First foray abroad

So I bought my first foreign listed stock this week: Washtec, a German business that makes car washing technology. 

It was quite an active week again. I also bought back into Just Eat and RWS (the latter following an excellent trading update) and sold a few of my weaker positions: Micro Focus, Microgen and Abcam all went. My portfolio turnover has been increasing recently as I have been becoming more aggressive in exploiting momentum. This gives me a bit of concern as it means more trading costs. However, my decisions have so far generally been turning out well and my portfolio is back to new highs since the blip in September, so I’m OK with the high portfolio turnover for now.

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Washtec

Washtec is a German provider of automated technology for car washes. It sells its products and services globally.

Quality

Washtec looks like a high quality business:

  • Business economics: Washtec has decent margins and very high returns on capital. It has historically very high cash generation but appears to be making quite a bit of capital expenditure recently to fund its growth.
  • Track record: Washtec has grown at a fast rate for the last 4-5 years. Its share price has correspondingly appreciated for the last few years.
  • Competitive advantage: Washtec appears to be a world leader in its niche. However, it faces two main competitors in Europe, another German business, Otto Christ, and a Spanish company, Istobal. Competition appears to occur mainly through investment in improving technology and creating a large service network. Washtec has a larger installed base of customers and may benefit to some extent from greater scale over these competitors. All three appear to be doing well – they are insulated from competition from smaller players through the need to have a large service network, particularly for larger customers (the oil majors and other petrol retailers). Outside of Europe the market for automated car wash equipment appears more nascent and Washtec appears to face less competition.
  • Growth prospects: Washtec has been growing at a fast pace and appears to have plenty of scope to continue to expand, particularly outside of Europe in North America and Asia.

Pricing

Earnings and price momentum are both very good, with Washtec in a strong long term upwards price trend. The valuation seems reasonable given the growth prospects, according to my simple valuation model. As a bonus Washtec pays a decent dividend.

 

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