What a difference a year makes!
That’s what I thought as I left the Keys to visit some of our European holdings and prospects a few weeks ago.
Over the past year, oil prices have dropped more than 40%, the US dollar strengthened 20% versus the euro, the Swiss franc uncoupled from the euro, the ECB cut interest rates and started quantitative easing, China’s growth slowed, governments and other organizations imposed sanctions on Russia – and Russia responded in kind.
Well, this is going to be an interesting trip, I mused – and so it was.
I bookended my first week in Europe with visits in Switzerland, making my way via trains, buses and trolleys with only twice having to say Ich bin Verloren.
I know how to say “I am lost” in several languages.
This trip I focused on smid-cap companies in the Yellowtail Folio, visiting Lonza, a leading supplier of biopharmaceuticals and nutrition and agro-chemicals; Swiss Life, a provider of life insurance and financial solutions in Switzerland, Germany and France; Dufry, a global duty-free and duty paid retailer; Bucher, a manufacturer of agricultural machinery and vehicles; and Georg Fischer, which produces automotive products and piping systems.
In general, the quick appreciation of the franc and negative reaction of share prices had been as much a shock to the Swiss companies as to me. Over time, as management teams explained to investors, the difference between translation effects (the accounting impact of consolidating international profits) and the transaction effects (the economic impact of mismatch in sales and costs), will help share prices gain back more ground. There will be a true impact on earnings, but companies are undertaking restructuring measures to improve long-term profitability even as the currency continues to fluctuate. In the meantime, a strong currency can be helpful in making acquisitions – as evidenced in the days just after my visit, when Dufry announced its decision to take a majority stake in World Duty Free Group.
In between Swiss visits, I flew to Berlin for Bayer’s “Meet Management” day and Volkswagen’s Media and Investor conference – unfortunately, leaving my iPad behind in Switzerland. In addition to receiving an update on their pipeline and crop strategy, I gained insights into Bayer’s decision to carve-out MaterialScience and focus on other strengths such as CropScience and HealthCare – the latter enhanced by their acquisition of Merck’s consumer healthcare business.
Did you know that Brazil is the largest market for Coppertone®?
Emerging markets were a focus of both meetings, with Russia and South America detracting from the picture a bit, and China still growing, although slower.
The same emerging market themes were revisited during the following week in Paris as I visited more Yellowtail holdings and attended a healthcare conference. I made my way using metros and trains to visit Societe BIC (check out www.bicworld.com and see how many pens, shavers and stationery items are sold during your visit); Ipsos, the survey-based research company; and Orpea, an operator of nursing homes and psychiatric clinics.
I only got lost once on that leg – Je suis perdu!
I learned a lot about “Value Based Healthcare” during the conference, although as I boarded the plane home, I felt like I had contracted every illness known to mankind.
But, no time to recover. I had to prepare for meetings back in South Florida with three more of our holdings – National Grid, a UK utility; Roche, a Swiss-based healthcare company; and LVMH, a French-based provider of luxury goods and spirits.
Oh, and my lost iPad?
After finally reaching the right person, the kind lady at the Zurich Swissport inquired of me – “Madame, do you have dogs?”
Apparently my screen saver (never mind my name tattooed on the back of the device) proved to her that I was the rightful owner of the iPad she had found. And I’m happy to say that my device and I have been reunited.
You can check out some pics of my latest trip here:
As usual, please write or call if you would like to discuss more about my trip – or our holdings in Frigate, Treasure Harbor or Yellowtail. And thank you for investing alongside your portfolio managers at IIM!