Portfolio Update – Q3 2016

Q3 performance: 6.12%

Q3 was a good quarter for my fledgling portfolio with the Q2 losses reversed and the portfolio now showing a decent profit for the period. The portfolio was supplemented with two new companies, both of which I shall be writing up (one is almost ready to go out).

The first company I added was the Austrian insurer, Vienna Insurance Group. I will discuss this company more in my next blog entry, so I will be brief here. This is a decent insurer that formerly attached a high valuation due to consistent profitable under-writing, history of premium growth, and prudent use of float. In the last year and a half though, they have hit some issues, the write-off of an IT system, the restatement of 2015 accounts due to account rules, a slowdown in premium growth, and a decline of investment income due to ECB quantitative easing. This has led to a collapse in the share price from over €40 in early 2015 to €18.50 today, leaving the company trading at just 8 times expected earnings for 2016 and below tangible book value of €20.31.

The second company is yet another bank that will be familiar to readers (for all the wrong reasons today) called Wells Fargo. I wasn’t too eager to add another bank, but I simply could resist the chance to buy a high quality business at a discount to intrinsic value. I will go into more detail on this very recent purchase over the next few weeks.

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