Thursday, June 14, 2018

Shopping Spree

I must admit that I have been on a purchasing spree lately. I have added another new stock recently and also added to a previous position. The new position is namely Design Studio Group (SGX:D11) , a SG company, and also adding to my position in Daimler AG, at 61.5.

Design Studio Group was bought because I believe that the company will recover from the issues it had last year, in which it had financial losses for the first time in many years. Other than that, the free cash flow available to the company, together with the little debt, would ensure that the company is worth purchasing. The intrinsic value of the company is high, while the stock is at an all time low, understandably because of the bad financial year it has had.

However, I still believe the stock has a ways to go up; namely because of a few things. Firstly, the new CEO of the company seems competent and has a strong background in high end designs for joinery. The losses was also due to writing off nearly 8.2 million for a fresh start. They have also already gotten many projects that account for at least half their revenue last year, going halfway in. This stock price is definitely not justified. Another possible factor which might seem small is the fact that Kim Jong Un stayed at the St. Regis Hotel, which Design Studio participated in. In this particular aspect, I believe this is in part speculation but I believe that having this ability to boast of its ability to create high end, luxurious designs is great for its reputation going forward.

With the current margin of safety one can enjoy from purchasing the stock now, I believe this is a great stock to purchase for the long run.

The other position that I have added heavily to is that of Daimler, more commonly known for owning the Mercedes brand. Mercedes has outsold many other luxurious automobiles and earnings has been going up, yet has been undervalued for awhile now. There are several reasons for this, one of which is that Daimler has invested large capital expenditure into autonomous vehicles as well as electric ones. The free cash flow available to the company has dropped a lot recently due to this. In addition, the recent scandal similar to the one encountered by Volkswagen has resulted in the stock crashing nearly 10 percent (unfortunately, my first position was badly affected by this). Nevertheless, it is my opinion that the company's strong position in the autonomous vehicle race, together with its strong earnings ( the recall of vehicles required by the EU will be but a temporary drop in profits), and its strong brand has allowed it a very strong moat to tide over these temporary problems. Time will tell if the autonomous vehicle race will have Daimler as a winner, or a laggard, but in my opinion, with the prices as it is now, I have decided to add more to my already large position in it.

Cheers.

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