for how much to take impression from each respective person that you try to learn investing from, i.e. the bigger the sum of investable assets, the more you should weigh in what they write/think.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhb-_gjKkzxDglRzXg-6rH_36bHOvMMF7HnI1FSn1Gsx8EraURIAgfPfMCJX88oOBQCaKrw1EsKu7Oa27VtVfvaxugP9kFEkGnOxluQzL6cW2VJAfrVwtGPIZS-Ch6_8s1ESNm9m0g2IGgq/s1600/Portfoliosize140531.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhb-_gjKkzxDglRzXg-6rH_36bHOvMMF7HnI1FSn1Gsx8EraURIAgfPfMCJX88oOBQCaKrw1EsKu7Oa27VtVfvaxugP9kFEkGnOxluQzL6cW2VJAfrVwtGPIZS-Ch6_8s1ESNm9m0g2IGgq/s1600/Portfoliosize140531.png" height="310" width="400" /></a></div>
<br />
Glad midsommar to you all!<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />Anonymoushttp://www.blogger.com/profile/06633440791427414196noreply@blogger.com2