Hanseatic Championship - Round 1

Quest for top equity investments

After the completion of last week’s qualification (237 stocks made it), we have entered Round 1 of the Hanseatic Championship. Winners are determined by our “Fusion Investing” approach, essentially the combination of fundamental factors with investor sentiment on the stock.

Round 1 will focus on fundamentals. Winning stocks need to have an attractive profile of growth (structural or turnaround) versus risks to growth. We view value not as a selection criterium, but as a risk factor. In the tradition of Benjamin Graham, you have a lower risk when buying cheap stocks.

This round is structured as a group phase competition. We had already split the qualifiers into 3 divisions: our proprietary risk categories Solid Growth / Turnaround / Highflyer. Within each division, we are forming groups along sectors.

The “Solid Growth” division lends itself to directly compare the growth trend to current valuation. We calculated the 3-year trend growth 2020-2023 using consensus estimates. Unfortunately, the sell-side with its motivation to justify ever higher valuations most often uses forward valuation multiples. But these have the growth already incorporated, therefore double-counting growth. Consequently, we use the current year valuation multiple as a base to then judge the future growth.

We start with the sector that everyone can relate to: consumer (both staples and discretionary). Here we get the results for the 40 stocks in this group “Solid Growth/Cons”:

These Matrices help eliminate a few stocks with unattractive growth-to-valuation profiles. From the remainder, only stocks that look good on two additional criteria will proceed to Round 2:

• Fundamental momentum: is sales growth accelerating or decelerating?

• Margin potential: can profit margins expand or contract?

And the winners of Round 1 “Solid Growth/Cons” are:

1 Accell ACCEL

2 Adevinta ADE

3 Auto1 Group AG1

4 Bygghemma BHG

5 Dometic DOM

6 Harvia HARVIA

7 HelloFresh HFG

8 Home24 H24

9 Husqvarna HUSQB

10 Knaus Tabbert KTA

11 Leifheit LEI

12 MTG MTGB

13 Musti Group MUSTI

14 Pierer Mobility PMAG

15 Storytel STORYB

16 Zalando ZAL

17 Acomo ACOMO

18 Barry Callebaut BARN

19 Greenyard GREEN

20 Mowi MHG

21 Symrise SY1

Next up is Round 1 "Solid Growth/Industrials, Materials".

The HanseaticHunter

#hanse #hanseaticchampionship #stockideas #bestinvestment #fusioninvesting