Portfolio Update October 2021

During October we have seen a substantial amount of companies report their Q3 earning, some have reported record profits while other have disappointed all expectations. A normal quarterly flow of reports, some good, some bad and others do not move the markets. As stocks have their own rhythm there are new investment channels such as crypto currencies, NFTs (non-fungible token) and most likely something I haven't even heard about yet. The new channels have taken people with storm, increasing in value beyond my understanding.  

As my portfolio swing month to month it is interesting to follow-up which are the biggest holdings based on market value.

 Currently my largest portfolio holdings are 

1. Nordea Bank 9,03%
2. Telia Company 8,65%
3. GlaxoSmithKline ADR 6,52%
4. BASF 6,05%
5. 3M Co. 5,72%
   

 The five biggest holdings represent almost 36% of my portfolio while top 10 largest holdings represent over 60% of my portfolio. Many might say it is a risky portfolio and poorly diversified, these people usually interpret volatility as risk while for me volatility is only opportunity. Risk is the probability of losing the investment in any form, meaning either the company files for bankruptcy without any recovery possibilities or the risk that the company loses its competitive edge and therefore sees a significant reduction in its value. There are many other views on risk as many would just use the theoretical systemic and firm specific risk and justify that volatility reflects both. 

During October a few minor changes in Top 5 largest holdings was that BASF dropped from 3rd largest holding to forth, overtaken by GlaxoSmithKline. 3M Co rose to fifth place while The Kraft Heinz Company dropped to sixth place. As I have been increasing my position in Telia it has remained one of the largest holdings in market value even as its market value has dropped.

 More details and current market value can be found on the Portfolio page.

Portfolio changes

 A few changes made during October, as usual just increased positions. Mainly looking at companies that underdelivered to market expectations and are undervalued in cash flow and which most likely could be sold at a premium to current value.

Telia

 Bought 110 shares to decrease the purchase price and to increase the coming dividend. Have a total of 1 440 shares now at a weighted average purchase price of 3,75€ compared to 3,77€ before. 

Telia announced their Q3 earnings which did not surprise me, yet the market was expecting better results based on reactions. 

Kone

Kones share dropped after Q3 publication as investors worried about Chinas impact on future profits. This gave me the opportunity to increase my position to 7 shares at a price of 57,24€, had 3 shares before at 57,25€. 

China is a large and important market for Kone, but I expect Kone to adjust fast to market changes and keep their competitive edge to competitors. A quarter here and there has hardly had a long-term impact on a company, except when they have used fraudulent accounting or deceived the public for a long time. 

Handelsbanken Latin Amerika mutual fund

Bought 30€ worth in Handelsbanken Latin Amerika fund partially driven by the decreased value, also as my long-term view remains the same. Latin Amerika has not recovered from COVID-19 caused issues and there are signals of unrest in some countries. 

Citating Baron Rothschild (not 100% sure he actually said it)

"the time to buy is when there's blood in the streets"

Dividends

October was a good month as Nordea Bank paid out their dividends for year 2019 and 2020 (note 2019 dividend should have been paid in Spring 2020, yet corona interrupted it). Old Republics extra dividend and GlaxoSmithKlines dividend helped reduce the gap to short-term goal yet not able to achieve it this year.

YTD dividends are about 1 600€ which is 600€ from the short-term target. Since December 2020 portfolio has received 1 740€ in dividends and all has been reinvested. The investments made in Bayer AG will hopefully give a return two years from now. Expecting Telia to pay the same dividend of 2 SEK per share next year which will increase my dividends unless SEK falls in value to EUR next year. 

Sampo has gathered some funds from the sale of its Nordea Bank shares and they announced at least a dividend of 2€ per share in 2022 which will help narrowing the gap. 

Bayer AG an undervalued company or still high risk

 Is Bayer AG an undervalued company or still high risk due to RoundUp! court cases?

Will shortly review Bayer from my perspective and apply similar principles as with my Alibaba review, first financials, dividends and then the political or in Bayer's case the damage lawsuits impact on shareholder value. One important question be answered, is Bayer AG undervalued excluding RoundUp! and what is the case when we add RoundUp!? This will be mainly a summary of historical number and not speculation around Bayer's future profits.

Let's jump straight into the numbers.

