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Once upon a time, VTG shareswere offered for € 6 each

Monday 13 June 2016

This is a success story for all involved. VTG which leases railway wagons has become a sensation on the stock exchange. A considerable success with limited risk can, in fact, be achieved in the market.


The best investment opportunities are often right on our doorstep. In the case of VTG, one could say: At the railway crossing.  Whenever I had to wait patiently in the car while a long freight train slowly crossed the road, I saw the sign "VTG" of the tank car. Eventually, I began to think about what was going on and find out what this "VTG" was all about. That was in 2007.

 

This is how one of my best value discoveries began. Even then, VTG, with its headquarters in Hamburg,  Europe, was the largest privately listed leaser of railway wagons. Hardly any investors bothered to check this stock out. Few of them understood the business model. Most were unable to to correctly decipher and interpret the profit and loss accounts and it is doubtful they ever bothered to read them.

 

The VTG Group was in 2005  acquired by the American investor Wilbur Ross, an experienced and tough old character. The vendor was the old Preussag, which now goes under the name TUI. Shortly thereafter, in 2007  Wilbur Ross listed the VTG shares on the stock exchange. Ross remained on the sole controlling shareholder.

 

It was quickly clear to me that this was a good opportunity to invest. The business model with its long term leases was impressive, the long-term trend of shipping goods by road to rail was obvious. However, no one agreed with my view on this. Especially because of the unpleasant way the market price of the stock moved. On top of that was this, in Germany, unknown majorshareholder who never showed up!

 

When my calculations showed that VTG was one of the very few stocks, at the time, listed below book value (not to mention the reserves and goodwill ), this was clearly a suitable investment for me. Between 2008 and 2009, in the midst of the Lehman financial crisis, I began to buy VTG shares. The first purchases were done at six euros each. Today, VTG shares are quoted at 29 euros.

 

The share remained unloved and ignored by the market, prices were for a long time stagnant. When the price reached 16 euros, I highlighted the huge undervaluation in my article in the financial magazine “The Shareholder”.

 

In the spring of 2016 Wilbur Ross began to retire due to advanced age and succeeded to secure the Joachim Herz Foundation (from the Tschibo family) as a strategic investor, which broke the ice. In my blog of 16 March 2016 "Private Research pays off - the VTG" and in my Guest Comment ( on the same day)

on the Financial website Wall Street Online "VTG in the spotlight", I alerted readers to the better prospects for VTG shares.

 

Last week there was renewed interest. The large corporation Kühne, from Kühne & Nagel, took over a 20 percent stake from Wilbur Ross holdings. The price level at the tine was 28 euros per share.

 

From the ignored VTG, where hardly any attention was paid to the shares, we now have, thanks to good work by management and the supervisory board with the cautious approach by an old major shareholder, a very interesting story to tell. The fact that in the meantime, three major professional shareholders are

engaged at a high price level, gives confidence in the long term prospects for VTG. Even in our value funds "ME Fund - Special Values" we see no reason to

sell the stock. We remain invested.

 

When I review statements of account and check the purchase price of VTG at six euros each, I will always be aware  that:

 

In order to increase the value of  capital on the stock exchange, I do not need be  in Silicon Valley engaged with start-ups and

 

unmanageable major risks. There is another way.  Stay at home  - and exercise a lot of patience and perseverance.

 

So keep your eyes on the road, especially before the level crossing!