A muddy idea

Climate change is in the news big time. Barely surviving Hurricane Florence, we’re onto Hurricane Michael. Climate change investing is a hot topic with investors, with a stream of snazzy startups piling into the space. If you look hard enough though, there are opportunities for us old school folk.

Last week my deep value idea for the European Investing Summit hosted by MOI Global happened also to be an investment opportunity in climate change adaptation. With the primacy of American markets, European investing ideas are the stepchildren of the investing world, but we should embrace them wholeheartedly.

I thought I’d share my company analysis as succinctly as possible (in under four minutes).

The Little Dutch Boy

You probably know the story of the Little Dutch Boy who saved his country from seawater by plugging a hole in a dyke with his finger. With large parts of their flat coast vulnerable to flooding, for centuries the Dutch have been masters of dredging up mud and creating barriers against floods and storms

What started as families coming together to defend themselves against the sea has evolved over the centuries into a listed company called Boskalis. Boskalis is a world leader in dredging and maritime services spread over 90 countries. With a carefully managed fleet of 900 vessels and 10,700 employees, it specialises in ports, coastal defences and protecting river banks. With climate change pretty much an undeniable reality, the need for their services will only expand.

Boskalis has a senior management team that has been around for decades. They provide a steady hand and have seen the company through many market cycles. The kind of winning team you would want, reasonably compensated and not into crazy expansion for the sake of temporary gains in results. They think long term.

Margin of Safety

In the last three years due to low energy and commodity prices, Boskalis has hit hard times and isn’t a market darling. They’ve been punished for a fall in their order book and the share price has dipped. Most investors who are thinking in terms of months rather than years - and that’s most investors, have punished the company with a major fall in share price as seen below. Value investors (at least the ones who agree with me) will see this as a buy and hold opportunity as the low price gives the investor a healthy margin of safety.

Picture1.png

Order book

The reason I think Boskalis’s share price will recover (apart from good management and growing business opportunities) is that it’s order book has recovered from the slump, but the market hasn’t adjusted to the change in the company’s fortunes yet.

Picture2.png

Cloning

Boskalis has recently been bought by some very clever investors such as HAL Trust, Third Avenue Capital and International Value Advisers. For some of them, this is a new position, for others, they are increasing an existing share. A good sign when you get to copy the cleverest investors.

And how does Mallika know all this?

Geez. A girl can’t give away ALL her secrets.

Thanks,

Mallika
 

All data from Bloomberg or https://boskalis.com/