 

4x Daily Market Reports With Hammerstone Markets!

 

Bayer AG Financials

Starting with Bayer's income statement since 2004 we see good revenue growth, stable gross margin while operating and net profit swings a bit. The biggest swings are due to one-off items, yet the goodwill write down made 2020 had a huge negative impact. Here we clearly see the importance of due diligence in big mergers and acquisitions as the Goodwill can eat up most of a company's equity in a very short period.

Income Statement

Revenue and gross profit including the gross margin in percentage has been very good and what we should expect from a pharma company. Even after Monsanto acquisition gross margin in percentage has stayed on the better side of 50 %. Since 2004 Bayer AGs revenue has grown by 2,35% per year which is a bit modest comparing to smaller companies, however for a big company like Bayer it is a proper result. 

The positive part is the gross margin and that we see a small growth in revenue. Even if there was years with almost no growth or declining revenue it still is normal for every company and I do not worry that much about it.

Next up is Operating profit, an operating margin %. As the graph displays the margin and profit has been growing with the business from 2004 until 2018 when Monsanto acquisition was finalized. Operating margin in % dropped from a healthy 16% to under 10% (around 9,6-9,9%) which clearly reflects the negative impact from Monsanto. Only in 2004, 2009 and 2010 did Bayer have a operating margin in % below 10%, if this is the new standard then one question I ask is, what shareholder value was created with Monsanto acquisition?

Net profit is what many look at and also EPS (earnings per share), as this is the result the company makes and could distribute to owners in many forms. Bayer AGs net profit has been developing well since 2004, a few highs in 2007, 2016 and 2017 mainly driven by non-reoccurring payments. In 2020 we see a big drop caused by goodwill write-down of around 2,2 billion euros and significant legal risk of 13 billion euros all related to the Monsanto acquisition (available in Bayer AGs 2020 annual report notes on page 189, other operating expenses). Without these two items we would have seen a good result from the company, however the legal claims and goodwill value of Monsanto is still a big question. We will see the impact on Bayer's balance sheet of the legal claim and goodwill write-down.

 

 Bayer's pay-out ratio has been moving a bit, yet dividends have risen since 2004 by 364% or equivalent to 8,4% on an annual basis. Note that Bayer decreased their dividend in 2020 from 2,80 euros to 2,00 euros reflecting the bad result in 2020. We also see that in 2018 Bayer paid out more than their result was for the year, looking a bit back that has a minor impact due to earlier years good results and lower pay-outs. If Bayer's EPS stabilizes to the average from 2004 to 2020 we would talk about an EPS of around 2,51 euros which sounds a bit low considering Bayer's normal business and operations. However, do understand why the stock is moving in the range of 46 to 49 euros.

Balance Sheet

Bayer's balance sheet will be discussed only briefly, will mainly focus on equity and goodwill per share as in 2020 their balance sheet ha more in goodwill then equity alone. 

Equity per share has grown well an equity ratio has displayed the same patter until 2014 were we see equity ratio drop from 40% to 29%. The reason behind the drop comes from 13,5 billion euros in acquisitions mainly funded by long-term debt. Bayer acquired Argentinian crops science company Biagro Group, Merck & Co Inc's consumer care business (largest acquisition that year) and Chinese Dihon Pharmaceutical Group. The graph clearly displays how equity ratio drops in 2014 while goodwill jumps to new highs. Still in 2014 Bayer had more in equity per share than goodwill per share which changed in 2020 due to the legal risk associated with RoundUp! legal claims mainly in USA. Note that the write-off of goodwill in 2020 has an impact both on equity as well as goodwill (a net zero game).

As 2018 shows we see the Monsanto goodwill impact with an all-time high in 2018.

I usually get worried if a company has more in goodwill than equity, goodwill if not real value is a risk factor for owners. It can be easily written down causing huge negative impact to shareholders and increasing the firm specific risk. I still see some risk of goodwill write-owns coming in Bayer's case yet limited in the long run.

Summary of Bayer AG

Removing the legal reservation and goodwill write-own in 2020, Bayer would have made a more normal net profit of around 4,5 billion euros and an EPS of around 4,59 euros per share. This is however just a simple calculation yet does not display the possible future cost from Monsanto. 

To summarize Bayer, I would not say it is under current circumstances a undervalued company. There are many risk factors associate with Monsanto that can have negative impacts in the future. Once these risk factors are taken care of then Bayer can proceed to making more normal results I would expect the net profit to land around 4 euros per share. Considering this if a bit in the future the current market price is fair.

Portfolio update September 2021, when there is not enough cash

 In September the market did move up and down as if there is a storm coming and some analyst, influencers and other do think so. They might be right, and they might be wrong, it might be the coming interest rate increases or it might have been Chinese Evergrande crisis causing the fear to rise once more. 

If we look at stock market history, we see a lot of fears and "happy joy joy" moments, some crashes and fast rises. This is normal and nothing to be afraid of, that is my opinion, I sleep like a kitten during turbulent times and dream of buying even more shares as the market crash. That's just me. 

The drop in value did create opportunities for me to increase my positions in companies mentioned below. I did invest more than the two scenarios I created to see if possible to reach the goal of 1 million euro portfolio (link to post here), the yield will be the challenging part, however we shall see what the outcome will be. 

Veolia has a rights issue ongoing to purchase the remaining 70% of Suez in which I will participate, yet only 2 shares will be bought (short post about the acquisition).

The graph below displays portfolio development to long-term goal of 100 000 euro, still a way to go as the market value on September 30 was 55 584,23 euro. During September my portfolio fell below the short-term goal of 55 000 euro market value, yet increased above mainly due to my additional purchases. I did want to buy even more shares in all the below companies and some other yet run out of cash. Will have to wait for the coming dividends as well as next paycheck.

Portfolio Changes September

Alibaba (ticker BABA)

Increased my position by 2 shares at $148,90 as the market value dropped, weighted average purchase price decreased from $212,98 to $205,61. I still find Alibaba a good investment in the long run even thought I have heard some negative comments about Alibaba mainly relating to it being under Chinese regulation. The important question to me is, will Alibaba still exist 20 years from now and will they have grown even more and profitable? My opinion is yes, the political risk will not ruin Alibaba so I will hold my position.

Bayer AG (ticker BAYN)

 Increased by 1 share to a total of 38 shares, weighted average purchase price decreased from 61,12€ to 60,76€. Still buying Bayer even if some might have lost hope with all the problems they manage to run into. Bayer has good products that help people and do see a future with Bayer still as a significant player with proper dividends and good growth. 

Telia (ticker TELIA1)

 Bought 30 shares in Telia in the price range of 3,53€ to 3,61€, weighted average purchase price did not move and remained the same at 3,77€ a share. Telias dividend is expected to be paid in beginning of November, will be 1 330 SEK gross and around 1 130,50 SEK net of withholding tax, around 111€. A good contribution and improved reinvestment opportunities.

Telias stock has taken a beating for some years, corruption scandals have hurt Telias reputation. The divestments made might have a positive impact and hope Telias current management is able to improve their reputation and get it on a small growth path.

Dividends

Received a total of 97,83€ in dividends during September, a little more than in June. my position in Pfizer received a full dividend for all 12 share and Wells-Fargo increases their dividend from $0,10 to $0,20. As the graph below displays the biggest dividend months have been April and May, when European companies pay their annual dividends. 

In October there will be a small dividend party as Nordea pays a dividend for 2019 and 2020 as well as Old Republics on-time cash dividend.

Below graph shows the monthly net dividends as well as cumulative net dividends, year to date I have received 1 184,42 euro which is 54% of my short-term goal. The gap will be reduced a bit however not enough to reach the full short-term goal, hopefully next year.

Veolia Environnement to acquire Suez

 On 16th of September Veolia Environnement announced their acquisition plan of Suez of the outstanding 70,1% of Suez shares not held by Veolia. This will create a new giant in environmental services like waste management and water. I only own 12 shares in Veolia Environnement meaning the impact to me is small. Link to Veolia Environnements investor page is here. The total acquisition price of Suez will be 9 billion euros, Veolia is striving for annual synergies of 500 million euros split between 100 million the first year and 400 million in the second year.

