Sirius Real Estate – I’m Out

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commercial property, German property, Karoo Investment Funds, KWG Kommunale Wohnen, Laxey, Margin of Safety, NAV discount, Net LTV, Principle Capital, residential property, Sirius Real Estate, special situations, SRE, Weiss

I’ve completely disposed of my remaining Sirius Real Estate (SRE:LN) holding. [I previously noted a small sale in August, reducing my portfolio stake to 2.8%]. This is a rare event – in the past year, my selling’s been mostly limited to top-slicing as certain stocks neared/exceeded my price target(s). Crikey, I must sound like a bloody buy & hold investor!? Rarer still, I think it’s only my second disposal of an investment that clearly hasn’t been working out. [Cresud (CRESY:US) was the first – a v different macro decision. Fortunately, the right decision…the stock’s down nearly 25% since!]

I actually managed to avoid a loss in both instances – not what you’d expect from stocks that haven’t worked out..! Obviously, there was plenty of luck involved – but I’d definitely credit a good entry price as a key saving grace. Having the discipline to demand an adequate margin of safety for each purchase isn’t just about increasing your potential upside – it can also save your bloody ass when things go wrong. Let’s take a closer look (using my original Sirius post for reference) & see if there’s anything to learn here:

Investment Opportunity & Crisis Hedge:   My investment thesis identified German property as a secular investment opportunity – it’s cheap in absolute terms, the German economy’s perhaps the most resilient in Europe, and Bund yields remain incredibly supportive. I continue to believe this thesis is correct, but actual property & share price gains to date have been mostly enjoyed by the residential sector. [Check out my German property series: Parts I to V]. I also suggested German property might be a good hedge against any further unraveling of the European sovereign debt crisis. Fortunately, sentiment’s improved dramatically this year – it’s interesting to see German residential share prices peak & then trade sideways/lower for much of the year, as investors migrated back into higher risk European exposure.

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Hitting The Century (IX – Property)

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Asia, BIW, catalyst, China, commercial property, de-leveraging, emerging markets, Germany, Joel Greenblatt, KWG Kommunale Wohnen, NAV, Net LTV, Price/Book, residential property, Russia, Sirius Real Estate, special situations, SRE, Stockopedia, Ukraine

Continued from here.

Property (10%):

As with Agri, some of my recent posts will overlap. I should obviously point you to my series on German Residential Property, Post I to Post V – it offers an in-depth look at my allocation & stock selection approach to Property. This culminated in a recent stock-pick I’m v pleased with: KWG Kommunale Wohnen (BIW:GR), a 5.1% portfolio holding.

At EUR 5.475, it’s up +6% since my write-up a month ago (and +9% from my actual avg. entry price). It’s clearly left resistance at EUR 5.25-32 trailing in the dust, and the next EUR 5.60-80 resistance now beckons. A possible break of EUR 6.10-20 in due course may suggest the share’s ready to muscle its way far higher. It’s fascinating to note that price level corresponds to a KWG market cap of about EUR 100 mio: Which is precisely the level I highlighted as a possible sweet spot for the market to award KWG a significantly higher price/book valuation!

You know, I’m not much of a stock screener – I mean why ruin a day of reading annual reports instead?! 😉 But I do think property stocks lend themselves v nicely to a stock screening approach (Stockopedia, of course!) – there’s only a couple of key variables on which you really need to focus. In fact, let me suggest a stock selection strategy, a la Joel Greenblatt: