03 09/21 03/09/2021

Weekly Newsletter Week 35

Newsletter week 35...

 

 

 


WEEK 35 | SEPTEMBER
WEEKLY NEWSLETTER

 

OVERVIEW

  • Financial Markets & EconomiesOn a Roll
  • Good to knowInflation in Europe
  • Your portfolio highlightsFairfax Financial Holdings, Lunar Value Fund, Dixons Carphone
  • In other news: Warren Buffett turns 91 but isn’t slowing down anytime soon
Financial Markets & Economies

Global financial markets have been good to investors so far in 2021. India stocks are on a roll as well with many Indian companies trading at all time-highs thanks to the recent deals happening in both the private and public equity markets. The materials sector has been rallying since the beginning of the year with aluminum prices hitting 10-year highs this week. Goldman Sachs expects this rally to continue and projects an aluminum price of $3000 per ton by the end of 2022.

We mentioned China in our earlier writings as a country with a lot of potential but with higher risk for investors due to their controlling government. This week China tightened restrictions for online gamers under the age of 16 so to curb what it deems unhealthy cultural influences. These minors are not allowed to play online video games on school days and are limited to one hour a day on weekend and holiday evenings. These types of government interventions which are not common in western countries may affect investors. This is a perfect example of an added risk due to a controlling government.

Aluminum - 1 Year Price Movement
Good to Know

The inflation in the Eurozone is at a ten-year high (3%) which is higher than most economists anticipated. The European countries with the highest inflation right now are Estonia, Lithuania, and Belgium. This spike in inflation puts pressure on the European Central Bank (ECB) to slow the pace of its bond purchases in order to curb the inflation seeing that it diverged from its 2% target. Some believe that the ECB may decide to increase its target inflation instead in the next policy announcement on September 9th.

The price increases are attributed to the economic rebound, higher energy costs, supply chain bottlenecks, and reversal of the German value added tax cut. The category with the highest price increase was energy with 15.4% followed by industrial goods with 2.7%, and tobacco with 2%. Core inflation (excluding volatile categories) more than doubled and now stand at 1.6%. Most economists are of the opinion that the inflation in Europe will also be transitory. In other words, it will decline by itself as temporary factors fade in 2022.

 
Your Portfolio Highlights
 

Fairfax Financial Holdings (FFH) announced the successful completion of the previously announced transaction in which the pension plan for Ontario’s municipal employees (OMERS) will acquire about14% interest in Brit Limited. Brit is a subsidiary of Fairfax. The transaction will be paid for in cash at a value of about $375 million. After closing the deal Fairfax will retain the possibility of repurchasing OMERS’ interest in Brit over time.
 
 
The Lunar Value Fund (LVF) invests in European equity securities with an emphasis on individual security selection based on thorough fundamental analysis rather than general equity market movements. The Fund concentrates its research and capital on undervalued, mid-cap companies chosen from a carefully defined universe of quality industrial and consumer products and services companies. The Lunar Value Fund returned +14.55% year-to-date. In the highlight this week is Dixons Carphone PLC which returned +17.36% year-to-date while yielding 2.20% in dividend payouts.            
  

Dixons Carphone plc (DX.) is a leading omnichannel retailer of technology products and services operating through 800+ stores and 16 websites in seven countries. The company is based in London, England, and was formed in 2014 after the merger of Dixons Retail and Carphone Warehouse Group. Dixons Carphone operates under a number of brands in the United Kingdom, Ireland and Europe. Some of these brands are Currys PC World, Team Knowhow, Carphone Warehouse in the U.K.; Dixons Travel in U.K., Ireland, and Oslo; Elkjøp in Norway; Elgiganten/ Gigantti in the other Nordic countries; and Kotsovolos in Greece. The 4 U.K. brands are in the process of merging and becoming one brand, namely Currys. This will be finalized in October 2021.

Dixons is doing phenomenally well growing sales strongly in all its markets for the first half of the year. This backs up their vision that technology now plays a more vital role in our day to day lives. It’s not just used for connectedness but also for productivity, entertainment, and wellness to name a few. Technology is believed to remain a structurally larger market than pre-pandemic. By being a growing market leader Dixons makes sure to benefit from this ongoing trend. Their diversification in terms of geographical locations, online/ in-store locations, suppliers, and products/ services categories help in limiting their risks while their credit and services sets them apart.


*Please visit the Dixons Carphone website for more information or click on one of the images below for their latest presentation.

Dixons Carphone - Year-to-date Price Movement
In Other News
 
We wish you a pleasant weekend and hope you stay safe.

Kind regards, 
Shernel Thielman 
Investment Manager 

www.solar-asset.com | shernel@solar-asset.com 
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