In order for Veolia to acquire the outstanding 70% of Suez they have launched an rights issue to shareholders. For every 21 rights you have you can acquire 4 shares in Veolia at a price of 22,70€, yet got 14 rights for the 12 shares I have, therefore I would end up with a few right that would not be used and will be worthless unless I sell them or buy more rights. I have decided the use the rights I have, still open if the excess ones will be sold or at some point. 

Veolias share closed at 32,82€ on Friday which would give me a discount of 30% to market price, something very interesting now and could be considered a good discount.

At the same time my portfolios market value has dropped below the short-term goal of 55 000€, 54 842,79€ was the closing value on Friday. A bit below target yet as I have earlier mentioned that is something that will happen from time to time. This is a good opportunity for me to review my portfolio holding, their weights and see what I find valuable to increase my positions in. By default Veolias share of my total portfolio will increase a bit.

This Fall has started with good new in my opinion, Old Republic International with their special, one-time cash dividend and now Veolia will acquire Suez.

In search for undervalued Swedish stocks

I went on a search for undervalued Swedish stocks and the result was surprising. Based on market valuation 17th of September the Stockholm stock exchange has only 10 low or undervalued stocks, most undervalued stocks according to the screen was in the investment company class. The criteria for being undervalued in this screen was the following

• P/B- ration less than 3
• P/B (most recent quarter) less than 2 
• Trailing 12 months P/E-ratio 0-20
• ROE over 15%
• ROA over 10%
• Gross margin over 40 %

Unsurprisingly the list consisted of investment firms, yet also a goldmine company. Why the list of investment firms was not surprising is partially the high gross and net margin I set. Investment firms usually have high margins until markets turn south, that is when market valuations no longer work in their favor. ROA is also something many industrial companies can have difficulty achieving as their balance sheet consists of many factories, inventories, goodwill and so on. Even though industrial companies should achieve a good return on their assets it might be that they are relatively high priced now.

It is not a surprise we see so few undervalued stocks in Sweden. The market has risen a lot and OMX Stockholm Price index is up over 26% year to date, since 2011 it has risen 242% equivalent to a CAGR of 13 % per year. In other words the broad index has given a good return to investors. But to the topic of undervalued companies..

 

Which companies did show up on the list, let me introduce Stockholms undervalued companies;

• Investor Ab
• Kinnevik Ab
• Bure Equity Ab
• Creades Ab
• VNV Global Ab
• Svolder Ab
• VEF Ab
• Ab Traction
• Kopy Goldfields Ab
• NAXS Ab

Here I will focus on only six of the ten companies, reason is that all are not interesting for me and primarily want to see what the return would have been if I invested in the company back in the days. Let me start with the biggest and oldest of them all.

Invesor AB is a known Nordic company mainly ruled by Wallenberg family. Investor has investments in many known global companies and some more niche specific and less known companies. The last 10 years Investors A share has risen 558% excluding dividends. A good return if you jumped on the stock back in 2011. If you bought a share back in September 2011 you would have received gross dividends of 23,75 SEK (adjusted for stock splits), almost as much as you would have paid for a share in the company. What might be special with Investor and the Wallenberg family is their investment policy and horizon, they see their investments as almost forever and focus on development and improvements instead of fast gain and splitting companies to quickly realize a short-term profit. 

Kinnevik Ab is an investment company, like many others they provide expertise and possibility to develop companies through the large network they have. The last 10 years the share has returned 526%, still a very good return even though a bit behind Investor Ab. Dividends since 2011 Kinnevik has paid a total of 170,40 SEK including share distributions of investments Kinnevik had. The shares they distributed have been a bit harmful for some owners as it has increased their workload to ensure they claim their right to the shares, example with Zalando. It has also been a bit confusing how to proceed and fulfill your claim for the shares Kinnevik has distributed to you. If we exclude the issues with dividends as shares, one share in Kinnevik would equal a dividend return of 224%, which means a very good total return. 

Bure Equity Ab is also a more normal investment company like Kinnevik and one very small position I have. The share has returned a staggering 1 909% in return over the last 10 years. Dividends it has paid out a total of 12 SEK and is a bit below the price you would have paid back in 2011. Bure Equity Ab is also one of the companies that now in 2021 launched a SPAC on Stockholm's stock exchange. Bure has many investments in for me unknown companies and interestingly they own a railway company, if it does not ring a bell then look at Berkshire Hathaway. Overall the return from Bure as an investment would be terrific in capital terms but not from a dividend perspective. 

