Final week has not solely introduced a transparent win for Donald Trump however in parallel additionally the (remaining) downfall of the German “Site visitors Mild” coalition.
US Markets celebrated the clear final result, additional rising the outperformance of something US primarily based. Everybody now tries to determine what a Trump administration will really do, however the “market” appears to agree that it will likely be “professional enterprise” and due to this fact nice for US shares (and Crypto and naturally Elon).
Decrease company taxes, extra oil & fuel drilling and tariffs on each import with a deal with China appear to be one thing the US inventory market actually likes.
One technique to play this as an investor could be to affix the assorted “Trump/Musk/Thiel Trades” like Bitcoin, US Financial institution, Palantir Tesla or the likes or simply change (much more) into ever profitable US shares. My inside contrarian nevertheless is screaming “crimson alert” as for my part a whole lot of this and even an excessive amount of is already baked into US asset costs on the whole. However possibly it’s simply my envy that US property are performing so a lot better than what I personal ? Who is aware of.
On the German facet, initially markets gave the impression to be glad that the German coalition has lastly crumbled, assuming that it might solely get higher. Personally, I hope the identical however there may be clearly a danger that there may be a nasty final result of a snap election within the present atmosphere. In the intervening time the market appears to have realized that Trump plans to play a zero sum sport with everybody however the US being a possible sufferer.
If the conservative CDU/CSU social gathering will likely be within the lead, then renewable energies may have a more durable time in Germany, too. Mr. Merz. the potential subsequent Chancellor is favring Fusion and Nuclear vitality. However extra on that in a separate put up. On the German facet, the already battered automotive firms clearly will see unfavourable penalties from US tariffs.
When US tariffs actually harm China, this can even not be good for firms with important actions in China. Which once more would imply extra unhealthy information for automotive producers and suppliers.
Some months in the past I might have assumed that that is already priced in to a big extent, however within the present atmosphere there appears to be no valuation backside for European shares in any respect.
Portfolio examine
As in my earlier two chapters of the “Panic Journal” (Covid, Russia assault on Ukraine), the Trump victory is an occasion that may clearly have varied impacts on the worldwide financial system and my portfolio.
My strategy is (once more) to take a look at unfavourable publicity in my portfolio first earlier than interested by benefiting from what has occurred or might occur.
The primary space of concern for my part are clearly direct tariffs on imports. In case you are a non-US firm that exports loads into the US with out the possibility to maneuver manufacturing anytime over quickly, you might need a brief time period drawback. Moreover, if the US actually manages to hit China economically, any massive China exposures may be in danger, too.
Then again, when you’ve got profitable native US operations, theoretically such an organization ought to profit from decrease taxes and many others.
So let’s run via the record of portfolio firms one after the other (sorted by dimension descending):
| Stef | No direct publicity, each to US and German coverage modifications for my part. |
| TFF | Barely unfavourable publicity to European wine exports to the US, barely constructive publicity to decrease taxes for the (rising) US operation. General impartial. |
| DCC | No exports.Probably some unfavourable affect on “clear vitality” initiatives, alternatively 20% of OP realized within the US, conventional vitality enterprise might need an extended runway. Barely constructive. Whereas I’ve been penning this. DCC introduced to deal with vitality, to which the share worth reacted positively. |
| SFS | SFS principally produces regionally. Nevertheless, through the acquired Hoffmann Group they’ve publicity to most of Europe’s exporters from the machining trade. On the flipside, Chinese language opponents to SFS’s clients may undergo much more. Nonetheless, total barely unfavourable, not less than within the brief to mid time period. |
| ATD | ATD has a whole lot of enterprise within the US, so decrease taxes must be good. Increased rates of interest for the Japanese Acquisition (if it goes via) could be unfavourable. General barely constructive. |
| Italmobiliare | No related publicity aside from some US primarily based PE funds. General impartial. |
