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Background:
As talked about within the feedback of the unique submit, I exited Nabaltec a couple of days in the past, so as to fund a brand new place. There isn’t any means round the truth that it was not a great funding. Truly, within the 13 years of this weblog, it certified because the 4th worst funding with regard to total proportion loss inside my “corridor of disgrace” that I proudly current on this desk:
After all, there will likely be all the time unhealthy investments however I feel you will need to analyze what I may have been doing higher so as to keep away from making the identical errors time and again.
So what went unsuitable ?
The preliminary thesis on Nabaltec was that it was a boring old-fashioned specialty chemical compounds firm that had a good observe file and a attention-grabbing story with regard to EVs and batteries (The “Boehmit story”).
Dangerous timing / Ukraine Invasion
The very first thing that went unsuitable was timing: I revealed the submit on February third 2022, 3 weeks later, Russia invaded Ukraine and the entire panorama with regard to vitality costs clearly modified perpetually. This nevertheless in my view was clearly unhealthy luck. Only a few folks have seen that coming again then, though the run up in Natutal gasoline costs within the months earlier than was fairly unusual.
Within the preliminary write-up, I included the “anti-pitch” which clearly indicated that this is able to create points:
In my first “Panic submit” after the invasion, I accurately recognized Nabaltec as a possible important place, however I additionally assumed that this is likely to be balanced by higher traction on the EV facet:
With regard to EVs, one of many clearly surprising outcomes is that gasoline costs at the moment are fairly low once more, which makes ICEs from a price perspective clearly extra aggressive in the meanwhile. And it doesn’t assist that the German Authorities simply killed the EV buy subsidy. There’s now clearly a danger, that particularly in Europe, EV adoption will progress slower than I’ve anticipated.
2. The “bull lure”
Trying on the chart, we are able to see that initially, Nabaltec moved consistent with the market, the true hole solely opened up in 2023:
One factor that was very distinctive was the truth that initially, Nabaltec appeared to profit from the entire bother as I lined out in a submit June 2022. Again then, I interpreted the Q1 outcomes as proof of pricing energy for Nabaltec and elevated the place to “full”, nevertheless at a big cheaper price than the preliminary place. Again then, I didn’t even think about that this is able to be solely a really quick time impact of “panic restoking” of the purchasers.
Within the Q2 2022 evaluate in July, I discussed {that a} potential cease of Russian Gasoline could possibly be a problem for Nabaltec:
Trying by way of the feedback, I traded the place way more than I often do. Initially I offered on the best way down like in June 2022:
However then I purchased again during which was pushed by persevering with good earnings all through 2022, as in November 2022:
I feel the primary tangible trace for this bull lure was the very cautious outlook in March 2023:
In any case, after Nabaltec warned for 2023 it was clear, that 2022 was realy solely a shrot time period exception and that they are going to wrestle for a while.
3. The “Boehmit Story” broke early
One subject that I clearly didn’t pay sufficient consideration to was the truth that the “Boehmit story” didn’t materialize. The rise in income noticed in 2022 was based mostly on quick time period features within the conventional enterprise, however the Boehmit ramp up didn’t materialize and as issues look now, EV adoption is likely to be slower than beforehand thought.
Additionally lots of potential Battery manufacturing tasks have been delayed and/or moved to the US the place Uncle Sam garnted very beneficiant subsidies within the IRA.
For my part, this creates the issue that additionally the runway shortens for this utility, as as an example subsequent technology batteries (Stable state) don’t require Boehmit. Toyota now plans for stable state mass manufacturing in 2027/2028 and usually, the Japanese usually are not identified to exagerate like Elno.
4. Placing it collectively
With the brand new state of affairs (no Russian gasoline) Nabaltec has a VERY completely different danger profile than earlier than. Possibly issues prove higher if LNG costs keep low, however Nabaltec will likely be topic to LNG worth volatility. From what I heard, they’ve mounted gasoline costs for 2024 however after that, they should purchase on the market, wherever the value will likely be.
It additionally doesn’t helpt that within the space the place they’re situated, there may be little or no renewable vitality improvement. With growing CO2 costs, they is likely to be topic to some hits there as properly. Mix this with very quick order cycles, you get a way more unstable enterprise mannequin than up to now. So assuming that the previous is an efficient predictor for the long run won’t be relevant right here.
Contemplating all this, I ought to have offered earlier from a basic perspective as my preliminary case isn’t legitimate anymore. Psychologically, one all the time hope for a reversal. Presently issues look higher for Chemical shares, however that would change shortly. In any case, I offered now as a result of I wanted the cash to fund a brand new place and my course of is to promote the one the place I’ve the bottom conviction.
Apparently, one of many positions I offered to finance Nabaltec was Agfa. I offered Agfa at 3,65 EUR per share, as a result of again then it was my lowest conviction place. Now it trades at 1,34 EUR. One may argue that I prevented an excellent bigger loss by byuing Nabaltec. The purpose is that over time, course of dominates end result.
In order a abstract, the 2 essential errors from a basic perspective have been to not react extra shortly on the modified fundamentals (Pure gasoline) and the failed Boehmit story.
The principle studying for me is that one actually wants to know {that a} quick time period constructive developments could possibly be a “bull lure” in an total detariorating atmosphere.
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