Final week has not solely introduced a transparent win for Donald Trump however in parallel additionally the (last) downfall of the German “Visitors Mild” coalition.
US Markets celebrated the clear end result, additional growing the outperformance of something US based mostly. 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 subsequently nice for US shares (and Crypto and naturally Elon).
Decrease company taxes, extra oil & gasoline drilling and tariffs on each import with a concentrate on China appear to be one thing the US inventory market actually likes.
One solution to play this as an investor can be to affix the assorted “Trump/Musk/Thiel Trades” like Bitcoin, US Financial institution, Palantir Tesla or the likes or simply swap (much more) into ever successful US shares. My inside contrarian nonetheless is screaming “crimson alert” as in my view numerous this and even an excessive amount of is already baked into US asset costs generally. However perhaps it’s simply my envy that US property are performing so significantly better than what I personal ? Who is aware of.
On the German aspect, initially markets appeared to be joyful that the German coalition has lastly crumbled, assuming that it may possibly solely get higher. Personally, I hope the identical however there’s clearly a threat that there may be a nasty end result of a snap election within the present surroundings. 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 might 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 submit. On the German aspect, the already battered automotive firms clearly will see unfavorable 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 surroundings there appears to be no valuation backside for European shares in any respect.
Portfolio test
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 economic system and my portfolio.
My method is (once more) to have a look at unfavorable publicity in my portfolio first earlier than fascinated about taking advantage of what has occurred or may occur.
The principle space of concern in my view are clearly direct tariffs on imports. If you’re a non-US firm that exports lots into the US with out the prospect to maneuver manufacturing anytime over quickly, you might need a brief time period downside. Moreover, if the US actually manages to hit China economically, any giant China exposures may be in danger, too.
Alternatively, when you have profitable native US operations, theoretically such an organization ought to profit from decrease taxes and so forth.
So let’s run by the listing of portfolio firms one after the other (sorted by dimension descending):
| Stef | No direct publicity, each to US and German coverage adjustments in my view. |
| TFF | Barely unfavorable publicity to European wine exports to the US, barely optimistic publicity to decrease taxes for the (rising) US operation. Total impartial. |
| DCC | No exports.Doubtlessly some unfavorable influence on “clear vitality” initiatives, alternatively 20% of OP realized within the US, conventional vitality enterprise might need an extended runway. Barely optimistic. Whereas I’ve been penning this. DCC introduced to concentrate on vitality, to which the share value reacted positively. |
| SFS | SFS largely produces regionally. Nevertheless, by way of the acquired Hoffmann Group they’ve publicity to most of Europe’s exporters from the machining business. On the flipside, Chinese language opponents to SFS’s prospects would possibly endure much more. Nonetheless, total barely unfavorable, no less than within the quick to mid time period. |
| ATD | ATD has numerous enterprise within the US, so decrease taxes must be good. Greater rates of interest for the Japanese Acquisition (if it goes by) can be unfavorable. Total barely optimistic. |
| Italmobiliare | No related publicity aside from some US based mostly PE funds. Total impartial. |
| Eurokai | A really attention-grabbing query. If world buying and selling quantity would decline considerably, Eurokai can be negatively affected though direct publicity to US strains is comparatively low to my data. Total, barely unfavorable. |
| G. Perrier | No exports to US to my data, total impartial or barely optimistic (Nuclear, protection) |
| Fuchs | Native manufacturing, no exports. Nevertheless, publicity to European Car business, barely unfavorable |
| 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 would possibly even have a bonus as they assemble in Europe and don’t import straight from China. Impartial to barely optimistic. |
| Royal Unibrew | No US publicity in any respect to my data.Impartial. |
| Thermador | Solely native French enterprise, impartial |
| Energiekontor | US mission rights may be negatively affected. Additionally, subsequent German Authorities would possibly de-prioritize renewables. Barely Unfavorable. Undecided how a lot is prized in. Because it appears there isn’t a backside in the meanwhile. |
| SIxt (Vz&St) | Sixt hasa been rising aggressively within the US. Will probably be more durable for Sixt to get (German) premium vehicles sooner or later for the US market. Total, I see barely optimistic impacts on Sixt. Throughout writing the submit, Sixt launched Q3 outcomes and guided to the decrease finish of the vary for 2024. Possibly I’m unsuitable, 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 perhaps extra energetic in pushing extra constructing exercise. Impartial |
| Bouvet | No direct US publicity. The Norwegian economic system remains to be geared in the direction of oil & gasoline costs. Impartial. |
| SAMSE | Publicity to the French building and renovation sector. Circuitously impacted. |
| Hermle | Hermle is a harder case. On the one hand, they are going to clearly endure if the European equipment sector suffers. Alternatively, 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 components and automation. Sure, there can be tariffs, however the Chinese language competitors may be harm rather more. That is clearly a inventory to observe intently on which aspect issues will go. |
| Amadeus Fireplace | No direct publicity, nonetheless clearly oblique publicity in the direction of a protracted /German/European financial droop particularly for the recruiting section. Apparently, simply after 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) adjustments in the direction of Renewable Power coverage. Total extra unfavorable. |
| 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 influence. The massive query is: How giant will the influence be and what’s already mirrored within the present share value ? |
Total the influence of this shift is barely unfavorable for the portfolio. As talked about above, perhaps 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 come back.
I’ve marginally decreased publicity in ABO Power and SFS, however in the meanwhile 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 believe the principle “hedge” I’ve within the portfolio is the standard of the administration groups. As previously, good administration groups will handle these challenges and perhaps come out even stronger. Most portfolio firms have actually good administration groups.
Conclusion: Now we have seen this film earlier than
As a small cap Worth investor, crucial difficulty is to develop a very “thick pores and skin” in opposition to the present craziness we see available in the market.
As soon as once more, folks make simple cash in Crypto and really speculative shares in a really quick interval in time.
Small caps and worth shares actually appear to be a losers sport. The older traders 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 shortly.
However, one ought to watch cautiously if for some motive one or the opposite portfolio firms is caught in a very unhealthy state of affairs.
Bonus Track
And likewise this time I add a music which may cheer up fellow Shitco err Worth Buyers:
