Summer 2025 Update and thoughts on positions

Disclaimer: This is not investment advice. We are providing this article for entertainment purpose only. The author is long the stocks mentioned in the below article, he may buy or sell at any time without further notice. The information presented express his opinions which may be biased.

After not posting for a while, I have just update my portfolio and performance pages as of this weekend and thought I should share a few thoughts. I will not spend much time on a nervous market which feels expensive near all time highs or about the mess which President No. 47 is generating on tariffs and more broadly. Instead, we will cover where the portfolio and certain positions stand.

Year to date (as of 18 July), the Augustusville portfolio is up 9.0% in EUR pre-tax. For those obsessed with measuring on a really comparable basis, the number up to 30 June is +7.4%. We think this is a satisfactory, but not great result and strive for more. We tend to outperform MSCI World and USD-based portfolios but underperform European domestic portfolios. With Augustusville having total freedom in terms of where to invest, you can always find a worse or better benchmark. We mentioned before to not care to much about the Relatiev Perforance Derby, but clearly strive for double-digit absolute returns while always being able to sleep well.

Winners and Losers:

So what drove returns so far? Let’s go through some positions:

Millicom (Return Contribution 259 bps, Share Price in USD +60%)

Millicom has thrived on improved operating performance and clearly better cash flwo generation which was already visible at the end of last year. The company has reached its leverage target and decided to remunerate its shareholders with a dividend and share repurchases. The company paid a 1$ one-off dividend in early Jan and announced a 0.75$ quarterly dividend on 14 January. At that time, TIGO was trading at 25USD for a forward dividend yield of 12%. I consider the run-up of the share prive largely as the market getting to terms with new realities. TIGO has also suspended its second listing in Stockholm and is now listed on NASDAQ only and partly closed its tower sale transaction which will result in additional distributions to shareholders. In the meantime, TIGO has acquired Telefonica’s operations in both Uruguay and Ecuador, potentially driving more growth.

Many of the positive developments we had hoped for in TIGO have materialized while and while we think there is more runway for good news and the stock is not expensive, we may what has grown into our third position (if we count BOL/ODET as one).

Funkwerk (Return Contribution 203 bps, Share Price in EUR +67%)

After I posted my write-up on Funkwerk back in 2023, the stock pretty much went sideways for two years. More recently however, the hidden champion in rail radio equipment and information systems from Kölleda has been catching a bid and fundamentals look promising.

Funkwerk has been stepping up investor communication and started issuing quartely reports (lamentably so far only in German). More importantly, Funkwerk won various large contracts/tenders across Europe over the last year which caused an improvement of the order book to 280m EUR as of March 2025 (versus 189m in March 2024). Q1 revenues have improved by 38% YOY and the company is guiding for a record revenue of 190-200m and EBIT of 20-25m. Historically, their guidance has been conservative. Funkwerk still operates with net cash (even though they have been doing small acquisitions) and only trades at 8x EBIT. Europe’s need and will to spend on digital and rail infrastructure should provide more tailwinds so that we may continue to hold the position

Fairfax (Return Contribution 148 bps, Share Price in CAD +22%)

The Fairfax return has been more than decent though not spectacular. We continue to see a company operating in attractive business, particularly insurance, led by a skillful and creative management which has done well at capital allocation. Faifax has become a huge company and if you really want to look into it, I suggest to read “The Emergence of a Great Company” . Fairfax has become more expensive than it was on a P/B basis. We think there it has executed so well that a premium valuation is deserved and have not sold a share yet. Still, the valuation is more ambitious than when we invested.

Bayer (Return Contribution 123 bps , Share Price in EUR +43%)

Bayer has so far been a case of a successful example of bottom fishing. While the situation around the Monsanto litigations remains complex and the legal risks high, the company delivered a Q1 which smelled like stabilization and some new product initiatives on the pharmaceutical side. The thesis on Bayer was not “this is a great company” but rather “Mr. Market hates it so much and the price has dropped 80% so it may be go higher from here. We will continue to look into blue chip companies at multi-year lows which may reflect an irrational level of pessimism and the fact that the market has given up on them.

Bollore/Odet (Return Contribution combined -69 bps, Share Price ODET -7%, BOL -10%)

Long term high conviction idea Bollore/Odet has been a laggard so far this year. The cleanup of the corporate structure is messier than necessary which is largely attributable to the Bollore family trying to save some money and cut corners on two occasions, the take-out of the Rivaud entities at a (too) cheap price and the actions around the Vivendi split which was supposed to grant Bollore control without having to make an offer to take out minorities. On both occasions, Bollore was put in its place by the French regulator AMF which seems to be taking the protection of minority shareholders seriously.

The fundamentals of the Bollore/Odet case have not changed in our view. The SOTP discount remains big and the corporate simplification is still happening. Bollore still has a lot of cash and its main asset UMG is still doing well.

Nilorn (Return Contribution -46 bps, Share Price -21% in SEK)

Nilorn posted disappointing Q2 results after which most of the share price drop occured. The company suffered from FX headwinds (with a significant portion of the cost in SEK and sales in USD), but also from high investory levels and a relatively weak luxury segement. They have been moving production between countries which I believe caused some ramp-up costs and hurt margins. For Nilorn to operate well, they should earn 10-12% operating margins whereas they have been just below 7% in Q2. We still have some faith and patience here as we believe in the business so will wait even though the share performance so far has not been stimulating.

Exit Blues

We parted ways with two Polish investments both of which cost us some money in H1, i.e. Eurotel (Return Contribution -53 bps) and Text SA (-48 bps). Eurotel reported a declining profitability to an extent that they would need to fundamentally change their business model. This was not the right situation for us, so we left. Text was sold because the capital was needed elsewhere.

Paypal (Return Contribution -88 bps) is a more painful story. The shares were bought at close to 60 USD in 2024 and had a good run up to 90USD, only to decline again up to April. I ended up selling pretty close to the bottom at 60 USD again for a total return of zero where we should have made some money after a good entry timing.

Talking mistakes, Paypal is not the first investment sold too early. We missed gains in PVA Tepla, Corecard and (to a lesser extent) IDT because we left all of these too quickly. While some investors make the mistake of sitting out a (poor) performance for too long, we have indeed sometimes made purchases at good prices but without full confidence in the name, causing is to unwind the position at times of greater uncertainty on the company or the market. We honestly think that we should permit ourselves some more patience and more confidence in the purchasing process which generally been satisfactory in terms of idea generation.

New Positions:

We established a new position in Now Vertical, building on the excellent pitch by Financial Skeptic on Substack.

Another new position is Zegona Communications, a company which owns the former Vodafone Spain. When Zegona received vendor financing in an interesting structure as redeemable shares. Zegona has the right to buy back these shares which currently form 69% of shares outstanding. Zegona is in the process of monetozing its network assets and is expected to repay the vendor financing while improving its operations. The stock has had a pretty good run but I think there could be some upside left.

We also opened a position in Regeneron, a long-term holding of John Hempton’s Bronte Capital, which had seen its stock price come down by >50% in one year. While we are no sector experts on pharma, we note that Regeneron has a (1) a history of profitable growth and high returns on capital, (2) two blockbuster drugs (Eylea and Dupixant) which continue to generate good profits, (3) 15bn (25% of its market cap) in net cash which it uses for share buybacks and (4) upside optionality from its pipeline. There are some risks and it is not the highest conviction idea but we found it a decent bet and started a position around 520 $.

We bought shares in Unidata, another laggard of the last 3 years even though the company has posted rising revenues and profits. Cairo Mezz, our final addition is more of a special situation.