Home free for Hemnet

Hi all, hope you’re enjoying World Cup drama.

This week, I’ll highlight some drama in a few other places:

• Terry Smith breaks his own rules

• Swedish small caps priced like it’s 2008

• Hemnet home free

• Big earnings week up ahead

Here we go.

Let’s start with someone named Terry Smith. And his latest investment letter.

I don’t know much about him.

Or his company, called Fundsmith (great name).

But apparently he’s a legend. Famous for buying quality at good prices and doing nothing.

And right now, he’s getting beaten up in the blogosphere.

For doing the opposite:

• Dumping quality names at the bottom

• Chasing momentum at higher prices

• Being super active

• Capitulating and breaking his own rules

He’s blaming passive index funds.

But my takeaway: another example that this investing stuff is hard.

Even for icons managing billions.

Maybe especially for them.

Next up: REQ, an investment company based in Norway.

I’ve only just discovered these guys. Super glad I did.

Because they’re even more into serial acquirers than I am.

They literally wrote the book on compounders.

And they’re doing something I’ve thought about too: building funds solely focused on acquirers.

This week, I read through their half-year report. Lots of good stuff there.

But one thing stood out: Swedish small- and mid-caps remain unpopular.

Instead of a historical 6% premium, small-caps are at a 9% discount to large caps.

Levels not seen since the financial crisis.

My take? Good.

These guys are as good as ever. I keep buying.

REQ agrees.

More good news this week — Hemnet settled that investigation.

A couple weeks ago, news broke that authorities had started investigating Hemnet.

For abusing its market dominance.

The share price cratered. I braced myself for months and months of limbo.

Then the script flipped:

• A couple big institutional investors stepped in and added to their positions. Driving the stock up some 20%.

• The investigation was suddenly settled and closed. With very little penalty.

Wow.

Home free.

Which means Hemnet’s outlook is better than ever.

Sure, Hemnet lost a little in the deal. It has to ease its sell-first, pay-later terms.

And sure, Hemnet still has broader issues. A weak market, competition, changing customer behavior etc.

But perhaps the company’s biggest risk was regulation.

With that favorable settlement, regulation risk has almost disappeared.

Meaning Hemnet has the green light…to continue dominating the market.

Looking ahead, it’s a big earnings week for me.

I’ve got three of my four big holdings reporting on Friday the 17th.

Karnell, Berner and Hemnet.

But another big day is Tuesday. When we’ll get fresh new numbers from Vitec.

For the past couple of reports, Vitec surged on great figures.

But then slowly tracked back down in the weeks and months that followed, on software worries.

Can’t wait to see how things go Tuesday.

So that was the free part of the post.

Click through to get a view of how my holdings are doing.

• Fund 1 — Small-cap growth. Concentrated, aggressive, focused on serial acquirers

• Fund 2 — The rock-solid, larger-cap fortress. Investor, Berkshire, and tactical mean-reversion like Novo and Adobe.

Click through.