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Background:
As talked about within the feedback of the unique put up, I exited Nabaltec just a few days in the past, as a way to fund a brand new place. There isn’t a manner round the truth that it was not an excellent 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 might be at all times dangerous investments however I feel it is very important analyze what I might have been doing higher as a way to keep away from making the identical errors again and again.
So what went incorrect ?
The preliminary thesis on Nabaltec was that it was a boring old skool specialty chemical compounds firm that had a good observe report and a attention-grabbing story with regard to EVs and batteries (The “Boehmit story”).
Unhealthy timing / Ukraine Invasion
The very first thing that went incorrect was timing: I printed the put up on February third 2022, 3 weeks later, Russia invaded Ukraine and the entire panorama with regard to vitality costs clearly modified perpetually. This nonetheless for my part was clearly dangerous luck. Only a few folks have seen that coming again then, though the run up in Natutal fuel 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 put up” after the invasion, I accurately recognized Nabaltec as a possible crucial place, however I additionally assumed that this is perhaps balanced by higher traction on the EV aspect:
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 price perspective clearly extra aggressive in the intervening time. 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 at the beginning, Nabaltec moved in keeping 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 put up June 2022. Again then, I interpreted the Q1 outcomes as proof of pricing energy for Nabaltec and elevated the place to “full”, nonetheless at a big 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 shoppers.
Within the Q2 2022 overview in July, I discussed {that a} potential cease of Russian Gasoline might be a difficulty for Nabaltec:
Trying via 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 by 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 battle 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 positive factors within the conventional enterprise, however the Boehmit ramp up didn’t materialize and as issues look now, EV adoption is perhaps slower than beforehand thought.
Additionally a whole lot of potential Battery manufacturing initiatives have been delayed and/or moved to the US the place Uncle Sam garnted very beneficiant subsidies within the IRA.
In my view, this creates the issue that additionally the runway shortens for this utility, as for example subsequent era batteries (Stable state) don’t require Boehmit. Toyota now plans for stable state mass manufacturing in 2027/2028 and usually, the Japanese are usually not recognized to exagerate like Elno.
4. Placing it collectively
With the brand new scenario (no Russian fuel) Nabaltec has a VERY totally different danger profile than earlier than. Possibly issues end up higher if LNG costs keep low, however Nabaltec might be topic to LNG worth volatility. From what I heard, they’ve mounted fuel costs for 2024 however after that, they should purchase on the market, wherever the worth might 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 rising CO2 costs, they is perhaps topic to some hits there as properly. Mix this with very brief order cycles, you get a way more unstable enterprise mannequin than previously. So assuming that the previous is an efficient predictor for the longer term may not be relevant right here.
Contemplating all this, I ought to have offered earlier from a basic perspective as my preliminary case will not be legitimate anymore. Psychologically, one at all times hope for a reversal. At the moment 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.
Curiously, 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 might argue that I averted a good bigger loss by byuing Nabaltec. The purpose is that over time, course of dominates consequence.
In order a abstract, the 2 principal errors from a basic perspective have been to not react extra shortly on the modified fundamentals (Pure fuel) and the failed Boehmit story.
The primary studying for me is that one actually wants to grasp {that a} brief time period constructive developments might be a “bull lure” in an total detariorating atmosphere.
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