| Eurokai | A really attention-grabbing query. If world buying and selling quantity would decline considerably, Eurokai could be negatively affected though direct publicity to US traces is comparatively low to my information. General, barely unfavourable. |
| G. Perrier | No exports to US to my information, total impartial or barely constructive (Nuclear, protection) |
| Fuchs | Native manufacturing, no exports. Nevertheless, publicity to European Car trade, barely unfavourable |
| EVS Broadcast | The US was one of many goal markets to broaden. For the {hardware} half, Tariffs may be a (small) difficulty, however I assume all opponents import their gear. EVS may even have a bonus as they assemble in Europe and don’t import immediately from China. Impartial to barely constructive. |
| Royal Unibrew | No US publicity in any respect to my information.Impartial. |
| Thermador | Solely native French enterprise, impartial |
| Energiekontor | US mission rights may be negatively affected. Additionally, subsequent German Authorities may de-prioritize renewables. Barely Damaging. Unsure how a lot is prized in. Because it appears there isn’t any backside in the intervening time. |
| SIxt (Vz&St) | Sixt hasa been rising aggressively within the US. It is going to be more durable for Sixt to get (German) premium automobiles sooner or later for the US market. General, I see barely constructive impacts on Sixt. Throughout writing the put up, Sixt launched Q3 outcomes and guided to the decrease finish of the vary for 2024. Perhaps I’m mistaken, however I nonetheless see the extra upside than draw back. |
| Sto SE | No publicity to US. New German Authorities may be much less eager on insulation, however possibly extra lively in pushing extra constructing exercise. Impartial |
| Bouvet | No direct US publicity. The Norwegian financial system remains to be geared in the direction of oil & fuel costs. Impartial. |
| SAMSE | Publicity to the French building and renovation sector. In a roundabout way impacted. |
| Hermle | Hermle is a harder case. On the one hand, they are going to clearly undergo if the European equipment sector suffers. Then again, when the US needs to extend its manufacturing capability, this might imply alternative, particularly for Hermle as they want extra machines to provide excessive precision elements and automation. Sure, there could be tariffs, however the Chinese language competitors may be harm far more. That is clearly a inventory to observe carefully on which facet issues will go. |
| Amadeus Hearth | No direct publicity, nevertheless clearly oblique publicity in the direction of a protracted /German/European financial stoop particularly for the recruiting section. Curiously, simply once I wrote this, activist fund AOC began a 9,4% place. |
| ABO Power | As a pure Renewable Developer, ABO is much more delicate in the direction of (important) modifications in the direction of Renewable Power coverage. General extra unfavourable. |
| Chapters Group | No direct publicity. Impartial. |
| Laurent Perrier | The US is the biggest importer of Champagne (15% of complete manufacturing), so there’ll clearly be an affect. The large query is: How massive will the affect be and what’s already mirrored within the present share worth ? |
General the affect of this shift is barely unfavourable for the portfolio. As talked about above, possibly a part of that is already mirrored within the low valuations however for a few of my portfolio firms there appears to be extra ache to return.
I’ve marginally lowered publicity in ABO Power and SFS, however in the interim I’m nonetheless in wait and see mode. In parallel I’m engaged on an up to date vitality thesis, particularly for the European market.
I feel the primary “hedge” I’ve within the portfolio is the standard of the administration groups. As previously, good administration groups will handle these challenges and possibly come out even stronger. Most portfolio firms have actually good administration groups.
Conclusion: We’ve seen this film earlier than
As a small cap Worth investor, crucial difficulty is to develop a extremely “thick pores and skin” towards the present craziness we see available in the market.
As soon as once more, individuals make simple cash in Crypto and really speculative shares in a really brief interval in time.
Small caps and worth shares actually seem like a losers sport. The older buyers have seen this film now a number of occasions earlier than (2000, 2007, 2021) however it isn’t simple to remain the course as particularly on social media everybody else appears to get wealthy rapidly.
Nonetheless, one ought to watch cautiously if for some purpose one or the opposite portfolio firms is caught in a extremely unhealthy state of affairs.
Bonus Music
And in addition this time I add a music that may cheer up fellow Shitco err Worth Traders:
