NZ & Aus
NZ Housing
Barfoot & Thompson said for the month of August it reported the highest number of sales since March 2022, while median house prices rose for the first time in 6-months, as buyers seem more certain interest rates have peaked.
Across the ditch, housing affordability is now at its worst. The mortgage repayments-to-income ratio for a new purchaser are at a record high 43% (vs 24% in 2019) while rent as a share of income has reached a record 30% (vs 24% in 2019). Something has to give eventually…this is unsustainable…
Qantas shares are down -12% over the last month as investors weighed a $15bn capital expenditure bill to upgrade its fleet and fines from the competition watchdog.
CEO Alan Joyce will step down from his position at the airline, bringing forward his retirement by 2-months on his 15-year tenure as the company faces allegations of illegal ticket sales and undue influence over the Aus government.
The Reserve Bank of Australia will release its interest rate decision today — widely expect to be another pause. SkyCity shares have bounced back following yesterday’s sell off — but we wonder if this is a sign of increasingly draconian regulation.
Three European Trade Ideas
One of our regular fixations is the (often) European practice of the holding company. They range from the simple to the complex and often have storied histories — Bolloré SE tracks its history back to 1822, when it was founded as a paper factory. Moreso than the US billionaires, the European billionaires (or dynastic wealth) tend to put their assets into holding companies, or a series of them — because of their relative obscurity they can offer value. So, three trade ideas of European holdcos — this may be a way to add a little bit of uncorrelated performance to your portfolio, as they tend to trade disconnected from the ASX/NZX. We’ll write about them in order of conviction and also in order of simple-to-complex.
1) Christian Dior SE (CDI)
CDI is the holding company for the sometimes-richest-man-in-the-world, Bernard Arnault. Its entire holding is LVMH (MC), the luxury goods conglomerate.
CDI owns ~42% of LVMH; ~97% of the company is owned by Arnault and family (since there is little liquidity, this is an idea for small PAs).
Why buy it? We love LVMH — it is the greatest luxury goods company in the world and is run enviously well; it consistently grows revenues in the double digits and has very good pricing power because it sells luxury products. CDI trades for 20x earnings, while LVMH itself trades for ~25x. You get LVMH at a ~20% discount.
2) Exor NV (EXO)
Exor is the investment company of the storied Agnelli family, who founded Fiat.
Today it is run by John Elkann, the grandson of Exor founder Gianni Agnelli, and its interests include a stake in Ferrari, auto group Stellantis, agriculture and construction servicing company CNH Industrial, magazine The Economist, healthcare companies like Institut Mérieux and Philips — the list goes on. They are a group of high quality assets which now go far beyond the auto industry.
Why buy it? Exor’s NTA is ~122 euro per share, while it trades for ~81 euro as of writing. You are buying it at a discount. Management has compounded NAV at 17.6% since 2009. You are investing alongside one of Italy’s richest families who have a vehicle which owns stakes in a lot of high quality assets. Since Elkann took over as CEO he has shown his capabilities as a capital allocator — we think of it as an Italian Infratil.
3) Bolloré SE (BOL)
Bolloré SE is the holding company for French billionaire Vincent Bolloré’s assets. It owns stakes in UMG, Vivendi, media group Havas, energy and logistics interests, 17% of Telecom Italia, etc. Andrew Brown, the Aussie fund manager, values it around ~13 euro per share. It currently trades at around ~5 euro. It offers the widest discount of all the companies, but given Bolloré’s frankly breathtaking labyrinth of companies it also offers the least clear catalyst to value.
Why buy it? Trades at a large discount to “true” value, aligns you with one of France’s best businessmen. However, the opacity of the holding may mean the holding takes time to show its true value.
Chart of interest — JP Morgan consumer spending tracker
