Thursday, May 23, 2024

Submit Mortem Nabaltec AG – Watch out for the “Brief time period basic Bull lure”


Background:

As talked about within the feedback of the unique publish, I exited Nabaltec a number of days in the past, to be able to fund a brand new place. There isn’t a means round the truth that it was not funding. Truly, within the 13 years of this weblog, it certified because the 4th worst funding with regard to general proportion loss inside my “corridor of disgrace” that I proudly current on this desk:

In fact, there will likely be at all times dangerous investments however I believe it is very important analyze what I may have been doing higher to be able to keep away from making the identical errors over and over.

So what went fallacious ?

The preliminary thesis on Nabaltec was that it was a boring old skool specialty chemical compounds firm that had an honest observe report and a attention-grabbing story with regard to EVs and batteries (The “Boehmit story”).

  1. Unhealthy timing / Ukraine Invasion

The very first thing that went fallacious was timing: I printed the publish on February third 2022, 3 weeks later, Russia invaded Ukraine and the entire panorama with regard to vitality costs clearly modified eternally. This nevertheless for my part was clearly dangerous luck. Only a few individuals 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 may create points:

In my first “Panic publish” after the invasion, I appropriately recognized Nabaltec as a possible crucial place, however I additionally assumed that this could be balanced by higher traction on the EV facet:

With regard to EVs, one of many clearly sudden outcomes is that gasoline costs are actually fairly low once more, which makes ICEs from a value perspective clearly extra aggressive in the intervening time. And it doesn’t assist that the German Authorities simply killed the EV buy subsidy. There may be now clearly a danger, that particularly in Europe, EV adoption will progress slower than I’ve anticipated.

2. The “bull lure”

Wanting on the chart, we will see that initially, Nabaltec moved in keeping with the market, the actual hole solely opened up in 2023:

One factor that was very distinctive was the truth that initially, Nabaltec appeared to profit from the entire hassle as I lined out in a publish 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 major cheaper price than the preliminary place. Again then, I didn’t even think about that this may be solely a really brief time impact of “panic restoking” of the purchasers.

Within the Q2 2022 evaluate in July, I discussed {that a} potential cease of Russian Gasoline may very well be a difficulty for Nabaltec:

Wanting via the feedback, I traded the place far more than I normally do. Initially I bought on the best way down like in June 2022:

However then I purchased again by which was pushed by persevering with good earnings all through 2022, as in November 2022:

I believe 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 primarily based on brief time period good points within the conventional enterprise, however the Boehmit ramp up didn’t materialize and as issues look now, EV adoption could be slower than beforehand thought.

Additionally lots of potential Battery manufacturing tasks had 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 software, as as an illustration subsequent era batteries (Stable state) don’t require Boehmit. Toyota now plans for strong state mass manufacturing in 2027/2028 and usually, the Japanese aren’t identified to exagerate like Elno.

4. Placing it collectively

With the brand new state of affairs (no Russian gasoline) Nabaltec has a VERY totally different danger profile than earlier than. Possibly issues end up higher if LNG costs keep low, however Nabaltec will likely be topic to LNG value volatility. From what I heard, they’ve fastened 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 could be topic to some hits there as nicely. Mix this with very brief order cycles, you get a way more unstable enterprise mannequin than prior to now. So assuming that the previous is an effective predictor for the long run may not be relevant right here.

Contemplating all this, I ought to have bought earlier from a basic perspective as my preliminary case isn’t legitimate anymore. Psychologically, one at all times hope for a reversal. At the moment issues look higher for Chemical shares, however that would change rapidly. In any case, I bought 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.

Curiously, one of many positions I bought to finance Nabaltec was Agfa. I bought 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 averted a good bigger loss by byuing Nabaltec. The level is that over time, course of dominates final result.

In order a abstract, the 2 predominant errors from a basic perspective had been to not react extra rapidly 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} brief time period optimistic developments may very well be a “bull lure” in an general detariorating surroundings.

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