Sifter's analyses

Stocks
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Greetings Inderes readers.

We have now shared a total of four Research Notes written by Sifter Fund analysts for you to read on Inderes. Here is a summary of all the publications:

-Costco
-iRobot
-Atlas Copco
-ADP

We also always publish our latest quarterly report on our website (sifterfund.com/rahasto). Now, for the first time, the report has also been published in video format.

The video contains:
00:00 Opening of the Quarterly Report
00:56 Fund’s Return Q1
01:25 Top Gainers and Losers Q1
02:41 Fund’s 10 Largest Investments
03:17 TSMC Company Presentation
04:13 TSMC Market Share
06:06 TSMC Future Outlook
08:12 Changes in Portfolio Q1
08:26 S&P Global (reduced)
09:45 Safran (added)
11:18 iRobot (sold)
12:03 Ain Holdings (sold)
13:11 Nitori Holdings (new investment)
18:58 Nitori Market Forecast
19:07 Sifter Fund Business Metrics

Here is a link to the YouTube video:

We would love to hear your feedback on the video.

Best regards,

Riku Pennanen
Sifter Fund
riku.pennanen@siftercapital.com

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Happy Sunday,

We have published Sifter Fund’s monthly report (April 2021) in video format, where we discuss, among other things, Atlas Copco’s business model. A written analysis of Atlas Copco can also be found behind the link.

https://www.inderes.fi/fi/videot/sifter-atlas-copco-sijoituskohteena

Best regards,
Riku Pennanen
Sifter Fund

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Sifter Fund 5/2021 monthly report published in video format (also includes Verisign company presentation)

The monthly report can be read in written form on Sifter Fund’s website:

It would be great to hear any thoughts or feedback you may have.

Best regards,

Riku Pennanen
Sifter Fund

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The company presentation for Disco Corporation has now also been published.

https://www.inderes.fi/fi/artikkeli/sifter-disco-corporation-sijoituskohteena-japanilainen-niche-markkinajohtaja

It would be great to hear if this material provided added value.

Best regards,
Riku
Sifter Fund

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A very interesting read; I’m frustrated that the average person can’t access the Japanese market directly through any Finnish bank (excluding funds :grin:).

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Sifter’s portfolio company Sony Corporation’s company presentation published:

https://www.inderes.fi/fi/artikkeli/sifter-sony-corporation-sijoituskohteena

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Thank you for sharing your high-quality analyses with the community. Super awesome! :slight_smile:

Is it possible for a small investor to invest in the Sifter Global fund? The fund’s page at https://sifterfund.com/rahasto/ currently states “Minimum subscription €100,000”. It would be a great opportunity if one could join with smaller capitals.

Second question: Are shares of your unlisted company for sale?

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Thank you for your comments and interest in our research. We hope you find our analyses useful and get to know Sifter Fund’s investment philosophy better.

The minimum investment for Sifter Fund’s Global R-class is 100,000 euros, after which subscriptions and redemptions can be made with freely chosen amounts. Smaller amounts are not accepted, and shares in our unlisted investment service company are not for sale, at least not at the moment. :slight_smile:

I’m happy to answer any further questions you may have!
-Riku

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Sifter Fund Global: annual report published. The video provides a fairly comprehensive overview of our portfolio companies:

Video topics:

00:00 Introduction
00:05 Annual return 2021 +34.3%
01:35 Biggest gainers 2021
01:43 Biggest decliners 2021
02:17 Old Dominion Freight Line +98.1%
04:46 Novo Nordisk +75.3%
07:31 Nitori Holdings -21.4%
10:30 Safran -6.8%
12:24 Portfolio changes
12:44 New investments 2021
12:55 Added investments 2021
13:08 Sold investments 2021
13:14 Reduced investments 2021
13:42 New investment: Sony Corporation
15:15 Sold investment: iRobot
16:57 Sold investment: Oracle
18:35 Sold investment: AIN Holdings
20:18 Sifter Fund vs S&P500 business metrics

Quality companies brought Sifter Fund an annual return of 34.3% in 2021

The Sifter Fund rose by 34.3% during the year, which was historically its best year. This return exceeded the global equity index (MSCI ACWI, Eur) by 6.8 percentage points, meaning we generated significant outperformance. The institutional class, or PI class, rose slightly more, by 34.8%, beating the market index by as much as 7.3 percentage points.

Which quality companies were the stock rockets in the Sifter portfolio in 2021? What changes did we make to the portfolio? We compiled an annual summary as both a website and a video.

Sifter’s Morningstar page

I’m here to help if you have any questions,

Happy New Year,

-Riku

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Sifter has made a great and interesting analysis of Disney, worth reading. I also recommend reading the other things offered in this thread. :sunglasses:

https://www.inderes.fi/fi/artikkeli/disney-sijoituskohteena

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Here is also a link to a video presentation about Disney https://youtu.be/eH4cgQS3FoI?t=1

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The Walt Disney Company
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It’s interesting how differently people approach investing. For some, it’s important to find well-known, giant companies that they believe are good investments due to their size. I personally first look at the industry and then move on to examine past performance based on numbers. For Disney, the last 10 years look like this according to Roic.ai’s figures:

The company’s equity market value is $210.86 billion.
The company’s enterprise value is $243.92 billion.

Years 2012-2021:

Free cash flow totaled 58,256 million.

The amount used for share buybacks totaled 40,168 million.

In 2012, there were an average of 1,794 million shares outstanding.
In 2021, there were an average of 1,816 million shares outstanding.

To me, this suggests that it hasn’t been worthwhile to be invested in Disney. The majority of the free cash flow has gone into share buybacks, and the end result is that there are more shares outstanding than when started.