Creades AB like Kinnevik and Bure Equity is a normal investment company, yet first trading day was in 2013. If you would have bought a share on the first trading day you would by today have a appreciated value of 689 %, strong growth in other words. From a dividend perspective you would be far behind with only 6,30 SEK in dividend compared to a purchase price of 13,256 SEK. From cash-flow perspective not the best but from a value appreciation perspective a solid return. Creades is also one of the companies that launched a SPAC on Stockholm stock exchange in June 2021. From Creades investments I only recognized one, apotea.se which is a pharmacy company (if you ever look at Swedish TV you eventually will see an apotea.se commercial). 

VNV Global Ab is an unknown investment firm to me, a Swedish mid cap company with an IPO back in 2007 just in time before the financial crisis. Just like the other investment firms VNV Global has many investments in companies I do not know nor have ever heard. Their investment idea seems to be utilizing network effects, assume the idea behind is good and solid as focus seems to be on value appreciation and not that much on cash flow. If you bought one share in VNV Global back in 2011 you would see a nice 1 617% value increase by today, not that bad, yet you would not have received any dividends from the company. From a value perspective the company has managed to show owners a good return in market value, yet the cash flow to investors is still open. 

Svolder Ab is an investment firm that invests in listed mid and small cap companies. Svolder could be seen as a small Investor Ab as they also invest mainly in listed companies. The idea seems to be close to the same with the difference that Svolder focuses on the mid cap and small cap companies that are not subject to a large analytic army. This way they can find value before others, or the market realizes it. One share of Svolder would have returned an awesome 1 208% for 10 years while dividends would account for about 59% of the purchase price. Interestingly Svolder announces NAV (net asset value) of their investments every week. 

Summary

As these firms are undervalued on a few indicators and have high margins I am not that confident they all will be good long run holdings. Gold mines have the issues of dependence on gold price which markets determine, not the company. This means the business is vulnerable and can be volatile, it also has the environmental issue as mines are hardly sustainable nor are they good at managing their waste. 

Investment firms value their holdings at market value, during booming markets it all looks spectacular, but as we saw in Q1 2020 it can rip large holes in their income statement. Investment firms cash flow would be a better option to analyze just as REITs have EPRA and FFO to better reflect the business health. I am not suggesting investment firms should be regulated or required to change reporting, just simply saying that it is strange they do not have a similar cash flow or operational reporting KPI. Operational performance before market valuation could give better indication of the business health.

Assume there is some lobbying behind it and finance has deep pockets, might explain a lot.

 

To shortly reflect the annual growth (CAGR) of stock price of the reviewed companies I could draw some conclusions, but not any final. 

 

Company	Stock CAGR %
Investor Ab	21 %
Kinnevik Ab	20 %
Bure Equity Ab	35 %
Creades Ab	29 %
VNV Global Ab	33 %
Svolder Ab	29 %

I am not that interested in the Swedish undervalued firms that the screen gave me. If markets fall rapidly by 20-50% I might take positions in Investor Ab or some other company and do hope that day will come in the nearest future. Was not able to find the market P/E-ratio for Sweden, would however guess it is over 25 as Western markets in general are reflecting a stimulus monetary policy. 

A review of Alibaba Group

 Since the market value of Alibaba has fallen and I have a decent amount invested in the company, I decided to make a quick review of Alibaba. How does Alibabas financials look like? What is Alibabas political risk? These questions will be answered.

Alibabas Group (ticker BABA) has fallen and shows a decent minus in my portfolio, even though only 14 shares at $216 the unrealized loss would be painful with -21% of invested amount. Link to portfolio page from where you can see the latest market price of Alibaba, its return and weight of my portfolio. 

I do not see any operational changes and I am left pondering is it something wrong with the financials or is it political. There was the sexual assault scandal at Alibaba but would not be surprised if many other big companies have the same issue however are covering it up or handling it better. Sexual harassment or assault in any way or form is not acceptable and do expect Alibaba to take required actions. 

Back to numbers.

