Exited my position in Burelle: discount at 34%

Sometimes I like to buy investments that are trading at a clear discount to underlying value, but with absolutely no catalyst in sight to narrow it. Burelle (EPA:BUR) was certainly one of those ideas: it’s a holding company with a large stake in Plastic Omnium (EPA:POM).  I wrote it up in 2013 when it was trading at a discount of roughly 50%, and since then Plastic Omnium has performed very well, but the discount has only shrunk slowly. However today, Burelle’s share price jumped with 7% while Plastic Omnium stayed almost flat reducing the discount to 34%:

As far as I can tell the only reason for todays market move is this article in the French Financial newspaper called Les Échos. An unexpected catalyst, but I’ll take it. A discount of 34% is not bad, but obviously a lot less attractive than a 50% discount and since I’m at the moment almost fully invested raising a bit of cash for potential new ideas is not a bad move. So I decided to exit my position in Burelle.

During my four year holding period the stock generated an total return of 236% and an internal rate of return of 34.1%. This compares favorably to an investment in Plastic Omnium itself which would have returned 189% during the same period for an IRR of 29.8%. So most of the return is definitely caused by the strong performance of the underlying stock, but at the same time this result shows the power of just buying stuff at a big discount. Having a discount shrink from ~50% to ~35% during a four year period sounds like a very marginal result. At the same time it’s enough to add almost 5% alpha annually for four years, and that is huge!


Author has no position in Burelle anymore

6 thoughts on “Exited my position in Burelle: discount at 34%

    1. KP

      Share price went up as well perhaps?

      Any views on Conduril? – big drop today, and I thought Angola were sorting themselves out?

      1. David

        If share price moving up than the Gap is cloed. The gap is not moving up with share price it gets down

  1. Eridon

    AV, how did you calculate the 5% alpha annually for four years?
    Also is France still a fertile investing country in your opinion or the party is towards the end and probably the market there is fairly valued or maybe overvalued?


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