|
|
 NEWS |
|
|
|
|
Stocks
Stock picks for the long haul: Hot European stocks
Jill Fraser - December 12, 2007
Fund manager stock pick: MAN AG and Lanxess
Current share price: MAN AG (MANG.DE) €111.08 ($184.64); Lanxess (LXSG.DE) €31.99 ($53.53)
Fund manager: James Falkiner, Falkiner Global Investors
|
|
|
James Falkiner, Falkiner Global Investors | In this section, CompareShares picks fund managers' brains for the stocks to watch in the year ahead. Jill Fraser reports
Note that these are international shares, which can only be bought via certain brokers - such as CommSec and Sonray Capital Markets.
German trucking company, MAN AG has shifted into top gear and James Falkiner, CEO, Falkiner Global Investors, is backing its ability to maintain its level of momentum and grunt for the long haul.
Falkiner sees the deregulation of German labour markets and a continuing push by German corporations into Eastern Europe, where economic growth is powering along, as precipitating MAN’s continuing development. He forecasts its current price of €111.08 ($184.64) could conceivably reach €150 ($249.34).
MAN is a leading engineering company based in Munich. The company has operations in 120 countries, conducted through four divisions: commercial vehicles, industrial services, diesel engines and turbomachines.
The MAN Group is one of Europe's leading manufacturers of commercial vehicles, engines and mechanical engineering equipment with annual sales of approximately €13 billion and 50,000 employees worldwide. MAN supplies trucks, buses, diesel engines, turbomachinery as well as industrial services and holds leading market positions in all its business areas. MAN AG is one of the top 30 companies listed on the German stock exchange.
"Roughly 50-60% of its revenue comes from its commercial vehicles, essentially its trucks and buses," says Falkiner.
Merrill Lynch has raised its price objective to €140 with a possible add of €15 or more from a potential merger with Swedish trucking company, Scania.
The research institution notes in a November report; "MAN reported a very strong set of 3Q results, surpassing our expectations for revenues and EBIT by 3% and 13% respectively. While an impressive performance we see scope for MAN to move up the gears further in 2008, as the new Polish facility ramps up (adding an extra 15k+ truck capacity), losses in buses reverse, internal efficiency programs begin to pay dividends and the extra capacity in diesel and turbo comes on stream".
Falkiner picked up MAN in 2005 when it was trading at €36 ($59.84).
With a sell side culture and a bottom-up, subjective take on the analytical process Falkiner has a strong focus on management changes. This led him to back the move by MAN AG’s chief executive, Hakan Samuelson, who took up the post in 2004 after resigning from rival trucking company, Scania.
Falkiner’s judgement paid off and MAN has gone from strength to strength with last month’s Merrill Lynch report referring to MAN AG as "one of the most attractive stories in the sector".
"Samuelson’s strategy is about no cross subsidization. It’s a simple approach of aiming to do what they do better each year," says Falkiner, admitting he admires Samuelson’s lack of tolerance for poor performing divisions.
"A lot of people say; we’ll put up with these divisions and wait for the cycle to turn. They then justify it with an argument of diversification and they end up with mediocrity."
Falkiner’s second stock tip, Lanxess, a German chemical company, holds the same philosophy of turfing any division that does not pull its weight.
Lanxess, the fourth largest German Chemistry Corporation in the Frankfurt Stock Exchange, was spun out of Bayer in January 2005. It is divided into four divisions: Performance Rubber, Engineering Plastics, Chemical Intermediates and Performance Chemicals. Currently Lanxess is trading at €31.99, double what it was when Falkiner took it on in 2005. He anticipates it climbing 43% in the next 12 months.
"It’s a similar story to MAN’s," says Falkiner. "A new management team came into a tired German chemical company, shut down businesses, picked up a chemical plant holus bolus in the US, put it in containers and took it to China where they rebuilt it and tripled profitability.
"It’s all fairly common sense stuff. But it’s a young management team, 35 to 45 years old, clean sheet of paper and a very rational German approach."
Admitting "the Greenies hate Lanxess because it manufactures petrochemicals", which are not environmentally friendly, Falkiner does not see any danger in the company going down the gurgler as the world becomes more sustainable. "There are lots of these companies around the world. They’re the backbone of the chemical industry," he says.
In a November report, UK research house, Morgan Stanley, describes Lanxess as "still a cheap stock" noting its strong performance in an unsteady market.
More articles from this edition of CompareShares:
Investing: A share portfolio for all seasons
Stocks: Stocks for the long haul: hot European stocks
Resident Trader: How stops can cut a profit run
Trading: The ultimate guide to trading shares for beginners - final part
Stocks: Corporate America embracing renewable energy
Markets: Fed rate cut no heart-starter for US sharemarkets
Stocks: Stock to watch: Uranium Exploration Australia
Companies: Bell Financial shines on debut
Whatever your views, you can discuss this article - or any of Jill's articles - on our message board Your 2 Cents.
Jill Fraser has 25 years' experience in the media as a radio producer on 2UE and journalist for News Ltd, Australian Consolidated Press and Key Media.
 Email to a friend
 Print this article
|
|