Alibabas financials

The numbers are from Alibabas 20-F filings and are all in USD, EPS (earnings per share) are for ADS which is equivalent to 8 ordinary shares. I will quickly start with the balance sheet and then proceed to the income statement and end with some key ratios.  

Balance sheet

Alibabas balance sheet is displayed in the below graph where we see that total assets have grown every year since 2015 while the equity ratio has remained stable. Alibabas equity ratio was at lowest 51% in 2018 and 2019 only to increase to 55% in 2021. This means Alibaba is profitable and reinvesting its earning into the company. It is exceptional that a company growing at this paste would be able to remain the high equity ratio unless it does what Alibaba is doing, reinvesting earnings. In the long run if Alibaba can remain on the same path the company can grow significantly and at some point might be able to declare dividends. 

 

 Alibabas current ratio has remained good, mostly around 1,90 except 2019 when it temporarily dropped to 1,30. Still good and means the company can handle its short-term obligation without any major problems. A ratio I use to see how fast a company can be debt free is cash to liabilities ratio, basically based on 31 March 2015 annual report Alibaba could have paid all their debt with the cash at hand, making the company debt free. 

Alibabas ROE (return on equity) has been outstanding, even though the company has a high P/B-ratio. The ability to return a high return on equity is important for any company as it states is the management can utilize the assets and cash at hand. Alibabas ROE has been very good.

Income statement

The following two graphs show Alibabas revenue development and net profit development since 2015. We can see that revenue has grown at a huge rate of almost 44% per year until 2021. The graph clearly shows that the growth rate has been above 40% from 2018 meaning Alibaba has been able to grow its revenue over 40% per year for 4 years. This is a huge achievement for any company, as we look further down the net profit has not followed the same growth patter as revenue. As Alibaba develops its operations and invests back in the business, while getting fined by Chinese government we can expect the profitability to rise at a slower paste than revenue.

In the above graph is Alibaba Groups revenue in million USD per year displayed in blue columns and scale on the left axis while annual compounded revenue growth is the red line and scale on right axis.

The graph below shows how Alibabas net profit has developed since 2015 until 2021. We see a strong growth rate and spike in profitability in 2016 while returning to a more modest growth rate of 28% to 40% between 2017 and 2021. The net profit margin of Alibaba has remained strong of a minimum of 20 % of revenue (2020). A net profit margin of over 20% is very strong for any company, many times banks and financial institutions have a similar strong net profit margin.

Above graph displays Alibaba Groups net profit in million USD per year in blue columns and scale on the left axis while red line shows the compounded annual growth rate of net profit. 

Alibabas segments

Now Alibaba has four operating segments, core commerce, cloud computing, digital media and entertainment and innovation initiatives. Of the four core commerce is the biggest with almost 87% of the total revenue and the only segment with a positive operating profit and EBITA. Of all the segments Alibaba has I find cloud computing the most interesting one and the one with a huge future potential. Cloud computing covers areas like big data analytics, machine learning, storage and elastic computing. If we look at Alibabas competitors like Amazon and Microsoft, they also have recognized the value of clouds and storage of data which is a big revenue stream for them with a tasty margin. Media and entertainment look interesting and do see it as a challenger to Western as well as locally in Asia as a possible profitable business, it will just take time and a few big hits.

P/E-ratio

Alibabas has a high P/E-ratio of 20,13 given the stock price of $168,10 and the last earnings per share of $8,35. Considering a tech-company and the growth opportunity the ratio is modest yet reflects the political risk associated with Alibaba.

Alibabas financials discussed

 Based on normal financial KPI’s (key performance indicators) Alibaba can be considered a bit expensive. At least P/B- ratio is very high at current market value. However, P/E-ratio is on a more moderate level for a company growing in the same speed. A fact that must be faced is that no company can grow forever and that needs to be considered in Alibabas case. To sum it up I still see Alibaba from a financial perspective a valuable company which will contribute with growth to my portfolio in the long run.

Political risk

Currently the biggest risk with Alibaba would be political or Chinese government in my opinion. The Chinese government has hit hard on different tech companies by adding legislation and forcing reduction of dominant position. This risk is reflected in market value and seems like many are expecting future fines and less profitable business. My opinion is that the market reaction is short sighted, and that Alibaba will recover just like rest of Chinese tech companies. Reason lies in Chinese government not wanting to scare businesses away as it employees and ensures discipline among citizen. If people have a job, they are less eager to rise against authority and governments limiting business loose tax revenue. I see the Chinese government regulation tech companies to ensure nobody gets a monopoly, which is good. Some companies do start with predatory pricing to remove competition only to raise prices afterwards. 

