This the editorial of our monthly Quant Value Investment Newsletter published on 2023-04-04. Sign up here to get it in your inbox the first Tuesday of every month.
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Subscribers ask me about good cheap brokers all the time. This month you get an update on the brokers I use here in Germany, but more importantly I want to hear about your experience with brokers.
But first the portfolio updates.
Portfolio Changes
Europe – Buy Two
Two new recommendations this month as the index is above its 200-day simple moving average.
The first is a debt free UK-based House builder. It looks expensive on a Price to Earnings ratio of 21.2 but is dirt cheap on other ratios, including, Price to Free Cash Flow of 10.9, EV to EBIT of 2.0, EV to Free Cash Flow of 5.5, Price to Book of 0.6 AND with an attractive dividend yield of 7.8%.
The second is a France-based environmental services company trading at a bargain price of 3.6 times Earnings, Price to Free Cash Flow of 3.2, EV to EBIT of 4.3, EV to Free Cash Flow of 5.7, Price to Book of 0.9 and pays a dividend of 5.9%.
North America – Buy One – Sell One
One new recommendation this month as the index is above its 200-day simple moving average.
The company is a US-based wholesale distributor of residential and commercial building products attractively undervalued at Price to Earnings ratio of 2.1, Price to Free Cash Flow of 1.7, EV to EBIT of 2.1, EV to Free Cash Flow of 2.5, and trading at book value.
Sell Linamar Corporation for a gain of +22.6%. After a year it no longer meets the newsletters’ selection criteria.
Asia – Buy One – Hold One
One new recommendation this month as the index is above its 200-day simple moving average.
It is a fast-growing Singapore-based food and beverages company trading at Price to Earnings ratio of 6.8, Price to Free Cash Flow of 6.9, EV to EBIT of 6.2, EV to Free Cash Flow of 5.5, Price to Book of 1.5 and also pays a dividend of 3.9%.
Continue to hold Shaver Shop Group Limited (-0.3%), recommended in April 2022, as it still meets this portfolio’s selection criteria.
Crash Portfolio – Buy Two – Sell One
Two Crash Portfolio recommendations this month.
The first is a UK-based manufacturer of advanced concrete placing equipment trading at Price to Earnings ratio of 8.3, Price to Free Cash Flow of 11.6, EV to EBIT of 5.3, EV to Free Cash Flow of 10.1, Price to Book of 3.4 and it pays a nice dividend of 11.8%.
The second is a Japanese Information Technology (IT) company trading at Price to Earnings ratio of 11.0, Price to Free Cash Flow of 7.5, EV to EBIT of 4.7, EV to Free Cash Flow of 4.9, Price to Book of 1.8 and a dividend yield of 3.2%.
Stop Loss - Sell
Sell Lee & Man Chemical Company Limited at a loss of -9.9%
What brokers do I use?
Subscribers ask me about brokers all the time. So here is an update on the brokers I use.
But before I get to that, I would really like your thoughts on the brokers you use.
It looks like US subscribers have problems investing worldwide, especially small companies, so if you have any good broker recommendation, I would really appreciate your thoughts.
With your permission I would like to include your input in next month’s newsletter.
I use three brokers
I use three brokers.
One is with my main bank, an online only bank here in Germany, the other is the online broker at Deutsche Bank, the third is SAXO Bank where I recently opened an account.
I spread my money across three brokers to lower the risk should one of them run into problems or change strategy and want to get rid of me as a client (I had this happen to me already).
Each one has its own advantages. For example, Deutsche Bank is not cheap but has great execution for small caps in nearly all markets worldwide. SAXO has an easy-to-use interface and allows the easy opening of currency accounts.
Here is a bit more details on a few brokers.
Interactive Brokers (IB)
Philip a friend and sophisticated investor that is very happy with Interactive Brokers.
According to their website Interactive Brokers LLC (IB) is a NASDAQ listed agency only, direct market access broker that provides execution, clearance, settlement, and prime brokerage for customers. They do not do any own trading and are rated 'BBB+’, Outlook Stable by Standard & Poor's.
They offer 150 markets in 26 currencies. Trading costs also look really low! The they also offer their services in multiple language websites.
It looks like they have a conservative and prudent risk management system to keep your assets safe. They invest customer cash in very short-term government securities maturing in a few months.
Advantages
- For Philip the biggest advantage is that they have a great API (Application Programming Interface) that can customized using the Microsoft .NET software development framework and the Python programming language.
- They also have a lot of built-in algorithms you can use to trade with.
- Very low trading costs
- Good fund manager level reporting for a reasonable price. For example, EMIR.
Disadvantages
- Because the trading interface is so powerful new users can find it overwhelming.
- A steep learning curve to make best use of the platform.
- A few markets, for example the UK AIM stock market is not available.
SAXO Bank
Against the recommendation from a subscriber, I recently opened an account Saxo Bank A/S (Saxo). The same as IB they also have websites in different languages.
Saxo is a fully licensed European bank supervised by the Danish FSA. It is a private company, 50.89% owned by Geely Financials Denmark A/S a subsidiary of Zhejiang Geely Holding Group Co., Ltd., a Chinese automotive company.
I still do not know what to make of this Chinese auto company majority ownership. It is not my main account and I do not hold a lot of cash with them. That said it looks like deposit insurance of EUR 100,000 is in place.
Their website says that they allow the trading of around 70,000 financial instruments on exchanges across the world.
Pricing is low and gets lower depending on your account tier which is linked to your account deposit amount. In the USA on the NASDAQ exchange pricing varies from 2c per share to 1c per share.
Advantages
- Easy to use interface
- Shows delayed bid and ask prices for most securities.
- Low fees and most developed markets available to trade.
- Can use different currency accounts which removes the 1% currency buy and sell fee.
Disadvantages
- Some small stocks not available and costs $200 if you want one added.
- Currency conversions cost of 1% which I find expensive.
- Tax reporting may not be available for your country which means more work for you or your accountant. This may be applicable to all brokers so make sure you check this.
What brokers do you use – feedback please
I hope you find this helpful. But more importantly, I (and other subscribers) would really like to hear your experience with your broker. Just click the Need help? button at the bottom right of this page.
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