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Screenshot_20220824-182951_Chrome1439×1541 157 KB

In my opinion, it has been profitable to be on board, except perhaps for the last 7-8 years. And even during that time, one could have made a profit by buying and selling at the right time. The stock has gone up 3-4x in the last 10 years or so.

What matters in the end is what profit one actually manages to get from the company, not what the numbers are.

It’s a bit like looking at hydrogen stocks based on their figures. There has been an opportunity to make 10x with them, regardless of the financial figures.

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Interesting thoughts. A company’s recognition or size does not play a very important role in Sifter’s criteria, as long as liquidity is high enough. We are talking about companies with a minimum market value of 200 million and daily stock turnover must be sufficient. The fund’s portfolio includes several companies that are not considered terribly well-known, such as The North West Company. Of course, when we talk about quality investing, a large part of the world’s highest quality companies happen to be quite well-known.

In the first, quantitative phase of Sifter Fund’s research, companies’ historical figures are purely examined based on over 20 selection criteria, thus filtering out the weakest companies. In the next, comparative phase, analysts review the companies that have passed the screening in order of affordability. In this phase, our analysts particularly examine the company’s competitive advantage and the prerequisites for the continuation of that competitive advantage.

In the third phase, in-depth analysis, our analysts delve into, among other things, the company’s industry, business model, competitive advantages, and competitors. Each company is also discussed in Sifter’s investment committee, and the analysis is supplemented according to the investment committee’s instructions. Our analysts prepare an assessment of the company’s money-making ability 3–5 years into the future. Analysts spend most of their time on this qualitative phase.

Quite comprehensive research note reports are made about the companies; here are some examples:

You should check out our strategy page in more detail from these links:

Regards, Riku

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Thanks to Tunturisusi for the excellent comment.

My understanding is that, in the long term, owning quality companies (quality investing) has been profitable on average – the entire quality factor has performed well against all major indices. As the buffalo once mentioned, “Time is the friend of the wonderful business, the enemy of the mediocre.”

Of course, in my understanding, value investing (low valuation/usually mediocre or poor companies) has also been proven to offer excess returns to investors over a very long term (e.g., the last 50 or 200 years). However, over the past 20 years, they have fallen far behind the most common indices. This year, the excess return of value investing (the value factor) has started to pick up relative to almost all other strategies (including quality investing). The future will show whether this so-called “value premium” has re-emerged?

The point is that, yes, ultimately what matters is the return an investor has received from a company, not just the company’s figures. Returns can be made even from poor companies and from asset classes that don’t even generate any cash flow for their owners. Sifter’s unitholders have chosen to remain owners of quality companies for a long time, even if there is evidence that worse companies could, in some situations, provide a temporarily better bump.

Personally, I feel that owning quality companies also supports the psychological process required for successful investing. When one knows that the target is, for example, 20 years away, owning quality companies (high ROIC, margins, low debt, high barriers to entry, etc.) feels safe even during the worst times, even if share prices have fallen sharply temporarily.

Let me know what you think!

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Exactly the same opinion… I don’t see it as reasonable to buy a stock that doesn’t produce anything or whose numbers don’t support growth and development, but these days you can also make money in other ways.

With the hype around certain stocks or industries, a good story that resonates with the public and investors, or even with sufficiently beaten-down stocks whose valuation is in the dumpster, you can make money, or with turnaround companies… Sometimes you can get a return from a company with poor results if the result doesn’t fall as much as feared, or you don’t get a return from a good company and solid growth if it’s already priced into the stock.

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Warm thanks to Sifter for the timely analysis on the topic "How to identify strong performers in a recession?".

Thank you for sharing detailed information and analysis that can be applied as tools and background information when considering one’s own investment decisions. Your videos and articles are inspiring and provide excellent information to support investment decisions. It’s great that you share your knowledge and expertise in this way. :slight_smile:

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The thread title is Sifter’s analyses, but I assume no one will mind if I share @Karo_Hamalainen’s excellent article about Kulvik and the Sifter fund, and upon closer inspection, this article describes Sifter’s analysis process quite well: Karon pörssi: Näin Hannes Kulvik sijoittaa, kasinokauden kuuluisuuden rahasto käyttää omaperäistä seulaa - Taloustaito.fi

A quote from the article including an interesting reading tip:
“In his book Sijoittaja (Investor) (Otava 2022), non-fiction writer Terho Puustinen describes the events behind the scenes of the Sifter fund during spring 2020 down to the details of emails. With a cinematic surge, he emphasizes one of the book’s key lessons: Keep your head cool, don’t let your emotions get the better of you!”

Addition: Also added the link that I forgot in my hurry. Of course, the most resourceful of you probably found Karo’s article based on the hints I gave :slight_smile:

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Thanks for the feedback, Juha. I hope these are helpful. Sometimes it goes right and sometimes it goes wrong. Hopefully, a little more often right.
Santeri

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Thanks @NukkeNukuttaja for the reading tip!

I just watched the video message from the book’s launch event. Hannes Kulvik exudes a calmness that is also at the core of his investment philosophy. In the video, he describes, for example, the following:

“We do not speculate on where the stock markets will move next. We do not reduce our stock weighting because we cannot know when the cash assets should be invested back into stocks. Our stock weighting is always one hundred percent. We trade infrequently. We are owners, not gamblers.” Hannes Kulvik, 2022 [1].

It’s great that the book provides an opportunity to get acquainted with the thinking of Sifter Fund founder Hannes Kulvik. Hopefully, the library’s long queue of 203 reservations will move quickly. :slight_smile:

[1] Hannes Kulvik – Videoterveiset Sijoittaja-kirjan julkaisutilaisuudesta 2.11.2022 - YouTube

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