Let us see what the actual outcome of government actions will be and how hard it will hit Alibaba.

Conclusion

My conclusion is that I will not sell my Alibaba shares as I see a good future. There will most likely be days when the market value is below current value of $168,10 and days it is above. The business will continue and they will come up with good future solutions and value generating services for customers. I will continue to hold my shares in Alibaba if the business changes I will have to review it and my position.

Portfolio Update August 2021

 August was an interesting month, my portfolio value was stable above 55 000 euros which is good from my goal perspective. The increased positions in Bayer AG contributed with better margin to the short-term goal. If markets start to panic then my portfolio will fall below the 55 000 euro threshold, yet in the long run it does not matter that much. 

Focus has lately been to summarize annual reports and find new value opportunities. It has been hard to find value as many companies are valued at high multiples, meaning a long payback period.

I mentioned in my last portfolio update from July that I might consider liquidating some positions. I am still weighting the benefits and costs from having these positions and if some would be liquidated and funds used to increase other positions. The issue I am facing is when to sell and at what price, probably one of the most difficult questions ever in investing. For example, if I would have had some GameStop shares when the stock started to fly I would have exited it way below its high at $483, most likely bought around $2 and sold at $10.

Graph below displays gap to goals in portfolio value. Left axis is for short and long-term goal while right axis is to the ultimate 1-million-euro goal. As you can see the gap to short-term goal is zero.

Markets were behaving interestingly in August, Corona cases, interest rates, employment numbers and inflation pressure has caused some headaches to many. Especially inflation pressure has been a hot topic for a while, and I do see prices rising. Question is then, will prices rise and keep on rising to a extent that forces Central Banks to raise interest rates? It might happen, especially in the USA however Euro area seem to be struggling in different ways that might postpone rate hikes.

Taliban's taking over Afghanistan did seem to impact markets for a second only to be forgotten due to limited impact on global economy. We saw new all-time highs for some indexes, partially supported by low interest rates and good Q2 results but also future expectations.

Portfolio Changes

Small changes during August as still awaiting better moments to increase my positions in a few companies. Was also a bit short on cash at hand which limited the possibility to buy more stocks. In total I purchased shares for 285,64€ in August which is a small amount.  

Alibaba (ticker BABA)

Weighted average purchase price decreased from $216,68 to $212,98 as one share was bought for $159,50, not the best price in August but of value for me. Alibaba has been hit by a lot of challenges, Chinese government, sexual scandal and challenges with US Securities and Exchange Commission. As I have been increasing my position it might be a clear statement that I still believe the value of Alibaba to increase over time. I do see more value in Alibaba then many hype stocks as they have more tangible services and products and are not dependent on hypothetical future development.

Bayer (ticker BAYN)

Bought 3 shares of Bayer AG during August, main reason is that I still expect its future to be brighter than what we currently see. As the legal claims regarding Roundup! and Monsanto acquisition will dissappere the future of Bayer will be brighter and earnings stronger. The weighted average purchase price decreased from 62,14€ to 61,12€ per share. Still a way to go when market closed at 47,20€ on Friday September 3rd. If I would have a average price around 50€ per share I would be happy so will most likely continue to buy more.

Dividends 

In August I received 73,54€ in net dividends and on a year-to-date basis 1 086,59€ in net dividends. Still far from 2 200€ which is my short-term goal, as the portfolio is being built up on a long-term basis (including taking advantage of any short-term bargains) it might be that the dividend goal will not be reached next year. 

 The graph below displays monthly dividends (blue staples) and cumulative dividends from start (red line).

Regarding the dividends, note that AT&T dividend does not reflect the full position of 121 shares as 5 shares were acquired after ex-dividend date. AT&T has also the split of WarnerMedia to come which based on statements will reduce the dividend by around 50%. This will have a negative impact on dividends unless Warner Bros Discovery can compensate. Do see it a bit challenged as Discovery has not paid any dividends on common stock for some time.